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Probate Administration

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Title: Probate Administration


1
Probate Administration
2
Angela M. Kirby, J.D., C.P.A. Certified
Specialist in Estate Planning Probate
Law Rogers Townsend Thomas, PC 220 Executive
Center Drive, Winthrop Building Columbia, SC
29210 (803) 771-7900 akirby_at_rtt-law.com www.rtt-la
w.com
3
What is Probate? Probate is a court-supervised
process to accomplish the transfer of property
from a Decedent to the Decedent's beneficiaries
as identified in the Decedent's Will or by the
laws of intestacy if there is no Will. The
Personal Representative (PR) is appointed by the
Probate Court to handle the administration of the
estate. The PR is a fiduciary with
responsibilities to the Probate Court, the
beneficiaries, and the creditors of the estate.
4
Is Probate Really Necessary?   In order to
determine if Probate is Necessary, you must
Gather Information about the Decedent, the
Decedents Heirs and the Decedents Assets. See
Tips for Gathering Information on Pages 278 to
280 and the Items Needed at the Initial Meeting
on Page 297
5
A Family Tree is Critical to the Process Dont
be Afraid to Ask Questions How many times was
Decedent married? Do you have a copy of the
divorce decree? Do you have a marriage license?
How can you prove that you are the common law
spouse? Have any children been born out of
wedlock? Have any children been adopted? Have any
children been taken care of by Decedent but not
legally adopted? Request copies of the birth
certificates, marriage license or divorce decrees
if necessary. TIP See Page 277 for other
factors that may reduce an intestate heirs
share!  
6
IF NO WILL then you look to the laws of INTESTACY
to control the DISTRIBUTION of probate
assets Married w/ no children all to
spouse Married with children one-half to spouse
and one-half to children Single w/ children only
all to children Single w/ no children all to
parents If no parents then all to siblings If no
siblings then all to nieces and nephews If no
nieces and nephews all to grandparents (maternal
and paternal) If no grandparents then all to
aunts and uncles (maternal and paternal) If no
aunts and uncles then all to cousins (maternal
and paternal) If no blood heirs then
stepchildren and if no stepchildren then the
State See SC Code of Laws Sections 62-2-102 and
62-2-103  
7
If There is No Will At All. . .
  • Then the Administration of the estate is
    controlled by state law starting with the fact
    that the State selects the heirs even if the
    Decedent never ver met them!
  • All heirs inherit a pro-rata share of everything
    unless they can agree otherwise and submit a
    private agreement to the Court for approval and
    this sometimes leads to fighting over who gets
    what
  • A Minor childs share is monitored by a Court
    appointed Conservator and is distributed at age
    18
  • The PR may have to be Bonded and they will have
    no Authority to Sell Real Estate without a
    Petition and no authority to sell personal
    property valued over 5,000
  • All heirs may have to pay a pro-rata share of
    estate taxes if applicable

8
Non-Probate Assets vs. Probate Assets Non-Probate
Assets are assets that will transfer
automatically at death to a new owner by
operation of law because of the way they are
titled or by virtue of a beneficiary designation.
Probate Assets are the assets that are in the
Decedents name as of death and do not transfer
upon death without the appointment of a Personal
Representative. The distribution of probate
assets will be either pursuant to the Will or the
laws of intestacy.    
9
Examples of Non-Probate Transfers
  • Joint Property titled as Joint tenancy with
    right of survivorship (bank accounts, brokerage
    accounts, cars) BEWARE Dig a little deeper in
    determining how the bank accounts became JTROS
    were they created by Decedent or a POA of the
    Decedent
  • Assets passing by operation of law with
    beneficiary designations (such as life insurance,
    IRAs, pension plan benefits, etc.)
  • Payable-on-death accounts
  • Real Property with the magic language with right
    of survivorship
  • Funded Trusts

