Estate Planning / Estate Administration

We all have an “estate” – it is our “stuff” or “belongings”. Today, we may own real and virtual things a/k/a “digital assets”. Our belongings have meaning to us. Gifting our belongings to others may bring joy to us and to the recipients. Lifetime gifts are wonderful gestures. Bequests, or gifts after our life, are meaningful and lasting treasures that fill our beneficiaries with love and strength to deal with the loss of someone they love.  

Finding and listing your “estate,” at least your important and meaningful belongings, will impact your wellbeing. Clients are happy to travel back into good memories and preserve those for generations. Although it continually amazes Clients how vast their estates are, the planning lifts the weight of worry.

Having an Estate Plan for your “stuff” is not only a gift to self but also a gift to the survivors. They want to be guided as to your wishes. Listing your assets and to whom the belongings will be bequeathed (gifted) brings relief, comfort and strength to the heirs and beneficiaries. Those receiving a bequest feel love and honor in the relationship. Those who do not receive a bequest may benefit emotionally from a direct explanation from the decedent.

The Firm has an Estate Planning Questionnaire to assist in identifying the stuff of your estate, i.e. your assets. You are welcome to download it for No Charge.

To start listing Your Estate, Download ESTATE Planning Questionnaire

Once you have reviewed and/or completed the Estate Planning Questionnaire, contact The Gilroy Law Firm to schedule an Estate Planning Meeting.

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An Estate Plan is the Estate Owner’s directive of how the Owner’s assets and liabilities will be handled after the Owner dies.

Having an Estate Plan matters for several reasons:

1. Leave a mark in Someone’s Heart: Assets big and small, when gifted at death, make a big impact in people’s lives. Bequests (a/k/a gifts at death) make big differences in the world. With a planned estate, everyone can have control over where and to whom their assets go.

2. The Owner’s Estate will not have to be probated, if planned correctly; or, at least, if probate is either desired or unavoidable, then it should be planned simply, if at all possible.

3. The Owner’s Assets can be protected from Creditors and Collectors.

4. The Owner’s Assets can be protected from depletion due to the cost of Long Term Care.

5. Plan a little to save a lot…of taxes and accountant fees. Caveat: tax law changes frequently. What works in an estate plan one year may not work as well in the following year. So, it is best to keep up to date on your estate plan and the ever-changing tax code. Read more on estate plans.

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A good Estate Plan answers those seven essential questions: Who, What, Where, When, How Much, How Many and Why.

Planning the future can be a joyous and enlightening experience, even if it is planning for the inevitable. The Gilroy Law Firm assists its clients to see their life from the bright side and to “make a difference in this world”. Gestures large and small all count. Well-intentioned and loving gestures help families and communities to grow and honor your memory. Through the planning process, Clients often come to know what their wishes really are. Importantly, posthumous (“after life”) wishes really do come true…with the right planning documents.

Your Estate Plan is (or will be) a direction on disposition of your assets possibly to family, friends, community and charity. Once you identify your assets, your wishes drive the plan for your Estate, which includes which assets should be used to pay any remaining debts.

A well thought out Estate Plan brings peace of mind. Your life legacy will live on; your assets will be protected and available to those you love and those in need. Importantly, your assets will be distributed in an orderly and tax-efficient manner.

POEM: Tough Issues Take Poetry
Death & Dying
A topic quite bold
For any of us,
As we age to old
Don’t want to face
The fear of our death
Just want to have
Our dear wishes met.
Today, we shall have
Our pencils in hand
And Give US a gift
Our Estate Plan.
THG 2014 at Estate Planning Seminar for 25 couples on Camano Island

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A good plan contemplates the many possibilities and changes in life. Nonetheless, the plan will need review and amending with your life changes: a marriage, an unexpected birth, a job change, a milestone birthday, a move into a 2nd home out of state, a marital adjustment, a business development or the intended sale of an asset. The law will also change. Some years, tax laws are generous; other years not.

So, just as you should review your insurance plan every year, Estate Plans should be reviewed periodically. A yearly or biannual update with The Gilroy Law Firm will ensure that your Estate Plan remains current and most tax-efficient.

