Probate Fundamentals

Transcription

1 Probate Fundamentals I. Basic Steps in System II. Overview of Probate III. Finding Probate Notices IV. Real Property Search V. Probate Worksheet VI. Researching Files at Clerk s Office VII. Understanding the Probate File VIII. Making Contact

2 Basic Steps in System A. Advantages of Investing in Probate Real Estate B. Basic Steps

3 Advantages of Investing in Probate Real Estate Bargain Prices Probate properties are mostly unwanted properties with highly motivated sellers willing to work out a great deal. Unlimited Inventory There are 2 times more probate properties than properties in foreclosure with almost 6 million estates in probate across the U.S. at any given time.

4 Advantages Continued No competition While everyone is chasing the latest trends, Probate remains an undiscovered niche that over the years has proven to be consistent and profitable. Buyer s Market Beneficiaries are anxious to sell the house, and other unwanted assets, so that they can pay off debts that must be settled before the estate can be distributed.

5 Advantages Continued Hidden Treasures Millions of items such as historic architecture, classic cars, fine jewelry, antiques, art and much, much more are yours for the taking. It s A Secret Very few investors know how to find and purchase property from an estate.

6 Advantages Continued Financial Freedom Investing in Probate can lead to a long, fulfilling career where you can achieve your financial goals and enjoy a greater quality of life. Baby Boomers The market is about to have a huge surge due to an aging Baby Boomer population.

7 Advantages Continued Multiple Deals Not only can you pick up the main real estate property of the estate, the decedent s residence, but occasionally the decedent will also have rental property, vacation property, land, etc. Cash Advances Not only can you profit from the Real Estate and Personal Property, but you can also earn extra money by facilitating cash advances.

8 Basic Steps a. Learn the Basics b. Do Searches and Start Probate Worksheet Always maintain between 100 and 200 active files c. Contact the Personal Representative d. Evaluate the Properties and Make Offers e. Have An Exit Strategy Planned for Each / Maintain a Buyers List f. Deposit Your Profits and Move to the Next Round of Deals

9 Overview of Probate A. Definition of Probate B. Probate law different in every state C. Wills D. Steps Involved in Probating an Estate E. Supervised vs. Unsupervised F. Difference in Probate and Non-probate Assets G. Key Players H. Diagram of the Probate Process

10 Definition of Probate Probate -- although the technical definition just refers to the validation of a will in court; the term is generally expanded to refer to the legal process of administering the decedent s estate whether decedent had a will or not. In other words, Probate is the legal process of transferring the ownership of assets from a deceased person to his or her heirs or beneficiaries AFTER all of decedent s debts and expenses of administration have been paid.

11 What Do You Pay Debts With? CASH Do you think the funeral home, the probate attorney, the court, the mortgage holder, the utility companies, the car dealer, and the credit card companies will let the personal representative give them the house and say take this as your payment? NO they want to be paid in CASH not in assets.

12 How many people have enough cash set aside to cover all of these things?

13 Statistics Did you know that the average American household owes $121,000 in debt and has less than $2,000 in saving? What does that mean? If the average American died tomorrow, how would all of his or her debts be paid?

14 Statistics (cont.) Other assets that Decedent owned have to be sold. Do you think that the home is generally the asset with the largest value? Guess what generally gets sold to pay those debts?

15 The House or Other Real Property

16 Next Question Statistically, most heirs and beneficiaries already have their own place to live and a life established away from the decedent s home. Do you think that most heirs and beneficiaries would prefer to have the home OR the cash proceeds from the sell of that home? Most want the CASH, and they prefer to have it NOW instead of later.

17 Welcome to Probate

18 So we are here to talk about how we find those houses and other real property that have to be sold in order to pay the debts and expenses and distribute what is left over to the heirs.

19 Probate law different in every state. a. Some of the filing deadlines and procedures might be slightly different but it is the same general process b. Always be courteous and professional when dealing with the clerk s office, attorneys, personal representative and the heirs

20 Wills a. Will Defined b. Testate vs. Intestate c. Distribution When No Will

21 Will Defined A legal document prepared and executed by a person (called the testator) with the formalities required by the state in which such person is domiciled at the time of signing the will. The will generally states the testator s desired direction as to the administration and distribution of his estate upon his or her death.

22 Testate vs. Intestate Testate - Term used when a person dies leaving a will. Intestate - When a person dies without making a will, or dies without leaving anything to testify what his or her wishes were with respect to the disposal of the person s property after death. If this happens, state law decides who will receive the decedent s property.

23 Distribution When No Will i. Determined by state law, the law of descent and distribution; ii. Different in every state; iii. May take little more work to clear chain of title, but potential for some great deals; iv. Always get title insurance!

