Probate & Trust Administration
Probate is a legal process that occurs after someone dies so that his or her affairs can be handled.
Trust administration is a legal process outside the court system used to clear title for property after a person with a revocable living trust passes away.
What is probate?
Probate is a legal process that takes place after someone dies so that their affairs can be “wrapped up”. Generally the probate process includes a court process to prove that a deceased person & will is valid, or that they died without a valid will (called “intestate”). The probate process includes identifying and valuing the deceased person & property, identifying and paying debts and taxes, and then distributing the remaining property as the will (or state law, if there is no will) directs. This process usually takes between 6 and 12 months, but can be much longer if complicated.
In Hawaii the probate process can be either “formal” involving court appearances, or informal, completed by filing paperwork without court appearances. Whether or not the process can occur informally vs. formally depends on many factors, and evaluation of the case will usually involve the assistance of an attorney. The cost of probate is paid from estate property.
To discover more about probate simply click a question below to reveal the answer.
+ How does Probate work?
After your death, the person named in the will as executor(or in Hawaii is called a “personal representative”) or, with no will, the person defined by law, requests that the court prove the validity of the will (or the absence of a will). That person will also request that the court grant them legal authority. As a result of the court proceeding, the court will issue “Letters Testamentary” or “Letters of Administration” (if no will). These “Letters” allow the personal representative to find, secure and manage assets during the probate process.
Depending on many circumstances, the personal representative will have to decide whether or not to liquidate securities and sell real estate and/or other property. For example, if your will makes a number of cash gifts, but the estate consists mostly of valuable artwork, the collection may be appraised and sold to produce cash. If there are outstanding debts, property may be sold to pay them. Each person’s situation is unique.
As things are settled, the personal representative will pay debts and taxes, then divide the remaining assets among the people or organizations named in the will (or legal heirs, if no will).
+ Does all property go through probate when a person dies?
No. Most states allow a certain amount of property to pass free of probate or through a simplified probate procedure. In Hawaii, for example, you can pass up to $100,000 of property without probate
In addition, some property may pass outside a will. Property that is owned in joint tenancy with rights of survivorship will pass to the surviving joint owner(s). Retirement accounts and/or life insurance pass to the designated beneficiary(ies), regardless of the terms of the will.
Another useful means to avoid probate is a “payable on death” (POD) designation. Hawaii allows for a payable on death designation for real estate. Bank accounts or other investment accounts may also carry a beneficiary designation that becomes effective upon the owner’s death. Some accounts may use the term “transfer on death” (TOD).
+ Who is responsible for handling probate?
Hawaii refers to the person responsible for handling tasks in the probate process as the “personal representative” (called an Executor in some states). The personal representative is named in the will. If no will exists, state law dictates who is appointed to the role.
+ Should I plan to avoid probate?
Probate has a horrible reputation, largely because in some states (e.g. California, New York), attorneys are paid a percentage of the estate’s assets, and the process involves several court hearings. This can amount to significant costs for the family. In Hawaii, attorney fees for probate are generally charged hourly. For a simple informal probate, fees can range from $3,000-$5,000. Many clients choose to plan their estates to avoid probate.
+ Someone has passed away. I think I need to deal with probate in Hawaii -- can you help?
Yes! Whether or not a court proceeding is necessary after someone’s death depends on many factors. Does property exist solely in the name of the decedent? If yes, did the decedent designate a beneficiary for the property? If no, chances are that some form of legal work is required to clear title to the property. The complexity of that legal work depends on various factors.
The best route is to schedule a time to talk to us for guidance.
+ What if some passed away who owned real property in Hawaii, but resided elsewhere?
In this situation, the legal work necessary depends on whether or not a probate proceeding is underway in another state. If the answer is yes, then we can generally use a simple proceeding called an “acknowledgement of authority” to clear title to the Hawaii real property. If no other probate proceeding is happening elsewhere, a probate will probably be required in Hawaii to clear title.
To take the most effective next step, schedule a time to talk to us. We will provide assistance in analyzing your situation, and develop a strategy for you to consider.
What is Trust Administration?
The term “trust administration” in its broadest sense refers to a trustee’s management of trust property according to the terms of the trust document, and for the benefit of the beneficiaries of the trust. More specifically, in the context of a deceased person, “trust administration” refers to the process that takes place to clear title to property after the person that established a revocable living trust passes away. While it is comparable to “probate” in the sense that it involves settling a deceased person’s affairs, a trust administration is handled more simply, more quickly, and at much less expense than if the deceased’s estate had to be probated because it not a court involved process.
If you are named as the successor trustee to a deceased person’s trust, it is recommended that you seek legal counsel to ensure that the process is handled properly.
Below are some of the task required for trust administration.
- Usually a trust administration will start with a mandatory notice to all trust beneficiaries of the existence of the trust.
- If the trust holds real property, there are steps that must be taken to clear title from the original trustee, to the successor trustee.
- In addition to real property, a trustee will need to inventory all other trust assets, such as bank and investment accounts, and also transfer the title of those assets into the successor trustee’s name.
- The successor trustee must acquire a federal tax identification number for the trust so that any income earned from the accounts in the name of the trust is correctly reported to the IRS.
- Tax returns may need to be filed.
- The successor trustee may be required to pay the deceased’s debts and evaluate claims against the estate.
- Value property to assess whether it is necessary to file a federal estate tax return.
- The successor trustee must keep a detailed accounting the trust property, and must keep trust property separate from the successor trustee personal property.
- Once the assets have been collected, debts paid, the tax returns filed, and the liabilities fulfilled, distribute the remaining trust assets according to the terms of the trust document.
Trustees are held to the highest standard of care under the law and may be held personally liable to the trust beneficiaries if the job is done in a negligent manner.