Oh! Not Again! The Need for Ancillary Probate

As we’ve discussed elsewhere, in an almost knee jerk way, people want to avoid probate. And for some good reasons. But what if I told you there were a possibility your heirs might have to go through two or even three probates? It’s true. If you own titled property, especially real estate, in another state than the one you live and die in, your personal representative is probably going to have to file probate papers in all the states where that property is located. And with that comes the added expense of additional attorneys and such.

It’s called ancillary probate, ancillary because its subsidiary or supplementary to the larger probate, the one in your state of residence where presumably most of your property is located. You can avoid ancillary probate a variety of ways. If the out-of-state property is real estate, you could simply make sure that another person is on the deed with you with rights of survivorship. That way, when you die, the property passes automatically to that person, without probate.   Or you could title the property using a so-called transfer on death deed, which are allowed in a number of states. Or you could hold the property in a revocable or living trust.

The trust approach is my preferred method because, unlike the other methods, this one makes it easier to direct the property to where you want it to go once the property is held in the name of the trust.

What is Probate Anyway?

Everybody wants to avoid probate, but far too many of those who want to avoid it, know what is. Here’s a primer:

Probate is the legal process in which a deceased person’s will is proved valid; her personal representative or executor appointed; her property collected and preserved; and her debts, including taxes, paid. Usually, the deceased’s family hires an attorney to file the appropriate papers with the probate court to begin the process. Depending on the state and the complexity or size of the state, the probate process can be complicated or streamlined. In Utah, for example, if the deceased’s estate is under $100,000, probate can be handled via a s0-called small estate affidavit, a much more simple process.

The deceased person’s personal representative (another term for executor) is the point person in the process. Essentially, a personal representative fills the shoes of the deceased. What the deceased could do if she were still alive, the personal representative does instead. Need to transfer title? The personal representative does that. Need to close a bank account. Again, the personal representative steps up. Often (but not always) named in the deceased’s will, the personal representative, once he has the court’s blessing, is the one who goes about collecting property, paying debts, and–finally–distributing what’s left to the deceased’s heirs. Often (but again, not always) this is done under court supervision, depending again on the state and the size/complexity of the estate.

Why do people say they want to avoid probate? Probably because they’ve heard it’s expensive–which it can be–or because they’ve heard it’s public–which it is; that is, it’s public in the sense that your nosey neighbor can walk down to the courthouse and ask the clerk to see your probate file. Then it really becomes public.

There are a number of ways to avoid probate the attendant publicity and some of the cost. One is to establish a revocable or living trust. For more on that, go here.

Trustees and Beneficiaries: More Good News than Bad?

I really like the idea behind “The Positive Story Project,” a new monthly column at Wealthmanagement.com. Here’ the first three paragraph from the opening salvo:

My goal in writing this column is to focus thinking within our community of practitioners—important players in the transfer of wealth to younger generations.   And, with so much at stake for our clients and their families—a good deal more than preservation of financial assets—let’s make this column a conversation.

Can the widespread dissatisfaction and all the talk of “problem” beneficiaries and “problem” trustees, give way to more creative and productive relationships?  I say:  “Absolutely.”  And, if your intuition is the same as mine, the harder question becomes “how do we get from here to there?”

To begin to find out, my colleague, Kathy Wiseman, and I have been going to the source—beneficiaries, trustees and their advisors—asking them for positive stories about moments in time when their relationships have worked well.  I’ll discuss what can be learned from these individuals and their stories in this column each month.

I look forward to more on this subject, both to help me as a practitioner and to inspire my clients and potential clients to use trusts to better carry out their wishes.

Trusts: Size Matters

The trusts I draft are almost always quite long–in excess of 40 pages. I sometimes wonder if they’re too long. And then I encounter a problem caused by a short, poorly drafted trust and wonder no more.

Folks, you probably won’t discover what’s wrong with your trust or your parents’ trust until one of the grantors dies or becomes incapacitated, but by then it will probably be too late to do anything. That’s why you and your attorney must be very careful in the beginning to think through your plan and make sure your estate planning documents are in good order. You should make sure they cover the many contingencies that could result in a weeping and wailing and gnashing of teeth if (when?) disgruntled beneficiaries decide to challenge the trustee.