24 Steps Involved in Probating an Estate a. File Application to Probate the Will, or Administer the Estate (sometimes called Petition for Probate) b. Court proceeding to Prove the Will, or Determination of Heirship c. Court appoints a Personal Representative d. Notify all Creditors e. Prepare an Inventory of the Estate f. Pay Expenses, Debts, and Taxes of the Estate g. Distribute the Remainder of the Estate to the Beneficiaries / Heirs

25 Notify All Creditors i. Notice to Creditors - usually the first notice published in the newspaper; usually must be published within 30 days of the personal representative s appointment ii. Generally must also give specific notice to known creditors; usually by sending a letter to the known creditor

26 Prepare an Inventory of the Estate i. The Inventory lists everything that the decedent owned that is considered probate assets. ii. Usually due within 60 to 90 days of personal representative s appointment by the court; but may be extended if an estate tax return is also due

27 Pay Expenses, Debts, and Taxes of the Estate i. State law determines who has priority of payment ii. Debts usually must be presented within a specific time period or will be barred from further claim against the estate

28 Pay Expenses, Debts, and Taxes of the Estate (cont.) iii. iv. If all the assets of the estate (real estate, personal property) are greater than the tax exemption amount, then an estate tax return must be filled within 9 months of the date of death and any estate taxes owed must be paid at that time Personal representative also has to file the Decedent s final income tax return

29 Distribute the Remainder of the Estate to the Beneficiaries/Heirs

30 Supervised vs. Unsupervised Supervised Court intervention and required approval of all activity and actions taken by the Personal Representative during the administration of an estate. Unsupervised Administration of an estate without court intervention or approval for any actions or activity.

31 Dependent vs. Independent Administration Dependent Administration- Another name for Supervised Administration. Personal Representative must get Court approval before each and every action. Independent Administration- No court approval required.

32 Uncontested vs. Contested Uncontested- When the decedent left a will and everyone (beneficiaries/ heirs/and PR) gets along and is in agreement about what needs to happen, who is going to do what, and what each will receive from the decedent s estate. -- No One is Contesting What the Will Says.

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34 Contested Decedent left a will, but someone is not happy and is letting everyone know about it though the court system.

35 Possible Reasons for Contest Not happy about who was named the personal representative Not happy about what they, or someone else, received or maybe decedent completely cut them out of receiving anything Claim that someone had undue influence over the person when they executed the will or that the person lacked mental capacity to execute the will

36 Bid Process Try to Avoid with Independent Administration of Estates Act Allows the Executor to Sell the Property without Court supervision Look for Specific Language in the Will that states the Executor has the power to sell without giving notice Still have to file a Notice of Proposed Action with the Court

37 Addendum to Offer Add this language to your purchase offer, as an addendum, to avoid court supervision: Executor will sell Subject Property to Buyer under the Independent Administration of Estates Act without Court supervision. The sale will be without notice and the beneficiaries will instruct the estate s attorney to file a Notice of Proposed Action with the Probate Court as soon as all contingencies are approved.

38 Difference in Probate & Non-probate Assets

39 Non-probate Assets These are assets that are not considered part of the probate estate but are considered part of decedent s estate for income and estate tax purposes. Non-probate Assets will not pass under the provisions of the Will or probate administration because they pass directly to the beneficiary named on that account or contract.

40 Non-probate Assets a. Joint Tenancy with Right of Survivorship (vs. Tenants In Common) b. Pay-on-Death Provisions c. Contractual Arrangements with Beneficiary Designation d. Trusts

41 Examples i. Real property held as joint tenants with right of survivorship ii. iii. iv. Bank accounts held as joint tenants with right of survivorship, or pay on death accounts Stocks and bonds held as joint tenancy with right of survivorship or pay on death provisions Insurance policies with named beneficiary v. Trust accounts with named beneficiary

42 Key Players

43 Key Players a. Personal Representative (Executor/ Administrator) b. Heirs (Beneficiaries / Devisees) c. Probate Attorney d. Probate Records Clerk and Probate Court Always be prepared and be professional when dealing with all of these People.