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The basic Estate Planning documents are not just a Will. To plan for potential illness or incapacity, we all need to have the following documents:

A Health Care Directive (“HCD”): This planning tool is sometimes called a “Living Will”, which is somewhat of a misnomer. It is not a Will, and it is not necessarily about living. Rather, the HCD directs health care providers about your decisions on how you wish to be cared for when you can no longer make those decisions on your own. It is the list of care that you want to have as you are preparing to pass. It also nominates the “agent” or “attorney-in-fact” who will have the “power of attorney” to make the decisions for you.

A Durable Power of Attorney (“DPOA”): This planning tool is for the finances of the planning client. A DPOA is a more powerful tool than a basic “Power of Attorney” because it is “durable”, just like it says. It endures even after the maker becomes incompetent to make decisions; whereas the “regular” power of attorney terminates when the maker becomes incompetent. It is essential to understand the difference in these two tools and how these tools can be used and misused if not properly planned.

A Will: This document is the well-settled method of having the last word on who you love, what you wish for, how you care for your family, friends and community after you pass. This is your last testament. It is a document that records your ancestry, your wishes for the demise of the body, your desire for a celebration of life, how debts are paid and who receives bequests. It also does the appointing of the Personal Representative/Executor who is the person in charge of managing the administration of the Will, along with chosen experts.

This planning document can be as vast or as simple as desired. The essential part of having a Will is to document the bequests of those sentimental items that are not necessarily “titled” but that are important items in your life. With a Will, planners can attach a “Personal Property List” to itemize as many gifts/bequests as desired, including vehicles, boats, art, jewelry, sport equipment etc.

NOTE: People who fail to plan are not failures. States make sure of it. Without a Will or other Estate Planning tools that dispose of all the assets, people die “intestate” (or without a will) as to those assets. Every state has a generic will or estate plan for its dead residents. The State’s plan is known as “intestate succession statutes”. These laws outline for the Courts all the relatives who will share in the decedent’s assets - if the decedent did not get around to the planning. For some, the State’s generic list is OK. But, to be sure, review the list.

Yet, remember, if relying upon the State’s Intestate Succession distribution of assets, then the planner will also be relying upon the State’s Courts to administer the estate. Letting the Courts control one’s estate is usually not the best plan, but it is the given plan if one fails to plan. Most view the State’s plan and are not offended by it, but it does not mirror their wishes at all. And, importantly, the State’s plan does not address many of the important questions when one passes: what did they want to do with their body? Who did they want to manage their estate? Which assets are to be given to which person, exactly? Which assets are used to pay debts and taxes?

A well-executed Estate Plan answers all these questions for you and your loved ones. It provides peace of mind that enlightenment and planning bring. You will have, in some way, left your legacy to your world of friends, family and community, and, your wishes really will come true. An Estate Plan will provide direction and give your “last words” of kindness or your last gesture for time immemorial.

A Trust: Trusts are mechanisms that allow owners to direct the long-term goals for the owner’s assets while avoiding the costs and time needed for administering assets through the Probate Court. Trusts can also provide asset protection. Selecting the appropriate category of trust is essential to achieving these goals.

There are two categories of Trusts: “Living” and “Testamentary”. Testamentary Trusts are drafted in a Testator’s Will (discussed further below) and are thereby created or “funded” upon the Testator’s death. Living Trusts are drafted during life and can be created or “funded” in life and/or via the Will.

Although Testamentary Trusts can be changed while the maker is still alive, once the maker has passed, the Testamentary Trust is irrevocable. Whereas Living Trusts can either be created to be “revocable” or “irrevocable.”

A “Revocable Trust” is changeable and within the owner’s control. Any income to the Trust is taxed to the Owner. All Revocable Trust assets are included in the owner’s estate for estate tax purposes. “Irrevocable Trusts” are not easily changed. If the Irrevocable Trust is outside of the owner’s control, it will not be included in the owner’s estate for estate tax purposes.

Certain Irrevocable Living Trusts shield and protect assets from collection and estate taxes. Those trusts also can protect assets for following generations and for those with special needs. All Living Trusts are known to avoid Probate, but both Living Trusts and Testamentary Trusts may seek Court protection and guidance in the administration process if necessary. Read more about TEDRA Actions below.

