Debts After Death. Who has authority after death? Who has authority after death?

Transcription

1 Debts After Death By: Kate Schilling, BSSA April 2011 Who has authority after death? Guardian s authority ends at death POA sauthority ends at death If not listed as a joint owner of the property or asset, you need authority to transfer or sell the asset. Who has authority after death? Personal representative (akaexecutor or administrator) should be nominated in will. If no will, heir can nominate him/herself as PR Before proceeding, the PR needs: Written consent of all interested persons (or approval by judge) Approval by county Register in Probate (in the form of Domiciliary Letters), and To post bond (if applicable) 1

2 Role of Personal Representative Identify and collect the decedent s assets Manage those assets during probate process Determine surviving spouse s rights Pay debts, claims, and taxes Make distributions to spouse or dependent children Distribute remaining assets to those names in will or heirs at law (if intestate). Probate The process where a decedent s debts get paid and assets pass according to will or statute. Probate Misconceptions Probate will take years Probate is expensive Probate is only for rich people, or only for poor people Probate is only necessary when there are disagreements Probate Who can open a probate? Any interested person or anyone named in will to act as personal representative. After 30 days, the guardian of the decedent or any creditor of the decedent. 2

3 Probate: Definitions Interested person means any of the following: Heir (whether or not named in the will) Beneficiary named in will/trust Personal representative Trustee named in a trust if applicable Anyone else a judge or the Register in Probate deems interested. Intestate means the person died without leaving a will Disclaim means to reject or deny a gift Bequest is a specific gift *Interested people get copies of the documents, notice of court hearings, and have standing in the matter. Probate Opened in county of decedent s domicile: Special Administration Informal Probate Formal Probate All 3 types of probate cases can be found on ccap at: (Search by name of the decedent) Special Administration Can be opened either before or after a probate. Not routinely done only when necessary for specific purpose. Necessary when: certain act needs to be performed on behalf of decedent; unadministeredassets are located after a probate already closed; something must be done before personal rep can be appointed (pay bills, collect money, etc.); Other circumstances at direction of court. 3

4 Informal Probate Beneficiaries agree on who should be personal representative and most other matters. Have original will. Will not contested. Cannot be used if will prohibits it. Personal representative takes the lead, does not need court approval for most actions. Can be converted to formal probate at any time if requested by an interested person. Supervised by county Register in Probate office. Formal Probate Judicial process before a judge; Every step, payment, distribution is approved by the judge in advance; No will left by decedent or the will is contested. Beneficiaries disagree. Interested person can request to be in formal probate at any time during informal probate proceedings. Can take a year or more, may involve multiple attorneys and/or litigation. Simplified Probate Process Death Probate opened Publication in newspaper Notice sent to known creditors Claims against the estate are filed Notification to Medicaid, estate recovery. Determine solvency of estate Pay priority claims* Pay claims & debts Pay specific bequests Distribute remainder according to residue Close probate. 4

5 Priority of Claims Before any creditors are paid, the following claims are paid out first(and in consecutive order) in every probate: 1. Costs & expenses of [probate] administration (atty fees) 2. Reasonable funeral & burial expenses 3. Provisions for family 4. Reasonable & necessary expenses of last illness 5. All debts, charges or taxes to US, state or government/municipality. 6. Wages to employees 7. Property assigned to surviving spouse or domestic partner (Spouse can ask to have $10,000 set aside for her support beforeothers are paid.) 8. All other claims allowed (credit card debt, etc.) Clarifying Probate Misconceptions Probate will take years Generally most uncontested probates close within 9 months to one year. Depends greatly on family dynamics and willingness to work together. Depends on how informed and organized PR is Most of time during probate is spent waiting (waiting for newspaper publication, waiting for claims, providing notice, etc.) Clarifying Probate Misconceptions Probate is expensive Probate can get expensive if a will is contested or if heirs are litigating capacity/undue influence issues. Just like any other litigation. Although hiring a lawyer is highly recommended (and minimizes the PR s liability), one is not required. Usually folks are in informal probate, and therefore the process is less arduous. 2% inventory fee for all assets to go through probate. $200,000 estimated assets $4,000 fee. Fee goes to Register in Probate. Attorneys fees are in addition. 5