44 Diagram of Probate Process Documents Filed File Petition for Probate 4 to 6 weeks -> Actions Taken Publish Notice of Petition to Administer Estate at least 10 days prior to hearing Mail Notice to persons entitled to receive notice at least 10 days prior to hearing File Bond (if required); Submit Letters and Order for Probate to court Documents Filed Hearing date on Petition for Probate (Letters issued) Three months minimum, up to one year (or 15 months if 706 is required) - > Actions Taken Prepare Inventory and Appraisal; file with court Give notice to known creditors; accept or reject creditors claims Pay debts; file tax returns (IRS Form 706 due 9 months after date of death); sell property if needed to pay debts and expenses Documents Filed File Accounting and Final Petition for Final Distribution 4 to 6 weeks -> Hearing Date Judge signs Judgment of Final Distribution File Declaration for Final Discharge (no hearing required) Actions Taken Mail notice to interested persons at least 10 days prior to hearing Distribute assets, record Judgment (if real property); file Receipts on Distribution; file final income tax returns if required

45 Finding Probate Notices

46 Finding the Notices a. Contact the County Probate Court or Clerk s Office and ask where the probate notices are published b. Contact a local Probate Attorney s office c. Contact the Local Newspaper You can contact by phone or use an Online search d. Usually in the Legal section of the classifieds

47 Online Search

48 Reading the Notices Key Words to Look For in the Notice: Notice to Creditors Citation by Publication Letters Testamentary Letters of Administration

49 Real Property Search

50 Real Property Search A. Online Search B. Physical Search at Tax Appraisal Office C. Reviewing Information

51 Online Search a. Google Search for Your Local County Tax Appraisal District or Tax Assessor s website b.

52 Reviewing Information a. How to Search b. Finding the Important Information

53 Probate Worksheet Practice Run on the Worksheet from the Information Found in Notice and Appraisal records

54 Probate File Search

55 Researching Probate Files 1. Locate Clerk s Office & Determine if Online Search is Available 2. General Ways to Search 1. Case File Number (Cause Number, Docket Number) 2. File Index / Registry

56 Remember to Always Be Professional and Courteous at the Clerk s Office They are the Gate Keepers of the Files

57 Online Search Sample Search of Travis County Probate Clerk

58 Understanding the Probate File A. Application for Probate B. Application for Determination of Heirship C. Death Certificate D. The Will E. The Order F. Oath G. The Inventory

59 Application for Probate May also be called the Petition for Probate Used when Decedent left a Will Usually will state whether seeking an Independent Administration or a Dependent Administration

60 Sample: Estate of Clark Austin Chronicle Notice to Creditors TCAD Search List TCAD possible matches Pull the Probate File: Online or In Person

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62 Estate of Clark Application to Probate Will Verify Name and Case Number match what you found in Notice Verify the type of probate Independent or Dependent Applicant usually the one being appointed PR but check the Application and the Order

63 Estate of Clark Application (Cont.) Applicant s Name and Address (write this down) Decedent s date of death Age at death Decedent s domicile, (verify that Tax Appraisal Information is correct) General information about what was owned Date of will

64 Death Certificate Name Date of death Residence Marital Status Place of Death Informant s Name and Relationship Informant s Mailing Address

65 Last Will and Testament Name Identity of Family Payment of Expenses Disposition of Estate Definition of Survival Appointment of Executor Powers of Executor

66 The Order Court order appointing the personal representative and admitting the will to probate. The court then issues Letters Testamentary, an official document that the personal representative must show third parties: banks, brokerage firms, title companies, etc., to show that he or she has the legal authority to deal with the estate.

67 The Order (cont.) Always read through the Order to make sure that the person you have as the PR was truly appointed as the PR Also look for the PR s authority level, and the courts involvement appointed Independent Executor

68 Oath Document the personal representative signs at the probate hearing, swearing that he or she will perform all of the duties as the executor or administrator of the estate.

69 Sample: Estate of Burnham Application for Probate of Will Investors must love this attorney Happy Dance! Key Points Last Will and Testament Very Specific Bequests

70 Application For Determination of Heirship Used when Decedent did not have a Will No Will -- passes by state law of descent and distribution (See Texas Descent & Distribution Charts) Court has to determine who are the heirs

71 Sample: Estate of Downing Austin Chronicle Citation by Publication Cause Number Names of Alleged Heirs Application for Determination of Heirship and Letters of Independent Administration TCAD Search Pull the Probate File: Online or In Person

72 Application to Determine Heirship Applicants, alleged heirs, and their addresses Unmarried at time of death Items owned Divorced, Never had children Heirs, relationship, address, and interest in estate Requesting that Susan L. Downing be appointed the Independent Administrator, gives her address

73 Sample: Estate of Broersma Affidavit of Service By Publication Published in Austin Business Journal Application for Determination of Heirship and for Appointment of Independent Administration and Issuance of Letters of Administration

74 Broersma Application Applicant, and address Age and date of death What he owned Died without a Will Divorced, Never had children Heirs, addresses, interest in estate Requesting Independent Administration

75 Broersma Order Court determined who are the heirs of the estate and their percentage interest Granted Letters of Independent Administration to Decedent s brother

76 The Inventory Lists all the probate assets and their values as of the Decedent s date of death Remember, there may also be nonprobate assets that are not listed in the Inventory

77 Sample: Estate of Broersma First page Summary Substantial amount of estate held in real property Some cash in checking and brokerage account Also know that heirs live out of the country

78 Broersma Estate Do you think there is a good chance the heirs in Spain and the Netherlands will not want the condos in Austin, Texas and will want to get rid of them quickly to settle the estate?

