Probate and Trust

[Gretel]

For the better or worse until yesterday I thought that if there is a trust that becomes irrevocable upon death and a pour-over will that probate is not required. I know now that this is only true if all assets were either titled to the trust, titled in a way that the asset can pass directly to a bene, or else are below the limit for probate (household goods).

Two daughters are the trustees and benes, and one of them the PR. They started the process of contacting banks etc and are totally overwhelmed, haven't gone to the court house yet for the official appointment of PR. I know the the PR is responsible for starting the probate process and here comes my question:

The PR doesn't know anything about rules, the accountant cannot give legal advise, the court house cannot determine if probate is needed since they do not know the value of the estate. Do you send every client to a lawyer to handle possible probate, or what do you do?

Seeing this scenario getting more and more complicated developing in front of my eyes I know that someone should have been with them at each step of the way gathering the financial information. I already had a run in with a banker who told them they do not need a separate checking account for the trust.

[Burke]

I wish banks would stay the heck out of this. I cannot tell you how many times tellers tell customers they don't need an estate, trust, etc bank account when they could not possibly know that off the top of their heads.

It does not take a rocket scientist to determine the value of most estates. Unless appraisals of valuables, real estate, businesses etc are involved, most personal representatives can determine bank accounts, CD's, savings instruments, stock accounts, and the like within 30 days, just by the mail that comes in. Filing the will for probate requires the best estimate of the estate at that time for the probate tax and to determine bond. In my state, a detailed inventory is not due for 4 months after qualification. This gives you time to go through more complicated evaluations. If the inventory is way more than first estimated at probate, they will assess an additional tax then. In addition, the clerk of court and/or commissioner of accounts gives full written instructions to go by in completing this process, and provides the fees and forms which will be involved. I work with my clients and guide them through this process as well, and will handle the entire accounting for a fee. Or they can do the accounting and inventory themselves. Unless it only consists of a few items, I recommend they have someone who has had experience do this. An attorney does not have to do it, and will be the most expensive option. I recommend an attorney in a few instances, depending on the situation with the estate and the family/beneficiaries.

[Gretel]

Thanks for your insight, Burke. It seems that your Clerk of Court is much more competent than ours. They did not even want to touch anything unless it goes through the lawyer. While I agree in this specific situation that the lawyer should be involved I do not understand why the court did appoint the PR as is stated in the will. This is a great learning experience for me, filling in some gaps of understanding the practical matters.

[Burke]

Sometimes it makes a big difference in the size of the town as far as competency of the probate court clerks go. And sometimes the states have inadequate forms as well. When I did one in SC, I could not believe the document they sent me to fill out. I practically had to re-write it. Funny, though, when the client took it all down to the courthouse, they said it was the best accounting they had ever come across. Didn't surprise me based on what they were giving the PR's.

[Gretel]

That gives me an idea. These forms might be available online. What is the State you are in or a good for forms, if you are willing to share this information.

[Burke]

These forms should be online. Go to your state's website (or Google "court (or probate) forms for fiduciaries XXXX(state)" and it should direct you to that location, which might be faster. You should use the forms they have approved for filing. Mine are under the state's website for the court system. They are not tax forms. They are accounting forms, which should follow the same format more or less. Cash in, cash out, any carryover balance from year to year. It also has the forms for Inventories, etc. etc.

[Gretel]

Burke, thanks again. Seems like I am out of luck in Montana. The only forms available online are for estates under $50,000. I am aware that you were talking about accounting forms and was hoping to find a good example for this from another State.

[Burke]

Try this:

http://www.courts.state.va.us/forms/circuit/fiduciary.html

Also, it appears Montana State University has a pretty good publication on procedures for settling estates there, with links to some forms. http://store.msuextension.org/public...MT199006HR.pdf

[Gretel]

Thanks again, I kept ending up there or on the official website. However, no forms other then for estates under $50,000 are available online. Let's give up here, I appreciate your efforts.

[Burke]

If you cannot find any forms, I suspect that they don't have any official ones. They just let the Execs, PR's, or their attorneys make up their own for accounting purposes. If you look at the VA site, the accounting forms are the summary page only. I still have to break down each of those categories which have any information in greater detail with supplementary pages. I just do it in Word and attach. (PS: I did find the form for applying to be the Personal Representative in Montana which is filed at the courthouse.) You just have to provide the best estimate of the estate value. IF everything is titled in or poured-over by will into the trust, you do not have to file probate. At least that is how it works everywhere I have ever seen.

[Gretel]

If you cannot find any forms, I suspect that they don't have any official ones. They just let the Execs, PR's, or their attorneys make up their own for accounting purposes. If you look at the VA site, the accounting forms are the summary page only. I still have to break down each of those categories which have any information in greater detail with supplementary pages. I just do it in Word and attach. (PS: I did find the form for applying to be the Personal Representative in Montana which is filed at the courthouse.) You just have to provide the best estimate of the estate value. IF everything is titled in or poured-over by will into the trust, you do not have to file probate. At least that is how it works everywhere I have ever seen.

Thanks a million. Your last statement is very interesting since this is what I believed until two attorneys independently said that the pour over will does not avoid probate. One of them is the attorney who set up the trust. I thought that might depend on the State. Now I am curious and will look up the Montana Statute when I have more time.

[Burke]

Thanks a million. Your last statement is very interesting since this is what I believed until two attorneys independently said that the pour over will does not avoid probate. One of them is the attorney who set up the trust. I thought that might depend on the State. Now I am curious and will look up the Montana Statute when I have more time.

Well, I will check with my people tomorrow and get back to you on what they have to say. It kinda makes sense if there are assets hanging outside the trust at death, but it was my understanding that was the whole purpose of the pour-over clause to begin with. I had one once where the TP died 4 days after setting up the trust, and nothing was in it yet. So it did go to probate.

[Burke]

I was able to discuss this with my local Commissioner's office, and the attorneys are correct. IF there are assets NOT already titled in the trust -- that are still titled in the deceased's name -- then they are estate assets and have to be accounted for (which means they are part of the probate estate), even if there IS a pour-over clause which sweeps up such assets and puts them in the trust after death. I should have realized that when I posted. Only assets inside the RLT bypass that estate process. If there are such assets outside the RLT, they would be shown on the inventory, and the accounting would be simple, showing only the estate assets being transferred to the trust, but still subject to probate tax and that review process. The PR should be able to determine what is and is not in the trust by the way statements are addressed, since once assets are titled in the trust's name, the proper custodians of those funds/assets should have made those corrections in their records. But not unless the grantor actually officially directed them to retitle them, and gave them a copy of that trust information.

[Gretel]

Yep, I learned that lesson. Yes, it is very clear, as far as accounts go, what belongs to the estate. I assume any household items belong to the estate unless they were included in the trust when the trust was set up. What I am still wondering about is how a house is "normally" titled when a married couple buys a house (I am aware that State rules are different). I will go to our court house and find out - it also might have changed over the course of decades. For my clients records a title search is under way since 50% of the residence might have belong to husband when he died 10 years ago and wasn't jointly owned. The attorney who handled that death did not even mention the home but listed all other assets. Without this home that old estate was not subject to probate. Once lives and learns. The biggest thing I learned (besides of what constitutes probate) is to be very careful with any legal opinion and to respect better what lawyers do.

[Burke]

Ah yes, real estate is an entire different ball game. Most homes are owned Joint Tenants by the Entirety which means if that were the case, ownership went to the spouse at the first spouse's death. There are other title arrangements too, then when you get to community property states, everything changes.