What happens in a probate hearing

We have talked about the P-Word before, but I still have clients that are scared of it. The root of that fear is often THE HEARING. IN COURT.

Let's dispel some myths.

If you're the executor or executrix of a will, or the adminstrator/adminstratix of an adminstration, this is what you can expect.

Scenario #1: Everyone gets along, and there is a valid Will.

Proate hearing in a Courtroom

Venue: First off, the proper county is where the person lived for the last bit of their life, or where they had some property (see TX Probate code Sec. 6.).

In some counties, (like Dallas, Fannin, Tarrant, and Hunt, to name a few), the hearings are held in a crowded courtroom, and dozens of cases are heard one after another.

Informal, office probate hearing

     

In other counties (Grayson, Collin, mostly the smaller counties but it really depends on the judge and if there is a statutory probate court), the hearing is often less formal, with the judge often shaking your hand at the door to his or her office, and then showing you to a chair right there in the office. You are still giving sworn testimony, but just from a comfy chair instead of a in a courtroom. Either way, its no big deal.

Proceedings: At the hearing, you will be sworn in, just like you are giving any other testimony in any court. This makes some people scared. Don't be. Next, you essentially say "yes" or "no" to a list of facts about your deceased relative or friend. "Did they live in this county when they died.... Yes." "Did they have any children born after this will was written...Yes or No (tell the truth). "Is this their last will and testament, and does this appear to be their signature...Yes (it better be)." Easy stuff. Next,  judge will then sign an order admitting the will to probate, and you sign several pieces of paper including an "Oath" which is you just swearing that you will do the right thing as the executor or administrator.

After the hearing, you go to the clerk's office and get Letters Testamentary or Letters of Administration which will allow you to go to banks, financial institutions, and other places in order to handle the business of the estate. You will also sign a required notice to creditors, that must be published so that anyone who things the deceased person owes them money can make a claim.

Final Steps:  Within 90 days of qualifying as executor or administrator, you must file an inventory with the court. If you need extra time, the court will usually let you have it. The inventory lists all the assets which pass under the decedent's will or estate, and not those that are directly distributed out (like POD accounts or insurance to others). After the inventory is filed, the judge will sign an order approving the inventory. Then you're pretty much done with the formal work, all that is left is paying the bills, filing a final income tax return (and an estate tax return if necessary) and distributing the estate. Remember that creditors have 1 year to come back and request you pay them debts, so it is usually a good practice to leave some funds in an account for that.

Note: Small estate administrations and muniments of title are similar to this, with less requirements.

Scenario #2: Everyone gets along, and there is no will.

Venue: Always the same, unless its contested, then it might get sent to District Court.

Proceedings: Since there is no will, an Attorney Ad Litem will have been appointed to do background research and determine the heirs. They will be at the hearing, and the estate has to pay them (think of this as the I HAD NO WILL tax). The Probate Code requires that you have witnesses if there is no will, think of these as close friends who knew the family, but are not inheriting anything. Some courts will let you get away with 1, many require 2. Sometimes you can have this done by an affidavit, so just check with the specific court. Everything else is the same.

Final Steps: Same as above.

Scenario #3: No one gets along, and there is a valid Will

Venue: Same as above, if there is not a contest to the will.

Proceedings: If the will names an independent executor, and this is not challenged, all is the same. Else, you have a fight on your hands, and this is where things get messy. Make sure your lawyer knows their stuff. Else, if you can actually get it to the probate hearing, its all the same.

Final Steps: Same, and good luck getting your family to agree on who gets Dad's old boots or Mom's favorite china.

Scenario #4: No one gets along, no will.

Venue: Same as above, depending on the county.

Proceedings: Now you are stuck in Dependent Administration land, which we have discussed before. This means you will be in court, a lot, and your legal bills will be high. Can't we all just get along?

Final Steps: Dependent administrations require annual accountings as well as a final. There are also some more paperwork to deal with, as well as dealing with creditors claims.

Final Thoughts

Most of probate is easy, and not scary. If you have a fight, it is no different from any other lawsuit, and those can be scary. Just make sure you know what you are getting yourself into before you show up at the courthouse unprepared.

