PROBATE – GETTING COURT ORDERS TO ADMINISTER ESTATES
Compassionate Legal Counsel During A Difficult Time
The death of a loved one is never easy. As an experienced probate attorney, I understand the personal and legal challenges people face after losing someone. I provide compassionate and sound legal counsel to those who need assistance with estate administration.
A good book about what to do when a loved one dies is called: I’m Dead, Now What?: Important Information About My Belongings, Business Affairs, and Wishes: Peter Pauper Press
Probate vs. Non-Probate Estate
Advantages of Avoiding Probate. It is best to avoid the cost, time, and public disclosure of probating the Estate of a deceased person. Probate is the Court supervised process for publicly appointing an Executor (Personal Representative) of the Estate to file an inventory and pay taxes, creditors, and beneficiaries. Doing so is referred to as Estate administration. The best source of online information about probate in Washington is at this link.
Probate is for solvent Estates. If an Estate is insolvent, there is no bankruptcy. Creditors are sent notice that there are no assets to probate, and Creditors write off the accounts as losses. Beneficiaries are not liable for debts of the Estate.
This Trust contains instructions for the Successor Trustee regarding administration. It also contains an explanation of options and the context in which Wills and Trusts operate. The purpose is to promote better decision making by the Trustors and Successor Trustees by raising issues to consider when giving to beneficiaries.
The way to avoid Court involvement is to increase the number of non-probate assets (passing to beneficiaries in ways which do not require an Executor). The Executor must be a resident of King County. The Successor Trustee of the Trust can live anywhere in the U.S.. These ways include: Transfer on Death Deeds for real estate, beneficiary designations for 401(k)‘s, IRAs, life insurance policies, and some brokerage accounts, payable on death designations for bank accounts, and funded revocable living trusts.
The broader purpose of estate planning is to promote family harmony through communication about difficult subjects, and to make your family more resilient and less likely to have disputes. Estate planning is ultimately about people, and how they feel and get along, not just property.
The Letters Testamentary issued by the Probate Court are need to transfer real estate that is not subject to a transfer on death deed, in a Trust, or owned jointly. Letters may also be necessary for the Successor Trustee to give full effect to the Trustors’ wishes because the Letters may be demanded by third parties. Typically, final distribution should be made four (4) months after Probate is initiated or after the Trustee gives notice of the Trust to beneficiaries. If the Trust will be making distributions for more than one (1) year, then a Taxpayer ID Number will be needed for the Trust, as well as an annual tax return.
Sometimes proof is required that there is no probate. This might be needed for a surviving spouse to transfer a home or to prove to creditors that there are no assets in the Estate by signing an Affidavit of No Probate.
Avoiding Probate with an Affidavit of Small Estates.( RCW § 11.62). As long as an Estate contains no real estate and is valued less than $100,000 no probate is needed. A notarized affidavit may be signed by the beneficiary in order to receive a check made payable to the Estate. This is an important reason to record Transfer on Death Deeds to remove all real estate from the Estate of the Deceased.
Avoiding Probate with Beneficiary Designations on Retirement Accounts. The Trust may be named as contingent beneficiary after your spouse on life insurance, 401(k) accounts, IRA accounts, or any account for which a beneficiary has been named. The Successor Trustee will then claim directly from the custodian of the asset without the need for involvement by the Personal Representative (Executor) of the Estate.
INHERITED IRAS AND 401(K)’S ARE TAXABLE. CONSULT A CPA. Inherited Roth IRA‘s are not taxable unless the Estate pays Estate Tax. Successor Trustees shall have the power to elect, pursuant to the terms of any inherited retirement plan, the mode of distribution of the proceeds – immediately, over 5 years, or over 10 years.
Surviving spouses can elect to treat the account at their own rather than as a beneficiary.