Don’t think that will happen in your family? Then you haven’t seen what money or the lack thereof can do to people, people known as beneficiaries. I’m watching this happen right now. Three siblings arguing that a fourth sibling/trustee is up to no good. Most of their argument is based on what they perceive as a badly drafted 7- or 8- page trust.

Now without agreeing with them–in fact, I disagree with them–I can say unequivocally that a good 40+ page trust would easily withstand their assault. Why? Because those 40+ pages aren’t just boiler plate, thrown in to make the trust look official. No, those pages are chock full of provisions that deal with death, divorce, incapacity, disgruntled beneficiaries, and  the like. They give powers to the trustee to do what the grantor would do if he or she were still alive when the unforeseen need arises. In short, those extra pages ensure that the trust will do what it’s supposed to do well after the grantor has ridden off into the sunset.

So no, I don’t worry any more that my trusts are too long. They’re not. They cover all the bases, and that’s just right.

Happy Birthday to It

It doesn’t look a day over . . . : The estate tax turns 100.

Estate Planning? I Don’t Have Time . . .

Why doves cry. Half of Prince’s estate to go to government.

What I’ve Been Reading Today

Some good advice about Social Security. 

About that Power of Attorney

A power of attorney gives someone else–the agent–the power to act in place of the person granting the power–the principal. A durable power of attorney is a power that continues even after the principal becomes incapacitated, hence the adjective “durable.”

If you or your attorney is drafting a power of attorney in Utah or any other Uniform Power of Attorney Act state, be careful and be very specific; make sure certain grants of power are “expressly” authorized in the document that allows the agent to act in the principal’s behalf.

To wit, Utah Code §75-5-503, signed into law in 2003, says:

A power of attorney may not be construed to grant authority to an attorney-in-fact or agent to perform any of the following, unless expressly authorized in the power of attorney:

(1)  create, modify, or revoke an inter vivos revocable trust created by the principal;

(2)  fund, with the principal’s property, a trust not created by the principal or by a person authorized to create a trust on behalf of the principal;

(3)  make or revoke a gift of the principal’s property, in trust or otherwise; or

(4)  designate or change the designation of beneficiaries to receive any property, benefit, or contract right on the principal’s death. (emphasis supplied)

General, broad language probably won’t do. The grant in these four cases must be express because these four cases present too great an opportunity for abuse. I’ve hedged just a little here because the one Utah Supreme Court case on this point seems to leave the door open, if only slightly, to less express language, language typical of a broad grant of power.

In fact, in analyzing the language of the durable power of attorney at issue in the Burrows case, the Utah Supreme Court talked favorably about both the broad and the express grants of power:

¶ 17 The durable power of attorney expressly granted Ray authority to gift Ida’s personal property. The two-page instrument gives Ray broad authority over Ida’s assets and personal property. It authorizes Ray “ in any and every way and manner [to] deal in and with goods, wares, and merchandise, [choses] in action, and other property in possession or in action, and to make, do, and transact all and every kind of business of what nature or kind soever.”

¶ 18 More specifically, the power of attorney expressly authorizes Ray “ to gift property whether real or personal.” . . .  131 P.3rd 9 (Utah 2008)

If I were arguing this proposition before another court, I would argue like a mother bear that even the broad language does the job according to Burrows. If I were drafting the power, I would make sure the power of attorney expressly authorized each of the four powers outlined in §75-5-503, that is, if my client wanted to give those powers to his agent.

Cyber Intestacy? Yeah, There’s That.

What happens to your Facebook, Twitter, and Instagram persona when you die? You might want to consider that question. 

Gonna Be a Prince of a Mess

Well, I guess since Prince didn’t have one, you don’t need one either . . .

Prince’s sister has said the superstar musician had no known will and that she has filed paperwork asking a Minneapolis court appoint a special administrator to oversee his estate.

Something tells me this will neither go smoothly nor end well.

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