Transferring Assets After Death
How do you handle wealth transfer to the intended beneficiaries?
What is Probate and Trust Administration?
When a loved one passes away, their Executor or Trustee must handle the process of transferring their assets to the intended beneficiaries. This process can be accomplished through the court process called probate or if the decedent’s assets were titled in a trust, by a trust administration.
Probate vs. Trust Administration
Although people often confuse the probate process with trust administration, they are not the same thing. The probate process is about transferring a decedent’s assets to the correct beneficiaries with the involvement of the local probate court. Assets owned by a trust will typically be distributed to the beneficiaries of the trust without court involvement.
Regardless of whether a probate or trust administration is required, the estate settlement process generally involves seven separate phases: including 1) the inventory of documents and finances, 2) valuation of assets, 3) redemption of insurance, annuities, and retirement plans, 4) payment of expenses and claims, 5) tracking of income, 6) payment of taxes, and 7) distribution of assets to the beneficiaries or heirs.
The probate process is a court proceeding that allows the court-appointed Personal Represenative (Executor or Administrator) of the estate to retitle assets from the decedent’s name into the names of the decedent’s beneficiaries. The probate is administered by the local circuit court.
A probate is necessary in Illinois when a person dies with at least $100,000 of probatable assets. Probatable assets include property that is not transferred automatically upon the death of the owner – for example, bank accounts with no joint owner or pay-on-death (POD) beneficiary, real estate held solely in one person’s name, or held “in common” with someone else, automobiles, artwork, collections, furniture, farm equipment, and all other personal property.
If the decedent passed away with a valid will, the will controls the appointment of the Executor and the distribution of property. On the other hand, if the decedent passed away without a will, the court will decide who to appoint as the Personal Representative (Administrator), and Illinois law will determine who is entitled to receive the property. In either case, the court-appointed representative (Executor or Administrator) must collect the assets, pay creditors of the estate, and distribute assets to the beneficiaries. All interested parties must be informed of the proceedings and a notice must be published in the local paper. Interested parties will have an opportunity to challenge the will. Any person or business owed money by the decedent must have a chance to make a claim against the estate. Once the process is complete, the representative provides the heirs and the court with a final accounting and a closing statement, and the probate is closed.
Unlike probate, trust administration does not involve the courts – so long as the assets were properly titled in the name of the Trust prior to death. Look to the Trust document to understand your powers as a fiduciary. The principal source of your Trustee powers is the Trust itself. The Trust contains two types of provisions: dispositive provisions that govern the distribution of property and administrative provisions that govern the powers of the Trustee, the payment of taxes and expenses, the rules for interpreting the Trust instrument, and other procedural issues.
If there are assets titled in the name of a trust as well as assets titled individually in the name of the decedent, it may be necessary to conduct both a probate and a trust administration. In either case, when you serve as Trustee, you are personally responsible for the payment of taxes and creditors if the trust administration is handled improperly.
Who Benefits from Probate or Trust Administration?
As the Executor or Administrator of a probate estate or the Trustee of a trust administration, you have significant responsibilities and liabilities. Obtaining proper counsel and advice is critical to ensuring you carry out your responsibilities in a manner that minimizes personal liability. If the estate administration is handled improperly, you may be subject to personal liability. Proper counsel ensures you handle the following situations correctly:
- Inventorying and distributing assets
- Correct document interpretation of legal documents
- Dealing with difficult beneficiaries
- Addressing income and estate tax issues
- Avoiding personal liability as a fiduciary
- Properly completing and filing court documents if necessary
What Should You Expect During the Planning Process?
The first step in the estate administration process is to call our office at 630-871-8778 or request a call here. Our staff will ask you a few questions about your needs and let you know how our firm works and what to expect. If you would like to schedule an initial meeting with an attorney, our staff will send you a Probate or a Trust Administration packet.
The packet includes an Estate Administration Information Worksheet which will help you with the information gathering process. The initial meeting is a working meeting, and we want you to get as much out of it as possible.
At your initial meeting, the attorney, either Bill Deitch or Kirsten Izatt, will set forth expectations regarding complexity, time frame, fees, and potential pitfalls.