The custodian of any retirement account shall be able to “look through” the Trust to the named beneficiaries. The required minimum distributions (RMD) required beginning date (RBD) is currently 72. Failure to take RMD results in an IRS penalty of 50% of the amount of tax owed for each year a distribution was not taken on time. The Successor Trustee shall have the right to amend this Trust to comply with any regulations to give effect to the Trustors’ wishes. Distributions from retirement accounts can start at 59-1/2 without the 10% penalty.
The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 was created to aid retirement savings and contains multiple provisions of which retirement account holders should be aware.
Holding Real Property as Joint Tenants With Right of Survivorship. Giving an interest in real estate to an adult child will avoid probate, but may have other unintended consequences. If the adult child files for bankruptcy or goes through divorce, the property may be affected. Issues regarding the 5-year minimum Medicaid reach back period may also arise. There is no step up in basis for gifts during life as there is for gifts after death.
Payable on Death Accounts (POD). Some accounts allow a Payable on Death designation that you can use to make the account a non-probate asset. This creates liquidity for the Estate by providing faster access to funds. Another significance of POD is that the funds are not subject to creditor claims.
No Asset Protection or Tax Planning. The Trust provides no asset protection for JANE DOE and JOHN DOE against any creditor claims, and includes no tax planning regarding the Federal Estate Tax or Washington Estate Tax. Tax planning is not covered by legal insurance plans, and involves additional cost, risk, administrative burden, and specialized legal and accounting services. Irrevocable Asset Protection Trusts are complicated.
The Washington Estate Tax filing threshold and exclusion amount in 2020 is $2.193 million, with a marginal tax rate starting at 10% with a top rate of 20% (the highest in the nation). Beneficiaries can be resentful if your Estate pays in taxes what could have made a difference in their lives.
Prior to 1981, Washington had an inheritance tax in which the beneficiaries paid the tax. Since then, the date-of-death value of the estate (minus real property transferred by a recorded Transfer on Death Deed) is subject to the tax, not the beneficiaries. Washington State has no gift tax. This is provided for informational purposes only. Verify exemptions, tax rates, and filing requirements for your situation with a CPA.
Planned Giving Over Your Lifetime to Avoid Estate Tax. In 2020, the federal lifetime unified exclusion amount for estate tax and gift tax is $11.58 million per person ($23.16 million per couple), with a top rate of 40%. The federal annual gift tax exclusion from reporting remains at $15,000. File IRS Form 709 if you give more than this to anyone other than your spouse in a year. Tuition or medical expenses you pay for someone to a third party are not considered gifts for IRS purposes. Gifts to charities and churches do not count against the exemption amount.
At Mulvaney Law Offices, PLLC, in Bellevue, Washington, I work with families and Personal Representatives to navigate them through probate. As your lawyer, I will offer straightforward guidance to help you handle your loved one’s estate appropriately and efficiently, while maintaining harmony among survivors to the maximum extent possible.
Top 10 Probate Pitfalls
If you are probating an estate, it is important to seek skilled legal guidance to avoid significant pitfalls that can lead to legal troubles and rifts in families. Common pitfalls include:
1. No will
2. No witnesses of will
3. Poor choice of personal representative
4. Personal representative not communicating with beneficiaries
5. Disagreements among beneficiaries
6. Disagreement between beneficiaries and personal representative
7. Inadequate inventory
8. Personal representative acting without beneficiary consent
9. Failure to secure estate property
10. Lack of focus on emotional impact of death and relationships among
surviving loved ones
Free Probate Law Consultations
Please email me at firstname.lastname@example.org to schedule a free initial legal consultation to discuss your probate concerns. I offer free, confidential legal consultations to individuals and families regarding probate.
MULVANEY LAW OFFICES, PLLC
14205 SE 36th St. Suite 100
Bellevue, WA 98006-1553
Mulvaney Law Offices, PLLC, is located in Bellevue, Washington, representing estate planning & probate, chapter 7 and chapter 13 bankruptcy, and real estate transactions clients in Seattle, Tacoma, Everett, Bellevue, Redmond, Renton, Issaquah, Sammamish, Maple Valley, Burien, SeaTac, and throughout King, Snohomish and Pierce counties.