10
  • Only Probate Assets are Controlled by the Will
  • Examples of Probate Assets Include
  • Real Estate titled solely in the Decedents name
    or titled as Tenants in Common (Another Common
    Misconception and unique to SC- we do not
    recognize Tenancy by the Entirety which in
    other states is an automatic transfer at death
    between husbands and wives owning real estate
    together)
  • Stocks or Brokerage Accounts solely in the
    Decedents name or titled as Tenants in Common
  • Cash accounts solely in the Decedents name
    (Most joint accounts are Joint Tenants with Right
    Of Survivorship)
  • Insurance or Annuities payable to the Estate
  • Personal Effects (cars, boats, etc) in the
    Decedents name

11
Which Probate Court Do I File My Petition With in
SC? Typically, the County where the Decedent was
domiciled or where the Decedent owned real
property. TIP If the County or State listed on
the death certificate differs from the County
where you are filing the Petition to open Probate
then file an Affidavit of Domicile  
12
Small Estate Administration
  • Assets less than 10,000 and NO Real Estate
  • Must wait 30 days after date of death
  • No Personal Representative is appointed
  • Cannot proceed if creditor files a claim at the
    Court
  • Applicant must typically provide proof of a paid
    funeral bill
  • (More information can be found at Page 278)

13
Finding, Reading, and Interpreting the Estate
Planning Documents Original Last Will and
Testament and all Codicils Revocable Trust
Agreements and all Amendments Memorandum for
Personal and Household Effects Locating the
Will Safe deposit box fireproof safe at the
home or office home office or work office check
with family attorney or drafting attorney if a
Copy can be found Inquire of Trust Departments,
CPA, Insurance Agents, Financial Advisors,
Brokers, Relatives or Advertise in local
publications or Bar publications.  
14
Finding the Estate Planning Documents Practical
Tip If the original Will cannot be located, you
may want to consider filing a Copy of the Will
and utilizing a Private Agreement but it must be
executed by all of the Testate and Intestate
Heirs. This topic is more fully discussed
under Private Agreements on Page 291 and SC Code
of Laws Section 62-3-912.  
15
Reading and Interpreting the Estate Planning
Documents It is your responsibility to read
these documents and to fully understand all of
the provisions. If any provisions are ambiguous,
it is the attorneys responsibility to assist the
Personal Representative with filing any necessary
actions to determine the proper interpretation of
these documents. Look for Critical Clauses
such as Reference to PHHE Memorandum, Powers to
Sell Real and Personal Property, Specific
Bequests, Age of Distributions, How to Pay Taxes,
Rest and Residue Clauses, etc.
16
Getting Started with the Probate
Administration The probate process is very
forms driven, and the official Probate Court
forms may be downloaded from the SC Judicial
Department website (Page 280) www.judicial.us.sta
te.sc/forms/search or by visiting your local
probate court website.   You may also buy a
software program. (See Alphabetical Index of
Probate Forms at Page 294)
17
Commencing a Probate Administration Informal
Application or Formal Petition(Form 300PC) The
probate administration is commenced by filing
Form 300PC to request the informal or formal
probate and appointment of a PR. This form was
recently revised as of June 2010. A Summons and
150 filing fee is only required for Formal
Petitions. Certified Death Certificate from
DHEC (Page 278) Initial Filing Fees for
Creditors Notice Probate Court Fees
18
Renunciation of Right To Administration/ Nominatio
n/Waiver of Bond (Form 302PC) This form is
typically only necessary for intestate estates or
in the event that the nominated Personal
Representative and successors are deceased or
unwilling or unable to serve. This form may be
utilized to avoid formal probate for intestate
estates when all heirs agree on who should serve
as Personal Representative. In addition, this
form can also be used to avoid the Personal
Representative from having to expend estate
assets to post a fiduciary bond for informal
probate. See Page 280 and 62-2-901(a)(8)
62-3-603(A)(1)  
19
Once the Certificate of Appointment is issued by
the Probate Court then You Must Complete the
Probate Critical Dates Checklist Name of
Decedent_________________________________ Probate
Court____________________________________ Probat
e Case No__________________________________ Date
of Death______________________________________ D
ate of Appointment of Personal Representative____
______ Date of Publication of Creditors Notice
________________ Most all of the critical dates
stem off of the above events  See Page 292 for
the complete form  
20
Probate Critical Dates Checklist   Notice to
Creditors (Form 370PC) Runs 3 Consecutive weeks
after Appointment and the Certificate of
Publication (Form 370PC) must also be filed with
the Court Retain a filed copy for the file
some Probate Courts contract with the newspapers
and the Affidavits are filed directly with the
Court Information to Heirs and Devisees (Form
305PC) Due 30 days after Date of Appointment of
Personal Representative (PR) Proof of
Delivery (Form 120PC) Due 30 days after Date of
Appointment of PR as evidence of service of Form
305PC and used to comply with Demand for Notice
     
