August 13, 2014 § 1 Comment
If one is to follow the statutory scheme as it currently stands in estate matters, here is what one would do after opening an estate:
- Unless waived by the court, warrants of appraisal issue under seal of the court “commanding three or more discreet persons not related to the deceased or interested in the estate” to make inventory and appraisal. Any three or more of the appointees may act. The warrant commands the appraisers to set aside the exempt property and one year’s support “and tuition” for those eligible (MCA 91-7-109 and -111).
- The form of the warrant is provided in MCA 91-7-113.
- The appraisers must report to the court the personal property that is exempt, and “set it apart” to the widow and/or children of the decedent. The court may allow or disallow all or part of the report, with instructions to the appraisers (MCA 91-7-117 and -137).
- Defaulting appraisers may be fined.
- MCA 91-7-93 requires executors and administrators, within 90 days of appointment, to inventory the money of and debts due to the decedent.
I could actually go on, but let me stop here and ask: Who has ever heard of an estate being administered in that fashion in any of our lifetimes?
Most attorneys ask to waive appraisement and work with the fiduciary to arrive at an inventory for the court to approve.
The problem is that, other than the cumbersome 3-headed appraisal procedure stated above, there is no clearcut procedure to determine the exempt property that passes outside the estate. Yes, I said outside the estate. That’s because MCA 91-7-117 specifically states that title of the widow and children to the exempt property vests in them by operation of law upon death of the decedent. DeBaum v. Hulett Undertaking Co., 169 Miss. 488, 153 So. 513, 515 (1934).
I think that Title 91, Chapter 7, needs to be rewritten — NOT to import some exotic provisions from other states that would drastically change our Mississippi probate practice — but rather to eliminate some of these archaic, unused, impractical provisions that clutter and confuse our code, and replace them with simple, clear, direct statements that reflect how lawyers and judges actually do business in these matters.
These points at a minimum need to be addressed:
- The code needs to charge the fiduciary with the responsibility to identify and report to the court the exempt property, and to obtain the court’s ruling as soon as possible after opening the estate.
- The 3-appraiser procedure needs to be abolished. When it was adopted in 1848, I am sure it was quite nifty. Today, it would cost a fortune to hire three disinterested persons to investigate the belongings of an individual, determine values, and report to the court not only the items and their values, but determine what is exempt and recommend a year’s support.
A previous post dealing with exempt property and estates is at the link.
July 5, 2011 § 6 Comments
- Before you file the pleadings, ask yourself whether it is necessary to open an estate in this case.
- And here’s some more info on how to pass assets without an estate.
- Exempt property is not a part of the estate. Here’s a guide to what is exempt and what is not.
- The original will must be probated and retained by the clerk.
- Bonds in testate and intestate estates.
- Probating a will in common form.
- How to probate a copy or a lost will.
- Administering an intestate estate.
- Determining the heirs in an intestate estate.
- When can inventory and appraisement be waived?
- Oops, you filed that estate in the wrong county. Here’s why it can not be transferred.
- What happens when a testator leaves a bequest that can not be satisfied? It’s called ademption.
- And here’s how to handle lapsed legacies.
- Can you set aside an inter vivos gift between spouses? Here’s the rule.
- Contesting probated claims.
- Will contests: Undue Influence.
- Will contests: Lack of testamentary capacity.
- Five tips to improve your probate practice.
- A few random estate matters.
- What you need to know before trying to sell real property in an estate.
- Navigating your way through an insolvent estate.
- You need to know how to deal with this wrinkle in publishing process to close an estate.
- Waiving accounting.
- A checklist for an accounting.
- Reading the duties of an attorney in a probate matter might give you second thoughts about taking that case.
- Sure, you want to get paid. Here’s what you need to prove to get an award of an attorney’s fee in a probate matter.
- A checklist for closing an estate.
- Handling estate matters in District 12, Place 2.
December 3, 2010 § 5 Comments
You are representing the executrix who is one of three siblings who are the legatees of the decedent. They have come to you because their dad’s only asset of any real value, other than his furniture and an old car, was a life insurance policy with a face value of $50,000 that he had made payable to his executor for the estate, and the estate needs to be probated to receive the insurance proceeds.
