When people die, they usually leave assets, debts, or both. Collectively, the assets and debts owned by the individual become owned by the individual’s estate. After a person’s death, someone needs to wrap up the decedent’s affairs, and the legal authority to do that comes through the estate administration process. This blog on the basics of the overall process is the first in a series of four covering estate administration in West Virginia (WV), Kentucky (KY), and Ohio (OH).
Why Understanding Estate Administration is Important
Estate administration is the legal process of winding up the affairs of someone who has died. This includes identifying all assets and debts, using estate assets to pay outstanding debts, filing state and federal estate tax returns if needed, and distributing assets appropriately.
The administration of an estate can also involve disputes. Examples include will contests and allegations of improper dealing by the persons or entities administering the estate. The estate administration process can include court proceedings to resolve such disputes.
How to administer an estate is often guided by formal estate planning documents, such as a will, although state law fills in when no valid will has been identified. In either case, administering an estate properly is imperative to carrying out the decedent’s wishes and distributing property to the rightful new owners. Improper estate administration can greatly affect those eligible to inherit, those to whom the decedent was in debt, and even the estate administrator.
Whether you’ve been asked to administer an estate, are developing your own estate plan, or are the beneficiary of an estate, understanding when estate administration is needed and how it works is critical to protecting your interests, carrying out the decedent’s wishes, and making sure the decedent’s property and debts are wound up completely and correctly.
What Is the Administrator of an Estate?
If probate is necessary, the court will name someone to have the responsibility and legal authority to settle the decedent’s affairs. This person is called the administrator of the estate in some jurisdictions and personal representative or executor in others. Any person, bank, or trust company may serve as the administrator or personal representative of an estate, and there may be more than one working in that capacity.
The decedent may have named in the will someone to serve as the administrator. If the will did not name an administrator, the named person declines to serve in that capacity, or there is no will, the court will name someone to administer the estate. If the will did not name an administrator, any beneficiary of the estate may petition the probate court to be appointed as the administrator.
What Is Probate?
The court process for administering an estate is called probate. Most states have designated probate courts for these proceedings; however, West Virginia does not have a probate. The most common first step in a probate case is delivering the will to the probate court or clerk to “open the estate.” This opens the legal case for wrapping up all of the decedent’s financial matters. Estate planning attorneys recommend that a comprehensive estate plan should include telling a trusted person where to find the will for filing because many states have deadlines for filing the will to open the estate.
The exact probate process may vary from one state to the next, but generally the process looks like this:
Someone files a certified copy of the death certificate and, if possible, the will in the probate court, if applicable, or with the probate clerk, and asks to be appointed as the estate administrator or executor. Alternatively, if there is no will, a beneficiary of the estate files a request with the court asking to be named as the administrator of an estate without a will.
The court issues letters testamentary or other documentation giving that person authority to act as the estate administrator or executor, which confers legal authority to manage the affairs of the estate. The estate administrator may or may not be required to post a bond.
The estate administrator identifies all estate assets and debts, including which assets pass outside of probate.
The estate administrator obtains valuations of probate assets.
The estate administrator identifies and notifies all beneficiaries and creditors of the decedent’s passing and the opening of the probate case.
The estate administrator pays the estate’s debts from estate assets or funds.
The estate administrator prepares and files an estate tax return, when applicable, and the estate income tax return.
The estate administrator distributes the remaining assets of the estate to the beneficiaries as directed in the will or, if there is no valid will, according to the state’s intestacy laws.
Probate is necessary to ensure that a statute of limitations is commenced for filing claims on a decedent or the heirs of a decedent. Assets that are distributed or passed on through other legal means do not need to be probated to change ownership. For example, a house, car, or bank account held in joint name with another person with rights of survivorship will pass automatically to the joint owner when one of them dies. Similarly, beneficiary designations on life insurance and financial accounts also pass to the beneficiary upon the owner’s death without the need for probate. These assets are said to “pass outside of probate.”
What Happens if the Decedent Left No Will?
If the decedent left no valid will or the will cannot be found, then the decedent is said to be intestate. In the event of intestacy, the administrator lacks legally reliable direction from the decedent about how to distribute the estate and, therefore, must distribute the estate according to the state’s intestacy laws. Generally, intestacy laws direct the estate to be distributed to the decedent’s living spouse, if any, children, or other family members. In some states, if there is no will and no living spouse or family members exist, the estate will escheat to the state, meaning the assets will become the property of the state.
What Is Summary Administration?
Most states have a simplified probate process for small estates. In these cases, court supervision or hearings may be limited or bypassed altogether. To determine eligibility for simplified or summary probate, the administrator first needs to determine the value of the estate, although how that is computed differs from one state to the next.
For example, West Virginia determines eligibility for summary probate by totaling the value of assets that would pass through probate. In other words, assets that pass outside of probate, such as assets held jointly with rights of survivorship or assets payable on death to a named beneficiary, are not included. If the total value of probate assets is $100,000 or less, it is eligible for summary probate. Summary probate is also available, regardless of the size of the estate, if the administrator or the surviving spouse is the sole beneficiary of the estate or if all beneficiaries agree that no disputes are likely.
Kentucky and Ohio also count only assets that pass through probate in determining eligibility for summary probate, but other criteria differ. In Kentucky, estates valued at less than $15,000 are eligible for simplified probate if no personal property passed through the will and the decedent left a surviving spouse or, alternatively, a third party paid $15,000 or more of the estate’s debts or claims and there is no surviving spouse. And, in Ohio, simplified probate is possible if the value of the estate is $35,000 or less or, alternatively, if the estate has a value of $100,000 or less and the surviving spouse inherits the entirety.
What Conflicts Can Arise in Estate Administration?
Several different types of disputes may arise in a probate matter. When administering an estate, conflicts may arise regarding any of the following:
Allegations disputing the validity of the will;
Allegations that the estate administrator is incapable of performing the duties required or has not performed them as required; and
Allegations that the valuation of one or more estate assets is incorrect or that assets were missed or should not be included in the estate.
Probate litigation can significantly lengthen the time required to wrap up the estate and increase the costs to the estate for legal representation or professional appraisals, for example. Having a clear, valid will that names an honest, capable, and willing person, bank, or trust company to administer the estate can go a long way to avoid costly probate litigation.
Where to Find Help with Estate Administration in WV, KY, or OH?
The process of administering an estate can take months or years depending on the size and complexity of the estate and the level of conflict in the matter. Working with an experienced probate lawyer in WV, KY, OH, or another state where the decedent resided at the time of death is the first step to making sure you have knowledgeable guidance on estate administration. For a consultation with an experienced estate planning attorney on probate matters in WV, KY, or OH, contact Anna M. Price at Jenkins Fenstermaker, PLLC at (304) 523-2100 or complete this online contact form.