A TAX! A TAX! My Kingdom for a TAX!
Prior to the Norman Conquest of England in 1066, all passage of title to lands and property came through the ecclesiastical courts. Afterwards, the common law of England created a government judicial system, and the noble’s social organization developed the law of Wills and how property was passed to heirs. This was a rich man's forum. Tiny Tim and his father would never litigate in the English courts of 13th Century England.
Kings had a reason to keep the nobles happy and the property flowing among the oldest male heirs – so the King could continue taxation of the land to fund his army and navy. The Church of England was promising an afterlife. The nobles set up a system for controlling the afterlife of property.
The common laws of England came to America with the settlement of the colonies.
The Latin term "provar" means "to prove." Probate is a process of proving the authenticity of the will and the testator's "intent" under that will. Where the deceased did not make a will, then his property was divided according to state law (called intestate succession).
Probate is a court-supervised process that oversees the transfers title to your assets to your beneficiaries after you die. After your death, the probate court steps in and provides the means by which assets are gathered, identified and valued, creditors are paid, and the remaining property transferred to your intended family, friends or institutions.
In highly abbreviated form, a medium sized Kansas estate being formally probated requires nine to 12 months to complete if there are no glitches, such as beneficiaries fighting over what is being distributed. Truly large estates might require longer since to pay significant estate taxes might require sale of some of the real estate.
Every attorney probate an estate differently. Each is unique -- just as the makers of the wills and trusts were unique individuals with unique issues. We rarely handle these matters the same way every time.
Public Nature of Probate.
In the 19th Century, when every town had at least two or more newspapers specializing in sensationalism the details of the deaths of prominent or wealthy citizens were often chronicled on the front page. Not so anymore. Other than legal publications of notices to creditors on the back pages, newspapers are not much involved anymore with probates.
Probate is an open system using the courts so it is handled through the court system. As a citizen you have the right to go to the Clerk of the local District Court and review what's in a probate file. Probates are open cases. Privacy of probate is one reason trusts are in common usage. (See our section on trusts.) However, when was the last time a prominent person died and you went to the court house to snoop in the file as to what property they owned, and determine what it was worth? Probably not very often.
Probates are public affairs, but not unduly so.
General Types of Probate.
There are two types of Probate actions depending on whether the deceased left a valid will. A "testate" action is when a person leaves a valid will and the heirs are probating the division of property per the statements in the will. An "intestate" action is when there is no valid will (or a will that was invalid because of irregularities in the signing or witnessing process). Distribution in the latter type is according to law -- half to the surviving spouse (if any) and the other half is divided equally by the surviving children (or their issue). If you want to leave a quarter section of ground to your Alma Mater or the Santa Fe Trail Center, you must make a devise of land by a will or trust document.
Small Kansas Estates.
If the estate of a Kansas decedent has no real estate and less than $40,000 in cash or funds, a simplified probate can be administered through affidavits. The person submitting the affidavits are responsible for paying the debts of the decedent and must promise in the affidavit to do so. This process has been criticized. Sometimes the out of state children swoop in and get the decedents cash in the bank by use of the affidavit format, then depart, leaving some creditors holding debt paper. Thus far, however, the state legislature has not seen fit to remedy this situation.
Some smaller estates are handed through what is called “informal administration” or “Simplified Administration.”
Determination of Descent.
A surprising number of probates are never filed, even when there is real estate to probate. Perhaps there is a small house in a small town that isn't worth much. The children do not want it. None of the neighbors has offered to buy it. The house just sits there. Six months after date of death, all unsecured creditors are frozen out of the process and the house can be sold without having to pay liens or judgments against the real estate (except for any back taxes that are owed to the county). Six months after death, a will is invalid too unless filed of record prior to that anniversary. However, the heirs of the deceased owner may need authorization of ownership so they can sell and deed-over the property. This requires what is called a "determination of descent."
Determination of descent is not a probate action as such. The decree of descent does not create title to property; it merely declares who has acquired the title from the decedent. The function of the decree is to declare the title which accrues under the law of intestate succession. The decree of descent does not originate title, but only releases it to the heirs from the condition of administration to which it was subject, and furnishes the heirs legal evidence of such release. Usually, when determination of descent has been determined, the property is sold -- either to one of the heirs or a third party.
