Probate

Probate is just the fancy term of distributing the assets to the right people through the proper court proceedings. Basically, this is what happens when you don’t do any planning or at least very little. Probate court is for those who have no trust and have assets that were not titled as joint tenants with rights of survivorship.

For example, lets say you die and have a house and a couple of bank accounts all titled in your name only. You are married and the bank accounts were acquired during the marriage but the house you owned before marriage. That is important because the probate court is going to want to know what property is separate property and what property is community property depending on what state you live in. Nevada is a community property state which means that everything that was acquired during the marriage is deemed to be community property so ½ of it is your spouses whether her name is on it or not. Those community assets, when they go to probate also get passed to the spouse upon your death.

Compare that with separate property which means that however it is titled it is presumed to be that person’s separate property. What that means in probate court is that we now have to follow that states intestacy (distribution) laws. In Nevada for example above because the house was yours before marriage it is separate property. Assuming you have more than one child, that house will be split, 1/3 to spouse and 2/3 are divided equally among the kids. If you think about this and in most cases,  this is a second marriage scenario, spouse now owns the house with your kids, not hers. This can lead to a lot of fights.

Now I do need to mention that if you have a will, the intestacy laws do not apply. The court is going to simply follow what you’ve outlined in the will, but you still have to go through the same steps, procedures and fees that are required with a non will probate.

That is just the distribution part of probate as well. We still need to get a person named in charge of the estate, guardian of the minor children (you don’t want to leave that up to the government do you?), etc. The general rule for probate court is that you will spend at least 5% on attorneys fees and court costs and it will tie up the assets for around 6 months or longer. Now that can very depending on the size of the estate.

In Nevada there are 4 types of probate matters that the estate could go through that depend solely on the value of the estate. Let’s talk about each one.

Affidavit of Entitlement

If the total estate value, meaning everything added up together, is less than $25,000 you don’t even have to go through probate court. Nevada law provides for you and your fellow heirs can sign an affidavit of entitlement stating that you are the rightful heirs of the estate, that the estate had no debt (if they did have debt this may make this not an option) and that the value of the estate is less than $25,000. The bank or DMV then has to honor that affidavit and distribute all assets to the heirs. It must be signed in front of a notary public and if you lie on it you can be held in contempt of court.

The Affidavit of Entitlement is really for those super small estates or if you forgot to put one or two things into your trust. 

Set Aside

A Set Aside probate is where the estate is over $25,000 but under $100,000. If they total estate is less than $25,000 you don’t have to go through probate court but simply sign an affidavit stating who the rightful heirs are. The set aside is great because it is an expedited probate court process. It only requires one hearing and then assuming the court agrees and no objections are made, they will grant an order giving the heirs the money/assets. Typical time line for a set aside is around 3 months.

Summary Administration

A Summary Probate Administration is when the estate is over $100,000 but less than $300,000. It requires a minimum of 2 hearings, usually more and we do have to file a 60 day notice to creditors. Once again if there are objections or delays in selling the property, it can add to the timeline and cost but the typical timeline is around 6-9 months.

Full Probate Administration

This is probate for estates with assets over $300,000. This requires a minimum of 2 but usually more hearings a 90 day notice to creditors and publication of all hearing dates. The time line for this is 9 months or longer.

Everything mentioned above is a very basic shell overview of the probate process. Each case will be different and so will the timeline. Plan on delays and frustration because the court systems are overworked, especially probate because lots of people are dying and few have their affairs fully in order.

While we definitely guide you through the difficult probate process, hopefully this serves as a reminder to stop delaying and get your estate planning done now so that your heirs will not have to go through the same mess you are dealing with.

 Joint Tenancy

I hear potential clients all the time say, I don’t need a trust because I already but my, spouse, kid, grandkid, etc. on the title of my accounts and/or house. While it is true that doing this can avoid probate, it is only prolonging the time until probate is needed and it isn’t the best way to transfer assets. Let me show you why.

Let’s say Mom owns her house outright. She realizes that she is getting older and might actually die so she puts the oldest of her 4 kids on the deed with her. Her though process is that, when I die it will go automatically (sort of true) to my son and then he can split it with his siblings. The first problem here is that nothing happens automatically. Son still has to terminate the joint tenancy upon Mom’s death. It is not a complicated process as long as you have access to the original deed that created the joint tenancy and a certified copy of the death certificate. Once you have those two items, we can help draft an affidavit terminating joint tenancy so that it can go solely into Son’s name.

The next issue we have with this scenario is that upon Mom’s death, she think Son will split it with his siblings. While in most cases, Son will do just that, he has no legal obligation to do so. Once Mom dies, the house is his and the siblings have no right to get any part of it from him. If he wanted to he could sell it and keep all of the money for himself. Or let’s say that Son did have good intentions to split it with his siblings but he dies shortly after Mom and never transferred the house into all 4 siblings names. Because its in his name, the house has to go through probate court and just like we talked about in the probate section, that house is going to be considered his separate property and distributed according to law. If he is married and has kids, the wife now owns 1/3 while the kids own 1/3 and you can bet they aren’t going to share that with Son’s siblings at that point and they don’t have any legal obligation to do so. It will ruin the family relationship but that happens more often than now when it comes to inheriting money.

The last problem with joint tenancy is from a liability perspective. As mentioned above, Mom owns the house outright. Let’s say that while Mom is living, Son causes a car wreck that is pretty bad and gets sued for it. Well, because he is listed as a co-owner on Mom’s house, her house is now subject to the law suit and the injured party can sue, foreclose and collect on Mom’s house to pay for Son’s debts. Its not just the house they can come after either, it could be anything to which he is listed as a joint owner. This is one of the best ways to make sure you don’t have any asset protection.

So how can you avoid all these pitfalls? The short answer is a living trust. Mom can name Son as the Successor Trustee when she passes and he could then manage the house for the benefit of his siblings, but he can never take it for his sole benefit. It also never becomes a liability concern either because the property never goes into Son’s name so even if he gets sued, that property never shows up in his name and cannot be part of the lawsuit or collections.

Now each situation is different and cannot follow a blanket roadmap. I still recommend that you speak with an attorney about your situation.