John Maher: Hi, I’m John Maher. Today, I’m here with Dan Doherty, an attorney and shareholder of MacLean Holloway Doherty Ardiff & Morse, one of the most prominent law firms on the North Shore of Boston, Massachusetts. Today, we’re talking about probate. Dan, what is probate?
Dan Doherty: John, probate, that’s a large term that encompasses a lot of different things. Probate is the process , the legal process by which the affairs of a deceased person are managed or unwound.
When somebody dies, the day before they died, they had bills. They had assets. They had income tax liabilities. They had debts that were outstanding.
What do we do with those? The person’s now dead. In short, the probate process is administering all those issues.
John: What property is subject to the probate process?
Dan: When a person dies, you take a snapshot of their assets on the date of death. The assets can be held in a variety of different ways. My wife and I own property jointly. That property is not part of the probate process.
By law, the surviving joint owner inherits 100 percent of that asset. They have the right to write checks on that joint checking account. There’s no need to administer that.
I have a bank account that is in my individual name. She doesn’t have check‑writing ability over that. How does she get the legal ability to get access to that money?
That acquisition of the authority to get over that bank account is the probate process. Put another way, only assets that are in the individual’s name alone are subject to the probate process.
Assets like joint property, assets like life insurance, where there is a named beneficiary, assets like retirement accounts that have a named beneficiary. Those assets, there’s no need to go through probate over those assets.
Trust assets, where the trust document decides who the beneficiaries are or lists who the beneficiaries are. Those assets don’t go through probate.
The assets that are part of the probate process are the assets that are in the decedent’s individual name.
John: How is this probate process started?
Dan: Let me give you an example. Person calls my offices and says to me, “Hi, I’m so and so. My father just passed away. I have some questions.”
I have some questions for them. “Did your dad leave a will?” That determines what kind of probate. If they leave a will, that means that the estate administration is testate. The person is a testator. They had a will. The will determines who the beneficiaries are.
If they didn’t leave a will, then they died intestate. That means that I have to look to the statutory scheme to determine who the beneficiaries are. That would probably be the first question.
The next question is I would like to meet with that person and have them bring with me as complete a list of the assets, regardless of how they are titled, a complete list of the assets with them to the meeting.
That would include, obviously, bank accounts, real estate, retirement accounts, life insurance, a listing of business interests, artwork, tangible assets, jewelry, an estimate of the furnishings in the home, are there any kinds of collectibles in the home.
They bring that. Depending upon whether there’s a will, depending upon the value of those assets, we then make some decisions.
If there is a will, they need to present that will to the probate court. In that process involves, we file it with the probate court. The court issues what’s known as a citation. That citation gets published in the newspaper.
“So and so has offered a will which purports to be the last will and testament of Mr. X. Anyone wishing to object to the allowance of that will must file their objections on or before such and such a date.”
Why would they object? This person is putting forth what they purport is the last will signed by the deceased person. But what if it isn’t the last will? What if there is another will that was signed at a date later than that date?
Which will should govern the disposition? How was that will executed? Was there undue influence? Was there duress put upon that person?
Those are the questions that are going to be asked by the probate court. People will have an opportunity to object. If they object, they’ll have a notice and opportunity to be heard.
Then the court is going to have to make a decision. That is, is this will valid, or is this will invalid? Once that’s decided. Let’s assume it’s valid, it governs the conduct of the parties.
The will typically will appoint who the personal representative is. That’s the person who has the authority to manage the decedent’s affairs during the administration process.
If there is no will, then a party interested in the estate has the opportunity to file a petition to probate. Usually, that’s a loved one. That person will be filing an administration request.
The Uniform Probate Code has just been adopted in Massachusetts recently. There are different forms of probate. There is what they call the “affidavit,” the voluntary affidavit.
If a person’s assets, including an automobile, are less than $25,000, then that’s the quickest and easiest way to become the person who, others can look to as being the responsible person.
If there was an auto loan, for example, and the auto loan was $5,000, that person would be the one that the lender would look to, to get paid. Tax returns have to be filed. That would be the person.
If it’s more than $25,000, then the administration can take, really, one of two ways. It can go in a formal process, or it can go in an informal process.
Now, depending upon the size of the estate and the kinds of assets, right now, if the estate involves real estate, then it’s going to have to go the formal process procedure. That’s because the title companies that are going to be issuing title policies on the real estate are going to require that it be a formal administration.