To “fund” a Trust, one must place the asset into the Trust by titling the asset to the Trust. Once the asset is titled to the Trust, the Trust is the owner. NOTE: title in the Trust’s name does not stop savvy creditors or Uncle Sam from seeking payments of bills or taxes through attachment of Trust assets – unless the Trust is irrevocable. To avoid creditors, Trust assets must be out of the control of the owner and into the total control and discretion of the Trustee; only then can assets in a Trust be free from collection and estate tax. To protect assets from collection and estate tax, an Irrevocable Trusts must be created during life.

The Irrevocable Trusts come in lots of varieties, all of which have acronyms: CST (Credit Shelter Trust) GRAT (Grantor Retained Annuity Trust) SLAT (Spousal Lifetime Access Trust), CRT (Charitable Remainder Trust), CRAT (Charitable Remainder Annuity Trust), CLT (Charitable Lead Trust), ILIT (Irrevocable Life Insurance Trust) and QPRT (Qualified Personal Residence Trust) et.al. Acronyms make it all appear complicated. But complication can be overcome. An Irrevocable Trust achieves the goals of tax saving, creditor sheltering, asset reduction and probate avoidance.

Direction from an estate planning lawyer and possibly an accountant is best before making any decisions on these instruments. Good planning will save tens or hundreds of thousands of dollars!

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Washington State taxes wealth at death. This wealth tax is called “Estate Tax.” It is a tax on the assets of a decedent if the decedent’s assets (including probate and non-probate assets) are valued over $2,193,000.00 per person (2020). Paying Estate Tax (and all Estate Debts) is required prior to any Estate Asset being distributed to the Decedent’s Beneficiaries. But, if an estate is well planned, paying Estate Tax will be unnecessary. It is only those who fail to plan who then have to pay their hard-earned assets to the state of Washington in the form of Estate Tax.

Avoiding Estate Tax takes some effort. It takes some expense. It is likely that good estate planning costs less than your yearly insurance bills. Take the time to save your money – for your beneficiaries.

Assets in an IRREVOCABLE living trust are not counted in the gross value of a Decedent’s Estate. Whereas assets in a REVOCABLE living trust ARE included in the Decedent’s Estate.

IF the Decedent’s Estate is not close to exceeding the Estate Tax Exclusion, it is acceptable to include the asset in the Decedent’s estate. But, during the Decedent’s life, the Decedent may have desired to not have “control” over the assets for “asset protection” reasons. If so, once again, an Irrevocable Trust may be best.

Think: if an asset can be controlled by the Trustor or Grantor of the Trust, then the Grantor/Trustor still “owns” the asset. It will be included in that person’s estate and subject to estate tax if the estate is in excess of $2.193,000.00 (2020). NOT so with assets in an Irrevocable Trust.

Gifting assets to an Irrevocable Trust requires the completion of a Gift Tax Form (Form 709) so that the IRS knows to whom/what the wealth is being transferred.

Gifting assets that are likely to appreciate in value over the lifetime of the Irrevocable Trust is a good, but not so easy, strategy to ponder along with “stepped up basis.” Balancing the goals of “asset protection” along with income tax avoidance via a “stepped up basis” should be done only after consultation with your CPA and Lawyer.

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Whether you appoint a family member or a professional to manage your Estate Plan, professional assistance is usually recommended. Connecting with local professionals to advise and assist with your Estate is best when pressure is low, i.e. before sickness and death arise. Empower yourself and your managers; it is an empowering experience. Relationships are developed and trust is enhanced.

The Gilroy Law Firm offers asset management services, estate planning and estate administration services coupled with legal counsel. It is the best of all worlds, yet even lawyers need other team members, including family members to assist in the estate administration process.

Selecting family members to manage assets of a family member or friend is asking much of a loved one in grief. The process is complicated, emotional, time consuming and stressful. Handling paperwork with the Courts, governmental agencies and creditors and correctly following the legal procedures and accounting procedures requires professional assistance. With a professional appointed and a family member in an assistant role, the planner is assured of the best of both worlds: a professional who is in touch with family desires.

