By Attorney Isaiah M. Richie, Schloemer Law Firm, S.C.
Losing a loved one is an emotional and trying time. Not only have you lost someone close—a spouse, a parent, a sibling, a friend, or heaven forbid, a child—but now you may be confronted with the immediate unavoidable question, “Now What?”
First, take a breath. Things will work themselves out in time.
Life goes on, and daily tasks can help weather the storm, but if you are an heir, or have been named as a representative or trustee, you might have the added burden of administering the decedent’s estate. Do not make any hasty decisions or start paying bills or distributing assets until you are confident that you have the authority to do so. Consult with an attorney before you take any of these steps. There is a lot of “hurry up and wait” involved, and hasty decision making can expose you to potential liability. This article will briefly explain the three types of estate administration, and what your job may be in each case. Those three common forms of administration are as follows:
- Probate administration
- Beneficiary administration
- Trust administration
Identify the Documents
The first step in estate administration will be to locate any estate planning documents, such as a Will or a Trust. Hopefully you will know beforehand where these are kept, and you will be able to find original documents. These documents will tell you who is going to be responsible for the estate administration. If there is a Will, it should name a Personal Representative (many people use the term ‘Executor’ as well). If there is a Trust, it should name a “Successor Trustee” or a surviving co-Trustee. The surviving Personal Representative or Successor Trustee/co-Trustee will be the one responsible for administering the estate.
Identify the Assets
The next step will be to locate estate assets to determine what type of administration will be necessary. There are two basic types of assets to consider in this determination, ‘probate assets’ and ‘non-probate assets’. This illustration demonstrates general examples of common types of assets:
|· Residence and other real estate
· Bank accounts
· Personal property (furniture, household items, firearms)
· Ownership in a business (partnership, LLC, corporation, etc.)
|· Life insurance
· Investments accounts and retirement accounts*
· Trust assets (titled in the name of a trust).
· Any assets with a beneficiary designation using Transfer on Death (TOD) or Payable on Death (POD).
*If a surviving beneficiary is named.
It’s important to understand that there are exceptions to this illustration. For example, if a life insurance policy names the decedent’s spouse, and the spouse has already passed away, the policy may have to go through probate. Alternatively, if real estate or a bank account has a beneficiary named, it is not a probate asset and will not go through probate. An experienced estate attorney can help you determine whether assets are probate or non-probate assets.
Once you have identified the assets, you will know which of the three forms of administration you will need to pursue.
While not technically an “administration”, you should be aware of steps required if assets have beneficiary designations. For most beneficiary assets, there is a fairly simple process of filing a claim form with the insurance company, bank, or financial institution to transfer the assets to the beneficiaries. This is not the responsibility of the Personal Representative or Successor Trustee. This is done by each individual beneficiary named.
For real estate with a TOD designation on it, the beneficiary must file what is called an HT-110 Termination of Decedent’s Interest form with the local county Register of Deeds along with a real estate transfer return. An attorney typically assists with these filings.
It’s important to remember that there may be bills or debts of the estate, and if those are not paid by the estate, the creditor may in some circumstances pursue a beneficiary for that debt up to the amount received by the beneficiary.
Even if no formal administration is required, under Wisconsin law a decedent’s original Will must be filed with the Register of Probate. Some counties require additional filings to accompany the Will, so it it important to consult with an attorney who is familiar with local rules.
On the opposite end of the spectrum, probate administration is usually the most time consuming and complex form of administration. Probate is required in Wisconsin if there are over $50,000 worth of probate assets or real estate of any value that is not in a trust or is not survivorship property or does not have a beneficiary. Probate is essentially the court-supervised administration and is informed either by statute of by a Will. In probate, the Personal Representative must file the Will with the court, along with several accompanying documents, to open proceedings.
Once appointed, the Personal Representative’s main duties are to:
- Identify and collect the decedent’s assets.
- Manage those assets during the probate process.
- Determine the surviving spouse’s (if any) rights under the state Marital Property Law.
- Pay debts, claims, taxes and probate administrative expenses.
- File an inventory with the court.
- Make any distributions to the surviving spouse or dependent children required under state law.
- Distribute the remaining assets to those named in the Will (or if there is no Will, to the heirs-at-law).
The Personal Representative will be required to follow certain court procedures and deadlines. They will most likely need to obtain an EIN number, and they also need to determine whether a personal or estate income tax return will need to be filed. These determination will be controlled by the state statutes, as well as local court rules. The Personal Representative will need to file a notice to creditors, wait for claims to be made, file an inventory with the court, and file for a closing certificate from the state, all during this process and while supervised by the court. Additionally, there can be formal and informal probate, each with different requirements. Again, with so many technical and legal
Somewhere between beneficiary designations and probate administration is the trust administration process. There is sometimes a misconception that a trust does not require any sort of formal administration. While it is certainly less formal and not typically supervised by a court, a trust still needs to be administered according to its terms and the Wisconsin Trust Code. Generally speaking, trust administration will include the same things as probate as listed above, but it will be less formal and rigid in structure (plus there is no judge looking over your shoulder).
At the end of the administration, the Successor Trustee will distribute the remaining trust assets along with a final accounting to inform beneficiaries what the assets and costs of the trust were. Additionally, some trusts may direct certain portions or shares to be held in a separate trust for the benefit of a particular individual. For example, a trust may say that if an heir is under 30 years old, that share of the trust must be held until they turn 30. In that case, the trustee must manage that share for an extended period of time. Like probate, the Successor Trustee must determine whether tax returns are necessary, and if so, whether they will be filed by the Trust or flow through to the beneficiaries. Again, an experience estate attorney can assist in making these determinations.
Summary of Steps
If you have been named as the representative or trustee of a decedent’s estate, it is important to begin gathering the documents that will govern administration as well as the assets that will be subject to administration. It is important to hold off making any sort of distributions or payments until you are sure that you are authorized to do so. Otherwise, you could be held responsible by a creditor or beneficiary.
Navigating estate administration in the midst of such an emotional time can be stressful and difficult. In addition, failure to follow required procedures can subject you to personal liability by upset family members, heirs, or creditors of the estate. If you are shouldering these responsibilities, meeting with and potentially retaining an experienced trust and probate administration attorney can help relieve the stress and guide you through the process.
If you have questions regarding a decedent’s assets or documents, or if you would like assistance in administering an estate, please contact the author of this article, Attorney Isaiah M. Richie, at [email protected] or you can contact Schloemer Law Firm, S.C. at 262-334-3471 or by email at [email protected].
Originally published: December 7, 2021.
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Disclaimer: The information contained in this post is for general informational purposes only and is not legal advice. -Due to the rapidly changing nature of law, Schloemer Law Firm makes no warranty or guarantee concerning the accuracy or completeness of this content. You should consult with an attorney to review the current status of the law and how it applies to your unique circumstances before deciding to take—or refrain from taking—any action. If you need legal guidance, please contact us at 262-334-3471 or [email protected].