21
Probate Critical Dates Checklist Inventory
and Appraisement (Form 350PC) Due 90 days after
Date of Appointment of PR   Estate Tax Return
(IRS Form 706) Due 9 months from Date of Death
  Decedents Personal Income Tax Return (IRS
Form 1040) and Gift Tax Return (IRS Form 709)
Due April 15th in year following Date of Death
22
Probate Critical Dates Checklist Expiration of
Creditors Claim Period Earlier of 8 months
after first date of publication found on the
Certificate of Publication (Form 370PC) or 1 Year
from Date of Death Estate Income Tax Return
(IRS Form 1041 and SC1041) Due 4 months and 15
days after closing of fiscal estate year or
calendar year if PR elects a calendar year
Interim Accounting (Form 361PC) Due
Annually from date of appointment if the estate
remains open for longer than a year due to
litigation or taxable estate      
23
Probate Critical Dates Checklist Closing of the
Estate Due 3 to 4 months after the creditors
claim period expires or within three months of
receiving a closing letter from IRS if a taxable
estate Closing forms include Petition for
Settlement (Form 412PC), Final Accounting (Form
361PC), Proposal for Distribution (Form 410PC),
Notice of Right to Demand a Hearing (Form 416PC),
Receipts and Releases (Form 403PC), Deeds of
Distribution (Form 400PC), and Waivers of Notice
(Form 111PC) Motion for Extension (Form 352PC)
Due immediately if any of the above dates cannot
be met in a timely fashion  
24
Obtaining Tax Identification Numbers An estate
is a separate taxpayer. As a result you will
have to apply for a tax identification number
(TIN) for the estate. This TIN will be used by
the PR when opening any bank or other accounts in
the name of the estate. This number will also be
required for the filing of the estates fiduciary
income tax return (Form 1041). The PR is
required to file this return each year during the
estate administration if the estate sales assets
or earns more than 600 in income.
25
Finding, Protecting, and Valuing Assets After
the PR has been appointed, the PR must file an
Inventory and Appraisement (Form 350PC), which
describes and places a value on all of the assets
of the estate and the debts secured by liens on
estate assets. This Inventory must normally
include a listing of all property. This
typically includes both "probate assets" and
"non-probate" assets. The values of the assets
are established by various means. Form
recently revised as of June 2010
26
Inventory and Appraisement Form 350PC Schedule
A Real Estate Schedule B Stocks and
Bonds Schedule C Cash and Receivables Schedu
le D1 Insurance Payable to the Estate Schedule
D2 Insurance Payable to Beneficiary (Not
Estate) Schedule E Joint Property With Right
of Survivorship Schedule F Personal
Property (including PHHE) Schedule G
Transfers During Life (Trusts and POD
accts) Schedule H Powers of Appointment
Schedule I Annuities (IRAs,
pensions) Encumbrances Only Secured Liens
27
Finding the Decedents Assets Tax Returns, Bank
Statements, Canceled Checks, Brokerage
Statements, Insurance Policies, Pay Stubs,
Decedents Mail, Safe Deposit Box, Public
Records for Deeds and Mortgages, Veterans
Affairs, Credit Bureaus, Other Estate Paperwork
that Decedent was a Beneficiary. Look back to
the List of Items Requested at the Initial
Conference with PR on Page 297
28
Valuing the Decedents Assets You must use Fair
Market Value as of the Date of Death for the
Probate Court forms. Although you do not have to
have a formal appraisal on all assets, there are
good reasons to have one. The beneficiaries
typically get a step up in basis and having an
accurate value on the assets inherited will
reduce capital gains tax paid by the
beneficiaries of an estate. Also, if the estate
is taxable the IRS will be less likely to
challenge the valuations if appraisals are
attached to the estate tax return. PHHE If
all parties are getting along then I do not
recommend an appraisal of PHHE. It is costly. If
litigation pursues, you may have no choice.
Typically, PHHE is valued at a nominal value.
29
Probate Fee Schedule  South Carolina Code
Section 8-21-770(B) Property Values Based on
the Inventory Fee Due   Property
Valued at Less Than 5,000 25.00 Property
Valued 5,000 but less than 20,000 45.00 Propert
y Valued 20,000 but less than 60,000 67.50
Property Valued 60,000 but less than
100,000 95.00 Property Valued over 100,000
95.00 plus .15 times over 100,000 up to
600,000 plus .25 times the amount over
600,000 NOTE Sample Calculations on Page 293
30
Ongoing Probate Estate Administration and Duties
of PR Setting up Estate checking
account Transferring Decedent's assets into
estate accounts Protecting assets from waste,
destruction, or reduction in value. Ensuring
that property and liability insurance is in place
to protect both the property and the PR from
personal liability.   Filing claims to obtain
