Just like families and finances, estate administration can be complicated. State probate and tax laws, family dynamics, and a failure to create a proper estate plan with the assistance of an experienced estate law attorney often creates stressful, time-consuming and costly situations.
For example, our Timothy Rice Estate and Elder Law firm team recently helped administer the estate of Jane Jones* after her family became tangled in a web of problems. These were caused by Jane’s failure to create an estate plan that adequately addressed how to distribute her assets, settle her debts and dissolve a family-owned business.
The Estate’s Assets and Debts
Jane died in February 2018. Her last Will and testament was prepared in 2014. Jane’s husband, Bob, died in 2012 and she re-married in 2017 to Jerry, whom she was in a relationship with for about four years.
Jane has three daughters and five siblings, including John Smith (her brother), who is named executor of Jane’s Will. John and Bob co-owned a small business but, despite Jane and John’s attempt to keep it operational after Bob’s death, it ceased operations. At the time of Jane’s death, the LLC had $16,000 in its bank account, which is under Bob’s and John’s name as “tenants-in-common” (each owning a one-half interest).
At the time of her death, Jane’s assets included:
- Four cars valuing $35,000 total
- Six properties in three states valued at $606,000 total
- A bank account containing $4,000
In addition to the $645,000 in assets listed above, Jane’s estate received a $30,000 settlement from a slip-and-fall lawsuit that resolved after Jane’s death. Also, Jane’s mother, who died several months before Jane, left her a sixth of a piece of property’s value — about $50,000.
Jane also had about $190,000 in debt at the time of her death.
Her Will stated the following:
- Jerry was to receive one of the vehicles
- Five of the properties in two states were to go to her three daughters
- Her daughters were to share whatever was left equally
Estate Administration Without an Updated Estate Plan
Jane’s estate administration became difficult. Here’s why:
- John must hire out-of-state attorneys so that “ancillary probate” proceedings could be filed in the other states. He must do this before he can sell or transfer property titles.
- John must contact the attorney handling Jane’s mother’s estate administration to ensure Jane’s share of her mother’s inheritance is distributed to Jane’s estate.
- Since there are not a lot of liquid assets, John must consider selling the vehicles or some of the properties to satisfy the outstanding debts. He must also attempt to negotiate a settlement with some of the creditors to try to reduce the debt amount.
- Because Jane married Jerry prior to her death but after she last executed her Will, Jerry may be entitled to an “elective share” of Jane’s estate in lieu of distribution under her Will under New Jersey law. In New Jersey, you cannot disinherit a spouse and a spouse is entitled to (at minimum) the elective share — which is the right of a surviving spouse, domestic partner or civil union partner to claim one-third of the deceased’s estate. This right is intended to prevent one spouse from disinheriting the other and to ensure that the surviving spouse receives a portion of the estate.
- John must also take the necessary steps to dissolve the LLC and ensure any required individual or business tax returns are filed.
Estate Planning to Avoid Estate Administration Problems
If Jane had worked with a knowledgeable estate law attorney to update her estate plan, many of the estate administration issues would not have arisen. Skilled estate planning attorneys, like those at TREEL, would have:
- Recommended placing Jane’s out-of-state property in trusts to avoid ancillary probate in those states;
- Recommended placing the LLC in a trust or created a business operating agreement to make the business transition easier;
- Worked with Jane to update her Will after she got remarried to clarify what amount of her assets she wanted to leave to Jerry and
- Advised Jane on the difference between probate and non-probate assets and how to use each strategically help make the estate administration process easier.
Don’t let outdated or incomplete estate plans create unnecessary stress for your loved ones. Contact the experienced attorneys at TREEL today to ensure your estate is properly planned, protecting your family and your legacy.
*Names and some details have been changed to protect the client’s privacy.
