Ask a trust officer: Estate Settlement
DEAR TRUST OFFICER:
How long does it take to settle an estate? —PROSPECTIVE TESTATOR
The short answer to your question might be, “It takes much longer to settle an estate than most beneficiaries think is reasonable.” To get to a more helpful and longer answer, we need to answer many more questions first, such as:
~ Is there a will?
~ If so, is there a chance the will could be challenged?
~ Are there complicated assets?
~ Are there hidden assets?
~ Are any assets located out of state?
~ Are the beneficiaries hostile?
~ Must death taxes be paid (typically only larger estates)?
To make this even more complicated, the time and procedures for settling an estate vary from state to state. In the very best case scenario, estate settlement could take six to nine months. Here’s an example of a worse case:
The estate of Prince Rogers Nelson (the artist formerly known as “Prince”) is nowhere near settlement four years after his death in April 2016. He left no will. There were protracted controversies over who qualified as his heir under the Minnesota laws of intestacy (laws that kick in when there is no will). Prince owned very complicated assets (royalty rights). Estate taxes are due, and valuing those royalty rights is very complicated. The estate has been estimated at $200 million, which could mean estate taxes in the $80 million range. Those taxes have to be paid in cash, which is in short supply in the estate.
Three of Prince’s heirs have sued the estate, saying that they have provided services for which they should be compensated. Their impatience at having no sign of their inheritance after four years of waiting is understandable.
However, the heirs need to understand the risks the executor faces. An executor who distributes assets to heirs before satisfying the IRS on estate taxes becomes personally liable for paying those taxes should the estate later run short of funds.
If you are concerned about how your heirs will fare during the probate process, you should definitely have a will. You should also consider employing a living trust, which may be able to provide a continuity of financial support to beneficiaries while the probate process unwinds.
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© 2020 M.A. Co. All rights reserved. (June 2020)