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Monthly Archives: February 2013

Estate Administration: The Will After Death

Wills are the most common way for people to state their preferences about how their estates should be handled after their deaths. A person who makes a will is known as a testator (male) or testatrix (female). A will is similar to an instruction booklet for the probate court. It provides the court with guidance as to how to distribute the person’s assets in accordance with the person’s wishes. Generally, a gift after death cannot be made to anyone other than a surviving spouse, children, or other relatives specified in state law in the laws pertaining to intestacy (dying without a will), unless there is a will that meets all the legal formalities required by state law. Thus, a will is the cornerstone of any estate plan.

A will is a very important legal document. The law favors the testamentary disposition of property, which is a main purpose and function of a will – to dispose of property which the testator owns. However, the disposition of property is not an essential characteristic of a will and a valid will may be made for the sole purpose of naming an executor. In general, people make wills in satisfaction of moral obligations. With such an obligation in mind, the testator almost always drafts a will that includes provisions for the distribution of his or her property after death. As circumstances, including applicable law, change, it is wise to consider updating your will.

Wills only control probate assets, that is, those assets that can be transferred by the probate court. Some assets do not have to be probated and generally are not controlled by a will. These assets include life insurance proceeds, which are paid to the beneficiaries designated in the policy. Other non-probate assets include property held in joint tenancy, which provides that, upon the death of a joint tenant, the deceased person’s interest automatically passes to the surviving joint tenant(s). Because these assets are transferred by means other than the probate process, a will generally does not control how they are distributed. A skilled estate or elder law attorney is the best source of advice regarding which assets are best distributed through a will, and which should be distributed through other estate planning instruments.

Example: A person names her spouse in a beneficiary designation (within the policy documents) to receive her life insurance proceeds on her death. In her will, she names her sister to receive those same proceeds. Because the proceeds are paid directly to the spouse, they never become part of the deceased person’s estate. Therefore, her will, which only controls her estate, cannot override the beneficiary designation.

A will must meet certain formal requirements in order to be valid. These requirements vary from state to state. Generally, the testator must be an adult of sound mind, meaning that the testator must be able to understand the full meaning of the document. Wills must be written. Some states, including Texas, allow a will to be in the testator’s own handwriting, which is known as a holographic will.  But it is generally considered a better and more enforceable option to have a typed or pre-printed document. For non-holographic wills, a testator must sign his or her own will, unless he or she is unable to do so, in which case the testator must direct another person to sign the will in the presence of witnesses, and  the signature must be witnessed and/or notarized. A valid will remains in force until revoked or superseded by a subsequent valid will. Some changes may be made by amendment (a “codicil”) without requiring a complete re-write.

Some legal restrictions prevent a testator from giving full effect to his or her wishes. Some laws prohibit disinheritance of spouses or dependent children. A married person cannot completely disinherit a spouse without the spouse’s consent, usually in a prenuptial agreement. In most jurisdictions, including Texas, a surviving spouse has a right of election, which allows the spouse to take a legally determined percentage (up to one-half in some places and circumstances) of the estate when he or she is dissatisfied with the will. Nondependent children may be disinherited, but this preference should be clearly stated in the will in order to avoid confusion and possible legal challenges.

A will usually appoints an executor or personal representative to perform the specific wishes of the testator after he or she dies. The personal representative consolidates and manages the testator’s assets, collects any debts owed to the testator at death, sells property necessary to pay estate taxes or expenses, and files all necessary court and tax documents for the estate. In many states, if the language of the will provides for it, the personal representative may act independently of court oversight and approval; in Texas, this is called being appointed as an independent executor or independent administrator.  If language allowing a personal representative to be independent is not included in the will, by default generally the administration of the estate must be “dependent” and must have court oversight and approval of most actions. Under certain conditions, it is possible to avoid a dependent administration even when the will does not provide for an independent executor.

While wills may be “tickets” to go through the probate process, not having a will forces the probate court to distribute the property without guidance from the testator. Dying without a will leaves an estate intestate, and a probate court must step in to divide up the estate using legal defaults to give property to surviving relatives. A personal representative must still be appointed, but the court must choose someone rather than following the deceased person’s wishes.

The court requires that any unpaid debts and death expenses be paid first, and then any distributions follow the legal guidelines found in the probate statutes. The rules vary depending on whether the deceased was married and had children, and whether the spouse and children are alive. If the intestate individual has no surviving spouse, children or grandchildren the estate is divided between various other relatives. Therefore, intestacy means that people who would never have been chosen to receive property may do so. Additionally, state intestacy laws only recognize relatives, so close friends or charities that the deceased favored do not receive anything. If no relatives are found, the estate goes to the government in its entirety. When made aware of the consequences of intestacy, most people prefer to leave instructions rather than subject their survivors and property to mandated division.