life insurance proceeds or retirement accounts
for the estate or a beneficiary.
31
Finding and inventorying any safe deposit
boxes.   Paying all proper debts of the
decedent. Paying all proper debts incurred by
PR you during the administration   Reviewing
investments to determine whether the particular
investment should be retained by the estate.
  Selling inappropriate estate
assets.   Complying with probate court filing
requirements and laws.
32
Filing the final income tax return for the
decedent.   Filing required fiduciary income
tax returns.   Paying all specific
bequests.   Filing the federal and/or state
estate tax return, if applicable.   Filing with
the probate court any required interim and final
fiduciary accountings.   Paying the remaining
estate assets to the residuary beneficiaries.
33
Transfer of Real Estate. The PR also has a duty
to file a Deed of Distribution (Form 400PC), with
detailed legal descriptions of any real property
which the decedent may have owned. This document
evidences the transfer of title from the decedent
to the beneficiary. TIP A title search is not
absolutely necessary, but add No Title Search
Performed to the Form 400PC and always compare
the Property Tax Notice to the Deeds into the
Decedents and compare for accuracy. If
discrepancies are apparent then a title search is
recommended to avoid problems with title in the
future. SC has a lot of heirs property and it
can be discovered and corrected with proper
research.
34
Creditor Claims Creditors are directed to file
their claims within the required period after the
first publication of notice or their claims will
be barred. All claims arising before the
decedent's death must be presented within the
dates specified by state law. Claims must be
filed with the PR and with the probate court. The
lawyer should advise PR on payment of claims and
recommend appropriate dispositions of each
creditors claim. It will be the PRs
responsibility to review all claims and to
disallow any improper claims.
35
Final Accounting. Upon the settlement and
closing of the estate, the PR must file with the
probate court a final accounting showing all of
the decedent's assets owned at death and all
receipts, disbursements, and interim
distributions. Simultaneously, the PR may file a
Proposal for Distribution detailing the
distribution of the remaining assets. TIP
Accurate financial record-keeping is absolutely
imperative. The PR should keep careful and
detailed records with respect to all assets paid
to the estate and all disbursements of any kind
made by PR, including dates of payment, amounts
paid, and reasons for payment. TIP Get
duplicate statements sent to law firm and review
statements with PR while entries are easily
remembered.
36
Personal Representative's Fee   The PR is
entitled by law to receive a commission. The
method of computation is determined both by the
nature of the assets and by state law. The
commission will be income to the PR and taxable
when received by PR. The PR is not required to
accept the commission. TIP PR is entitled to
5 of the value of the Probate Assets listed on
Schedule B, C, D1, F, and I (if estate is
beneficiary) along with 5 of the net proceeds
from the sale of real estate and 5 of income to
the estate (See page 287 and SC Code of Laws
Section 62-3-739)
37
Closing the Estate   After all of the assets have
been collected and the debts and taxes paid, the
PR must then distribute the remaining assets to
those remainder beneficiaries entitled to receive
them. Distributions of estate assets to
beneficiaries can be complex. SC Forms
Petition for Settlement (Form 412PC), Final
Accounting (Form 361PC), Proposal for
Distribution (Form 410PC), Notice of Right to
Demand a Hearing (Form 416PC), Receipts and
Releases (Form 403PC), Deeds of Distribution
(Form 400PC), and Waivers of Notice (Form 111PC)
along with a Proof of Delivery (Form 120PC)
evidencing the closing documents were served on
all remainder beneficiaries.  
38
Time Period for Estate Administration   It is
usually not possible to complete the
administration of an estate in less than about
one year. Normally, an estate administration
takes up to eighteen months due to the various
income tax returns that are required to be filed.
If there are disputes with heirs or creditors,
it can take even longer. If the estate is
required to file an estate tax return, then the
estate administration period might be two to
three years from the date of death.
39
Estate Taxes Who Pays
Them and How Much?
40
  • As of press time, we are still awaiting
  • the final verdict for 2010.
  • Will Congress reinstate the 3.5 million dollar
    threshold for estate taxes?
  • Will Congress increase the threshold?
  • Will Congress do nothing at all and allow the
    threshold to go back to 1 million dollars?

