PROBATE AND THE PROCESS

The probate court and probate process has a proper function. Probate is necessary to protect the rights to the probate estate of a decedent’s heirs, devisees, and creditors, and to ensure assets are distributed correctly. If you have a Will, the court will ensure your wishes are carried out. If you do not have a Will, the Missouri statutes set out how your assets are distributed. In most cases that would be how you would wish anyway: to the surviving spouse; if none, then to children in equal shares; if a child predeceases you and has children of his or her own, then those grandchildren split their parent’s share, etc.

Small Estates – All assets less liens, debt, and encumbrances are less than $40,000.00.

In such cases, the assets can be handled without a full probate case upon the filing of an “Affidavit for Collection of Small Estate.†The other qualifications are that 30 days have elapsed since the death of the decedent, no application for full administration is pending or has been granted, or such application has been granted and subsequently revoked, and a bond, in an amount not less than the value of the personal property, approved by the judge or clerk of the probate division is filed by the person making the affidavit. The bond is conditioned upon the payment of the debts of the decedent, including any debts to the state of Missouri, and the expenses of funeral and burial. The court may dispense with the filing of a bond if it finds that the same is not necessary.

An attorney is still required to manage this procedure. However, separate arrangements must be made for payment of the legal fees since the ultimate court order does not cover them.

All other cases

Who is in charge. Your Will can designate who you trust to be in charge. If that person is challenged, is unqualified, or unavailable, we have often been appointed by the Court to handle the administration of a person’s probate estate. That also happens when no one applies or is qualified and the beneficiaries consent.

Supervised and Independent Administration

There are two forms of probate administration.

In a supervised case, usually required where was no Will, or the Will did not authorize “independent administration.†In that case the Personal Representative must get court approval for most actions, such as selling a car, investing funds, filing suit to pursue claims against others etc. Supervised administration requires the Personal Representative to annual reports and accountings with the court and get court approval each time of the accounting. While sometimes necessary, supervised administration carries delays in necessary actions while waiting for court approval, and additional attorneys fees to get that approval.

Independent administration is the modern method of efficient administration. Under this method, which must be designated in the Will, or approved by the Court with consent of all heirs, there are no required court approvals for administration of assets, and no annual settlements. However, there must still be final Statement of Account approved by the Court, a proposed Order of Distribution following the Will, or the law if there is no Will, and court approval of any fees in excess of the statutory minimum.

For all estates where assets are $40,000 or more, or even if less when you expect to have to pursue claims against others or have particular issues with assets:

If you have a Will:

1. The Will must be filed within one year of date of death. If not, it is no longer enforceable.

2. If the witnesses’ signatures are notarized and the proper statutory language is used in the witness paragraph, the witnesses are not required to appear in court later.

3. If the Will suggests who you want in charge, now called the Personal Representative, formerly “Executor,†the Court will appoint that person unless that person declines or is unavailable, or other heirs object and file a Petition to have someone else appointed. Then the court will conduct a hearing and determine who is best. Without an objection, the Court will appoint the person you name.

4. Regardless, the Personal Representative is required to use the services of an attorney to file the Petition and throughout the administration.

5. Fees and costs.

The court costs are minimal. The Personal Representative is entitled to compensation based upon the Missouri statute which a minimum fee schedule. That person may receive additional compensation only if the court approves.

The attorney for the estate is also entitled to compensation under the same terms. However, where our office or any other attorney is appointed as the Personal Representative, there can be only one fee. That is another reason why this office is often appointed as Personal Representative.

The current fee schedule, based upon the value of personal property finally distributed is:

5% of the first $5,000.00	$ 250.00
4% of the next $20,000.00	$ 800.00
3% of the next $75,000.00	$ 2,250.00
2.75% on the next $300,000	$ 8,250.00
2.5% on the next $600,000	$15,000.00
2% on all over $1,000,000

So for example, for a $100,000.00 estate the minimum fee would be $3,300. In a typical estate of $100,000.00 the minimum fees is usually the most paid.

The fees will be paid from the assets in the estate. However, when the estate is quite small and services will not be covered by the schedule, the client is expected to separately pay the fee and will be reimbursed to the extent the minimum fee schedule applies. For example, the attorney’s work involved will usually be more than $1,050 that the schedule allows on a $25,000 estate.

4. If the Will says a security bond is not required, then the court will follow that request. Otherwise, the Personal Representative will be required to have an insurance company file a bond in an amount to cover the value of the property that is not real estate, to guaranty the Personal Representative properly administers the assets. If additional assets are discovered, the Court will require an increased bond. The cost of the bond will be paid from the assets in the estate.

If a person has no Will or it is not filed within a year after death.

