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This blog was part of an ongoing series of educational classes and attempts to summarize a class on basic estate planning documents and the probate process. Nothing in this blog should be used in place of actual legal advice. Please contact an attorney if you need help with planning your estate.
The first thing I’m always asked is “Do I need to do anything when someone passes away?” and the answer is yes, you always need to do something. It may not always be a full-blown probate of a will or an estate, but you always need to do something.
Probate comes from the original Latin term probatum, meaning “to test or prove.” Attorneys use it as both a noun and a verb (to probate something vs. to file something in probate). When we file in probate we are testing a will and proving a will in a probate process so that we can, with legal authority, say who is supposed to be next in line to inherit property. The records of the probate court support that process; this includes all the real estate records that prove who owns what, as well as death certificates, marriage certificates, judgements, liens, title documents, and anything else that helps show who owns property.
GENERAL ESTATE PLANNING
I always recommend that everyone have the following documents as part of their estate, especially if you have children:
- Last Will & Testament -- Details who will inherit what you own when you pass away
- Power of Attorney -- We recommend all spouses have one for each other, and if you don’t have a spouse then we recommend giving one to a parent or other trusted person
- Living Will / Advanced Directive -- Put out by each state, offered for free
Other estate planning tools you’ll see used are:
- Trusts - At our firm we don’t recommend trusts as often as others unless there is a specific need for it, because in Alabama there is less of a tax incentive than in other States. We do recommend them in the case of special needs trusts or medical trusts.
- Deeds with Survivorship Clauses - These property deeds allow the living party to automatically gain sole ownership over the property after the co-owner passes away.
- Beneficiary Clauses - In estate terms, this can change whether something passes through your estate or outside of your estate. The will doesn’t control everything after you die: i.e. the survivorship deed and beneficiary clauses will be handled outside of the probate estate. A beneficiary clause can be added to things like bank accounts, retirement accounts, investment portfolios, etc. A beneficiary clause will generally preempt the estate; sometimes they will be to the benefit of an estate, in which case the will will regain control of that asset once it comes back to the estate, but anything with a beneficiary clause will pass outside the Probate Estate and will not be controlled by your will.
POA vs. ESTATE REPRESENTATIVE
This is something that routinely confuses people. An easy way to understand the difference is that a Power of Attorney is only useful to you when the person is alive, and a Personal Rep takes over when you die. The idea behind this is that a POA gives an agent the power to act as the principal. So if the principal is dead, then the agent can only do what a dead person can do (which, legally speaking, is nothing). This creates a moment of transition where a personal representative must be appointed to take over the representation of the principal.
WHAT HAPPENS AFTER DEATH
- Will: You record what you want to happen and it gets proven (probated) in Probate Court. I will always advise that you go to an attorney to draft your will rather than downloading one online in an attempt to save money; wills aren’t very expensive and every state has unique requirements and powers that can drastically change how beneficial your will is to your estate.
- No will: The state decides for you. There are statutory rules for who gets to inherit and in what order they inherit. One of the key things that surprises people is that the spouse does not automatically take everything in every case. It is also generally more expensive to probate an estate without a will than with one.
- Deed - Joint Tenants with Rights of Survivorship: As soon as you pass, the property will go to whoever is still surviving (usually your spouse). Once that person also passes, then the property will go through the estate of the last owner to die.
- Other types of Deeds: Will usually go through your estate.
- Beneficiary Clauses: Will go directly to the beneficiary and pass outside your estate.
We recommend that you update your estate planning documents at least every 5-7 years because estate laws change and you may even have life changes occur that warrant an update. For example, your kids grow up so you no longer need trust provisions where someone else will handle the property for them until they’re of a certain age. We also recommend that you update your estate planning documents every time you change which state you live in as your primary home.
TYPES OF ESTATES
- Testate Estates - Died with a Will
- The Probate Court grants the personal representative, as named in the will, Letters of Testamentary. Generally this gives the personal representative the authority to act on behalf of the estate with the powers outlined in the will.
- Intestate Estates - Died without a Will
- The Probate Court appoints someone to represent the estate and gives them Letters of Administration. This administrator then reports back to the court at different intervals and for specific approval to take particular actions.
WHEN DO HEIRS RECEIVE THEIR MONEY?
With an estate, heirs can generally receive their inheritance 6 months from when the Letters are issued (not from when the person dies), but sometimes it can be longer. This is due to the creditors' claim period.
The process for selling real estate through an estate is different depending on whether you have a Testate Estate or Intestate Estate. Be sure to ask an attorney for advice before you try to sell the real estate of a deceased person.
For more on estate planning, see our estate planning blog HERE.
If you need help with estate planning, feel free to call our office at 256-427-2760 and make an appointment for a consultation.