. Transfer on death deeds avoid probate by moving real estate to an heir or other disposition (to a charity) after the decedent's death. Until that moment, the decedent, if competent, can change his or her mind. There are pros and cons of the widespread use of a TOD deed in lieu of probate, but, except for some notable exceptions (such as Medicaid claims against an estate that tries to TOD away the assets) TODs are a form of testamentary disposition for smaller estates with older and less valuable real estate, such as a small house in town. While it can be used to transfer farm ground, if you have those sorts of assets you may want to use a more formal document, such as a trust or wills with testamentary trusts and life estates. Further, if you are transferring real estate to one heir but not others, you don’t want to do that in a TOD because it is a public document and can be accessed by the person you are excluding from the will. You may want to consider a will or a trust to do this for privacy. No one knows what you’ve done with your property until your death.
Some heirs purposefully withhold from probate Mom or Dad's Last Will and Testament. That might good, or bad. If all the property is held in joint tenancy and the parent that dies is the first to die, then all the property is owned by the surviving spouse and it requires no probate to pass title. All one needs to do is a simple affidavit process and filing of the death certificate.
Sometimes, however, if there is significant property, if one child who lives close to home lets a will become "lost" and after six months the will is not found and a determination of descent must be utilized in order to change ownership of the real estate. Or, because the will is not found, the estate proceeds under intestate succession (without a Last Will and Testament). The probate passes title, but equally, to the heirs. What if that child and heir, under the will, was to get only a token amount, but by making the will "lost," he or she instead gets an undivided equal share? Such persons can be sued if, later, it is found out that their action was intentional and improper. But proving all that is expensive for all the other heirs.
What about Creditors?
If no probate is filed but a creditor believes there are assets being held without probate by the heirs, creditors have six months from date of death to file what is called a "creditor's probate," where the creditor files a probate wanting the judge to allow payment of the creditor's debt. If the heirs file the probate (which is the usual case), anyone owed money has four months after the first publication of notice in the newspaper that the deceased person has died. If the creditor is "known" to the heirs, the creditor is usually sent a letter and the time limit is shortened to 30 days after the letter arrives. If the creditor doesn't file a demand claim within those time periods, their claim is barred forever. These time periods act like statutes of limitation -- file a claim within the statute period or you are out of luck.
What about Medicaid?
If you are 55 or older and need nursing care and you “divide assets” with a spouse, the state taxpayers pay your nursing home care. In 2020 it is about $5000 to 6000 per month. After the death of the second spouse, what is owned the state is recouped in a “creditor probate.” Property that was to go to children can be “pulled back” into a Medical Assistance Estate and sold or auctioned to repay the claim.
Lots of children of decedents don’t like this law. However, Medicaid is tax money and Medicaid was there to help loved ones when nobody else could, or would. Children who can pay the nursing home or private care costs of mom or dad will not have Medicaid problems because if there is private pay of nursing costs, then Medicaid is not involved and has no later claim.
What is the relationship of probate to estate taxes?
Henry VIII relied on probate to raise taxes to finance his armies. When land passed through probate, the estate paid a tax. Then the Church created the idea of a trust, which avoided probate and deprived the King of his tax revenues. Henry VIII went to Parliament and had them pass the "Rule Against Perpetuities" which effectively said that a trust can't go on forever, so that its contents can be probated and taxed.
Today, there exists little relationship between probate and estate taxes. If you own it, it is counted toward computing your estate tax obligation, whether or not it has to be under a court's estate administration in order for title to pass to others. However, the person who is appointed by the Court to be the Personal Representative of the estate is required to file the estate tax return, if one is required. Further, the Personal Representative can become personally liable for the estate taxes, if he distributes the assets of the estate to beneficiaries but fails to pay all or a portion of the tax bill to the taxing authorities. DON'T WORRY. If the estate is large enough to where estate taxes are going to be paid, the estate will need to hire tax accountants. Let them jawbone with the IRS.
How long does probate take?
Let us assume that the beneficiaries of the estate are not fighting. Let us assume further that everybody knows what are the assets of the estate, where they are, and that the taxes on the estate, if any, are easy to compute. That estate will likely settle in six months. But more important, the Personal Representative, once appointed, has immediate authority, in ordinary circumstances, to transfer some or all of the assets to the estate beneficiaries.
What are the duties of a Personal Representative?
Distilled down to the basics:
- Obey Court orders
- Locate and collect the estate assets
- Pay the just debts of the estate, including taxes
- Deal in good faith with estate beneficiaries and account to them
- Distribute the estate assets as called for in the Will or otherwise by law
Is a Personal Representative entitled to be compensated?
He is entitled by law to "reasonable" compensation. Sometimes the heirs will object to the fee awarded to the executor. Thus, it is a good idea to keep track of your time as executor for the estate: dates of service, the description of the service, and the amount of time expended.
If you have estate and probate questions, ask us.