When a parent dies, her family members need to settle her financial affairs. The need to settle a person’s financial affairs is the source of great angst. Clients come to me wondering how they can make things simpler for their family members after their deaths. Family members call my office after a loved one dies thinking they need to hire an attorney to assist them settle the estate.
Let’s assume that Mrs. Smith has four children. She owns a house, three bank accounts, an IRA, a life insurance policy, and some stocks in various companies. Mrs. Smith dies with a last will and testament that appoints her son Joe as her executor and leaves her entire estate to her four children equally. Her IRA names all four of her children as beneficiaries. Her life insurance with a $10,000 death benefit names Joe as the sole beneficiary; Mrs. Smith named Joe as beneficiary so Joe could use the money to pay for her funeral. Mrs. Smith had her daughter Mary as a co-owner of one of her bank accounts. She made Mary a co-owner of the bank account because she wanted Mary to have access to some money in case Mrs. Smith were unable to pay her household bills at some point in time—a power of attorney of sorts.
Joe called my office. He has many questions about how to settle his mother’s estate. He believes he needs (as in he is required to) hire an attorney to assist him with his mother’s estate.
Since Joe is named as the executor in his mother’s Will, Joe needs to submit her Will to probate. In New Jersey, the surrogate of the county in which Mrs. Smith died domiciled would admit her Will to probate. The surrogate is an elected office. One of the jobs of a surrogate is admitting valid Wills to probate.
When the surrogate admits a Will to probate, she is merely declaring that the document presented as Mrs. Smith’s Will is a valid Will, which typically means that Mrs. Smith signed the Will in the presence of two witnesses and that all three signatures are notarized. Finding that a Will is valid is not a high hurdle to get over. The process of admitting a Will to probate takes about twenty minutes and costs about $150.
Once Joe is appointed as Mrs. Smith executor, he is, for all intents and purposes, Mrs. Smith. He can take the forms that the surrogate provides to him to the banks and access his mother’s accounts. He can contact the companies that issued the stocks and sell the stocks. He can contact a realtor and sell Mrs. Smith’s home. In short, Joe, as the duly appointed executor of his mother’s estate, can sell Mrs. Smith’s assets and deal with Mrs. Smith’s assets as if he were Mrs. Smith.
The job of administering Mrs. Smith’s estate would be relatively simple. The things that could cause issues are the things that Mrs. Smith did attempting to simplify her estate. For instance, Mrs. Smith names Joe as the sole beneficiary of her life insurance policy in order to give Joe money to pay for her funeral.
The problem is, Joe is named as beneficiary. He’s not named as beneficiary contingent upon his using the money to pay for her funeral. Joe could simply keep the money from the life insurance policy. It is his money. Now, Joe probably will not retain the money; he probably will use the money to pay for his mother’s funeral; but he has no legal obligation to do so, and he could have just used the money in Mrs. Smith’s bank accounts to pay for her funeral.
By naming Mary as the co-owner of a bank account, Mrs. Smith may have inadvertently caused an issue. Banking law would say that when Mrs. Smith died, the bank account that she co-owned with Mary became the sole property of Mary. If Mary claimed that Mrs. Smith wanted her to have the money in the account and Mary kept the money, then Joe as executor would have to sue Mary to get Mary to return the money. Joe may or may not prevail.
Administering an estate is, in most cases, relatively simple. There may be a lot of running around and grunt work, but there is very little cerebral work. Typically, it’s the things people do to try and avoid probate that cause the most challenging issues.