Estate administration is the term used to describe the
process by which a person's affairs are settled after
death. The process varies depending on whether a person
died leaving a Will, died leaving no document at all,
or died leaving a Living Trust. If a person dies leaving
a Will or with no document at all, then the person's estate
(with certain limited exceptions) must go through probate
at their death. If a person died with a Living Trust which
was funded with their property at their death, then the
trust goes through a process called trust
administration to settle the person's final
Probate is the process by which a court transfers property
of a person who dies to the person's beneficiaries or
heirs. It requires that a petition be filed with the Superior
Court and that an executor or administrator be appointed
to inventory the estate, identify and collect assets,
pay debts of the estate, account for expenditures and
income of the estate, and ultimately distribute the estate
to the persons entitled to it.
Why Does Everyone Want To Avoid Probate?
• Probate takes time. Even the simplest estate
takes a minimum of 6 months to probate. A complicated
estate or an estate involved in litigation can take years
to probate. However, in most cases, when a person dies
with one or two pieces of real property and other liquid
assets, an estate can be probated in about a year's time.
• Probate costs money. Probate is a process involving
a court. As a result costs associated with the court process
(filing fees, bond premiums, appraisal fees) and attorney
fees (set by law as a percentage of the estate, 2 - 4%
depending on the size of the estate) will be incurred
by the estate.
There Are Some Advantages To Probate
• Costs are controlled. Although probate costs
will be incurred (see above), they are also subject to
approval by the court. Ordinary fees are set by statute
and extraordinary fees are reviewed and approved by the
court. An attorney or executor only receives what the
court approves. Attorney fees and trustee fees incurred
in settling a Living Trust are neither reviewed by nor
approved by the court and in some cases may be higher
than fees for a probated estate.
• Probate involves court supervision. There are
some situations where court supervision is desirable.
When a person dies leaving minor children, for instance,
it may be desirable to have the court involved and reviewing
accountings of the executor or administrator. The court
must also approve fees paid by the estate. These are significant
advantages when beneficiaries are too young or otherwise
unable to protect their own interests.
While a Living Trust can substantially reduce the amount
of work and costs when a person dies, there are nevertheless
important legal steps that must be taken following death.
At that time the remaining trustee or successor trustee
should always consult an attorney to make sure that title
documents to real property are prepared and recorded,
to review the terms of the trust for proper administration,
to make decisions regarding taxes and tax planning, to
prepare necessary tax returns for the deceased person
and the estate, to take steps to extinguish creditor rights,
and otherwise to settle the affairs of the trust following
the death of a trustee.
After a person's death, a trustee of a trust is generally
required to assemble and inventory assets, pay debts and
taxes, account for trust property during the trustee's
administration, and distribute trust property according
to the terms of the trust. While one of the purposes of
a trust is to avoid the formalities of probate, there
are nevertheless certain "formalities" which
provide a measure of protection both for the trustee and
the beneficiaries. These measures provide for limiting
the time in which contests and claims can be made against
a trust and limiting the personal liability of the trustee.
The guidance of an experienced attorney is important
in this process for the protection of the trustee and
the trust estate.