Anyone who has ever lost a loved one has more likely been involved in the complex and often overwhelming road of going through probate.

To shed more light on the matter and help individuals understand the process better, Philip J. Ruce of Stone Arch Law returned to KSTP and talked about the first steps to starting the probate process.

Key Discussion Points

What is an Estate?

The word “estate” sounds like a big piece of property somewhere on the outskirts of the city. But an estate actually refers to all the assets and debts left behind by a person who passes away. These assets need to be distributed to the family or named beneficiaries.

How Do You Deal With Handling an Estate?

With an estate encompassing a large array of properties and assets, dealing with it may seem like a difficult feat. Attorney Philip Ruce says dealing with an estate depends on what kind of plan one has created — if any.

Intestacy Statutes

If the person who passes away leaves no estate document to dictate the distribution of their assets, there are default rules laid down by law that will come into play. These are called intestacy statutes.

Following these rules, the estate goes through probate where the court will appoint a personal representative or executor who will administer the estate — paying the debts and distributing the assets. The default rules also set forth to whom the assets will be distributed, which prioritizes the deceased’s spouse, children, and other immediate family members.

Will

If the deceased leaves a will, the probate process will be easier. The will guides the entire probate process and its provisions will be followed by the court in detail.

The document determines who is in charge of administering the estate, names specific assets and how they should be distributed, and other provisions that concern funeral directives and debt settling.

Trust

Some individuals who want to avoid probate opt to leave a revocable trust. This is a private document that doesn’t go through court. Everything in the trust is automatically transferred to the named beneficiaries.

Moreso, anyone nominated as the personal representative or trustee can resign from the responsibility of administering the trust and transfer the job to the next person in line.

Benefits of a Revocable Trust

The most pressing benefit of a revocable trust is its status as a private document. With that, it doesn’t go through the probate process, saving the family a ton of time and money.

Further, trusts aren’t public documents that are filed with the court for a hearing. This gives the family more privacy and peace of mind that the assets and distribution are not going to be public knowledge.

How to Get Started With Probate

Probate is a lengthy and overwhelming process that can take up to 9 months from the date of death. Estate planning attorney Philip Ruce has four tips to help families get started on the probate process.

Take a Breath

First, take a breath. A lot of people stress so much about starting the probate process and rushing into it immediately after they’ve lost their loved one. This is under the impression that probate needs to be settled right away. However, that’s not the case.

Families of deceased loved ones have up to three years to kickstart the probate process. That’s plenty of time to take a breath, mourn, and move forward from their loss.

Gather Important Documents

Once the family is ready to start probate, they first need to go through a preparation stage. The first step of that is to gather all important documents, particularly, the will. If the family cannot get access to the will or is unable to find it, they should talk to the deceased attorney and see if they have kept a copy.

Other documents that will be needed in probate include:

  • Bank statements
  • Real estate documents
  • Other records pertaining to the deceased’s assets

Create an Inventory of Assets

Next, it’s important to know how much money the deceased has and which assets they have ownership of. These must be recorded in an inventory of assets. Bank records, real estate documents, retirement accounts, and investment accounts are some assets that must be included.

Formulate a Strategic Plan

Finally, it’s recommended to create a strategic plan that outlines things like the order in which debts are to be paid, the order of distributions to beneficiaries, etc. Certain creditors have seniority over others, and it’s very important to pay them first.

Biggest Probate Mistakes People Make

Without proper guidance, people tend to make crucial mistakes in the probate process that ends up costing them money and delaying the distribution of assets. Attorney Philip Ruce names two of the biggest.

Distributing the Money to the Beneficiaries Too Early

Some families may want to get their inheritances a little more quickly during the probate process and hence, make private agreements to distribute the funds before the creditors are paid.

While this may seem harmless, it can actually lead to headaches in the long run, requiring the executor to get that money back because the creditors have to be paid before the distribution.

Paying Things Out of Order

The second big mistake is paying the creditors out of order. Some creditors will make it their business to speak to the executor and negotiate that they are paid first. However, before that money is committed to them, it’s important that the executor speaks to an attorney.

There could be creditors that need to be paid before them. There are also further intricacies when it comes to secured and unsecured debts. So paying creditors out of order can complicate matters and cause problems in the probate process.

Can the Estate Default on Outstanding Debts?

In estate planning, there exist filial responsibility laws that legally obligate the heirs to pay for their parent’s debts when the latter is unable to. However, filial responsibility is not applicable in Minnesota.

If an estate is not enough to cover the debts of the deceased, the creditors will be paid to the extent possible and the beneficiaries are not going to get anything. If there is no money left, the judge will eliminate the outstanding debts and rule the estate to be insolvent. The unpaid debts will not be carried over to the children.

What if the Family Can’t Find the Will or Trust?

Often, people create some sort of estate plan but don’t tell their families about it. This poses a problem down the line when the time comes to go to probate.

At Stone Arch Law Office, we always say that estate planning works best in the light of day. We recommend our clients tell people that a will, trust, or other estate planning document exists so they can find it when needed.