41
  • Have you addressed the possibility of estate
    taxes in your estate planning?
  • Threshold for Estate Taxes Max. Rate
  • 2009 3,500,000 45
  • 2010 0 0
  • 2011 1,000,000 55

42
Estate Taxes
  • Due nine months from date of death (IRS Form
    706) if in a year with estate taxes
  • The Estate planning documents outline who has to
    pay the estate taxes and in what proportions if
    not addressed then pro-rata based on inheritance
  • Charities and spouses do not pay estate taxes on
    bequests and are typically treated as a deduction
    on the estate tax return
  • Currently, SC does not impose an estate tax

43
Decedents Income Tax Returns The PR is also
responsible for the final state and federal
income tax returns of the decedent, not only for
the year in which the decedent died, but also for
all previous years, if any, for which returns
were or will be due but have not been filed.
Thus the PR must determine if sufficient income
was received by the decedent during the year of
death and for previous years in order to
determine whether income tax returns are due.  
44
Fiduciary Income Tax Returns If the estate
receives income during any year, a federal
"fiduciary" income tax return must be filed for
the estate. A state fiduciary income tax return
must be filed as well for any state in which the
estate earned income during the estates
administration.
45
Guardianships and Conservatorships
46
  • Does Your Adult Client Have a Power of Attorney
    or a Health Care Power of Attorney?
  • Is it a Durable Power of Attorney? Special
    language must be in the document to make it
    durable (ie. Language that the document is still
    effective regardless of Incapacity of the
    Principal)
  • Does the Power of Attorney have a springing power
    of attorney? What are the requirements for
    springing into effect?
  • Has the Original Power of Attorney been recorded
    in the County Register of Deeds office?

47
  •  What happens if no Durable Powers of Attorney
    or Health Care Powers of Attorney have been
    executed or are found?
  • If no DPOA or HCPOA, then a Petition for
    Guardianship (Form 530PC) and Conservatorship
    (Form 540PC) will need to be filed in the Probate
    Court to have a relative or friend appointed to
    handle an incapacitated adults medical and
    financial affairs and the Court will monitor the
    actions of the court appointed fiduciary annually
    until the incapacity terminates.
  • See Pages 288 to 290 for more details
  •  

48
  • Conservatorships for Minors
  • 10,000 or more left via Will, Beneficiary
    Designation, JTROS, Workers Comp Benefits,
    Personal Injury Settlement
  • Fiduciary Appointed until Minor is 18
  • Money is conservatively invested and subject to a
    Bond and/or Restricted Account Agreement
  • Annual Financial Reporting to the Court
  • Petitions for Expenditures and Orders required to
    spend funds on the Minor
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