Debts After Death. Who has authority after death? Who has authority after death?

Debts After Death

By: Kate Schilling, BSSA April 2011

Who has authority after death?

Guardian’s authority ends at death

POA’s authority ends at death

If not listed as a joint owner of the property

or asset, you need authority to transfer or

sell the asset.

Who has authority after death?

administrator) should be nominated in will.
If no will, heir can nominate him/herself as PR
Before proceeding, the PR needs:

Role of Personal Representative

Identify and collect the decedent’s assets

Manage those assets during probate process

Determine surviving spouse’s rights

Pay debts, claims, and taxes

Make distributions to spouse or dependent

children

Distribute remaining assets to those names

in will or heirs at law (if intestate).

Probate

The process where a decedent’s debts get paid and assets pass according to will or statute.

Probate Misconceptions
Probate will take years
Probate is expensive

Probate is only for rich people, or only for poor people
Probate is only necessary when there are

disagreements

Probate

Who can open a probate?

Any “interested person” or anyone named in will to act as personal representative.

After 30 days, the guardian of the decedent or any creditor of the decedent.

Probate: Definitions

 Heir (whether or not named in the will)

 Beneficiary named in will/trust

 Personal representative

 Trustee named in a trust if applicable

 Anyone else a judge or the Register in Probate deems “interested.”
“Intestate” means the person died without leaving a will

“Disclaim” means to reject or deny a gift

“Bequest” is a specific gift

*Interested people get copies of the documents, notice of court hearings, and have standing in the matter.

Probate

Opened in county of decedent’s domicile:

Special Administration

Informal Probate
Formal Probate

All 3 types of probate cases can be found on ccap at: http://wcca.wicourts.gov/index.xsl

(Search by name of the decedent)

Special Administration

Can be opened either before or after a probate.
Not routinely done—only when necessary for

specific purpose.
Necessary when:

Informal Probate

Beneficiaries agree on who should be personal representative and most other matters.
Have original will.

Will not contested.

Cannot be used if will prohibits it.

Personal representative takes the lead, does not need court approval for most actions.

Can be converted to formal probate at any time if requested by an interested person.

Supervised by county Register in Probate office.

Formal Probate

Every step, payment, distribution is approved by the judge in advance;

No will left by decedent or the will is contested.
Beneficiaries disagree.

Interested person can request to be in formal probate at any time during informal probate proceedings.

Can take a year or more, may involve multiple attorneys and/or litigation.

Simplified Probate Process

Probate opened
Publication in newspaper
Notice sent to known

creditors

Claims against the estate are filed

Notification to Medicaid, estate recovery.

Determine solvency of estate

Pay priority claims*
Pay claims & debts
Pay specific bequests
Distribute remainder according to residue
Close probate.

Priority of Claims

Before any creditors are paid, the following claims are paid out first (and in consecutive order) in every probate:

1. Costs & expenses of [probate] administration (atty fees)

2. Reasonable funeral & burial expenses

3. Provisions for family

4. Reasonable & necessary expenses of last illness

5. All debts, charges or taxes to US, state or government/municipality.

6. Wages to employees

7. Property assigned to surviving spouse or domestic partner

(Spouse can ask to have $10,000 set aside for her support before others are paid.)

8. All other claims allowed (credit card debt, etc.)

Clarifying Probate Misconceptions

Generally most uncontested probates close within 9 months to one year.

Depends greatly on family dynamics and willingness to work together.

Depends on how informed and organized PR is
Most of time during probate is spent waiting

(waiting for newspaper publication, waiting for claims, providing notice, etc.)

Clarifying Probate Misconceptions

Probate can get expensive if a will is contested or if heirs are litigating capacity/undue influence issues. Just like any other litigation.

Although hiring a lawyer is highly recommended (and minimizes the PR’s liability), one is not required.

Clarifying Probate Misconceptions

Actually, probate is for anyone with over $50,000 in assets that does not have a trust.

