Estate Settlements

 

Wills are settled through probate, probate being a court case to settle the affairs of a decedent.  Some clients think that having a Will avoids probate.  That is not the case at all.  “Probate” means to prove; that is to prove up the Will as valid.  All assets distributed under a Will go through probate.

Trusts can sometimes be settled outside of court (a “private” estate settlement) unless there are disputes or problems.  Here to, though, there is a lot of misinformation.  The public assumes that if you have a Living Trust that the client will then automatically avoid probate. That is definitely not the case for all clients.  To begin with, a trust avoids probate only for assets that are funded into the trust.  So if assets are outside the trust, some assets may be subject to the probate process despite the client having a “Living Trust.”  Further, your primary residence in Florida is homestead.  In Florida, a homestead in a Living Trust nevertheless still has homestead character.  A homestead order is obtained from the probate court, regardless of whether the homestead is under a Will  or a Trust.

The person handling a settlement of a Will in probate is called a personal representative, executor/executrix or administrator (these terms have the same general meaning).  The same function in a trust settlement is performed by a successor trustee.  Whether under a Will or a Trust, a settlement of an estate involves the following steps: collecting and accounting for the assets, communicating with beneficiaries, accountings to beneficiaries, clearing claims of creditors and settling estate taxes if any, settling disputes among beneficiaries, and finally distributing the assets of the estate or trust.

Settling an Estate or Trust is a big responsibility.  The executor or successor trustee needs to: 1) design and execute a communications plan with beneficiaries, 2) design accounting methods to track estate and trust assets so that accountings can be delivered later in the process, 3) retain qualified professionals (attorneys, accountants, etc), 4) gather assets, 5) carefully follow and adhere to the relevant documents (Trust or Will), 6) follow all applicable laws, and avoid conflicts of interest, self dealing and mismanagement.

A CEO of a business often has leadership authority to set the direction of the business.  An executor or successor trustee usually lacks that lattitude.  The executor or trustee is bound to follow both the trust instrument and all applicable laws; and is not free to set a new direction as they wish.  Failure to follow the governing documents and/or comply with applicable laws can lead to liability.  But liability can be avoided by communication, prudence, accounting, and caution.

 A longer memorandum is available on settling an estate for a free copy contact the author: by filling out the contact form on the “contact us” page of this website, by mail, email, or telephone.