24 Jun I Lost a Parent… What Happens Next?
When a loved one such as a parent passes away, it is a difficult time. Once the funeral is over and the death certificates have been collected, the children are often overwhelmed with the details and wondering—now what? Where/what are their assets? How are they titled? Are there relevant documents involved? The collection and administration of a decedent’s assets is a step-by-step process. Sometimes the process is simple and straightforward, sometimes it’s more complicated. Rarely are two situations exactly the same. These five questions help determine the details of your process.
Question 1. What are the assets?
The first step is to determine the nature and location of assets. Did they own real estate, bank accounts, life insurance, retirement plan accounts? This discovery process can be easy or difficult. Often, a good place to start (assuming your parent did not have a conversation with you about these things prior to his or her death) is the mail. If there is real estate, there will be real estate tax bills. If there are bank accounts or brokerage accounts, there may be monthly or quarterly statements. If there is life insurance there may be annual statements or premiums. If it is close to tax time, a parent’s tax return is a great place for clues about financial or income producing assets.
Essentially, you will be gathering information about their assets from the paperwork in your parent’s life. Once you start to get a handle on the nature and location of the assets, the next step is to determine how those assets are titled.
Question 2. How are the assets titled?
The titling of an asset clues you in on what the next steps will be. An asset can be titled in various ways:
An asset or account can be titled in just one person’s name. A bank account at the county bank titled in the name of Joe Jones is an example of sole ownership. Similarly, if an asset or account is titled in the name of two individuals jointly, but one of the individuals has already died, such as a parcel of real estate titled in the name of Joe and Betty Jones (but Betty died two years ago), then this parcel is also an example of sole ownership. In the case of sole ownership, some form of probate administration is required.
Sole Ownership with a Beneficiary Designation
There may be an asset or account that, on its face, appears to be held solely in the name of the decedent, but upon further digging, it contains a beneficiary designation. An example of this is a bank account in the name of Betty Jones, but with paperwork at the bank, Mary placed a “Payable on Death” or “POD” designation on the account such that, at Mary’s death, it would pass to her daughter, Sally. Similarly, a parcel of real estate can be in a single person’s name but if there is a “beneficiary deed” that has been signed and recorded by the sole owner, this designation prevents the parcel from requiring a probate administration.
An asset can be titled jointly with another person. For example, Joe and Betty Jones. But, there are different kinds of joint ownership. If the joint ownership is “with right of survivorship,” such as between a husband and wife, when one passes, the other becomes the sole owner of the asset. However, if the joint ownership is “as tenants in common” each owner has sole ownership of his or her undivided interest in the parcel. When one of the joint owner’s passes, if there is no beneficiary deed in place as to that joint owner’s undivided interest, we’re back to needing some form of probate administration.
Joint ownership “with right of survivorship” takes precedence over whatever a decedent’s will or another document states about that asset. For example, if Joe passed, the asset goes to the joint owner, Betty—even if his will states that the asset goes to his son Carl.
Beneficiary on an Asset or Account
There are certain assets that routinely require the naming of a beneficiary—such as life insurance or a retirement account.
The beneficiary or beneficiaries listed on the account or policy are the individuals who will receive the asset. The decedent’s will, trust, and any other documents are, generally, not relevant if the account lists a beneficiary.
What’s the difference between a beneficiary on an account and a joint owner?
A joint owner has certain rights to an account or asset during their lifetime. So, if two people are joint owners on an asset, they both have certain rights to that asset when they’re both alive. A beneficiary doesn’t have the right to an asset until the owner’s death. On the other side of the coin, the creditor of a joint owner may be able to reach a joint asset to satisfy his or her claim, but a creditor of a beneficiary of an asset generally has no ability to reach an asset until the beneficiary becomes the owner.
Asset Titled in the Name of a Trust
A trust is a legal arrangement that allows a trustee to hold assets for the benefit of a beneficiary or beneficiaries. A trust is like a basket. The basket has a set of instructions that goes with it called a trust agreement. Transferring assets into a trust is like putting assets in the basket. When a person is alive and has a revocable trust that they are a trustee of, the basket is just part of them. When someone dies who has a trust, the basket becomes its own separate entity. An individual who has created a trust may have either transferred assets into the trust, such as an individual who changes his bank account from Joe Jones to Joe Jones, Trustee of the Joe Jones Trust; or he can designate his trust as beneficiary of an asset or account, such as a piece of real estate titled in the name of Joe Jones but which contains a beneficiary deed naming the trustee of the Joe Jones Trust as beneficiary at his death. If an asset is either titled in the name of decedent’s trust or is payable to decedent’s trust, the trust agreement will control what happens next.
Question 3. Are there relevant documents?
Did Dad have a will? Did Mom have a trust? Does the life insurance policy or retirement plan account that you found contain a beneficiary designation? Did mom or dad have a separate statement which disposes of their personal household items? Tracking down these documents if they exist, is an important step in this process.
Question 4. What actions have to be taken?
We’ve determined what assets there are and how they are titled. We found the relevant documents. Now, all of this information will guide the next steps. If there are sole ownership assets, there will be some form of probate administration, depending on the value of the assets. If there is a will, it will need to be “admitted to probate” in order to control the probate administration. If there is no will, the probate laws in Missouri will control the probate administration. The existence of a will DOES NOT mean there is no probate administration, just that the will controls the probate administration.
If there are assets which contain payable on death (POD) or transfer on death (TOD) designations, or which contain a named beneficiary, the individual or individuals named as beneficiary are responsible for taking steps to collect those assets.
If there are assets titled in or payable to a trust, the trustee (or successor trustee) named in the trust agreement is the person who is responsible for collecting assets and following the instructions in the trust agreement.
Question 5. Do I need a Lawyer?
At any point, while answering these questions or collecting information, you might need the assistance of an attorney. Generally speaking, if there is any form of administration required—whether a probate administration or trust administration, legal assistance is likely required. For example, if there’s an asset that requires probate, trust administration, or another administrative action required to get the asset from the decedent’s name to the ultimate recipient’s name, then a lawyer’s assistance might be necessary to help you through the process. In addition, there are questions like—Who is responsible to pay mom’s bills? How do I deal with creditors? In what time frame do I have to take care of these matters? What tax returns are required for dad or dad’s trust? What does this language in mom’s trust mean? An attorney with experience in estate and trust administration matters can be invaluable to this process.