 Certain assets (life insurance, retirement accounts, annuities, etc.) pass by virtue of a contract, and do not go through probate.
Trusts bring level of privacy, but can bring uncertainty

if an issue arises which was not clearly addressed in terms of trust.

People with trusts need pour-over wills to “catch” assets not funded in the trust. Example: wrongful death claim.

Clarifying Probate Misconceptions

that do not get along and would benefit from court oversight, and lengthy statutes which lay out rules and expectations of parties.

However, informal probates are routinely opened when heirs do agree to assure debts are paid correctly and assets are distributed appropriately to heirs.

Alternatives to Probate

Transfer by Affidavit (<$50,000 or less)

POD accounts

Beneficiary designations (retirement, life

insurance proceeds, annuities, etc.)

Transfer on Death Deeds for real estate

Jointly held assets or property

Death Certificates

Certified death certificates are necessary for

the following situations:

Transfer car title

Claim for insurance proceeds Take a spouse’s name off joint property Probate court

An uncertified death certificate will contain almost all of the same info, but is not acceptable for legal purposes.

Death Certificates

Usually available 3 weeks after date of death
Requires application

Done in-person, by mail, or fax only. Need photo ID.
Cost is $20 for search and 1 copy. Add’l copies are

$3 each. Usually start with 10+ copies.

Must be immediate family member of decedent (or guardian), or have notarized consent from immediate family member to get certified death certificate. (“Step relatives are not considered immediate family.)

Role of EBS

EBS cannot assist with probate, transfer by affidavit, or wills.

EBS can:

 Help family members get a copy of a death certificate;

 Consult with BSSA’s regarding passage of debt to heirs;

Role of EBS

Common questions from clients:

Can I inherit my parent’s debt?

What happens to these debts if no probate is opened?

Do client confidentiality rules end at death?

Role of EBS: Debts

Generally, children/heirs do NOT inherit debt.

After someone dies, the estate is the only legal entity obliged to pay the bills for the decedent.

Estate exists once there is a court order starting a probate and naming a PR.

If a probate has not been opened, a creditor can initiate a probate to attempt to get paid if the creditor believes the decedent left assets.

Otherwise, the debt may die with the person.

Role of EBS: Debts

Exceptions:

Certain debts (liens, mortgages) are attached

to the inherited property or assets.

Cars come with lien on title

Homes mortgages/liens attached to property

Contractual obligations

Child signed as a guarantor for NH or is cosigner on a car, loan, mortgage, etc.

Role of EBS: Debts

Assuming deceased spouse was the debt-incurring spouse (his medical bills), creditor cannot collect from survivorship MP, jt tenancy property, deceased deferred employment benefits, life insurance proceeds.

Creditor would have to commence a probate action to get paid. Remember, creditor only gets paid after priority of claims.

Role of EBS: Debts

Example: Alfred dies leaving surviving spouse

Edna. Alfred owes money to hospital for his

medical expenses. Alfred’s funeral cost

$10,000 which Edna paid for. If Alfred leaves

less than $10,000 in assets at his death, then

after payment for priority of claims, no

money is left to pay creditor.

Role of EBS: Divestment

Institutionalized spouse on NH Medicaid

cannot disclaim any inheritance.

Must spend-down those assets, or Set up a WisPACT trust

Role of EBS: Divestment

Example: Spousal impoverishment situation: 1 spouse on NH Medicaid, other spouse in community.

If community spouse (CS) dies first, institutionalized spouse (IS) inherits assets and becomes over-asset for Medicaid, and therefore ineligible until assets spent down.

Even if CS leaves all assets to kids in a will, the IS must elect against the will to receive ½ the estate assets, otherwise a divestment occurs.

Private Medicaid/estate planning attorneys can assist clients to avoid this situation.

Note: If IS dies first, and leaves a surviving spouse, then no estate recovery! CS can leave estate to whomever he wants.

Role of EBS: Confidentiality

Remember, confidentiality does not die with

the client.

EBS (and others) still have a duty to maintain

all client files in confidential manner, cannot

disclose client info to others.

Talk to your BSSA anytime you are asked to

release info about a client or disclose info in

your file.