1.  The Probate Process

2.  Probate – the legal process through which a decedent’s assets, that are not automatically transferred at death to their “rightful” heirs by contract law, are retitled to the heirs via the court decree.  Probate with a will – individual dies testate o The will becomes an active document upon the death of the will maker and establishes the legatees for the designated property o Will must be “filed” with the court and accepted  Probate without a will – individual dies intestate o The state laws on intestacy are used to determine the heirs of property owned by the deceased o Intestate laws vary from state to state

3.  Property and Assets that typically pass outside of Probate o Life Insurance policies – designated beneficiaries receive proceeds directly from insurance company o Annuities – designated beneficiaries receive proceeds directly from investment company o Qualified Retirement Plans – designated beneficiaries receive proceeds directly from plan administrators IRAs (Individual Retirement Accounts) SEPs (Simplified Employee Pension) SIMPLEs (Savings Incentive Match Plans for Employees) 401Ks, 403(b)s, or 457(b)s and Employer Plans (OSU - ORP) o Property held in Trust and Pay on Death Accounts o Automatic Survivorship Interests

4.  Why a Probate Process? o Protect potential legatees and heirs Court process provides legal claims and challenges to will to have “hearing” Court protects the assets that otherwise might be converted into cash, distributed outside of probate denying the “will” of the owner Process to ensure proper retitle of assets (clear title) o Protect creditors Prohibit distribution of funds to legatees and heirs prior to payment of legal claims against estate Provides a process for potential claimants to be informed of death of individual (advertising the death and court for probate) Provide process to file claims against estate

5.  Disadvantages of Probate (Reasons to avoid Probate) o Costly – the process may require legal fees to settle potential claims, contest the will, pay administrator, etc. o Delays in distribution of property – process may take anywhere from 4 to 24 months depending on the assets, claims, will, etc. o Loss of Privacy – Wills and probate proceedings are public documents o Non-traditional partners claims (and designations from will) can be set aside via challenge to will or outside intestate laws of the state o (DOMA – Defense of Marriage Act) o Ancillary Probate for real property in a non-domiciled state  Issues for a Financial Planner?

6.  The Probate Process -- At Death of an Individual o If a Will exists, present the Will to the Probate Court and certified death certificate o If a Will does not exist, go to Probate Court and start estate administration with presentation of certified death certificate  Court opens the “case” o Validation of the Will Self proving clause Witnesses o Appoints executor with a valid will (often individual named in will) o Appoints administrator without a valid will

7.  The Probate Process -- At Death of an Individual (cont.)  Authority to Conduct Business of Court issued o Letter of Testimony issued to executor o Letter of Administration issued to administrator  Personal Representatives (executor or administrator) o Provides Court List of all known assets List with names and addresses of all known heirs List of all known creditors o Notifies all potential claimants of probate hearing in community and legal newspapers

8.  The Probate Process -- At Death of an Individual (cont.)  Administers Estate during the probate process o “Cares” for property during process – Marshalling the Assets Ensures that the property is properly maintained (for example, residential property upkeep and payment of bills for upkeep of property) Ensures that funds (checking accounts, investment accounts, etc.) are properly maintained Ensures that tangible property is not removed, destroyed, altered, or otherwise devalued during the process May conduct estate sales to convert tangible property into funds (depending on the will and beneficiaries of designated tangible property) o At Conclusion of process – distribute property according to will or intestate laws as ordered by court

9.  Ademption o Named asset is no longer owned by deceased Legatee cannot receive asset Legatee does not get “another asset” to replace named asset  Abatement o Insufficient assets to cover the will Bequest totals exceed the value of the estate Court will generally reduce the bequests Could pro-rate assets to specific set of individuals Could reduce assets to second generation legatees Could chose some “reasonable” distribution based on other aspects of the will  Tax payments may be altered by court for “fairness”

10.  What are some of the issues around probate and the probate process for Financial Planners? o Does the client understand the ramifications of the legal process and the documents used in probate (will) o Does the will have a self proving clause o Does the named executor know about the appoint and where the official will is stored? o Does the client have unusual requests in the will that may be challenged successfully in court? o Does the will cover the non-probate assets or have a residual property distribution for unnamed assets? o Other potential issues?