A Professional, who already understands the system and the likely results of impending disputes, is best to guide in the first stage, i.e. drafting of the Estate Plan. That Professional is also best to guide in the end to ensure that the Estate Plan is implemented as intended. A Professional can also be aided by family members and friends to curb costs. For example: some Professional Services offer to take an inventory of household assets, but The Gilroy Law Firm finds that family members are far better served to be allowed to inventory the assets themselves – with guidance if needed.

The Gilroy Law Firm is committed to excellent personal service to Clients and their beneficiaries.

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IN THE WILL

PERSONAL REPRESENTATIVE or “Executor”: a person who is appointed to manage a Decedent’s Will

ADMINISTRATOR: If one dies without a Will and must proceed under the laws of “Intestate Succession”, the manager of the estate is known as the "Administrator“

The duties of the Personal Representative (P.R.) or Executor (synonymous with P.R.) or Administrator are complicated, even in the simplest estate. Experience and knowledge are essential components for this position. Most P.R.s do not have the experience in Estate Administration, but The Gilroy Law Firm can guide the appointed into having a less-stressful experience

READ MORE: What are some of the duties of a Personal Representative/Executor?

IN THE TRUST

“Trustee”: a person or entity that manages a Grantor’s or Trustor’s Trust.
“Beneficiary”: a person or entity who receives a gift or inheritance from the Trust.
“Trust Protector”: a person or entity who advocates for the Beneficiaries of the Trust

IN THE HEALTH CARE DIRECTIVE – POWER OF ATTORNEY

“Attorney-in-Fact” or “Agent”: a person who is in charge of the Grantor’s health care decisions per the Grantor’s Health Care Directive created.

IN THE DURABLE POWER OF ATTORNEY

“Attorney-in-Fact” or “Agent”: a person who is in charge of the Grantor’s financial matters.

AS A “Guardians” (Care for Person) -Court Appointed Power of Attorney

AS A “Conservators” (Care for Estate of Person) - Court Appointed Power of Atty.

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Assets that do not need to be transferred by order of the Probate Court are “non-probate assets.” These assets, although not inventoried for a Court, still must be counted as a part of your Estate for Estate Tax Purposes. In Washington State, the Estate Tax Exclusion is $2,193,000.00. Any value in the estate above that number is taxed at death of the estate owner unless another exclusion applies, e.g. the marital deduction.

Non-probate assets are typically:
1. Real Estate titled with Rights of Survivorship
2. Real Estate with a recorded and applicable Transfer on Death Deed
3. Bank Accounts and Investment Accounts with Payable on Death Designations
4. IRA or other Pension Accounts with Payable on Death Designations.

These assets must be valued, with an appraisal or by the account custodian, at the date of death of the estate owner. IF the value of these “non-probate assets” together with the “probate assets” equate to more than $2,193,000.00, then Washington Estate Tax is owed. If the assets equate to more than $11,800,000.00, then Federal Estate Tax is owed.

This is one reason why it is important to know what “non-probate assets” are and how much they are worth. The other reason to be aware of these types of assets is because, if the estate owner had any debts (other than potential estate tax debt) then these assets are subject to being used to satisfy those debts. It follows, then, that beneficiaries of these assets should be made aware of that fact and not receive these assets until such time as all debts are, at least, accounted for and hopefully satisfied with other assets.

Read about Investment Bank Accounts, Beneficiary Designations, Individual Retirement Accounts.

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Owner’s RETIREMENT Funds: An owner’s qualified retirement funds, including those in an IRA, are exempt assets in the owner’s bankruptcy proceeding per the Bankruptcy Act (Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 BABCPA, Pub. L. No 109-8.) In 1992, the Court acknowledged that the Employee Retirement Security Act of 1974 (ERISA) did protect the participant’s retirement fund assets from becoming a part of the participant’s bankruptcy proceeding.

After Clark, the IRA assets remain protected against the owner’s bankruptcy, but not as against the IRA Beneficiary’s bankruptcy. To address any concerns, then, of asset protection for the beneficiary, a Trust with a spendthrift clause should be designed and utilized.