The catch is that the creditors have claims that exceed the proceeds of the life insurance policy: $17,000 to various credit cards; $8,000 to a loan company; and $36,000 to doctors and hospitals for the final illness. Pretty bleak.
The furniture and car are exempt property, as we know. Is there anything else you can do?
Look at MCA § 85-3-13. Here’s what it says:
The proceeds of a life insurance policy not exceeding Fifty Thousand Dollars ($50,000.00) payable to the executor, or administrator, of the insured, shall inure to the heirs or legatees, freed from all liability for the debts of the decedent, except premiums paid on the policy by any one other than the insured, for debts due for expenses of last illness and for burial; but if the life of the deceased be otherwise insured for the benefit of his heirs or legatees at the time of his death, and they shall collect the same, the sum collected shall be deducted from the Fifty Thousand Dollars ($50,000.00) and the excess of the latter only shall be exempt. No fee shall be paid or allowed by the court to the executor or administrator for handling same.
Under this section, the first $50,000 in life insurance proceeds is exempt from the claims of creditors, although that amount would be reduced by the amount of any other life insurance proceeds that the legatees receive from policies on the decedent’s life. The only exceptions to the exemption would be: Any claim made for payment of life insurance premiums made on the policy by someone other than the insured; and any claims for the burial and administrator’s or executor’s attorney’s fees for administering the estate, since those are not debts of the decedent, but rather are debts of his estate. Dobbs v. Chandler, 36 So. 388 (Miss. 1904). But attorney’s fees incurred in recovering insurance proceeds are not an administrative expense chargeable against the proceeds. Abernethy v. Savage, 132 So. 553, 554 (Miss. 1931).
The exemption is not limited to the spouse and children, but inures to the benefit of the heirs or legatees, and must be liberally construed in their favor. Coates v. Worthy, 17 So. 606; on suggestion of error, 18 So. 916 (Miss. 1895).
The exempt proceeds are divided among the heirs or legatees on a pro rata basis. Magee v. Bank of Hattiesburg & Trust Co., 98 So. 541 (Miss. 1923).
The insurance proceeds must be payable to the executor or administrator of the estate. In Rice v. Smith, 16 So. 417 (Miss. 1894), the court found the proceeds not to be exempt where the insured had named himself, his executors, administrators and assigns as beneficiaries. Held that the decedent himself was the true beneficiary, and that his administrator held the proceeds just as if the decedent himself had held them. This is a curious result, since it seems to presuppose that one may somehow collect one’s own life insurance proceeds. But the significance of this case is that the statute requires the beneficiary to be the executor or administrator.
Caveat: MCA § 85-3-11 disallows the exemption where the decedent can be proven to have used life insurance to defraud creditors.
Note: The cases cited are ancient, but I believe them to be good law and I found no negative history.
October 28, 2010 § 14 Comments
You’re handling an estate of a decedent whose spouse predeceased him. The decedent was a man of modest means with a two-bedroom home in town, some furniture and appliances, an older car, some savings and $6,000 in a 401(k) account. There’s not enough cash to pay all the creditors’ claims. The surviving children and grandchildren want you to close the estate as soon as possible. Do you advise them to sell the furniture at an estate sale to muster up enough cash to satisfy the creditors? Or should you get court approval to sell the house, pay the debts, and distribute what’s left?
Not so fast. All that property may not even belong in the estate in the first place. It may not be subject to the creditors’ claims at all.
MCA § 91-1-19 provides in part:
The property, real and personal, exempted by law from sale under execution or attachment shall, on the death of the husband or wife owning it, descend to the survivor of them and the children and grandchildren of the decedent, as tenants in common, grandchildren inheriting their deceased parent’s share; and if there be no children or grandchildren of the decedent, to the surviving wife or husband; and if there be no such survivor, to the children and grandchildren of the deceased owner.”
What this language means is that the property that is exempted by Mississippi law from sale under execution or attachment descends automatically, not through any estate, as stated in the statute. You would be shortchanging the statutory survivors considerably by not pursuing the exemptions.