If the family suspects there to be an estate plan but doesn’t know where to find it, they can ask the deceased’s financial advisor or attorney, who may have copies of the documents. If the will still cannot be found after these efforts, the judge may proceed with probate following the default rules of intestacy statutes.

Learn More About the First Steps of Probate

Stone Arch Law provides a lot of information and resources on estate planning and probate on our website. For those who want to learn more, we have an e-book all about the first steps of probate that they can download.

Interview Transcript

Interviewer:

If you have ever lost a loved one, or maybe you’ve started having conversations with a loved one about what happens when they pass, you quickly realize that it can be overwhelming.

I went through this in 2012, we were just talking about this morning when my father passed away. There is a lot to take care of, things you just wouldn’t even imagine. Estate planning attorney, Philip J. Ruce from the Stone Arch Law Firm is here with a little bit of advice. Philip, always good to see you.

Philip J. Ruce:

Thank you. It’s so good to be back.

Interviewer:

So let’s start with this. Establish what an estate is. I think right there is an interesting thing because when some people think of estate, you’re thinking, “Oh, estate.”

Like a big house somewhere. It means anything that they’ve got.

Philip J. Ruce:

It does sound like some huge thing. Anybody who passes away is going to leave behind assets and some debts, and how we pay those debts, how we distribute those assets to family or wherever it’s supposed to go, that is the estate.

Interviewer:

So how do you deal with handling an estate? Is it a will? Is it a trust? Is it a combination of multiple things?

Philip J. Ruce:

It depends a little bit on what kind of plan someone created, if any. If there’s no will at all, no trust, or anything of that nature, we are going to use Minnesota’s backup rules. They’re called the intestate statutes, but they’re the backup, kind of defaults that we all use if we don’t have a document, that we’ll use those statutes to go through probate and nominate or appoint a personal representative.

That’s the executor. We hear that term executor a lot. That’s the person who pays debts, distributes the money, distributes the house, sells the house, administers the estate, et cetera. If we have a will, that’s going to show us, that will document itself is going to determine who is going to be in charge. If that person can’t act, who’s next?

Some people want to avoid probate altogether. If that’s the case, wills are the wrong tool. Wills control probate. There’s something called a revocable trust. Assets pass through this thing and are distributed probate free, and that’s going to have a successor trustee, but it’s the same job.

If you are nominated as a personal representative, a trustee, et cetera, you don’t have to do it. You can take a pass, you can resign from that, and it’ll go to the next person in line in the document or the next person in line in the statute.

Interviewer:

So do you want to have a trust versus having it go through the state? I mean, tell me the benefits of that and why you would want one over the other. Obviously, you have more control with the trust.

Philip J. Ruce:

Here’s the thing about probate. So probate is a court process. So if you have a will document, we’re going to use that to take us through this court process. If we don’t have a will document, we’re going to use the backup rules.

But either way, we’re going to court, and the court can take a long time. Probates vary depending on the county, but right now, it’s tough to get one started fewer than nine months, maybe from the date of death.

Interviewer:

Wow.

Philip J. Ruce:

It’s public, so whatever I have, any debts I have, that can become public knowledge, as can my will, because that’s filed with the court. And it can be expensive. It’s almost certainly going to involve an attorney.

And between those three things, some folks want to avoid it, and that’s where this revocable trust tool comes into play. It’s a will replacement. Assets passed through this thing are distributed out the other end without opening a court hearing at all.

Interviewer:

So where do we start in this process? If there’s a punch list of things you need to do, where do you start with that?

Philip J. Ruce:

Well, the first thing we want to do is take a breath. Oftentimes we’ve lost someone, and we don’t need to rush into this. There are some folks, I think, who feel like they need to get this settled right away. You have up to three years to start probate. So there’s plenty of time. Take some time.

For those that want to get started, those that want to jump in, three steps. The first one is you want to gather important documents. So we’re going to look for that will. If we can’t find a will, talk to that attorney that prepared it, hopefully.

If we don’t have a will at all, again, we’re going to use those statutes. But we still need to find bank statements, maybe real estate documents. We had done a segment here previously about digital estate planning, and sometimes that can help with tracking down those bank records.

The next step is we want to do an inventory of our assets. So hopefully those documents, those records, are going to help us understand how much money is out there, retirement accounts, bank accounts, investment accounts. Also though, what kind of real estate are we going to need to do an appraisal? Usually, you’ll hold off on that until that personal representative is actually appointed. But at that point we want to know how much is out there, and what kind of assets.

And then lastly, we want to have our strategic plan. Very importantly, there is an order in which debts are paid. Certain creditors have seniority over others, and we don’t want to pay those out of order. Not only that, but the will document probably has an order in which the distributions need to be made to beneficiaries. We don’t want to distribute things to the wrong people in the wrong order.

Interviewer:

We had talked a little bit about that because we kind of teased it at the top of our show. I had no idea that bills had to be paid in a certain order, and you think, somebody dies. Oh, they left me $10,000. I’ll take my $10,000. They may not realize they need to wait nine months, a year, or even longer until everything’s taken care of, and then that money can come out. Right? How does that work?