SPOUSAL Inherited RETIREMENT Funds: a Few Notes
Several special tax breaks are enjoyed only by the surviving spouse (and sometimes the ex-spouse). The first is the surviving spouses right to “rollover” the inherited IRA into the survivor’s IRA or qualified retirement account. A non-spouse does not have the “rollover” option, but must simply keep the funds in a separate “inherited IRA.” CAVEAT: The Supreme Court in Clark (see below), acknowledged that a surviving spouse has choice to rollover the IRA of the deceased spouse or to keep the funds as an “inherited IRA”. With a surviving spouse choosing the rollover, then the IRA funds are more likely to be viewed by the Supreme Court as “retirement funds”; whereas if the spouse chooses to keep the funds in an inherited IRA, then the spouse’s inherited IRA is vulnerable to the collection issue in the Clark case, cited below. Note: the “rollover” option does have an “early withdrawal” penalty; whereas the “inherited IRA” option does not. So, some surviving spouses may choose to do both. The choice should be made after consulting with Legal Counsel and a Tax Advisor.

Also, the survivor does not have to begin RMDs until the decedent would have had to begin the RMDs and the “stretch” of the IRA is still possible. Whereas, the non-spouse beneficiary no longer has the “stretch."

BENEFICIARY’s Inherited IRA Funds
A unanimous United States Supreme Court in 2014, Clark v. Rameker 134 S.Ct 2242 (2014), held that a non-spouse beneficiary’s inherited IRA was not an exempt asset in the IRA beneficiary’s bankruptcy proceeding. The Court’s reasoning applies to other types of tax-deferred retirement plans and accounts as well. The Court reasoned that the inheritance was not a “retirement fund” of the beneficiary; therefore it was not exempt (as a retirement fund) from a bankruptcy. This decision was based, mostly, on the fact that the IRA Beneficiary had the advantage of being permitted to freely withdraw the IRA asset without early withdrawal penalty – subject to income tax of course.
Therefore, if the IRA beneficiary has less control over the asset and treats it more as a retirement fund, it may have a chance of exemption from inclusion in the bankruptcy assets of the beneficiary.

Indeed, if the owner’s retirement fund can be analyzed more as a spendthrift trust, with beneficiary asset protection against creditors, then the beneficiary may have an exempt asset. This is not likely, though, with an IRA unless the spendthrift trust is named as the beneficiary of the IRA, which has its own tax challenges. For example, the trust as IRA beneficiary may be subject to an accelerated taxable distributions from the IRA – 5 years (same as when the estate is named as beneficiary). But, if the Trust can be viewed as a “look-through” or a “see-through” trust (synonyms), then if the Trust has a spendthrift provision, the trust’s assets are exempt from the beneficiary’s bankruptcy assets. To be a see-through the trust must meet the following criteria: (a) the trust must be valid under state law or would be but for not having a corpus; (b) the trust must be irrevocable or testamentary; (c) the beneficiaries are identifiable within the meaning of the trust instrument; and (d) the required documentation has been provided to the plan administrator. IRC Section 402 (c)(11)(B); IRS Notice 2007-7, Q&A16.

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One of the good ways to distribute assets of an IRA is to name a charity as the Beneficiary during or after the life of the owner.

During the life of the Owner, after reaching age 70 ½ years, the Owner can contribute up to $100,000.00 per year to a Qualified Charitable Trust. If married, both spouses can make a $100,000.00 per year charitable contribution from IRA funds.
Why is this a particularly good idea? Remember that IRA assets are pre-tax dollars growing tax-deferred. So, when IRA funds are distributed as an RMD to the Owner, the Owner pays income tax on the full amount of the distribution. If that RMD is instead paid to qualified charity, the funds are not taxed as charities are exempt from income tax.

Then, with after-death distributions of IRA funds to the non-charity beneficiaries, the funds are again taxable income and taxed at the recipient’s income tax level. If an IRA Beneficiary is a qualified charity, the charity is tax-exempt. So, again, the IRA distribution to the charity will also be exempt from income tax.

That means that the whole IRA asset is distributable to the charity itself with Uncle Sam’s blessing. That provides, say, 33% more money to the Charity than would be possible if it had been distributed to a person.

The Charity would then be allowed to take the distributions immediately or over a 5 year period of time or the remaining life expectancy of the Owner with still no tax consequences. GOOD DEAL!

