What Is a Waiver of Probate?
A waiver of probate simply means a formal release signed by the person (or persons) specified in the will and the executor. The purpose of this document is for the executor to be relieved of any liability from the people making the claim against the estate. If the estate is insolvent, the persons making the request are stating that they release the executor so that he or she may distribute the assets directly without going through probate . If the estate is solvent (has the funds to pay all creditors as well as beneficiaries), waivers of probate can be used to clear the executor of responsibility if there are any claims against the estate after the distribution of assets. In other words, the executor can execute a waiver of probate which then allows the transfer of assets to the beneficiaries outside of the formal probate procedure. אןאות if you are certain that there will be no debts left over after the distribution of assets, the need for probate should be considered.
Benefits Associated With Waiving Probate
There are a number of benefits to spouses, children and/or other beneficiaries when probate is waived. The cost of probate is costly in both fees and time. There are various costs involved in administering probate such as Court filing fees, legal fees, accounting fees and personal costs such as postage, printing and photocopying. Costs will vary from state to state so it is wise to check ordinances in your area or your attorney can assist you with cost issues.
Some states do not require probate at all for small estates and some are able to use a small estate affidavit in lieu of probate. Sometimes assets are worth very little but the process of obtaining probate is expensive and time consuming. A will may disinherit a child or some beneficiary and therefore an heir can contest the will. If the deceased had assets in various states, probate will have to be opened in each state and not all states recognize foreign probates so if the decedent resided in one state and died owning real property in another state, a probate may have to be opened in both states. Banks, brokerage firms and insurance companies can be very difficult in working with family members regarding the release of funds without a probate so the payment of these accounts may be delayed until a probate is opened.
Often one spouse dies and the surviving spouse is not the owner of any of the bank accounts, brokerage accounts or certificates of deposit or may only own them as a joint account or a tenant by the entirety. As owner of 100% of the bank account, the beneficiary will receive the interest in the account without the necessity of a probate. In addition, in most states this will prevent creditors and judgement holders from attaching the account. It is common for banks to attempt to charge a fee for preparing the paperwork to transfer the asset however this can easily be overcome with a simple request to speak with the Manager of the bank.
Waiver of Probate and Agreement of Indemnity
When a waiver of probate is obtained, it is common for a party executing the waiver to enter into an agreement of indemnity. An agreement of indemnity in these circumstances is an agreement that, if the executor or trustee later incurs a liability to a beneficiary or creditor in respect of the estate, the waiving party will indemnify the executor or trustee, or reimburse them their loss in respect of the claim.
A waiver of probate only addresses the question of whether a party has the right to deal with the estate assets once it is collected. It does not address whether what the executors have done is correct or not and it does not affect the rights of beneficiaries. Given the potential liability which an executor or trustee faces for distributing or transferring assets to the wrong party, having an agreement of indemnity from another party who has the right to receive the asset, should be required to mitigate the risk that the executor or trustee has to undertake.
When Waivers of Probate and Agreements of Indemnity Are Preferable
A Waiver of Probate and Agreement of Indemnity is generally used when the estate is small and the will is clear. A ‘small estate’ is one where the assets value is likely to be low enough that the court costs and any surety bond premiums required for the personal representative would exceed the value of the estate. We suggest a combined estate of $75,000.00 or less, with the most common size being $35,000.00 and the lowest being $0.00. However, since the minimum filing fee with the court is $10, even an estate with $0.00 of assets is subject to the $10 filing fee. The most common example we see is a parent leaves their 2005 Ford vehicle worth $1,000 to their child. The Court would cost $225.00 ($174 filing fee plus $51.00 recording fee x 3 for the petition, Order Admitting Will to Probated and Letters of Personal Representative) but the value of the estate is only $1,000. If probate wasn’t required, the surviving child would just have to pay $3 recording fees to transfer the title of the vehicle ($1.50 each for 2 titles and $1.50 to record the deed) to their name and there would be no court or surety costs.
You may also find a Waiver of Probate and Agreement of Indemnity is appropriate where relations between the beneficiaries are so good that you wouldn’t expect anyone would challenge the Will.
How to Prepare a Waiver of Probate and Agreement of Indemnity
The most important part of the Waiver of Probate and Agreement of Indemnity, whether you are using it to obtain an elective share, to obtain a specific bequest or other property, is that it be drafted in accordance with the laws of the State of New York. The problem with this is that most Waivers of Probate and Agreements of Indemnity are drafted either by internet forms (the so-called "do-it-yourself" forms), or by some attorney who does not practice in the State of New York and sometimes is not even a New York attorney.
Even when the document is stamped with the word "Notarized," it does not mean it has been notarized in New York. It could rather have been a document notarized in another state and "notarized" in New York by way of the Single Certificate under the Uniform Recognition of Valid U.S. Orders Act.
The issue with Waiver of Probate and Agreement of Indemnity is that an improperly written one could invalidate the rights of the surviving spouse, whether she is obtaining elective share or any other property that belongs to her .
The Waiver of Probate and Agreement of Indemnity can also result in the imposition of "caveat" rights by the other residuary beneficiaries or heirs at law. A violation of the rights of the other creditors (if there are any) under Surrogate’s Court Procedure law section 1418 can result in litigation in which all parties can be prevented from receiving what has been properly assigned to them.
There are certain requirements under Surrogate’s Court Procedure law section 5-1.1-A that Waivers of Probate and Agreements of Indemnity must have in order to comply with the laws of the State of New York. An attorney who specializes in probate matters in New York can be of great help to you in drafting an uncontested Waiver of Probate and Agreement of Indemnity so that everyone knows their rights and the rights of the estate are preserved.
Legal Considerations and Potential Obstacles
In terms of legal considerations, there are some potential pitfalls that you should be aware of when dealing with a waiver of probate and an agreement of indemnity. In most cases, these documents work seamlessly to ensure that whichever of the personal representatives is the predominant one to deal with the estate will be responsible for the payment of fees and the undertaking to the revenue will be binding on the other personal representative. There can be issues, however, especially in unexpected cases. One such example could be where the deciding personal representative has a change of mind or problems with their cash flow which results in them declining to act. This can happen even after the waiver of probate and agreement of indemnity has been in place otherwise all tax planning will be consistent with the aggrieved agreement and there may be no way to unwind everything you have done subsequently. You may also find that circumstances demand a change to the people that would ordinarily be personal representatives for example where one of the personal representatives has set up home with seriously dysfunctional heirs and it becomes clear that if they remain as personal representatives their actions may not be in the estate’s best interest. In this case, the tax office would become involved and potential liability pushed onto the personal representatives who should have been advising on tax matters even though the personal representatives were never actually employed by the estate. Another unforeseen consequence could be one where it later transpires that employment status was not disclosed to the revenue but would have made a difference had it been. Trusts may be treated as deemed employment for the purposes of income tax so care must be taken to ensure that all current and ongoing employment income is disclosed to the revenue for the trustees and personal representatives’ benefit.
Conclusion: Understanding Options
In the realm of estate planning and administration, understanding the options available to settle matters efficiently and effectively is of utmost importance. Waiver of probate and agreement of indemnity are two such options that, when properly applied, can help to mitigate time and costs associated with administering an estate .
However, it is equally important for executors, administrators, and the beneficiaries of an estate to make informed decisions that best suit their circumstances. This includes recognizing the advantages and potential limitations of waivers of probate and agreements of indemnity. Consulting with experienced estate planning and trust lawyers can provide invaluable guidance and support in choosing the right path to resolution.