For the Moms

Mother's day is coming up. All of us, whether we know them or not, have one.  If they are in your life, wonderful. If not, I'm sure you either know of a mom out there somewhere who could use a nice word of encouragement, or just an afternoon of help in her mom-duties.

For those of you who are still trying to scramble for a last minute mother's day gift, skip the flowers or the card. It's time you gave the gift of some estate planning and tax advice to the mother in your life.

Here is a list of some of the great gifts you could give that special mom out there:


1.  Designation of Guardian of a Child Advance- In Texas, a competent adult guardian of a minor child can designate a backup guardian in case they become disabled or pass away. You can also do this in a Will, but in the event there is not Will, this is a good safety valve. This allows mom to rest easy, knowing that who she wants to take care of her child, will.

2. Help her make a Will- Beat the person who offers just number 1, and help her actually make a will. You can combine the designation of a child guardian, and this way you can set up an estate plan or a trust that will provide the comfort that knowing your children will be taken care of provides.

3. Educate her about Tax Savings- The more kids you have...the more you get child tax credits! Educate the mom in your life to make sure she is getting all the appropriate income tax credits and deductions. See here.

4. Educate Mom about Life Insurance, and Savings Accounts- If your mom has work sponsored or even just a life insurance policy, make sure it is left to the right person(s), or in a way that it will take care of their loved ones. Also, tell them to make sure and check any bank, savings, or investment accounts, to that the proper beneficiary designations are made.

OR, scrap all this, and get her some cupcakes or chocolate covered strawberries.

Special thanks to all you moms out there. I, and the rest of us wouldn't be here without you.

Elder Abuse: How to Spot it, What to do About it

Just typing the words "child abuse" makes me sick, and just plain mad. As I'm assuming it does for most. But what about "elder" abuse? Do you even know what it is?

We treat children specially because we have determined, as a society, that they are not responsible enough to be left alone, make their own decisions on important matters, or handle finances. Thankfully, the Texas Department of Family and Protective Services is there for the old folks too.

The department offers services for "any adult who has a disability or who is age 65 or older over that is in a state of abuse, neglect, or exploitation." Lets break this down into what this means, and how to look for it.


Scenario 1.
You have a (neighbor/friend/family member/parent hereafter "Papa") who is getting on in years and/or suffering from a disability. As a result, they require home health care. You have never really paid attention to Papa's finances, but have noticed that home health care attendant (hereafter "Anna Nicole") is coming around more often, and Papa is speaking about them more. You notice one day that Anna Nicole is driving a new, different car, and generally looks like she has new jewelry.

Then you ask Papa, and he tells you they are getting married.

What to do:

You can take a guardianship out on Papa to control his finances, but they are expensive. If he is competent, get a Power of Attorney over Papa. You likely just need to sit Papa down, tell Anna Nicole to get lost, and hope she hasn't done too much damage. Check Papa's bank accounts, insurance policies, and any brokerage or financial accounts, and see if Anna Nicole's name is there or if she has somehow become a beneficiary. Tell the police, but usually the best bet is to get Papa away from the damage and stop the bleeding. Also, report Anna Nicole to the Texas DFPS at 1 800 252 5400 so they will have her on record.

Scenario 2.

You have a (neighbor/friend/family member/parent hereafter "Nani") who lives alone and has no kids. Nani passes away, and leaves you, the favorite niece, in charge of the estate. You start going through Nani's finances and realize that something is amiss. You find in her personal papers, amongst her will, is a Power of Attorney naming someone you are not familiar with (hereafter, "John"). You do a little more digging and check the banking records, and realize that John has cleared out a significant amount of money from Nani's accounts. For a real life example, see here.

What to do:

Call the police. They prosecute this stuff. Hopefully you can try and get some of the money back, but you never know. The best way to fight it is prevention: talk with your elderly friends and make sure they have their estate and powers of attorney in order. You can't stop all fraud and exploitation, but you can prepare and try to limit the potential damage.


Conclusion:

I try and bring levity to most topics, but elder abuse is not funny on any level. Often, the above scenarios are much worse, and physical abuse, threats, and emotional abuse are going on as well. The point is that abuse is abuse, and we all deserve a voice. There are resources out there to stop this terrible practice. Lets educate ourselves, know the warning signs, and do something about it.
 

