While many people have heard about estate planning and the process of settling an estate, most have only a vague idea of how it works unless they have gone through the process themselves. Some people don’t even realize they have an estate because they have not made plans with a lawyer as to how to deal with their finances after they pass on.
Settling an estate simply means that an individual’s assets are used to pay off creditors, then whatever remains is divided up among the people who will inherit after the death of the individual. Oftentimes, one of the people who inherit, called a beneficiary, will be chosen to help handle the necessary tasks. Unfortunately, things can get quite complicated when settling an estate. Settling the estate can be complicated depending on if there is a large number of assets or debts, the type of assets involved, and how well the beneficiaries get along.
Here are the most common mistakes people make regarding the probate process:
Not Having a Plan
Estate planning can seem overwhelming because it encompasses all the aspects of an individual’s financial life. It is important to keep in mind how much harder it is to make all these important decisions later, and how much money can be lost if there is not a plan. Think about what your specific goals are and how you may be able to achieve them. Will a spouse need help to pay off a house? Does your business depend on you for input? Marc Cormier said, “Once I knew exactly what was going to happen with all the assets and debts, I experienced real peace of mind knowing how everything would be taken care of.” Creating your individual plan in mind is the best way to keep stress out of the process.
Not Having an Attorney or Financial Advisor
You wouldn’t try to fly a plane or perform surgery unless you’d gone through hundreds of hours of training and education. When you don’t have specific training in a subject, you can miss out on important details. With estate planning, it can mean the difference between having your wishes met and having the money wasted on fees and/or taxes. Attorneys who practice in probate see their clients face the same challenges, and we can help you decide how to deal with them before they become a problem for you. It is always a good idea to educate yourself as much as possible about important financial matters, but it is also vital to consult with other professionals, like attorneys, realtors, accountants, and/or financial advisors. Someone who practices in those areas will make the process easier and help take the stress out of the process too.
Naming Your Beneficiaries
The single most common specific mistake people probably make is a failure to properly name their beneficiaries. Most people name a spouse and/or children when filling out retirement, life insurance, or inheritance paperwork, but many fail to provide a suitable back-up in case that person is no longer available to inherit. When they remarry, many individuals forget to revisit their paperwork, so a newer spouse is often surprised to find that an ex-spouse is the one who will receive the assets. It’s a good idea to review paperwork at the same time every year, such as when filling out income tax paperwork. When this isn’t taken care of ahead of time, it can be impossible to correct.
Putting Off the Probate Process
Nobody really enjoys dealing with creditors or other financial matters, something made particularly difficult after suffering a loss. At the beginning of the probate process when you are grieving, the creditors won’t be applying too much pressure yet. However, as time goes on, those who are owed money will begin to become more insistent, trying to settle the accounts one last time. Don’t forget that assets won’t be distributed until the creditors are paid off, so that puts extra pressure on you if you are depending on the assets from the estate to help with burial expenses, bills, or other financial needs. You have to take care of yourself first, but sometimes that means moving forward to put the probate process behind you.
Not Having an Inventory
Once someone dies, that person’s estate is frozen in time, like a snapshot of a picture. Anything that should be part of the estate cannot legally be disposed of until the estate is settled, whether property, investments, or bank accounts. It is best to get an accurate assessment of everything which is part of the estate and its plan for distribution as soon as possible. Some of the most bitter arguments among relatives are those regarding the distribution of certain assets after a loved one’s death.
Not Taking Control of the Assets Right Away
It will be easier to keep things under control once you have your inventory. Some of the most important assets to take control over are real estate, and you may need to make sure the location is secure and the taxes and mortgage are paid. It is also important to notify any financial institutions that the person is deceased, so the accounts can be frozen until the estate is settled.
Handling the Real Estate
If you shared the home with the person who has passed, there will hopefully be a plan to help you take possession yourself now. If you have to handle the transfer of the real estate as part of the estate liquidation process, there are some things to keep in mind. The property might be the biggest asset in the estate, so you need to make sure you are getting the proper value. Depending on what kind of shape the house is in, you may need to try to do some repairs on the home before selling it or sell it through an investor if you aren’t going to do repairs yourself. You should consult with a local real estate agent as to what your best options are. It can take a long time to sell a property, so you should start working with someone as soon as possible.
Choosing the Wrong People to Help You
You may have friends who tell you that they have experience in a certain area, so you ask if they can help you out with settling this estate. Often their experience isn’t specific to probate, but they are your friends and they want to help you out anyways. Remember that any fees you pay a professional can be billed to the estate and that people who work in this area have the experience to do a better job for the estate. They may mean well, but the estate will probably benefit more from someone who specializes in probate.
Not Keeping Good Records
You are responsible for everything related to the probate process once you have agreed to do it, so you need to keep good records. A special court which hears probate matters will get to see all the paperwork before closing the estate for good. You can use a professional accountant or financial planner to help you keep track of all the records on regular accounting worksheets. Failure to keep good records is one of the things that can hold up probate for months or even a year longer than necessary.
Not Picking Up Mail
It seems silly, but it’s simple: when the person isn’t around to pick up mail anymore, it will pile up, letting everyone know that person isn’t there protecting the property. Not only that, there may be important financial communications you will miss if you don’t pick up the mail, so you should at least give it a cursory glance before disposing of it.
Not Being Open with the Beneficiaries
The people who benefit from the estate have a right to their share of the assets, and may even be depending on them. You can save yourself a lot of heartache by simply making sure they know how to contact you and they know how the process is going.
You need to get approval from the Court to close an estate. After that point, the heirs to the estate will know that the process is really over and they can keep their assets. Finishing up in court also protects you from liability issues later.