Vantage Point Legal Services LLC

Probate Estates

Most people are familiar with the operation of the civil and criminal courts, having seen trials portrayed on television and described in various newspaper articles. However, to the average person, the role of the probate court is a complete mystery. In fact, many people remain unaware of the existence of the probate court until they are faced with the many financial and legal details which may arise on the death of a close friend or relative.

WHAT IS PROBATE?

The term “probate” is used for the administrative court proceeding required by state law to oversee and administer the proper and lawful transfer of ownership of property from the estate of a person who dies (i.e., a “decedent” or “deceased” person) to his or her heirs or beneficiaries. This proceeding takes place in the “probate court”, which is a specially designated division of the circuit court of the county in which the decedent resided at the time of death.

WHY DO WE HAVE A PROBATE COURT?

In this country, we have the right to own private property and, upon our deaths, to pass that property on to those we select as our beneficiaries. However, this right is not without regulation. We can pass our property on to our spouses, our children and other beneficiaries only by following certain formal requirements. In most cases these requirements are met by the execution of a Last Will and Testament (“will”) that is prepared and signed in accordance with the law of the state in which you reside.

When one dies leaving a will, we say that person died testate. If one dies without a will, the person is said to have diedintestate. Whether the decedent left a will or not, the distribution of most property in the State of Missouri, over certain minimum amounts as set forth in the statutes, will involve the appointment of a Personal Representative (formerly “Executor”) and the opening of an estate in a probate court of the county in which the decedent permanently resided at the time of death. The individual beneficiaries who share in that distribution are then determined either by the decedent’s will or as provided by statute if no will has been made.

If the size of a decedent’s estate is below statutory minimums, certain expedited procedures may be followed in order to eliminate the necessity of full administration with the appointment of a Personal Representative.

TRANSFER OF PROPERTY AT DEATH

The probate court has been established, among other things, to protect the property rights of heirs and beneficiaries of a decedent, and his or her creditors, and to assure the orderly transfer of property, whether or not the decedent had a will. However, if an individual disposes of all property prior to death, either by gift, living trust, joint ownership with right of survivorship, payable-on-death accounts, POD beneficiary accounts or other similar transfer-on-death beneficiary designations, then there may be no need for any asset to go through probate. However, in the case of most individuals dying with property in Missouri, some involvement with the probate court may be necessary.

The assets of the decedent, except for any real estate passing to heirs or devisees under the will, are held and managed by the Personal Representative during the administration of the estate. The Personal Representative makes distribution of the estate when the administration is ended, after the Personal Representative has reported all transactions to the probate court for approval.

The earliest that an estate can reasonably be expected to be closed and distribution made to the heirs or beneficiaries is approximately nine (9) months after the opening of the estate. However, it is not unusual for probate to take up to twelve (12) to eighteen (18) months to complete.

RIGHTS OF CREDITORS AND COLLECTION OF DEBTS

The probate court serves as a forum through which creditors of the decedent can assert their claims and seek payment. Also, the Personal Representative of the estate can pursue and collect payment of any debts that may have been owed to the decedent, as well as seek the recovery of property owned by the decedent, but which is in the possession of others.

PAYMENT OF DEATH TAXES

Another important function of the probate court is to provide for the collection of any taxes that might have been due by reason of the decedent’s death or on the transfer of his or her property. The administration of the estate normally may not be closed until all death taxes (state and federal), final income taxes, fiduciary income taxes, personal property taxes and real property taxes have been paid. The Missouri Estate Tax Law has completely eliminated Missouri death taxes for most small and medium sized estates. Thus, a Missouri Estate Tax Return is necessary only for estates for which a federal estate tax return must be filed. Such estates are those involving more than $5,000,000 of probate and non-probate assets for individuals dying in 2011-2013.

ESTABLISHING TITLE TO REAL ESTATE

The administration of an estate in the probate court also serves to establish clear title to any real estate that the decedent may have owned at the time of death. Real property passes directly to one’s heirs, or to one’s devisee if a will is admitted to probate; thus, it does not technically form a part of the probate estate unless it becomes necessary to sell the property or for certain other reasons as set out in the statutes.

However, even though real property does not always form a part of the estate, if there is no probate administration it may be impossible for the heirs to pass clear title to the property for one (1) year after death. This is due to the fact that, in Missouri, a will may be filed at any time within one (1) year after the death of the individual executing the will, and that will could possibly alter the ownership of the property.

Similarly, creditors may take actions to enforce claims which could force the sale of real property. However, if an estate is probated, the period of time in which the title to the real property can be so affected is reduced to approximately six (6) months after the opening of the estate.

THE SURVIVING SPOUSE’S RIGHTS

It is a common misconception that, upon death, all of a married person’s property passes directly to the surviving spouse. This is simply not always the case. In Missouri, if a person dies without leaving a will, the surviving spouse is entitled to receive one-half (1/2) of the estate if the decedent is survived by children, and the first $20,000 from the estate if the surviving spouse is also the parent of all of the surviving children. This share is in addition to certain exempt property and other statutory allowances. The exempt property is that which the spouse or the unmarried minor children are entitled to receive absolutely, without regard to any provisions the decedent might have made for the disposition of other assets. The exempt property includes the family Bible, books, clothing, household appliances, furniture, one automobile, and the like. The support allowance is an award made to the surviving spouse for his or her maintenance, and that of the unmarried minor children, for a period of one year after the decedent’s death. The amount of the award is determined in light of the family’s previous standard of living. The surviving spouse receives the entire estate only if there are no surviving children or grandchildren of the decedent.