Its all about Trust

Who can you trust?  What can you trust? Can you trust your assets to a Trust?

People hear the word "trust" and think lots of things. Trust me. Trust fund. Trust fund baby. Bank and trust. Trust account.

I have previously written on the perils of the probate avoidance "living trust" and how people get scammed into making one.

So I will not belabor that. What I will focus on is a growing problem of choosing your trustee.

Scenario 1.
You are your own Trustee.

Ok, you out smarted the system. Who needs to trust anyone except themselves? Well, the government has figured that one out. They look at someone who created a trust, for their own benefit, who named themself as a trustee...as a nothing. You just put your wallet from your back pocket to the front, as you still have control. Your trust is pointless, and you probably were convinced you needed one by someone who didn't know what they were talking about.

Also, as an individual taxpayer, you have to earn $400k in 2013 dollars to hit the top, 39.6% tax rate. Got your business in a trust? You get there at $11,950.  That is a huge, huge tax hit, and that applies to all of these scenarios.

Scenario 2.
You pick a close family member as Trustee.

Ok, a little better. Don't pick a beneficiary, or their share loses any creditor protection like in scenario 1. Further, if you picked your wife/brother/son, what happens if they get mad at you? What if they get too busy? What if, they decide to invest all your assets in a great stock tip they heard, only to have it turn out to be a bust? Do you have any recourse? Are you going to sue your wife/son/brother? I didn't think so. Choose wisely here, and make sure they are not a beneficiary of the trust.

Scenario 3.
You pick a bank or institutional Trustee.

A pro trustee, banks are a safe bet. They are insured, know what they are doing, and have access to investment leverage and knowledge that most do not. However, they do not know your family (likely) and are not emotionally invested, so you might not be able to call them at midnight or on the weekend for an emergency. Also, they cost.

Conclusion:

Picking a trustee, like picking an executor for your will, is a big decision. If you are in over your head and know a family member or friend would be too, then trust a professional. If it doesn't make financial sense to pay someone, then pick someone whom you trust, who has the time, and will do a good job. Finally, unless you have talked to a professional about the limited instances you should be trustee over your own trust, don't. Just don't.

The Holographic Will

Sounds spooky, right? Sound eerily similar to the Smash 1995 hit, Hologram Man? Does it make you think of the resurrection of Hologram Tupac at last year's Coachella concert? (warning, explicit lyrics coming from Hologram 'pac. However, it was pretty amazing.)

Well, it's a lot like that. Kinda.

In Texas and many other states, there are a variety of things that pass for a will. According to the Texas probate code, a "holographic will" can pass for a valid last will and testament if it is written, and signed, "wholly in the handwriting" of the testator. They changed the handwriting part because the old statute just said writing, which led to the case where a fully typed out will being deemed valid, with even the signature typed out. Those are easy to forge, so they changed it.

What this really means: You can take a crayon, and write your will on a napkin. Really. According to a bunch of people and what I still cannot track down as a relevant source, a guy wrote "all to wife" on a bedroom wall, and this counted as a holographic will. A farmer in Canada allegedly scratched his will into the fender or a tractor, as he knew he was going to die. This worked.

I have also seen a husband and wife try to do a "joint" holographic will. You can do a "joint" will, if it is executed with all the formalities of a witnessed, attested normal will, but this does not work for a holographic will. Think about it: whoever did the writing of the "joint" holographic will and signs their name has made a valid will. However, the extra signature of the spouse makes the will fail because it is not "wholly in the handwriting" of the testator. (see Roberts v. Drake (Civ.App. 1964) 380 S.W.2d 657 if you want to read about the story there).  Then you're stuck, and your estate passes by intestate succession. (see my earlier post for what that means.)

But don't do this. I don't recommend holographic wills, mainly because they end up being more expensive for your estate than if you just paid someone (a lawyer) to do one. You have to "prove" the will in Court after you die, which requires witnesses, and usually a lawyer to quarterback everything. However, sometimes you just can't wait.

IF you must do a holographic will, take out a nice pen and paper, and do it right. Sign your name, and date it. Write out "this is my last will and testament, and I revoke any other prior wills by this writing." Then say what you want to happen.