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Suffering the loss of a family member, spouse or friend is devastating. Some, grieving, are additionally called upon to help with necessary tasks and important decisions at the same time. Each person and situation calls for different considerations, but all should be treated with kindness and gentle leadership. The Gilroy Law Firm can help here.
But first, here are some basic steps:
1. Personal and private notifications of friends and family. Leave the social media notifications to another day and request privacy from others.
2. Arrange for the pre-arranged or otherwise respectful repose of the decedent’s physical body. Check Decedent’s Health Care Directive or other communication that instructs on Decedent’s desires for organ donation and burial/cremation/etc. Ask if there are any pre-paid services.
3. Arrange for the after-life celebration.
4. Create an obituary in the Newspaper, if desired, and request donations to decedent’s named charities. This makes a positive impact for the community and leaves a legacy for the decedent.
5. Notify Employer for salary and other benefit information and payments if applicable. Inquire of continuing spousal or familial benefits.
6. Notify family employers for bereavement leave.
7. Notify schools of decedent’s children.
8. Notify Mortgage Company, Utility Companies, Insurance Companies, Professional Organizations and other Charitable Organizations of decedent’s death.
9. Obtain numerous original copies of Death Certificates, which will allow for you to make claims and proper notification.
10. Locate the Will and contact the named Personal Representative or Executor.
11. Locate other important papers, including usernames & passwords (see above for tasks of the Executor/Personal Rep/Administrator). Here are the basics that may be necessary in the administration of the Decedent’s Estate:
a. Birth Certificates
b. Marriage Certificates
c. Adoption Papers
d. Military Records
e. Titles to Real Estate and Personal Property, e.g. cars and boats
f. Leases and Other Real Estate Agreements
g. Recent Investment, IRA/Retirement, and Bank Statements
h. Stock and Bond Certificates
i. Insurance Policies
j. Mortgages
k. Other Debts (secured and non-secured)
l. Recent Credit Card Statements
m. Other Estate Planning Documents: Trusts and Transfer on Death Deeds
n. 3 years of Tax Returns
o. Prior Gift Tax Returns (Form 709)
p. Valuation Reports on any Assets, including purchase information

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Estate Administration is the process of legally distributing assets of a deceased person, a/k/a “the decedent.” Assets of the decedent’s or the “decedent’s estate” includes all assets such as houses, pets, cash, automobiles, sport equipment, art, jewelry, artifacts, furniture, digital assets, stocks, bonds, IRA, other investments and other real estate. Decedent’s estate assets must be used to pay off decedent’s debts. The balance of assets and debts along with the distribution of the assets remaining after all debts are paid can be a time-consuming legal process. Planning the distribution process during life makes Estate Administration easier on surviving loved ones.

Estate assets are of two categories: “probate assets” and “non-probate assets.”
Probate assets are those assets that must be “probated”, i.e. transferred to a beneficiary or heir by Court Order. Real estate is the perfect example of an asset that needs a Court Order to transfer title from a decedent to a beneficiary unless the decedent pre-planned for the transfer via a Transfer on Death Deed or a myriad of other titling methods.
If a Will exists and it is “self-proving”, then it can be filed and reviewed by the Court. If all appears in order, then the Court will appoint a Personal Representative/Executor or, if no Will is filed, the Court will appoint an Administrator of the Estate. Then the Court issues an Order that gives the P.R. or Administrator “Letters” or a Certification that the P.R./Administrator is in charge of the Estate, i.e. the P.R./Administrator will be authorized to pay debts and the transfer of assets.

The idea of obtaining a Court Order sounds daunting and expensive. But, having the Court’s supervision in some cases is very helpful and, actually, the least expensive manner for asset distribution. It's all on the planning tools selected and the planner’s goals for the assets and for friends, family and community. Either way, the administration of both of these categories of assets takes time, effort and strategy that is best to put into place before that final day.
Non-probate assets are those assets that can be transferred to a beneficiary without a Court Order. But, note, these non-probate assets should not be distributed unless and until all legitimate estate debts are settled.

Good estate planning usually finds a mechanism to move assets into the non-probate category.
Handling the legal paperwork and procedures of Estate Administration is best done by a neutral party who has not just suffered the loss of a loved one. That is why The Gilroy Law Firm recommends retaining a lawyer and a CPA who are trained to help when legal work and tax deadlines are looming. Surviving spouses, adult-offspring, children and friends are attached and emotional; not usually the best time to be making decisions that affect finances and memories. Without a neutral party guiding the process, it takes a toll. Disputes will likely happen, and feelings may be hurt.
The Gilroy Law Firm assists its clients through these tumultuous times with thoughtful and kind leadership through the legal process of Estate Administration.

