Paul T. Czepiga, J.D.
Czepiga Daly Dillman, LLC
Newington & Wethersfield , Connecticut
Member of the national ElderCare Matters Alliance,
Editor’s note: The following article about the probate process is a case study of the system in Connecticut. Although not nati0nal in scope, the steps examined in this article may be useful when doing estate planning in whatever state you live in and for generating questions for your financial and legal advisors.
Many people believe it is important is avoid probate. Some have heard that using a “living trust” avoids probate. Others may have had a particularly bad experience with a probate court.
To understand why one might want to use or avoid probate, let’s first understand what the probate court’s role is in processing estates of decedents, sometimes called the estate administration process.In Connecticut, probate courts deal with a variety of matters, from processing estates of decedents to handling termination of parental rights. Generally, when a person dies, the probate court serves:
In summary, the probate court oversees the transfer of title of the decedent’s assets from the decedent’s name to the decedent’s beneficiaries, making sure along the way that all the assets are accounted for and all the bills are paid.
Much of estate administration requires filing a series of forms with the probate court, with occasional hearings and deadlines. A brief walk-through of the steps follows:
1. Application for administration or probate of will
The first step is to file an application with the appropriate probate court, together with a certified death certificate and the original will and codicils. The application will list basic information about the decedent, including the beneficiaries under any will or codicil and all heirs at law.
Once the probate court receives the application, it will schedule a hearing to admit the will and appoint an executor. If there was no will, then the court will appoint an administrator. In certain circumstances, the probate court can either streamline the hearing process or dispense with the hearing if all interested parties sign waivers.
The probate court will provide the executor or the administrator with fiduciary certificates to evidence his authority to act on behalf of the estate.
2. Certificate for Land Records
If the decedent owned real estate, the probate court will provide a “Certificate for Land Records” that the executor or administrator will record with the town clerk showing that the executor or administrator has been appointed.
3. Inventory of solely-owned assets
Immediately after appointment, the executor or administrator should marshal the decedent’s assets and determine the value of all assets on the decedent’s date of death. All assets that were owned by the decedent in his sole name must be reported to the probate court. To do so, the executor or administrator must file an inventory listing the solely-owned assets and date-of-death values with the probate court within two months of appointment.
Certain assets owned by the decedent need not be reported. These include anything payable to a named beneficiary (so long as the named beneficiary is not the estate), such as life insurance policies and annuities, and joint bank accounts, which transfer automatically on death to the joint owner without the need for probate court oversight. Although some assets may pass outside of probate, the executor or administrator will need to know the date-of-death value of these assets to complete the estate tax return, discussed in further detail below.
4. Pay expenses and claims
Once the executor or administrator is appointed, the probate court will have a “Notice to Creditors” published in a local newspaper. Creditors have five months to present claims against the estate to the executor or administrator.
The decedent may also have outstanding bills of which the executor is already aware – such as the funeral bill, an ambulance bill, or payment for nursing home services.
The executor or administrator should keep track of the outstanding bills and claims.
After the five-month notice to creditor period expires, the executor or administrator must file a “return and list of claims” with the probate court, detailing what expenses and claims have been made against the estate.
5. File estate tax returns
Within nine months after the decedent’s date of death, the executor or administrator must file a Connecticut estate tax return, regardless of whether any estate tax is due. The executor or administrator may also have to file a federal estate tax return. Each will be discussed in more detail below.
For estate tax purposes, under both state and federal rules, the estate consists not only of the solely-owned assets but also the decedent’s interest in any joint assets or assets that pass outside of probate. Therefore, the executor or administrator must confirm the date-of-death value of all assets to complete the estate tax return (s).
The Connecticut estate tax return must be filed no matter the size of the estate. At present, only estates valued at $2 million or higher have Connecticut estate tax exposure. Those estates must file the Connecticut return with the Department of Revenue Services. Estates valued at less than $2 million need only file the return with the probate court.
The federal estate tax return is only required if the estate is valued at $3.5 million or more. If the estate is required to file this federal return, it must be filed within nine months after the decedent’s date of death.
If estate tax is due, it must be paid at the time of filing the return.
After the respective state and federal taxing authorities have reviewed the estate tax returns, each will send the executor either confirmation that the estate tax calculation was accurate or a letter advising of any deficiency.
If no estate tax is due, the probate court will issue a certificate or other evidence that will confirm that no estate tax was due. If the decedent owned an interest in real property, this certificate should be recorded on the land records.
6. Final acccounting and proposed distribution
Upon receipt of the assessment and evidence that all taxes were paid or none are due, the executor can start to prepare a “Final Accounting and Proposed Distribution of the Estate.”
The final accounting shows all activity that occurred in the estate, starting with the value of the inventory (the value of all solely-owned assets on the decedent’s date of death), showing all bills and expenses that were paid, and finally listing a proposed distribution of the remaining assets in the probate estate.
After the executor or administrator files the final accounting, the probate court will hold a hearing and if no objections are raised, the court will accept and approve the final accounting and proposed distribution of assets to the beneficiaries. The executor or administrator then distributes the remaining assets accordingly.
The executor or administrator could make advanced distributions before the final accounting is approved by the probate court, so long as he retains sufficient assets to pay all expenses, claims, and taxes. The executor or administrator is personally liable if there is a shortfall because of making an advanced distribution.
LENGTH OF ESTATE ADMINISTRATION
The estate administration process is not a long one. Probate estates in Connecticut generally take no longer than one year. Typically, that year is spent waiting for the notice to creditors period to expire and waiting to receive clearance on any estate tax returns filed.
More complicated estates may take longer, particularly if the executor or administrator has no prior knowledge of the decedent’s assets and must recreate what the decedent had.
Occasionally, liquidating assets can extend the estate administration process as well.
COSTS OF ESTATE ADMINISTRATION
While probate is not an inherently expensive process, we have found three reasons why probate may become expensive.
1. If the beneficiaries and/or heirs contest anything along the way, the estate will spend more time and money defending its actions or responding to objections. This typically happens when someone contests the admission of a will or the appointment of a person as executor. Beneficiaries could also contest the value of items included on the inventory and the payment of expenses, including any fee taken by the executor.
2. If the executor or administrator is not particularly trustworthy or intelligent, his actions (or inactions, as the case may be) could cause the estate to suffer additional expenses or drag on for an extended period.
3. The cost of probate may be exacerbated if the decedent left an ambiguous or inconsistent disposition of property in the will. A poorly drafted will, for example, could result in disputes over how assets are distributed. Additionally, the decedent may have made verbal promises to various relatives or friends that those relatives or friends seek to enforce after his passing.
In any event, most of the costs incurred in probate – for example, fees for accountants, lawyers, and appraisers – result from tax issues that arise regardless of whether your assets avoid probate. These professional fees will result even if you use a living trust.
Another fee that cannot be avoided is the probate court’s fee, which in Connecticut is funded in part based on fees that they levy on a decedent’s taxable estate.
People who use living trusts have taxable estates as well and will have to pay a probate fee even though their assets pass outside of probate!
Assuming a harmonious family and a properly thought-out estate plan, there is no reason to fear probate. Probate may even be a beneficial process, providing an independent and skilled entity – the probate court – to oversee the process and to ensure that everything happens according to your wishes.
Both avoiding probate and going through probate have their pros and cons. What is important is to discuss your objectives and desires with a trusted advisor who can counsel you on the advantages of either path in light of your personal situation.
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