Losing a loved one is difficult enough without the added stress of having to make important financial decisions while grieving. For many people, the duties and responsibilities of probating a loved one's estate can feel overwhelming. The probate process is time-consuming, complicated, and, quite often, extremely frustrating. If you have been named as an executor or personal representative and are tasked with settling an estate through probate, you'll want to avoid these common mistakes.

Handling assets incorrectly

One of the first things an executor or personal representative must do is secure all of the decedent's assets. Accomplishing this requires taking different steps for different types of assets. For example, financial accounts may simply need to be closed, whereas real property (such as a house) might require making sure the property is secure and arranging for its maintenance.

Failing to determine "Date of Death" values

Date of Death values refer to the fair market value of each estate asset at the time of the decedent's passing. The sooner this task is undertaken, the easier it will be to determine the correct value. Personal representatives often turn to professional appraisers for assistance with this task.

Handling creditors improperly

Every potential creditor of the estate must be notified about the estate going into probate. If the creditor is known, he or she can be notified personally. Unknown creditors, on the other hand, must also be notified. How? Through a notice published in a local newspaper.

The probate must be kept open for a period of time mandated by state statute to allow creditors to file claims against the decedent's estate.

Failing to communicate effectively with estate beneficiaries

Working closely with beneficiaries is not a legal requirement, but failing to keep them abreast of developments can be a big mistake. In fact, poor communication sometimes leads to unnecessary, and expensive, litigation.

Remember: You are not the only one dealing with the loss of a loved one--so, too, are the decedent's heirs. It is an emotional time for them, and they may feel slighted or ill-treated if you don't stay in touch with them.

Distributing estate assets too soon

As the estate's personal representative, you have the authority to distribute assets to beneficiaries as well as to approve and pay creditor claims. However, sometimes an estate lacks sufficient assets to honor bequests made in the will and pay every creditor claim. In such a situation, creditors must be prioritized according to the law and assets must be dispersed based on that prioritization. If you, as personal representative, do not follow the law, you could be held personally liable.

Our clients often express concern about protecting the inheritances of their children. Sometimes, parents worry about the security of a child's job and what will happen if he or she loses that job, cannot pay bills, and subsequently loses the inheritance to creditors. Other times, parents worry about the influence a child's spouse has over their child's money management decisions. A child embroiled in a "bad marriage" frequently leads to parental concerns over an inheritance being diminished or lost through divorce. Finally, parents often wonder whether their children are mature enough to handle an inheritance on their own.

Discretionary trusts

With these types of trusts, the trustee has complete discretion to determine trust distributions and the beneficiary cannot demand distributions.

The settlor of the trust can provide guidance about distributions and withhold distributions if a child is facing divorce, bankruptcy, and/or personal problems that may impact his or her ability to manage the inheritance wisely. In addition, creditors cannot access trust assets.

Support trusts

In the case of a support trust, the trustee is required to make distributions for health, education, support, or maintenance to the beneficiary if so desired by the beneficiary. Only certain creditors, known as "super creditors," can access the trust assets. Examples include child support/alimony payments, claims for services that "protected, preserved or enhanced the beneficiary's interest," and state/federal government debts such as tax liens.

Spendthrift trusts

These trusts prevent the beneficiary from voluntarily or involuntarily transferring his or interest in the trust and protect trust assets from most creditors, excluding the super creditors described above.

Many grantors name a spouse, an adult child, a relative, or a close personal friend as trustee.

The person you choose must have the ability to serve in this capacity and the willingness to devote all of the time and energy necessary to carry out the mandates of the trust. It is important to note that the trustee must administer the trust faithfully and accurately. He or she can be held legally and financially responsible for any mistakes, even those that are unintentional. This is why you should think long and hard about your choice of trustee. Do not take this important decision lightly.

It feels like the summer is cruising right along. I hope you've been able to get out and enjoy some of this great weather. This quarter's newsletter is packed with information that I hope you find helpful. Add it to your pile of summer reading.

I know that I say this every year, but since the kids will be going back to school in a blink of an eye, if you have a child who is now 18 years or older and is heading off to college, don't forget to have them get a power of attorney and health care proxy in place. Now that they are adults, this is the only way you will have legal authority to help them if the need should arise. Reach out to us if you need help getting those documents in place.

As always, thanks for taking the time to read and reflect!

Warmly,