Probate and Trust Administration

Probating An Estate.  For some estates, probate proceedings are required. For others, probate is not required. The need for probate depends on circumstances. Various factors, including the value and nature of assets, creditors and the relationship of the survivors to the deceased, will determine whether probate is appropriate. In the state of Washington, most probate proceedings are relatively simple, requiring little direct court involvement mostly due to Washington’s unique nonintervention option. The process requires the preparation and filing of legal documents and may require the holding of one or more court hearings. The procedure usually begins with the appointment of an individual as a personal representative to collect, manage and settle a decedent’s estate.

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A decedent who has a will dies “testate,” and distribution of that person’s probate estate is made according to the will. The will usually designates a personal representative (sometimes called the “executor”) to manage the estate assets. If no valid will exists, the decedent dies “intestate,” and the court will appoint a personal
representative, or “administrator.” The personal representative, often with the guidance of a lawyer, is responsible for the proper handling and settlement of the decedent’s estate. Typically, the representative is required to:

1. Notify heirs and creditors of the probate proceedings.
2. Take possession of, inventory and preserve the decedent’s probate assets.
3. Collect all income, such as rents, interest or dividends as well as debts, claims and notes due the decedent.
4. Determine the names, ages, residences and degrees of relationship of all heirs.
5. Complete any pending lawsuits in which the decedent had an interest and represent the estate in any
challenges to the will.
6. Prepare returns for and pay all state and federal estate and income taxes.
7. Pay the valid claims of creditors.
8. When necessary, sell property to raise funds to settle claims, taxes, and administrative expenses.
9. Transfer decedent’s title to real property and to certain personal property (such as stocks and bonds) to
those entitled to receive it.
10. Distribute remaining assets to designated persons.
11. File a Declaration of Completion of Probate with the court.

In some cases, more extensive proceedings are required. An example would be an “insolvent estate” (more debt than assets) or where a contentious family situation exists. In other cases, informal methods may be used to transfer property without court proceedings. An affidavit procedure, for example, provides a swift and informal transfer of certain “small estates.” Proceeds of life insurance and retirement benefits may also be paid directly to beneficiaries without a probate proceeding.

The Role of the Court. All probate proceedings are subject to the jurisdiction and supervision of the Superior Court. The location for a probate is generally determined by the decedent’s county of residence, but can be held in any county of the state. Once appointed, the day-to-day work of the personal representative, such as paying bills, settling uncontested claims, selling estate assets, preparing tax returns and paying taxes, is generally accomplished without intervention by the court. When disputes arise or uncertainty exists as to the proper meaning of a document or the identity of a person entitled to share in the estate, the court will hear testimony and enter appropriate orders.

Time Required to Settle an Estate. Because each situation is unique, it is difficult to precisely predict the time required to settle an estate. Some estates can be closed within weeks while others may take many months, even a year or two. The initial step of petitioning for admission of the will to probate usually occurs within weeks of a death.The personal representative then notifies creditors, the beneficiaries named in the will and other heirs of the death. Partial distribution of assets may be made in some but not all probates before the estate is formally closed. Typically, distributions occur after the creditors’ claims are resolved. Creditors are required to file claims against an estate within four months from the date of the first published Notice to Creditors. Tax requirements or the need to sell and distribute funds to beneficiaries or claimants may complicate and prolong final settlement.

Taxes. Every estate may be subject to two types of taxes, depending on the value of assets included in the“taxable estate” and the income and expenses of the estate. The “taxable estate” includes both probate and non-probate assets.

One type of tax, imposed by the federal government, is the federal estate tax due nine months after death. Based on the value of assets in the taxable estate, this graduated tax is levied on the net taxable estate after allowing certain deductions and exemptions. A second tax is the Washington estate tax, which is now a separate amount and payable directly to the state. Consultation with a legal or tax adviser may be appropriate to determine what filings are necessary. Because the estate is a separate tax-paying entity, a federal fiduciary income tax may be due. This tax is based on income and expenses generated from probate estate assets, and is similar to the federal personal income tax. The obligation to prepare and file tax returns and pay appropriate tax liabilities may exist even if none of the estate passes through probate. Because a large body of law has evolved with regard to the taxes described above,extreme care should be exercised by a personal representative when computing taxes and preparing returns.

Fees and Costs. Probate costs can vary, ranging from a few hundred to several thousand dollars or more. Fees and expenses are influenced by an estate’s complexity, including such factors as the type of assets, claims by creditors and the need to file tax returns. Both the personal representative and the lawyer for the estate are entitled to reasonable compensation for their services, and their fees may require approval of the probate court. Fees may not be based solely on a percentage of the estate’s value; common considerations in determining fees are an estate’s complexity and the type and amount of work involved.