6 Clarifying Probate Misconceptions Probate is only for the very rich/poor Actually, probate is for anyone with over $50,000 in assets that does not have a trust. Certain assets (life insurance, retirement accounts, annuities, etc.) pass by virtue of a contract, and do not go through probate. Trusts bring level of privacy, but can bring uncertainty if an issue arises which was not clearly addressed in terms of trust. People with trusts need pour-over wills to catch assets not funded in the trust. Example: wrongful death claim. Clarifying Probate Misconceptions Probate is only used when the heirs disagree Probate is the recommended procedure for families that do not get along and would benefit from court oversight, and lengthy statutes which lay out rules and expectations of parties. However, informal probates are routinely opened when heirs doagree to assure debts are paid correctly and assets are distributed appropriately to heirs. Alternatives to Probate Transfer by Affidavit (<$50,000 or less) POD accounts Beneficiary designations (retirement, life insurance proceeds, annuities, etc.) Transfer on Death Deeds for real estate Jointly held assets or property Trust 6

7 Death Certificates Certified death certificates are necessary for the following situations: Transfer car title Claim for insurance proceeds Take a spouse s name off joint property Probate court An uncertified death certificate will contain almost all of the same info, but is not acceptable for legal purposes. Death Certificates Usually available 3 weeks after date of death Requires application Done in-person, by mail, or fax only. Need photo ID. Cost is $20 for search and 1 copy. Add lcopies are $3 each. Usually start with 10+ copies. Must be immediate family member of decedent (or guardian), or have notarized consent from immediate family member to get certifieddeath certificate. ( Step relatives are not considered immediate family.) Role of EBS EBS cannot assist with probate, transfer by affidavit, or wills. EBS can: Help family members get a copy of a death certificate; Consult with BSSA s regarding passage of debt to heirs; Point out potential divestment issues; Remind clients of the duty to notify Medicaid/Estate Recovery upon the death of a Medicaid recipient; Explain importance of a private attorney, and refer clients to LRIS. 7

8 Role of EBS Common questions from clients: Can I inherit my parent s debt? What happens to these debts if no probate is opened? Do client confidentiality rules end at death? Role of EBS: Debts Generally, children/heirs do NOT inherit debt. After someone dies, the estate is the only legal entity obliged to pay the bills for the decedent. Estate exists once there is a court order starting a probate and naming a PR. If a probate has not been opened, a creditor can initiate a probate to attempt to get paid if the creditor believes the decedent left assets. Otherwise, the debt may die with the person. Role of EBS: Debts Exceptions: Certain debts (liens, mortgages) are attached to the inherited property or assets. Cars come with lien on title Homes mortgages/liens attached to property Contractual obligations Child signed as a guarantor for NH or is cosigner on a car, loan, mortgage, etc. Child is a joint owner 8

9 Role of EBS: Debts Surviving spouse situation: Very fact-specific. Talk to BSSA. Assuming deceased spouse was the debt-incurring spouse (his medical bills), creditor cannot collect from survivorship MP, jttenancy property, deceased deferred employment benefits, life insurance proceeds. Creditor would have to commence a probate action to get paid. Remember, creditor only gets paid afterpriority of claims. Role of EBS: Debts Example: Alfred dies leaving surviving spouse Edna. Alfred owes money to hospital for his medical expenses. Alfred s funeral cost $10,000 which Edna paid for. If Alfred leaves less than $10,000 in assets at his death, then after payment for priority of claims, no money is left to pay creditor. Role of EBS: Divestment Institutionalized spouse on NH Medicaid cannot disclaim any inheritance. Must spend-down those assets, or Set up a WisPACTtrust Failure to elect against a spouse s will Wisconsin law states that spouses are entitled to ½of the marital estate unless the couple has previously signed a marital property agreement. 9

10 Role of EBS: Divestment Example: Spousal impoverishment situation: 1 spouse on NH Medicaid, other spouse in community. If community spouse (CS) dies first, institutionalized spouse (IS) inherits assets and becomes over-asset for Medicaid, and therefore ineligible until assets spent down. Even if CS leaves all assets to kids in a will, the IS must elect against the will to receive ½the estate assets, otherwise a divestment occurs. Private Medicaid/estate planning attorneys can assist clients to avoid this situation. Note: If IS dies first, and leaves a surviving spouse, then no estate recovery! CS can leave estate to whomever he wants. Role of EBS: Confidentiality Remember, confidentiality does notdie with the client. EBS (and others) still have a duty to maintain all client files in confidential manner, cannot disclose client info to others. Talk to your BSSA anytime you are asked to release info about a client or disclose info in your file. 10