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What is involved in the probate estate administration process?

8/23/2016

While every estate is different, there is a general procedure that is applicable in almost every estate.

The executor (called the personal representative if there is a will or administrator if there is no will) or another loved one should notify the IRS, SSA, or VA of the death of the deceased.
Notify life insurance companies or any other assets that are to be paid to a beneficiary upon the death of the deceased.
The executor will apply to be appointed by submitting an application, taking an oath, and sometimes paying a bond.
- The application requires a preliminary inventory of the deceased’s assets.
- The application fee is $120.
- The executor must provide a copy of the death certificate and will, if there is one.
At the time of appointment, if there is a surviving spouse or minor children, the executor should apply for a family allowance that is given to the family free and clear of creditor claims.
Once appointed, the executor applies for a tax identification number (EIN).
With the EIN, the executor can open an estate bank account and transfer estate funds into the estate bank account.
Collect and safeguard all other property of the estate. Have property appraised, if necessary.
Notify known creditors of the deceased that an estate has been opened. The executor should publish Notice to Creditors in the appropriate newspaper for those unknown creditors.
- It is important to have mail forwarded so that the executor is aware of assets and liabilities of the deceased.
Ninety days from the date of appointment, the executor should file an inventory with the Court. This should be an accurate list of assets.
File income tax return for the deceased’s last taxable year.
- If there is estate income or estate tax owed, additional returns may be required.
Once 90 days has passed since the date creditors were notified of the estate, creditor claims are no longer accepted. The executor should file an affidavit that notice was published with the court. Then, if there are sufficient funds to pay all the debts and expenses of the estate, the executor will do that out of the estate bank account.
- If there are not, outside property may be pulled into the estate.
- If there is no outside property available, there is a statutory formula for paying claims when there is not enough money to satisfy each in full.
If there is money left over after paying debts and expenses of the estate, the remaining funds (and other property) are to be distributed to the beneficiaries according to the will or intestacy statute.
File a final account with the Court, showing all bills paid and distributions made, with an estate account balance of $0.
- If the estate is open longer than one year, an annual account must be filed prior to the final account being filed.

Sometimes, issues arise with who can serve as an administrator, how debts and expenses are paid, and whether property needs to be pulled into the estate to pay these claims. The Clerk of Court Estates Department will assist in the completion of forms, but they will not provide legal advice. A probate attorney can ensure that the estate is administered correctly and quickly.

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What is a business buy/sell agreement?

8/9/2016

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A buy/sell agreement governs how, when, and why partners/owners leave a business, as well as other types of events. A partner’s interest in the business is an asset, and assets are affected at death, divorce, and bankruptcy. As a business owner, you do not want a partner’s death, divorce, or bankruptcy to detrimentally impact the business, right? All of these contingencies can be planned for in advance. We typically encourage our clients to incorporate these provisions in their partnership or operating agreement right from the very beginning, but the buy/sell agreement can be a stand-alone contract.

There are a lot of decisions to be made when going into business with others—naming your business, marketing, capital and profit sharing arrangements, etc. Unfortunately, partners do not always think about the end game, which is exiting the business. Maybe there is a disagreement between the owners as to the future of the company. One partner may want to sell while another doesn’t. If one owner wants to sell just their interest and retire, do the other owners have any say to whom the owner sells to? Should the other owners get the option of purchasing the interest first? If a partner passes away, a family member could inherit their interest, leaving an unsophisticated person running the business with you. Even worse is divorce—during the equitable distribution of a couple’s finances, an ex-spouse could become part owner of a business or force the sale of the spouse’s interest.

Another important concept that many people overlook is how they are going to be able to afford buying another partner out. Oftentimes, having that much cash on hand is impossible. An installment payment plan can be provided for in the buy/sell or operating agreement. To protect against death, life insurance policies are a great way to fund the buyout of a partner who has passed away. The company or the other owners buy policies for each other (but not themselves), and upon the death of a member, the company or owners receive the life insurance benefit. That money can be paid to the family of the deceased as payment for his or her interest in the business.

Finally, buy/sell or operating agreements can stipulate the type of valuation that should be used if and when an ownership interest is sold. There are three main types of business valuation methods: Asset Approach, Market Approach, and Income Approach. Even if business owners agree on who should purchase the interest, if they haven’t previously agreed upon the valuation method, the owners could come up with different valuations and be forced to file a lawsuit and have the court decide.

In the event that business owners have not planned for these almost-certain future events, depending on the terms of the operating agreement, a court can force the dissolution of a business. Many business owners avoid hiring attorneys because of the cost. However, it is important that business owners consider the comparatively small cost of hiring an attorney to assist them with these matters now, as the future cost could be much, much higher, and their business could suffer or be forced to close as a result.

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What is involved in the probate estate administration process?

What is a business buy/sell agreement?

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