A Guide to Ancillary Probate

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A probate proceeding in Alabama is the court-supervised process of administering one’s estate. When someone dies owning property in multiple states, an ancillary proceeding may be necessary. 

Ancillary probate refers to a court proceeding that’s required in addition to the primary probate process that takes place in the home state of the decedent. This secondary probate is required because the probate court in the decedent’s home state has no legal jurisdiction over real property that’s located out-of-state. 

For instance, you might live full-time in Alabama, but own a piece of real estate in Florida. That property can’t be probated in Alabama. Ancillary probate can also be applied for tangible personal property such as cars, boats, or airplanes that are registered and titled out-of-state. 

One of the biggest disadvantages of having to take on an ancillary probate proceeding is the added cost of administering more than one estate. This can often mean additional attorney fees, additional court expenses and additional accounting fees. One of the best ways to avoid undergoing an ancillary probate proceeding is by structuring your estate plan so that all property is titled and belongs to a revocable living trust. 

To learn more about strategic estate planning or ancillary probate, call our office today to set up a consultation. (251) 621-1555

Medical Debt After Death: Who’s Responsible?

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Oftentimes when a loved one passes away, there’s remaining medical debt due to a hospital stay or time spent at a nursing home. So, the question becomes, who is responsible for paying that debt?

Generally speaking, any and all debts incurred by the decedent remain their debts even after death, but they must now be paid out of the decedent’s “estate.” This means that debts owed, including medical debts, will need to be paid from monies held in bank accounts or sometimes by liquidating assets owned by the decedent in order to satisfy those debts. If the decedent passed away with a valid will in place, the Executor will be the person responsible for ensuring those bills get paid out of estate funds. 

So, what happens if there’s not enough money or assets in a decedent’s estate to cover debts owed? In many cases, creditors may contact a spouse or an adult child, in an effort to seek payment, but that does not mean those individuals are in fact legally obligated to use their own money to pay off a decedent’s debt. There are exceptions, however. 

First, if you are a co-signor for the debt, you will be financially responsible for payment. This often occurs if you sign off as the financially responsible party when placing your loved one in a nursing home. 

Second, if you’re a joint account holder, such as on a credit card. Note, this is sometimes different than being an authorized user. 

Third, if the decedent was your spouse and you live in a community property state (note: Alabama is NOT a community property state). 

Ultimately, if you don’t fall under one of these categories, you are not likely to be held financially responsible for the debts of a deceased loved one, even if they were your spouse or if you, as an adult child, were your parent’s primary caregiver. 

Although debt collectors can (and often do) contacts spouses, guardians, adult children, etc. to discuss a loved one’s debts, remember that they are still required to follow the rules under the Fair Debt Collection Practices Act. 

For more information on the process of probating a loved one’s estate and the accompanying responsibilities that come with that, contact our office to speak to one of our attorneys. (251) 621-1555

I’ve Been Appointed as Executor of a Will…Now What?

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Before appointing someone—or accepting an appointment, as it relates to the Executor of a Will, it’s important to know the duties and responsibilities that come with that role. As an Executor, perhaps the most important thing to know is that the process will take time and it will require good organizational skills. Essentially, as an Executor, you are responsible for seeing to it that all assets of the decedent are given to their new owners (per the Will’s terms), for representing the estate in probate court, for paying any debts of the estate and, sometimes, for handling the funeral/burial arrangements. 

Whether you, as the Executor, are a member of the immediate family or are a trusted friend or colleague, you will be working closely with a grieving family and, in most cases, there is money involved, so patience and a good temperament are also key. In order to carry out your duties as an Executor in the most efficient and stress-free manner, it’s important to consider taking some advance preparations. 

First, you’ll want to know as soon as you’re appointed, where the relevant documents are stored. These documents would of course include the Will itself, but may also include trust documents, tax records, credit card statements, banking records, funeral and/or cemetery arrangements, etc. Also, it would be in good practice to make copies of these documents for yourself and keep them in a safe location. 

Second, you may want to consider going over all of the documents, in detail, with the individual who has appointed you as Executor. Remember, once your role as Executor is “activated” you will not be able to communicate with the decedent and there may be certain terms and conditions in their estate plan that are vague or confusing. Asking any clarifying questions you may have as earlier as possible, will save you a tremendous amount of time and headache in the long run. 

Third, know who the other “players” are and keep good contact information on everyone. Not only will you want to know the beneficiaries of the Will/Trust, but you’ll want to know if there’s a specific accountant to assist with buttoning up financial matters, and of course you’ll want to know if the client has a probate attorney in mind who will guide you through the probate court process. 

For more information on estate planning and probate matters, call the firm today and speak to one of our seasoned attorneys. (251) 621-1555

“Letter of Testamentary” Explained

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It’s a common misconception that some people assume if they are in possession of someone’s Will, and especially if they are the named Executor of said Will, that they can start acting immediately upon that person’s passing. This can include taking actions like removing personal property from the decedent’s home, selling vehicles or other possessions, paying bills and/or distributing property to Will beneficiaries. 