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When a person dies, their assets and debts are now deemed to be assets and debts of the person’s “Estate.” To administer a person’s estate, a nominated or appointed person (as discussed above) must manage the assets, the debts and all unfinished matters of the decedent or, now, the decedent’s estate.

Personal matters of the decedent, like income taxes, are handled as a debt of the estate. IF the decedent has assets to pay debts, those assets need to first be used to pay those debts, assuming the debts are legitimate. Then, the assets must be distributed through established estate administration procedures.

ADMINISTRATION OF A WILL or an ESTATE USING INTESTATE SUCCESSION
If the decedent died with a will, administration includes the reading and completion of the directives in the will. IF the decedent died without a will, administration includes the handling of the decedent’s debts and assets under the state law of “intestate succession”

The steps for handling these two aspects of Estate Administration can be found in answers to questions above. The best step to take, though, is to contact an Attorney. Wills and Intestate Succession means there is a likelihood of the need to involve the Probate Court. The Gilroy Law Firm is available to assist in Estate Administration in Island, Skagit, Snohomish, Whatcom and King Counties.

Before seeking legal counsel, it is best to attempt to locate the Will. Thereafter, with Will or knowing that there is not a Will, these next steps can also be done before seeking legal counsel. Of course, The Gilroy Law Firm stands ready to assist with these steps as well as all the additional steps required for Probate Administration. But, the preliminary steps that can be taken before legal counsel is engaged (if done swiftly) are:
1. alert the Beneficiaries of the Will;
2. obtain the decedent’s Death Certificates;
3. inventory the assets and debts of the decedent;
4. notify the asset holders, i.e. banks and investment houses, that no funds should be paid out until debts and taxes are paid.

The Gilroy Law Firm stands ready to assist at any stage of this process. After Steps #1-4 are performed, the Estate is ready to prepare for Probate Court.

The legal process includes the following steps:
1. Petition the Court to Open a Probate Matter for the Decedent. Note: the Petition is a legal document that must conform to Court Rules and Statutory Procedures; it is best to have a lawyer draft the Petition for filing;
2. Obtain “Letters Testamentary” or “Letters of Administration”, which are proof of the Personal Representative’s authority to manage the Estate. Some Wills and some Courts, regardless of the language in the Will, require the Personal Representative to be bonded prior to issuing “Letters.”
3. Notify the Beneficiaries and Heirs of the Estate of the “Letters” and allow time for objections, if any.
4. Notify the Department of Social and Health Services (DSHS).
5. Revisit the Initial Inventory of the Estate Assets and Debts. Have all the assets been found with banks, brokerage houses, and insurance companies? All real estate located? Have Death Benefits (for surviving spouse) been applied for from Social Security or Employer Pensions?
6. Appraise assets as of the date of death (or alternative 6-month date if helpful) in order to establish the value of the estate as well as the value of the assets upon distribution to the beneficiaries.
7. Notify creditors, including DSHS mentioned above, of decedent’s death and negotiate payments of legitimate debts. There are strategies here that need to be discussed with legal counsel.
8. Manage estate assets and be sure to deposit any income into the “estate bank account”, which will require a Tax Identification Number.
9. File Tax Returns (see above discussion about Estate Tax Returns, which in estates under $2,193,000.00 (WA – 2020) are not usually required). Tax Returns also include the Income Tax Return for: (1) the decedent; and (2) the Estate, (Form 1041) for each year that the estate earns income.
10. After all debts and taxes are paid, distribute the assets to the Beneficiaries and Close the Estate with the Court.