79 Sample: Estate of Bennight TCAD Don t assume there is a surviving spouse without reading the Probate Application Application for Determination of Heirship and for Letters of Independent Administration Judgment Declaring Heirship and Authorizing Independent Administration

80 Bennight Applicaton Applicant name, address, and relationship Decedent s date of death and age at death What he owned Never married, no children List of Heirs and addresses

81 Bennight Judgment Court Order Formally appoints the Independent Administrator Formally declares the Heirs of the Estate and defines exactly how much each Heir receives from the Estate

82 Notice for Dependent Administration Description: NOTICE TO CREDITORS NOTICE is hereby given that original Letters of Dependent Administration with Will Annexed for the Estate of Virginia Shields Kirk, Deceased, were issued on December 9, 2008, in Cause No. 89,141, pending in Probate Court No. 1 of Travis County, Texas, to: Wells Fargo Bank Texas, N.A. The notice to the Dependent Administrator may be delivered at the following address: c/o Barnes Lipscomb & Stewart, PLLC Attorneys at Law 2901 Bee Caves Road, Box D Austin, Texas All persons having claims against this Estate which is currently being administered are required to present them within the time and in the manner prescribed by law. Dated the 30th day of December, 2008.

83 Final Note Please read Application carefully, especially if have someone else doing the initial research and filling out the Probate Worksheet Recent Case - Very sensitive but was not noted in Worksheet

84 Making Contact A. Contacting the Personal Representative B. Contacting Attorneys Make a Brief Personal Appearance- Wear Suit and Bring a Business Card C. Address the Person s Concerns and Show How You re the Solution D. Sending Your Letters E. Telephone Calls

85 Contacting the Personal Representative a. Remember -- No Letters/ No Deals b. Online Address and Telephone Information:

86 Contacting Attorneys a. Call ahead do they handle probate, ask for legal secretary s name, attorney s name, and their office hours b. 5 Minute Introduction of My Services appointment or drop in Friday afternoon

87 Contacting Attorneys a. Wear a suit, bring your business card b. Always be courteous and professional, keep your meeting brief and friendly

88 Contacting Attorneys Continued d. Give business card to Secretary and Attorney. e. Be very nice to the legal secretary -- gate keeper to the attorney and often has a lot of contact with the personal representative. a. Most attorney s work on billable hours, so time is money to them. Anything the legal secretary can handle, they do because it benefits the attorney by letting the attorney work on the legal matter the secretary can t do and benefits the client because the legal secretary is billed at a lower rate. b. If you get in good with the legal secretary, he or she can pass your card along to clients asking for those services.

89 Address the Person s Concerns and Show How You re the Solution a. Personal Representative b. Heirs/ Beneficiaries c. Attorney

90 Personal Representative Concern- how to complete their job in the least amount of time, with the least amount of additional work, and avoid disgruntled heirs and beneficiaries

91 Personal Representative (cont.) Solution- You can purchase the property in its current condition so they don t have to worry about the extra time involved to get the property in top condition and the added risk that it will take a long time to sell the property.

92 Heirs / Beneficiaries Concern- how to get what they want out of the estate usually the faster the better, but not always

93 Heirs / Beneficiaries (cont.) Solution- You can purchase the property quickly and cash them out much sooner than if they wait for repairs and the time involved to sell through a realtor. You also put more in their pocket because the longer the probate takes, the more they pay in attorneys fees and cost of maintaining the property.

94 Attorney Concern- worried about fiduciary responsibility to client and avoiding a litigious client; has to know that anyone they are recommending is professional and trustworthy

95 Attorney (cont.) Solution- You are a professional, honest, and trustworthy investor with experience in probate real estate and are there to help the personal representative sell quickly, avoid more holding costs and repair expense.

96 Attorney (cont.) You allow them to settle the estate faster so that the heirs/ beneficiaries and personal representative are happy with everyone involved because they are getting what they want and avoiding the financial risk and frustration of waiting longer.

97 Sending Your Letters Letters to Personal Representative: a. Initial Contact, First Letter b. Second Letter c. Third Letter d. Follow-up

98 Sending Letters (cont.) Letters to Attorney: Marketing Letter with business card Send one to legal secretary also Postcards

99 Sending Letters (cont.) Letters to Heirs : Ultimate Influence All or None Approach

100 Telephone Calls a. Personal Representative b. Heirs c. Attorney