However, before taking actions it is necessary for the Executor to obtain what is called a “Letter of Testamentary”. This document can only be granted by the probate court in your jurisdiction and it specifically grants authority to the Executor to formally act on behalf of the decedent’s estate. 

To obtain these letters through the probate court, you will most likely need to start by hiring a licensed probate attorney in your area. While it is not required in Alabama that you engage an attorney for the purpose of probating a Will, most individuals find it nearly impossible to navigate the probate process without legal guidance. 

In addition to the original Last Will and Testament of the decedent, you will need a death certificate and a number of required forms the probate court will request. This is where having a licensed (and seasoned) probate attorney will provide you the most help. Once you petition the court to probate the estate and grant you Letters of Testamentary, the court will set a hearing to validate the will and assess your capacity to serve as the Executor. 

So what if your loved one passed away without a Will, but instead, had a Trust that provided for the distribution of their assets upon death? In that case, you would not need to obtain Letters of Testamentary or interact with the court at all. In fact, a Trust administration avoids the entire probate process, which is a huge advantage to establishing a trust in the first place. 

To learn more about Estate Planning and the Probate Process, call our office today and schedule your appointment. (251) 621-1555

Can I Add My Mobile Home to My Will?

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According to various resources, an estimated 17 to 22 million Americans currently live in Mobile homes, making it a valid asset for many people to consider when creating their estate plan. Planning for the devise of a mobile home requires some special attention, as legally they can be viewed as real estate in some situations. A mobile home by itself is considered personal property and if you do not own the land upon which it sits, or if you only rent the land, it stays in the category of personal property and not real estate. 

However, if you own the mobile home AND the property on which it sits, you can transfer your mobile home into real estate. In order to be real estate the property must be permanent and you’ll likely have to submit an application with your state to have the ownership of the home and the land combined into one. 

If you own your mobile home and the land on which it sits, it is considered real estate and you would add it to your Will in the same way as any other real estate asset. It is important to note, though, that regardless of whether or not your mobile home is considered property, it still has a title that will need to be transferred over to the beneficiary you leave it to, upon your death. 

If your mobile home is not permanently affixed to land that you own and is therefore considered personal property and not real estate, you will leave only the mobile home to a beneficiary in your Will. Obviously, it will be up to the recipient of the mobile to take over any rental payments for the land it sits on or moving the mobile home to a new location. 

See the below link for information specifically related to Baldwin County residents:

https://baldwincountyal.gov/government/probate-office/licenses/manufactured-home 

 

For more information about this topic or any other issue related to real estate and estate planning call us today and set up a consultation. (251) 621-1555

Should You Add a No-Contest Clause in Your Will/Trust

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As we all know, family dynamics can make estate planning challenging. When I have clients that are concerned about a specific individual challenging the validity of their will or trust, they often ask me if they should add a no-contest clause provision in their estate plan. In theory these clauses are designed to prevent unhappy relatives from challenging your will or trust. In practice, however, a no-contest clause truly only discourages someone who has something to lose by challenging your estate plan in court. 

Below is sample language of a standard no-contest clause:

“If any beneficiary under this will seeks to obtain in any proceeding in any court an adjudication that this will or any of its provisions is void, or seeks otherwise to void, nullify, or set aside this will or any of its provisions, then the right of that person to take any interest given to him or her by this will shall be determined as it would have been determined had such person predeceased the execution of this will without issue.”

Let’s say for example you have two adult children, each of whom is set to inherit $25,000. If one of those children is financially irresponsible and is really depending on that inheritance, he or she will likely think twice about launching a will challenge as a loss in court could cost them their much-needed inheritance. 

However, if you choose to completely disinherit someone, that individual would have nothing to lose by contesting your will. Going back to our example, if you disinherited one child, he or she would lose nothing by challenging your will because if they win (by having your will declared invalid), that child would theoretically inherit half of your estate. 

At Davis, Davis & Associates, we are here to help our clients navigate these difficult situations with alternative avenues to prevent estate plan challenges. Call us to set up your appointment today, (251) 621-1555.

Storage of Estate Planning Documents: What to Know

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I’ve been practicing for long enough at this point in my life that I can tell a real life story for almost every situation that occurs and boy, do I have stories about mishaps regarding the storage of vital estate planning documents. From Wills being locked in safety deposit boxes to Health Care documents being stored improperly during times of medical emergencies, I’ve seen it all. If you live down in this area of the state, you probably already have an emergency kit ready in the event of a hurricane. This probably includes medication, batteries, a weather radio, water, etc. However, it’s equally as important to take time storing and keeping tabs on your important personal documents such as estate planning documents, medical records, tax information, etc.  