ADMINISTRATION OF A TRUST
Many people have not only a Will to administer but also a Trust. Estate Administration also involves the administration of decedent’s trusts. If decedent had a Revocable Living Trust, the decedent (or Trust Grantor) likely intended for the Trust’s assets to be distributed without probate procedures, i.e. the assets are to be distributed through the Trust’s own procedures. Note: unbeknownst to many a trustor, the Trust’s assets (in a Revocable Living Trust) may escape the probate process for the distribution of assets and payment of debts, but they are still subject to collection proceedings or subject to being used to pay the decedent’s creditors. Again, Trust assets avoid probate procedures if the named beneficiaries survive the decedent, but Trust assets do not avoid creditors – unless the Trust was an Irrevocable Trust before the decedent’s death.

Whether the Trust is a Living Trust or a Testamentary Trust, the Trust will become irrevocable in decedent’s death. An irrevocable Trust is an entity that stands alone, much like a corporation. It is to be identified and its assets/debts administered by a Trustee, who has either been nominated in the Trust document or will be appointed by a Court upon request.

Either way, the administration of a trust by the new (“successor”) Trustee includes the following:
1. Obtain a Tax Identification Number (TIN) for the now irrevocable trust (unless the trust already had been issued one as an irrevocable trust.) Note: EIN, “employer identification number” is also the acronym used to describe this identification number. Basically, as mentioned above, an irrevocable Trust stands on its own, i.e. it can no longer use the decedent’s Social Security Number for identification as the decedent’s number is no longer operative. Therefore, the irrevocable trust (or revocable trust after death of the trustor) needs a number to be identified by the banks, the courts and any entity or person dealing with the Trust.
2. Establish a new Bank Account for the Trust and be sure that the Trust’s Assets (found under Step #6 below) are associated with the new TIN (established in Step #1, above.)
3. Provide the Trust Beneficiaries with notice of Trust and the Successor Trustee accepting the position of successor trustee.
4. Send the Trust Beneficiaries an Initial Report of Irrevocable Trust, which needs to be notarized. This notice should be sent within 60 days of the Successor Trustee accepting the appointment.
5. Send the Trust Beneficiaries notice before entering into any “significant" non-routine transactions. For example, with real estate sales, beneficiaries should receive at least 20 days notice prior to sale. The notice should be personally served or sent via certified mail. This notice is also required in other transactions: (a) agreements that bind the trust for 10 years; (b) a sale of a large tangible (non-real estate) asset; (c) a sale of a large component of stock. Bottom line: disclose, disclose, disclose.
6. Take Inventory of the Trust’s Assets. Also be sure to be aware of assets that are not in the Trust in case there are debts that need to be paid, as it will need to be determined which assets are scheduled to be used for such payments.
7. Take Inventory of the Trust’s Debts. These debts should be settled prior to the distribution of any assets to Trust Beneficiaries. Otherwise, the assets are subject to creditor claims.
8. File Trust’s tax returns by first selecting a tax professional with experience in filing such tax returns. Do not delay as the Trust’s Trustee can be personally responsible for the unpaid taxes if the job is not completed and assets are distributed without the payment of taxes.
9. Prepare an Annual Accounting of the assets and debts/expenses. Note: many trust documents waive this requirement, but it is a “best practice” and will prepare the Trustee for any questions from the Trust Beneficiaries as well as any litigation that may be pursued by Trust Beneficiaries.
10. Determine compensation for the Trustee and be certain to make that compensation reasonable under the circumstances and disclose it to the Trust Beneficiaries.
11. Pay all Trust debts, inclusive of any Estate Tax and Estate Income Tax. Consulting with legal counsel and a CPA or accountant familiar with these issues is essential. The Gilroy Law Firm provides counsel as to the legitimacy of the debt and the possible negotiation of a lower settlement number.
12. Distribute assets pursuant to the Trust’s procedures.
13. Terminate the Trust and celebrate a job well done!

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If a dispute between Estate or Trust Beneficiaries occurs, an efficient resolution is possible. The Gilroy Law Firm will guide its Clients though the dispute resolution process which process has been provided by Washington State since 2000. The dispute resolution processes of Mediation and Arbitration are used regularly to resolve matters in Estate Administration. Those processes and laws are found in TEDRA – Trust and Estates Dispute Resolution Act. TEDRA saves families from more formal litigation. TEDRA does require court filings, but mediation and arbitration allow for some informalities that tend to allow participants to concentrate more on the issues rather than the court procedures.

Read more about TEDRA Action and Agreements   

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“The Professional Legal Service Provider since 1994”