Mistake Number One: Probating The Wrong Documents
It is one of the first mistakes that people can make as an executor, and when they make it, it can be a doozy. The problem is the failure to probate the correct document. Now let me talk about a couple of words I used there. One is the failure to probate, and when people hear the word probate, they become naturally alarmed because of all the things we have read that probate is to be avoided at all cost.
I would just like to start by saying that if you’re an executor in Pennsylvania, take a deep breath and relax a little bit, because probate in Pennsylvania is not nearly as bad as it is in many states. In many states, probate can be a long, protracted, difficult, court supervised system that is very expensive. In Pennsylvania, the vast, vast majority of the executors that we represent, whether they are trust companies, banks with trust departments, or individuals, the vast majority of them never go through the full, court supervised probate process.
Most executors administer the estate, and then they do what’s called a Family Settlement Agreement and they “opt out” of much of the probate process. Pennsylvania is a high tax state and a low probate fee state, and Pennsylvania has a fairly easy, fairly simple, fairly straight forward probate system. So, when I talk about probate, I am not talking about the scary part of it, I am simply talking about getting appointed as the executor so that you can handle things.
Interviewer: David, when we talk about probate, a lot of people are a little confused with that term.
I think because it is a little scary and you see all of these CNBC, and Suze Orman saying oh be careful, you need to set up a trust. A lot of people think that it is a tax, so what specifically is probate?
Dave Frees: Ok, probate has two different meanings. When you hear someone say I am going to probate the will, that has a very narrow meaning and that means that you are going to go to the court or go to the Registrar of Wills in Pennsylvania, and you are going to get sworn in, and that is there for the protection of everyone. When you say you are going to probate the will, what happens is you’re going to go into the Registrar of Wills and someone there will check to see if the will is authentic and to make sure you are the executor, then you will take an oath to promise to do what you have to do. And there will be a small probate fee, but for example, that fee is often a couple of hundred dollars. I was recently involved in probate of an estate that was 6 million dollars and I think the probate fee was in the range of $2,500.00. So they are not onerous.
When I talk about probate tonight, that is what I am going to mean, it is the act of going over to the Register of Wills and getting sworn in and that’s not necessarily a bad thing. People think of the word probate generically to mean a process in a lot of states where you must go through a court supervised estate administration, where you have to tell a judge everything you do, but if you have a properly drafted will in Pennsylvania, that gives the executor lots of power, it is pretty easy to go through that process without any court supervision.
Interviewer: Before we go on, just to set the audience at ease, can you talk a little bit about how many years you have been doing this as an attorney?
Dave Frees: In case they are wondering ”Who is this guy? and Why should I listen to him?"
That is a very good question and it is one I tell people to ask when they are hiring lawyers to help them with things. It is one of the important questions to ask. I have been practicing law for over 22 years. I went to the University of Pennsylvania Law School. While I was there I studied Estate and Trust Planning, and Estate and Trust Administration, Wealth Preservation, and Estate and Inheritance Tax.
I currently represent individuals in planning their estates, setting up trusts, establishing wills, setting up irrevocable and revocable trusts, setting, helping to set up trusts to do Medicaid planning, and then I also represent individuals who are trustees or who are executors in helping them to properly administer an estate or properly administer a trust and do all the things that they’re supposed to do to keep them out of trouble, and finally, the third sort of broad category of things that I do, I represent banks and trust companies who have been appointed by people to do the same thing.
Banks and trust companies obviously a lot of times you guys have a much higher level of knowledge of the day to day tasks that need to be performed, but executors or trustees, whether they are individuals or banks or trust companies will often times come across unique legal situations where they want the guidance of counseling so we provide that.
I probably help somewhere between, well I see 300 to 400 people a year, to either plan their estates or help them as executors and administrators and probably at any given time I have 40 to 50 trusts or estates under administration where I am personally or the paralegals or lawyers that are working for me are helping people to administer those trusts and estates.
Then in addition I have served as the executor and trustee in a number of situations both for my own family and through the years for clients. I also represent, for example, Phoenixville Federal Bank and Trust and a number of other smaller and larger trust companies in helping them to do these things each day.
So those are my credentials, now having told you I am a lawyer, I am required also to say, anything I tell you tonight is general information, it is to help you to become a better informed consumer of legal services. It is not a legal opinion. So that even though I may be your lawyer, if you are one of my clients listening in, or even though you may be the bank’s customer, if you want to get specific legal information on your particular case, you should consult your counsel and tell them the particular facts and show them the particular documents so that they make sure they are giving you advice that is specific to you.
Dave Frees: Now let me go back to this, this issue here of the failure to probate the correct documents. And one of the first duties of an Executor is to make sure you have got the right will, and the right trust and the right documents. And a lot of times people stop too early, they are going through a desk and they find an original document and its dated 1992, and they take it over and they probate it and they get appointed. However, it is really part of your duty to make sure that you have identified the most recent document and that has not been revoked.
So one of the things that any executor should do is make sure that they have checked the safe deposit box, make sure they have checked with the drafting counsel, to make sure that there is not a more recent document. That is vitally important to do because if you start down the wrong path you will find that you have spent thousands of dollars in some cases to fix the problem that would not have existed. You want to start doing what you are supposed to be doing with the right document. So it is not a common mistake but when it happens it is a doozy and that is the failure to probate, or deal with the correct document.
The same thing applies to trust, even if you do not have to probate a will, you better make sure if you have a revocable living trust, that you have got the most recent copy and the most recent version of that trust because people, you keep the right to change these often and do change them throughout their life so you don not want to be giving out money and doing things based on the wrong documents.
Kurt Kunsch: Excellent. David I guess the next question would be....
Be sure to check this article liabray and our blog for parts 2- 10 of the executor series to avoid the maitakes that executors make and the personal liability that can result.
David M. Frees III, Esquire
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David is also a contributor to the Unruh, Turner, Burke and Frees Estate and Wealth Preservation Blog.
Mistake Number One: Probating The Wrong Documents