Probate is about assets. And, irony of ironies, the one person who knows all about them just died.
Pity the poor executor. They don’t understand probate, the decedent kept no records, the beneficiaries are restless, and now they have to hire a lawyer. They make an appointment, eagerly await my questionnaire, and then ignore it until the night before. They finally read it and are appalled to discover I expect a forensic audit, with full support, by 10:00 a.m. the next morning.
I know the executor has 90 days to file a sworn inventory of the decedent’s probate assets. They know their flight leaves Sunday, although they’re a little vague where to return the rental car.
Little wonder the information clients bring me is incomplete, incoherent, and unreliable. And don’t get me started on widows with community assets they won’t disclose, because “it’s nobody’s business.”
I learned to start with the client’s information, and then run my own searches. Eventually I became methodical, but in a monkey-robot sort of way. I’m more efficient than you, I know better, and your input annoys me.
My associate Christina Schuler now handles most administrations. She runs the same searches, but finds more assets. How? She talks to the clients more, and more often. She shares search results at each stage, answers questions, asks her own, and then repeats. Turns out clients disclose more when they understand more. My initial interviews may be Academy Award winning, but good lawyers aren’t made in a day, and, apparently, neither are good clients.
Here’s our current checklist. Sometimes we do more, often we do less, but this is where we start. If you have other suggestions, please, share.
- Read the obituary. The name’s always different than the will. You might need both for the probate application. It’s kind of hard to request information or collect assets when the letters testamentary and account names don’t match. At this stage you don’t know which name is on the money. Both may be.
- Look at the decedent’s homestead taxes and voter registration. Again, we’re looking for name variations. Repeat for the surviving spouse. Does the spouse’s name turn up? Look at the marriage license. You may learn something both scandalous and relevant.
- Send the prospective client Form 1, the Probate Information List, and Letter 1 from the Texas Probate System. This is a comprehensive questionnaire and cover letter to get both client and lawyer started. It asks for all the information and documents needed for probate and an estate tax return.
- During the initial interview—
- Discuss the Probate Information List and return a copy to the client after marking up any additional information required. If a spouse survived, confirm his or her assets were disclosed, too.
- Explain community property to the client. They don’t know why the widow’s car belongs on the decedent’s inventory. Until they do, you’re working against each other.
- Ask about nonprobate assets, beneficiary designations, survivorship agreements, and real estate in other states. The client’s first impulse is to ignore assets that don’t need probate. Explain that the executor is personally liable for decedent’s income taxes, which includes income on assets that skip probate. That motivates them.
- Review the will for assets. Specific bequests often identify particular property.
- Draw a family tree. If the client is unsure, send them to Ancestry.com to work one up on their own time. Ask about probate of relative’s estates. Done right, those files lead to trust interests, real estate, minerals, and more. Done wrong, or not all, our decedent may have an undivided interest in another decedent’s estate.
- Supplement the client’s Probate Information List with a public records search. We use Lexis. It provides vehicle identification numbers, real property, etc. from multiple states and counties. Search on the surviving spouse, too. Community property means both spouse’s assets go on the inventory, not just the decedent’s.
- Check ClaimItTexas.org for lost assets. Repeat for the surviving spouse. Missingmoney.com has a multi-state database, but not all states participate. Don’t search there and think you’ve covered California. You haven’t.
- Read and sort the client’s papers, posting asset information to a spreadsheet. Share the spreadsheet with the client. They’ll realize they forgot something. With every major update, copy the client again, and discuss what you’ve learned, the remaining mysteries, and the new mysteries.
- Tax notices, statements, and other mail keeps on coming when you die. An executor should forward the mail and give the IRS Form 56 Notice of a Fiduciary Relationship.
- Review tax returns for assets. If you don’t know how, read The 1040 Handbook: A Guide to Income and Asset Discovery, Seventh Edition. If the client can’t find tax returns, request copies using IRS Form 4506 Request for Copy of Tax Return. Paid preparers sign tax returns, and a copy will have their contact information. Call them. They may know more about decedent’s assets than anyone alive. Repeat for the surviving spouse.
- Order tax transcripts online. This picks up items the taxpayer may not have reported, as well as refunds and deficiencies. Transcripts are free, and a great supplement to the tax return. Repeat for the surviving spouse.
- Order decedent’s credit report by mail. Order the surviving spouse’ credit report online. Review both for secured debts. Those are assets with a lien.
- Write employers, banks, stockbrokers, insurance companies, etc. for more information. The Texas Probate System has letters tailored for each. Ask about the surviving spouse’ benefits and assets, too. The responses may disclose a burial policy or assets that didn’t generate enough interest to appear on anyone’s radar, e.g., a $12,000 checking account. Also, banks have been known to deliver assets to the wrong person. You don’t know who the right one is without reviewing the bank’s paperwork.
- When a bank or broker responds to one of your letters, you’ll likely find an unpublished phone number for the estate department. Call. They don’t read their own documents, much less yours. Explain what you need, and why, and provide the adult supervision they’re not getting on the job. When you finally get their best answers, update your spreadsheet, copy the client, and discuss.
- Check the tax rolls again for real property, and not just the homestead. You’re looking for rental property, acreage, and vacation homes. If decedent moved in recent years, check the last place they lived. Repeat for the surviving spouse.
- If there are rumors of royalties, but nothing more, search the appraisal district for mineral interests, and for several years back, not just the year of death. When royalties stop, mineral interests are dropped from the tax rolls. Old records can identify a current asset. Family farms may have been sold generations ago, but I bet they kept the minerals. That suggests searching counties where decedent or even decedent’s parents grew up.
- Before you prepare a draft inventory, ask the client what they’ve found in decedent’s mail. They won’t think to volunteer, and you need to ask. Insurance statements may come once a year. If the client got one after the initial interview, you need a copy.
- Before you share an inventory with the client, compare your final draft with the client’s initial Probate Information List responses. Now that you have the big picture, do the client’s responses strike you differently? Did you omit anything the client included? What assets did you discover? Do you understand why the client didn’t list those assets in the beginning? Does the client?
The human factor
Clients will sign anything with a red arrow on it, but their signature does not mean the inventory is accurate or even that they read it. Unless this is your first probate, you will move faster than your client, and it’s easy to get too far ahead of them. Slow down, explain your work, and keep them involved.
Mailing form letters to banks and employers is fun, but silence doesn’t mean there’s nothing, and a response doesn’t mean they told you half what matters. Pick up the phone and call.
It would be nice if decedents left a balance sheet and a cash flow statement, but that’s wishful thinking. The reality is that we have to take their survivors as we find them, and work from there.
What have I missed? If you have suggestions, please, just respond below. I’m interested in your comments.