Formal administration is little more complicated than an informal, but not much. It’s a process that is overseen by the probate court. Whether there’s a will or not a will, it could be formal or informal, but it is overseen by the probate court.
Now, what happens? Shortly after somebody dies, we have to file what’s known as an inventory. That inventory is a listing of the probate assets, the assets that were in the decedent’s individual name.
The inventory does include joint assets. That’s the beginning point. The personal representative, that’s the person who’s been appointed as the responsible person for administering the estate.
John: How does that person get appointed?
Dan: Through the probate process, so the will get a will or the petition gets filed with the probate court. Then the period of time expires.
The will is allowed, or the court files a decision that this person is to be appointed as the administrator. They issue their letters or their judgment that this is the person who is going to be the responsible…
John: Is that normally a family member or something like that?
Dan: Normally, a family member, but it may not be. It could be a professional. It could be a bank. Most often, it’s a family member.
John: What is it that that personal representative does?
Dan: Their first job is to gather the assets, file the inventory, and then begin to identify who are the creditors, what are the types of assets that are involved in the estate.
Those assets need to be appraised, if there is the potential to file an estate tax return. Massachusetts has an exemption of $1 million. Federal government has an exemption of $5 million.
What does that mean? If the estate is less than $1 million, we don’t have to file an estate tax return. If the estate is over $1 million, we have to file a Massachusetts estate tax return. If the estate is over $5 million, we have to file a federal estate and a Mass estate tax return.
Those require appraised date of death values of the assets. The personal representative hires appraisers to go out and value the real estate, hires an appraiser to value the antiques in the house, or the furnishings in the house, or the jewelry.
Determining what the fair market value of these assets, as of the date of death. It takes control over those assets. The other important thing that the personal representative has to do is identify who the creditors are.
There is a hierarchy of creditors. Obviously, as you might have guessed, the federal government and the Commonwealth of Massachusetts have a priority for the payment of taxes.
Has the person got an income tax return liability that has to be determined and assets have to be set aside to pay those taxes. There are also other claims, alimony, child support, estate administration expenses.
If people need to have professional services to assist them, if lawyers and accountants need to get involved in the estate administration process, they necessarily go to the top of the list.
As far as creditors are concerned, because if I’m going to be at the bottom of the list, and I have the potential of not getting paid, I’m really not going to be too interested in helping this person and administer the estate.
So the court recognizes, the legislature, more importantly, recognizes that and there a hierarchy of creditors. The personal representative has to determine that hierarchy, has to get an idea of assets. Are there sufficient assets to pay all of these expenses.
If they conclude that the estate is not sufficient of a sufficient size to pay those claims, are there non‑probate assets that the personal representative could look to, to help satisfy those claims?
For example, did the person leave a trust? Is that trust flush with cash that we could use and does the law allow for that? Most instances, if it’s a revocable trust, the law does allow those assets to be made available to pay the creditor claims. Not only does it allow it, it requires those assets.
It’s a process. It’s an information gathering process. The law recognizes that it is going to take time. The estate tax return, if one is due, is due nine months after the date of death.
During the nine month period we’re assessing the assets. We’re determining their values and we’re making a determination of an assessment of taxes are owed and do we have enough assets to pay those? That’s really what the personal representative’s job entails.
Now, once that is complete, and usually is not complete for at least a year, why a year? Because under the statute, creditors have one year from the date of a person’s death to file a claim.
On the 364th day after somebody died, could a creditor file a claim? Yes, and if they do, it jumps in and it’s part of the process.
Well, what if the personal representative paid everybody else but this creditor? That personal representative could be personally liable to that creditor to the extend of those distributed assets.
It’s important that the personal representative understand that this a slow down time. It’s let’s get this right. Let’s make sure we’re doing what we need to do, to do this.
There are occasions when you do have to do things quickly. There’s a question of title. Who owns this? It doesn’t make sense to wait a year to determine who owns the property.
You got to get on that right away, make a determination because, is that asset of the estate, is that an asset that I have to take control of? Those are all questions that are valid questions that the personal representative needs to ask and needs to answer.
John: We’ve been talking about the probate process with Dan Doherty. Thanks very much.
Dan: Thank you.
John: For more information, you can visit the firm’s website at mhdpc.com or call 978‑774‑7123.