Philip J. Ruce:

That’s right. So a couple of the biggest mistakes that we see, one of them is paying things out of order, but also distributing money to the beneficiaries too early.

Interviewer:

Too early, yeah.

Philip J. Ruce:

So everybody wants their money sometimes. Depends on the family, of course. A lot of families are very amicable. But sometimes you get one where they want the money a little more quickly, and if that distribution is made before we’re able to pay these bills, you’re going to be asking for that money back, because those creditors have to get paid first.

Interviewer:

And good luck with that.

Philip J. Ruce:

Yeah, again, that’s a very difficult conversation.

Interviewer:

Yeah.

Philip J. Ruce:

Absolutely. Mistake number two is making a commitment to a creditor without talking to your attorney first. They want their money, and if they’re talking to you, and you commit that money, you may have made a pretty big mistake because, again, there could be other creditors before them.

Probably easy to guess that the tax man is number one on there, right? And then there’s certain secured debts, unsecured debts. Credit cards are really sort of at the bottom. And we don’t want to get out of order, because we’re going to end up having to explain that to the beneficiaries.

Interviewer:

On that note, can the estate default on some of those debts that might be outstanding?

Philip J. Ruce:

Yes.

Interviewer:

Does the credit card debt, does the medical debt stay with you even though you’re gone?

Philip J. Ruce:

No, that’s a great question. It’s called filial laws, and we don’t have them here.

Interviewer:

Uh-huh.

Philip J. Ruce:

And what it means is, if an estate is upside down or insolvent, like a bankrupt estate.

Interviewer:

Yeah.

Philip J. Ruce:

The beneficiaries aren’t going to get anything. The creditors still have to be paid to the extent that they can be paid. But if there’s no money left, the judge will eliminate those debts and rule them to be in … It’s an insolvent estate.

Interviewer:

Okay.

Philip J. Ruce:

So those would ultimately go away. It would not pass on to the children.

Interviewer:

What if someone passes and you can’t find a will or a trust, and you think may be, there was a conversation?

I can walk you through that one.

Philip J. Ruce:

We run into that question, don’t we? Yeah. And that’s, again, that’s challenging, especially if there’s like an idea or a rumor that a will was created.

Interviewer:

Yeah.

Philip J. Ruce:

Was it?

Interviewer:

Mm-hmm.

Philip J. Ruce:

At our office, Stone Arch Law Office, we like to tell people that estate planning works best in the light of day. So if you do have a will document, tell people you have it, tell them where it is so that they can find it.

If you have an idea of who the financial advisor was, sometimes that financial advisor has a copy. If you have an idea about the attorney, absolutely contact that attorney. We do encrypt electronic copies for our clients and hang on to them, but someone has to ask us for them because we don’t always know what’s going on with that family.

If there is no will, ultimately we’re going to use those default statutes. If we can’t find the will, the judge will say, we’re going to proceed as if there’s no will, and we’re going to use those backup rules.

Interviewer:

This was one thing that I noticed that I’d never really thought of when we went through this process. The funeral home asked me, “How many copies of the death certificate do you want?” And I’m like, “Two,” or I didn’t know. One for me, one for my sister?

And they’re like, “Are you sure?” And I’m like, “How many you think I need?” They’re like, “I’d start with 20.” And I was the executor. In order to take care of any single thing, you’ve got to prove that you are… Close accounts, et cetera. You have to just, that simple thing of proving that someone has passed.

Philip J. Ruce:

And they all want original, certified copies.

Interviewer:

Yeah, yeah.

Philip J. Ruce:

And photocopies won’t work, and you’re going to be sending out multiple things to multiple accounts. So you’d think you could give them one certified copy, and then get it back and go to the next, but you’re doing everything at once. 10 to 20’s not wrong. We usually say at least 10.

Interviewer:

And to do that at that moment, because otherwise, you’ve got to go through that whole process where you’ve got to rigamarole of government.

Philip J. Ruce:

Yeah.

Interviewer:

Always making things easy for us.

Philip J. Ruce:

Everything moves slowly.

Interviewer:

Right.

Philip J. Ruce:

Yeah. Patience is a virtue, and it’s challenging, especially in times like that. We have quite a bit of information and resources on our website if folks are interested.

Interviewer:

Okay.

Philip J. Ruce:

In fact, we have an e-book that talks about the first steps of probate. If you go to Stone Arch, Stone Arch, like the bridge.

Interviewer:

Mm-hmm.

Philip J. Ruce:

stonearchlaw.com, scroll down a bit. A couple of free resources, tons of videos, tons of information, and certainly, if there are any questions, give our team a call.

Interviewer:

Excellent. Great information, Philip.

Philip J. Ruce:

Thank you.

Interviewer:

Great to see you again.

Philip J. Ruce:

Good to see you.

Interviewer:

Thank you again. We have posted the contact information for Philip and his team, Stone Arch Law, at minnesotalive.com. So you can check that out.