1. This is called an “intestate estate†and an heir must apply to be appointed Personal Representative. If no heir comes forward, or is not qualified or financially unable to post the proper bond, the court may appoint another heir on request, or appoint someone else with the consent of all heirs. Typically this person is an attorney, since it will avoid a fee for both the Personal Representative and the attorney, and the attorney will have far more experience in what needs to be done and how to do it.

2. A surety bond is almost always required but this office has never been turned down on a bond application. Where an heir or other person is requested to be in charge, investigation of whether that person is qualified to obtain the bond will be more efficient, since denial of the bond will slow down opening the probate estate and taking charge of the assets.

3. The fees are based upon the same fee schedule. Where the attorney needs to perform extraordinary services, like preparing tax returns or pursuing litigation to collect claims, or contests over claims filed against the estate, the attorney may be entitled to additional fees but only after justifying them to the court, notice to all heirs is given with an opportunity to object, and a court hearing is held. The court is not required to grant the total fees requested, nor to honor the hourly rate of the time expended.

Relief and payments to heirs while the estate remains open.

Delays in closing the estate and waiting on claims to be filed do not necessarily mean a delay in at least partial distributions to heirs. A surviving spouse and minor dependent children are entitled to certain allowances regardless of and ahead of any claims and the probate delays. And, thereafter and even once claims are paid, if it is obvious the assets are sufficient to pay all costs and fees, the court can allow partial distributions to the heirs.

Claims And Allowances:

The following allowances in probate are allowed ahead of any claims and relatively quickly after the case is opened:

1. Exempt property. The surviving spouse, or unmarried minor children of a decedent are entitled absolutely to the following property of the estate without regard to its value: The family bible and other books, one automobile or other passenger motor vehicle, including a pickup truck, with its means of propulsion, all wearing apparel of the family, all household electrical appliances, all household musical and other amusement instruments and all household and kitchen furniture, appliances, utensils and implements; in equal shares.

3. Family allowances. In addition to the right to homestead allowance and exempt property, the decedent’s surviving spouse and minor children whom the decedent was obligated to support and the children who were in fact being supported by the decedent are entitled to a reasonable allowance in money out of the estate for their maintenance during the period of administration, which allowance may not continue for longer than one year.

4. Homestead Allowance: On application of the surviving spouse or of the guardian, conservator, or person having custody of the persons of the unmarried minor children of a decedent, the Court shall make an allowance to the surviving spouse or unmarried minor children of an amount not exceeding fifty percent of the value of the estate, exclusive of exempt property, and the Family allowance, but to a maximum of $15,000.00.

Claims of Creditors:

Once the Court authorizes opening the Estate this fact is published in the local legal newspaper. Creditors then have a deadline of six (6) months from the date of the first publication within which to file claims. This is where the value of the attorney is proven. If the Personal Representative or attorney objects to the timeliness, or validity or lack of documentation of the claim, the Court will set a hearing after notice to the Creditor. Many claims are denied after objections are filed because the creditor does not have the proper documentation or does not believe it is worth their expense of time or attorneys fees. This is usually true of credit card claims since they are usually handled by collection agencies who do not have the documentation to show what the person bought and that the cost was reasonable. Collection agencies and many credit card companies usually produce only “balance due†bills showing only interest charges or a few recent purchases, and such documentation is never sufficient to succeed.

Exceptions:

Where a Petition to open the estate is not filed, creditors have up to one year to file claims and ask that the estate be opened on their own behalf. If one year goes by without a Petition, all creditors failing to file claims are forever barred from attempting to collect them.

The time limitations do not apply to claims for:

1. Costs and expenses of administration

2. Exempt property

3. Family allowances

4. Homestead allowance

5. Tax claims of the U.S. or any taxing authority

Time frame for administration. – seven months at a minimum

A regular probate case (other than an Affidavit for Collection of Small Estate, which can be concluded in maybe 60 days) can not be closed for at least six (6) months from the date of publication. This is because creditors are allowed those six months to file their claims.If no claims are filed, the attorney can begin preparation of the required Final Settlement in the case. It may take the court one or several months to review all the receipts and disbursements before the Settlement is approved. In a perfect world, the Settlement is filed the week after the six months expires, the court auditing staff reviews and approves it within two weeks thereafter, and the Court issues the final order authorizing distribution of the assets to the heirs. (There is no perfect world).

If litigation is pending to challenge claims filed, or to pursue claims for the decedent against others, the estate can not be closed until those matters are finally concluded. If the litigation pursuing the decedent’s claims results in judgment in the estate’s favor, the estate can not be closed until that judgment is collected or it appears, on court approval, that the judgment became uncollectible.

In short there are many reasons why a probate estate is not closed for months and sometimes years after it is opened but there are built-in provisions to relieve financial distress of heirs.

Upon review of the above extensive discussion of the probate process, it is quite obvious why the use of a Trust now is a virtual necessity.