“In this world,” Benjamin Franklin once observed, “nothing can be said to be certain, except death and taxes.” Unfortunately, both of these grim constants converge in the world of trust, estate, and probate law. Additionally, without careful estate planning in advance, a third layer of salt is added to the wounds of grieving loved ones during this difficult period in their lives—legal proceedings in probate court.
A tremendous amount of unnecessary delay, legal expense, inconvenience, and suffering can be bypassed through creating a prudent estate plan with a will and trust, along with other related steps such as medical directives, durable power of attorney to address any medical incapacity, and non-probate transfer designations in connection with bank accounts, annuities, life insurance policies, real estate title, retirement accounts, and other similar records. Taking such steps and keeping the documents current with developments in life is a no-brainer for anyone who cares about the well-being of those they love. Failure to do so can result in outcomes and consequences far different, and often much more adverse, than one would really desire for themselves and others. Probate court is often slow, confusing, and expensive, and default law for incapacity or intestate distribution of assets is often quite different than what someone might otherwise expect or prefer. Few who have been dragged through such a process need further convincing that estate planning is a better way, but unfortunately a large portion of the general public is unaware of this dynamic.
Even less commonly understood is the fact that the probate and trust administration process for a decedent with significant assets is typically an inherently slow, tedious, complicated, and grinding process under even the best of circumstances. In other words, even when there is a well-drafted pour-over will and trust, and the surviving relatives all get along, and the trustee is doing a capable and fair job, a properly executed trust administration and distribution process will usually take months and often require years. Estate plans and trusts can greatly enhance efficiency and reduce the pain associated with intestacy or probate court involvement, but even at its best (and with able legal counsel) the process is often extended and difficult. Unfortunately, far more is involved than simply reading some provisions in a trust document and then having the trustee write out checks to the beneficiaries. This is all counterintuitive to most people who have never encountered the process before, including even trustees and beneficiaries who are generally able, well-educated, and worldly-wise. Almost invariably, trustees and beneficiaries express surprise and frustration when they start working through the process and begin to realize things are going to take much longer and require more effort than they thought.
Why Does Probate and Trust Administration Take So Long?
There are numerous reasons why probate and trust administration turn out to be more difficult, costly, tedious, complicated, and slow than most people think. In Utah and throughout the U.S., some of these include the following.
First, death and taxes are not only certain, but also intertwined. It is typically necessary to file a final personal income tax return for the deceased, as well as tax returns for trusts and other entities created by or owned by the deceased. In addition, if the estate is sufficiently large, special estate and gift taxes may apply. There may also be property taxes or other taxes associated with certain assets. The task of completing proper tax accounting and analysis, filing proper returns, and paying taxes, is considerable in and of itself, especially if a large number of assets, multiple states, and/or international assets are involved.
Second, in addition to taxes, a trust and estate typically has other financial obligations to pay and reconcile before distributing to the beneficiaries. In most states, creditors typically have a right to file claims against the estate a year or more after death, or (depending on the statute) after notice of death has been noticed in a newspaper or by other means for a minimum number of weeks. It is quite common for a deceased to have unpaid debts, medical bills, funeral costs, and the like, all of which have to be paid from some source and have the effect of reducing (sometimes unevenly) the assets available for distribution to the beneficiaries. If the deceased was involved in causing accident or injury to others, or died in the middle of other legal controversies, it can also take months or years to resolve lawsuits against the decedent or the decedent’s estate. Creditors must be paid before the remainder of the assets (if any) are paid to beneficiaries.
Third, it is often a major task to identify and inventory the assets owned by the trust or estate. Deceased individuals rarely leave a complete, up-to-date list of every last asset they own. It can be a major chore just to find where basic trust, property, tax, and financial documents are kept. There may be numerous real estate or personal property items to locate, list, and appraise. As for bank accounts, life insurance policies, annuity policies, retirement accounts, and the like it can take months just to submit the documentation needed to obtain cooperation so that records will be disclosed and accounts retitled, assets liquidated policy benefits paid out, etc.
Fourth, some assets require management, storage, rental, sale, or liquidation, often to the point that the trustee feel like he or she has to live two lives instead of one. To take but one example, if the deceased lived alone in a house owned by the deceased, that house initially continues to have all of the same issues associated with homeowner insurance, utilities, mortgage payments, upkeep, and the like. The house may need to be rented out or sold, which in turn may require advertising, repair of the home, hiring a real estate agent, appraisal, a closing or renting transaction, property tax resolution, and so on.
Last, but not least, there may disputes between the potential beneficiaries about what the terms of the trust (or trusts) actually mean, or how such terms apply to the circumstances (e.g. creditors clean out the bank account meant for child number one, while the home as left for child number two still remains), or who is entitled to be a beneficiary (e.g. blended families from divorce, live-in girlfriends, out-of-wedlock children, questionable trusts drafted with possible duress, fraud, or medical impairment). There may also be disputes over how to administer and manage the assets, such as whether and when to sell a house, who to use as an agent, what to accept as the purchase price, whether to invest in fixing up a house prior to sale, etc. The beneficiaries may also dispute how to balance financial valuation and sentimentality considerations as to the distribution of personal property (a lottery and choose approach is sometimes a possible solution).
Handling Probate and Trust Administration Effectively
For all the above reasons, and others, a trustee or personal representative is typically advised to proceed in a careful, thorough, transparent, and sequential manner. If the steps are not completed in a proper sequential way, assets may be overlooked, wasted, mismanaged, misreported, or incorrectly distributed. Trustees can be subjected to criticism or even legal exposure. Note that most of the complications above will arise regardless of the trustee and beneficiaries involved; incompetent or contentious actors can make the situation far worse, but the process will not in any event be instantaneous or easy.
Understanding and patience in regard to these realities has another side benefit as well. The death of a loved one can be one of the most difficult times in a person’s life, even before the difficult attendant legal, financial, and estate/trust administrative chores kick in. A death can also ignite feelings of fear, anger, jealously, resentment, distrust, and greed among those who survive the decedent. Approaching the situation with realism, understanding, cooperation, communication, and patience is almost always the most effective way for everyone to find an optimal solution to the situation and move forward with life in the best way possible. Involving skilled legal counsel early in the process is also essential both before death, in terms of planning an estate, and soon after death, in connection with implementing administration of the estate in Utah.
Unfortunately, there is often no way to eliminate pain, sorrow, and aggravation in connection with death and taxes. However, by being mindful of how the process works, such difficulties can be kept to the minimum possible level.
Helping Bereaved Families in Utah
Pearson Butler is a full-service law firm dedicated to helping Utah residents through a wide range of legal issues and processes. We can help you plan your own estate or guide you through the administration of a loved one’s estate/trust with compassion and ease. Our legal team has extensive experience in handling the complexities of these multifaceted matters, and we are more than happy to answer any questions you may have in a risk-free consultation.
Call (800) 265-2314 or fill out an online form to get in touch with a qualified attorney in Utah.