When thinking about where to best store your estate planning documents you should put some thought into both the safety and durability of the storage device and the ease of accessibility to it in the event of an emergency. The most important thing is that YOU are not the sole individual who can access these documents. They should be accessible by appropriate, trusted people in your inner circle otherwise, they are virtually useless. Here are a few storage options to consider:

  1. A fire-proof and flood proof safe located in your home or office. Usually these are relatively inexpensive and more secure than something like a locked filing cabinet. Some best practices would be to keep the safe in a private area of your home or office, make sure it utilizes a combination lock or key and ideally, would be difficult to move. 
  2. A safe-deposit box at a bank. While these fire-proof metal boxes are used by many people for safe storage of important documents, keep in mind that they can be difficult to access in an emergency (for instance, when local banks/business are shut down). Also, access to safe-deposit boxes can be restricted by the bank to only yourself and could be frozen upon your passing. This would require that your family—if a separate individual is not explicitly listed on the box—go through the probate court to even obtain access to your documents.
  3. Online Storage. For the tech savvy, this may be a great options as there are a number of online cloud storage systems available these days. Keeping your documents online keeps them organized, protected from external damage and easily accessible from any digital device with access to the login and password. Keep in mind, however, that some medical/financial institutions may still require original documents, so it’s always best to keep the originals in one safe location, in addition to using a digital storage option. 
  4. At your attorney’s office. Many firms, including Davis, Davis & Associates, offer clients the option to retain original documents, free of charge. Allowing your attorney to safely store your documents is a great way to prevent the misplacement of vital original records, keep documents safe from getting into the hands of any unwanted individuals in your home and keep the records accessible to your trusted attorney, should your family need legal assistance. 

 

For more information on how to best organize and store your estate planning documents, reach out to your trusted financial advisor or legal professional. At Davis, Davis, & Associates, it’s not just our job, but our honor to assist you. 

Capacity Issues in Relation to Estate Planning

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A common misconception that often arises in my practice is that someone who is cognitively “stable” automatically has testamentary capacity and is capable of drafting (or directing someone to draft) their estate planning documents. According to the CDC, 1 in 4 Americans in 2023 have some form of a disability and according to the Alzheimer’s Association, an estimated 5.8 million Americans suffers from Alzheimer’s dementia today. That number is expected to triple by the year 2050. Because illnesses of this nature are progressive, persons in the mild to moderate stages often retain the capacity necessary to execute estate planning documents, while other may only have lucid intervals. 

In terms of determining testamentary capacity (the capacity to execute a last will and testament), the testator must generally know (1) what property he/she has, (2) what he/she wants to do with their property upon their passing, (3) know the individuals whom he/she want to receive said property and (4) fully understand the results of those choices. While an individual may be able to rattle off the street they live on or their birthday, these things are not relevant in terms of testamentary capacity. 

When drafting estate planning documents, attorneys must always exercise caution when there is a reason to question mental capacity because failing to do so can lead to disastrous consequences, such as will contests. Every attorney is different in their approach to this sensitive issue, but I have always found it best to meet with the client in person and without unnecessary family/friends in the room so I can ask the necessary questions I need in order to assess capacity. If I’m left feeling unsure, my next step is to require the client to provide a detailed written opinion from a doctor as to the testator’s capacity, preferably written within a week or two of drafting the estate documents. 

Of course the takeaway from all of this is that it is so very important to take care of your estate planning needs early on, before you or someone you love begins to experience a decline in mental health. You are never too young to have an estate plan in place!

 

To learn more about estate planning and how we can assist you, contact Davis, Davis & Associates today to schedule a consultation. (251) 621-1555. 

Funding a Revocable Living Trust

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As of late, many of my clients are choosing to structure their estate plan using a revocable living trust instead of relying simply on a will. They prefer to cost advantage, the privacy, the savings in time and the added control over assets that a trust can provide in the event of their incapacity and death. 

When properly prepared and funded, a trust can avoid the public, costly, and time-consuming probate process. It can let you provide for your spouse during your spouse’s lifetime and for your children after your spouse’s death, which can be important particularly in second marriages or for blended families. It can defer or reduce estate taxes and a trust can protect inheritances from court interference, creditors, spouses, divorce proceedings, and irresponsible spending.

Still, many people make a big mistake that sends their assets right into the court system: they do not fund their trusts.

Funding your trust is the process of transferring your assets from you (as an individual) to your trust (with you as the trustee of said trust). To do this, you physically change the titles of your assets from your individual name to the name of your trust. If you are married, you and your spouse might change the titles of your jointly owned assets to your joint trust or to each of your individual trusts, whether in equal or unequal portions.

If you have signed your trust agreement but have not changed titles and beneficiary designations, you are unlikely to avoid probate. Your trust agreement and trustee can only immediately control the assets you have put into the trust. You may have a great trust, but until you fund it (transfer your assets to it by changing titles or provide for transfer by beneficiary designation), it does not control anything. 

Below are a few examples of assets you may want in your trust and others which would not be appropriate to fund your trust:

Assets you probably want in your RLT:

  • Real property (home, land, other real estate)
  • Bank/credit union accounts, safe deposit boxes
  • Investments (CDs, stocks, mutual funds, etc.)
  • Notes payable (money owed to you)
  • Life insurance (or use irrevocable trust)
  • Business interests, intellectual property
  • Oil and gas interests, foreign assets
  • Personal untitled property

Assets you may not want in your RLT:

  • IRAs and other tax-deferred retirement accounts
  • Incentive stock options and Section 1244 stock
  • Interests in professional corporations
  • Funding real estate into an RLT is state specific and may not apply in all states

 

To learn more about estate planning and planning when new residency is involved, contact Davis, Davis & Associates today to schedule a consultation.