On the other hand, in Missouri, even if an individual leaves a will, the spouse cannot be completely disinherited unless some form of contractual arrangement has been made before death, such as in a Pre-Nuptial Agreement. For example, a surviving spouse, who is supposedly written out of the will, is nevertheless entitled to receive as his or her minimum share either one-half (1/2) of the decedent’s property if there are no children or grandchildren, or one-third (1/3) of the property if the deceased spouse is survived by children or grandchildren.

This participation in the decedent’s estate is subject to the claims of creditors, and is in addition to the survivor’s statutory allowances and exempt property as discussed above. However, in determining the statutory percentages, certain other property received by the survivor, such as life insurance, joint property and trust assets, must also be taken into account.

If the decedent leaves a will giving the spouse less than these percentages, the spouse may within a specified time elect to “take against the will” and thus receive the statutory share instead of the provisions made in the will. The probate court is required to notify the surviving spouse of this right of election shortly after the will is probated. “Omitted” spouses, or those who were married after the decedent’s will was executed, may claim an intestate share of the estate. In certain cases, similar provisions are also included for any children who might have been born after the will was executed.

EXPENSES OF PROBATE

The administration of any probate estate necessarily involves the payment of certain expenses. Those assisting in its administration are entitled to be paid for their services, and the court is also paid certain court costs for its administration of the estate. The expenditures are, in most cases, governed by statute. The expenses usually encountered in the average estate fall into four main categories.

1. Bond Premiums. The Personal Representative may be required to provide the court with an indemnity bond to guarantee the faithful performance of his or her duties. The necessity for such a bond may, however, be waived by the decedent in the will or, in certain cases, by the court or all beneficiaries. The cost of such a bond is set in proportion to the value of property to be administered and is paid out of the assets of the estate.

2. Costs Of Publication. Generally, two notices would be published during the administration of each estate, one (at the beginning of the estate) announcing that the estate has been opened (Notice to Creditors) and a second one (at the end of the estate) when the estate is in a position to be closed (Notice of Intention to File a Final Settlement or Statement of Account). These notices are for the protection of those who are financially interested as a beneficiary of the estate and vary in cost depending upon the type of newspaper in which they are published.

3. Court Costs. While the probate court is a part of the court system maintained by the state government, it is not entirely supported by taxpayers. Every estate must pay a share of the expenses the court incurs on its behalf. These court costs are generally based upon the size of the estate being administered and, in some cases, on the extent of service the court is called upon to provide to the estate.

4. Personal Representative’s Fees And Attorney’s Fees. The fees the Personal Representative (formerly known as the “Executor”) receives are based upon the size of the estate and the amount of work performed. Missouri statutes provide for a minimum fee schedule, which is followed in most estates. Compensation in excess of this scheduled fee may be paid only upon an order of the court or upon consent of all beneficiaries. The minimum scheduled fees are based upon a percentage of the amount of money and personal property distributed from the estate. This percentage is based upon a graduated scale as follows: 5% of the first $5,000; 4% of the next $20,000; 3% of the next $75,000; 2.75% of the next $300,000; 2.5% of the next $600,000; and 2% of everything over $1,000,000. Special provisions are made for situations in which an estate has more than one Personal Representative.

The attorney who assists the Personal Representative in the administration of an estate (and only an attorney can represent an estate before the probate court) receives a separate fee based upon the same scale established for the Personal Representative. However, if this attorney also serves as the Personal Representative, the attorney will receive only one fee.

INDEPENDENT PROBATE ADMINISTRATION

Two types of probate administration are permitted by the Probate Code, supervised or independent. As the names suggest, asupervised administration is closely monitored by the probate court; such an estate requires ongoing court approval for many actions of the Personal Representative, who must also file annual accountings, or settlements, which are fully reviewed and audited by the probate court before further activity may be taken in the estate. Independent administration is more informal and eliminates the need for ongoing supervision by the probate court and annual settlements. An estate may beindependently administered if so designated in the decedent’s will or if the beneficiaries all agree.

OTHER FUNCTIONS OF THE PROBATE COURT

In addition to its role in administering decedents’ estates, the probate court also has general supervisory jurisdiction over the estates of minors and any adult whom the court finds to be disabled or incapacitated. Thus, if an individual cannot handle their own affairs, either because they are under age or in some other way disabled or incapacitated, or because they are enable to care for themselves personally, the probate court may then step in (upon proper application, hearing and determination) and appoint: (a) a conservator to look after their financial matters; and/or (b) a guardian for their personal care, custody and control.

This section focuses on probate estates administered for decedents. For more information on guardianships and conservatorships for minor children and adults who are incapacitated, please see the section entitled “Guardians and Conservators”.

HOW TO AVOID PROBATE

Of course, one of your estate planning goals is to take all reasonable steps to reduce or avoid probate altogether. This goal can be achieved in large measure through the careful and coordinated utilization of (a) Revocable or Irrevocable Trusts, (b) holding property in Joint Names With Right of Survivorship, (c) Transfer on Death (“T.O.D.”) and Payable on Death (“P.O.D.”) Beneficiary Designations, and (d) Beneficiary Deeds on real estate. We will address each of these separate estate planning techniques further below.