Transferring a decedent's assets under court supervision
|
|
Probate in Nevada Transferring a decedent's assets under court supervision
|
Title and ownership of assets that do not pass by operation of law or contract passes according to a statutory procedure, which may involve affidavits or various levels of court proceedings. These materials are based on Nevada law, but similar principles apply in most states.
1. What is Probate?: "Probate" generally refers to the court proceeding required to formalize the transfer of the assets (1) belonging to a deceased person ("decedent") that do not pass directly by law or under the terms of a contract. If the decedent leaves a will, he or she has died "testate", and the executor nominated in the will is appointed by the court, and the estate passes to the beneficiaries named in the will. A person who dies without a will has died "intestate", and his or her estate will be administered by a court-appointed administrator, and that person's assets pass to his or her heirs, who are those designated under state law to inherit the estate.
2. What Assets Are Subject to Probate? Asset ownership is the key to determining what assets are subject to probate. The assets of a decedent pass at death in one of three ways: (1) by operation of law; (2) under the terms of a contract; or (3) under state probate law. Assets passing by operation of law or under a contract are usually not subject to administration in probate and are usually referred to as "nonprobate assets". As a general rule, nonprobate assets are not affected by a will. The "probate estate" consists of assets that do not pass by operation of law or by contract, and, as mentioned above, the probate estate passes to will beneficiaries or to heirs, depending on whether or not the decedent left a valid will.
3. What Does A Nevada Probate Involve? Nevada's probate law has different requirements based on the value of the probate estate.
a. Affidavit of Entitlement. If the probate estate is valued at $20,000 or less and does not include any interest in real property (including a mortgage, lien, or trust deed), the assets can be claimed by an affidavit, and a court proceeding is not required. Under the statute (NRS 146.080), the claimant must be entitled to the assets by intestate succession or under the decedent's will. An affidavit is not valid until 40 days have elapsed since the decedent's death, and it does not work if there is a probate proceeding in any other jurisdiction. Filing a false affidavit is a felony in Nevada.
b. Setting Aside Assets without Administration. If the probate estate is valued at $75,000 or less, the assets can be set aside without administration by court order. In determining the value of the estate, liens and encumbrances are deducted, so that an estate consisting solely of a $150,000 home with an $80,000 mortgage would qualify for this procedure. This requires the filing of a petition and a court hearing, but a personal representative (executor or administrator) is not appointed and a formal probate proceeding is not required. If there is a spouse or one or more minor children, the court has the discretion to disregard creditors and will provisions.
c. Summary Administration. An estate of $200,000 or less can qualify for Nevada's "summary administration". This is a formal probate procedure where the notice of the hearing on the initial petition need not be published, the creditors' claim period is shortened from 90 to 60 days, and the requirement confirm sales of personal property (but not real property) is eliminated. If assets are subsequently shown to exceed $200,000, then the personal representative is under an obligation to petition the court for revocation of the summary administration. (2)
d. Regular Administration. For estates over $75,000, a regular probate administration procedure is the usual course of action. The process is outlined as follows (with optional items marked with an asterisk):
4. Legal Fees and Other Expenses. In Nevada, legal fees are set by agreement and not by statute (5), and a fee arrangement should be agreed upon before legal work is commenced. You are entitled to a written fee agreement. In addition to the legal fees, clients are billed for out-of-pocket costs, such as filing fees (6), fax charges, overnight mail and courier charges, certified copies, long-distance telephone charges, fiduciary bond premiums, recording fees, appraisal fees, publication charges, service-of-process fees, etc.
5. Other Considerations. A court-appointed personal representative is expected to comply with all applicable federal and state tax laws, as well as the state laws relating to probate. The tax laws often apply to more than just the probate estate.
a. Estate and Inheritance Taxes. For example, a decedent's "taxable estate" under federal estate tax law includes all assets in which the decedent had an interest at the time of his or her death, whether classified as nonprobate assets (i.e., assets that pass by operation of law or under a contract) or as part of the probate estate. For taxable estates that exceed the "applicable exclusion" for estate tax purposes (7), a federal estate tax return must be filed, even if deductions will reduce the tax to zero. Although Nevada has no "inheritance tax", it is entitled to that portion of the federal tax that is allowed as a credit under federal tax law. Because of that, a copy of the federal estate tax return must be filed with the Nevada Department of Taxation. If the decedent's taxable estate includes assets located in one or more other states, each such state's inheritance tax laws must be followed.
b. Income Tax. A court-appointed personal representative has a duty to pay all income taxes owed by the decedent and by the decedent's probate estate. The primary responsibility for paying taxes related to nonprobate assets belongs to those persons who receive those assets, but the personal representative should make sure that all income is properly reported.
6. Conclusion. "Probate" is the process of transferring a decedent's "probate estate" to those entitled to that estate under state law. Under Nevada law, for probate estates having a net value in excess of $20,000, a court proceeding is required, and for probate estates having a value in excess of $75,000, the appointment of a personal representative and a formal probate proceeding are required. The duties of a personal representative and the process involved during the probate proceeding will depend on the nature and value of the assets and liabilities, the existence or nonexistence of a will, the cooperation (or lack thereof) of the heirs or will beneficiaries, and applicable tax law. Because of that, each probate proceeding is unique. If you engage us to assist you, our job will be to educate and to assist you through the process.
Previous Article: "Who Will Get My Property at My Death?".
Next Article: "Estate Planning Goals and Tools".
1. From a legal perspective, "assets", "property", and "estate" are synonyms.
2. The Nevada legislature attempted to simplify the conversion of a summary administration into a standard administration, but NRS 145.110 states that the estate administration may continue "upon providing such portions of the regular proceedings and notices as were dispensed with by the order for summary administration." Since those requirements that are dispensed with under summary administration include giving a published notice of the initial probate hearing, it is unclear how such notice could be given without starting the probate proceeding over from the beginning. It can be inferred from the permissive wording of the statute, however, that the court would not normally require commencing the proceeding from the start.
3. A "personal representative" is the person appointed by the court to administer the estate and can be an executor (if there is a will) or an administrator (if there is no will).
4. The Nevada legislature has indicated a desire to have all probate cases closed within six months. Unfortunately, if federal estate taxes are involved, the IRS has at least 18 months from the date of the decedent's death or nine months from the filing of the federal estate tax return (IRS form 709) to evaluate the estate tax return. For that reason, where an estate tax return is required, it is common for the estate to be open for at least 18 months or even longer.
5. As a general rule, The Rushforth Firm, Ltd. charges "by the hour" rather than a percentage fee, but some firms (and some clients) prefer a percentage fee.
6. At the time this memo was prepared, the filing fee for probate cases in Clark County, Nevada was $146, plus $30 for each additional co-petitioner after the first. [See http://www.co.clark.nv.us/CLERK/Clerk_Fees.htm for current filing fees.]
7. Internal Revenue Code § 2010(c) provides for an "applicable exclusion", which is the cumulative amount that can pass free of gift and/or estate tax. This is sometimes called "the exemption equivalent of the Unified Credit". Some past, present, and future values of the applicable exclusion are: $625,000 in 1998; $650,000 in 1999; $675,000 in 2000 and 2001; $1,000,000 in 2002 and 2003; $1,500,000 in 2004 and 2005; $2,000,000 in 2006, 2007, and 2008; $3,500,000 in 2009; unlimiated in 2010; and $1,000,000 in 2011 and beyond.
Email address:
comments@rushforth.net
Your comments and suggestions will be greatly appreciated.