It’s important to know what are the exemptions. MCA § 85-3-1 sets out the personal property and financial assets that are exempt:
(a) Tangible personal property of the following kinds selected by the debtor, not exceeding Ten Thousand Dollars ($10,000.00) in cumulative value:
(i) Household goods, wearing apparel, books, animals or crops;
(ii) Motor vehicles;
(iii) Implements, professional books or tools of the trade;
(iv) Cash on hand;
(v) Professionally prescribed health aids;
(vi) Any items of tangible personal property worth less than Two Hundred Dollars ($200.00) each.
Household goods, as used in this paragraph (a), means clothing, furniture, appliances, one (1) radio and one (1) television, one (1) firearm, one (1) lawnmower, linens, china, crockery, kitchenware, and personal effects (including wedding rings) of the debtor and his dependents; however, works of art, electronic entertainment equipment (except one (1) television and one (1) radio), jewelry (other than wedding rings), and items acquired as antiques are not included within the scope of the term “household goods.” This paragraph (a) shall not apply to distress warrants issued for collection of taxes due the state or to wages described in Section 85-3-4.
(b)(i) The proceeds of insurance on property, real and personal, exempt from execution or attachment, and the proceeds of the sale of such property.
(ii) Income from disability insurance.
(c) All property in this state, real, personal and mixed, for the satisfaction of a judgment or claim in favor of another state or political subdivision of another state for failure to pay that state’s or that political subdivision’s income tax on benefits received from a pension or other retirement plan. As used in this paragraph (c), “pension or other retirement plan” includes:
(i) An annuity, pension, or profit-sharing or stock bonus or similar plan established to provide retirement benefits for an officer or employee of a public or private employer or for a self-employed individual;
(ii) An annuity, pension, or military retirement pay plan or other retirement plan administered by the United States; and
(iii) An individual retirement account.
(d) One (1) mobile home, trailer, manufactured housing, or similar type dwelling owned and occupied as the primary residence by the debtor, not exceeding a value of Thirty Thousand Dollars ($30,000.00); in determining this value, existing encumbrances on the dwelling, including taxes and all other liens, shall first be deducted from the actual value of the dwelling. A debtor is not entitled to the exemption of a mobile home as personal property who claims a homestead exemption under Section 85-3-21, and the exemption shall not apply to collection of delinquent taxes under Sections 27-41-101 through 27-41-109.
(e) Assets held in, or monies payable to the participant or beneficiary from, whether vested or not, (i) a pension, profit-sharing, stock bonus or similar plan or contract established to provide retirement benefits for the participant or beneficiary and qualified under Section 401(a), 403(a), or 403(b) of the Internal Revenue Code (or corresponding provisions of any successor law), including a retirement plan for self-employed individuals qualified under one of such enumerated sections, (ii) an eligible deferred compensation plan described in Section 457(b) of the Internal Revenue Code (or corresponding provisions of any successor law), or (iii) an individual retirement account or an individual retirement annuity within the meaning of Section 408 of the Internal Revenue Code (or corresponding provisions of any successor law), including a simplified employee pension plan.
(f) Monies paid into or, to the extent payments out are applied to tuition or other qualified higher education expenses at eligible educational institutions, as defined in Section 529 of the Internal Revenue Code or corresponding provisions of any successor law, monies paid out of the assets of and the income from any validly existing qualified tuition program authorized under Section 529 of the Internal Revenue Code or corresponding provisions of any successor law, including, but not limited to, the Mississippi Prepaid Affordable College Tuition (MPACT) Program established under Sections 37-155-1 through 37-155-27 and the Mississippi Affordable College Savings (MACS) Program established under Sections 37-155-101 through 37-155-125.
(g) The assets of a health savings account, including any interest accrued thereon, established pursuant to a health savings account program as provided in the Health Savings Accounts Act (Sections 83-62-1 through 83-62-9).
(h) In addition to all other exemptions listed in this section, there shall be an additional exemption of property having a value of Fifty Thousand Dollars ($50,000.00) of whatever type, whether real, personal or mixed, tangible or intangible, including deposits of money, available to any Mississippi resident who is seventy (70) years of age or older.
(i) An amount not to exceed Five Thousand Dollars ($5,000.00) of earned income tax credit proceeds.
(j) An amount not to exceed Five Thousand Dollars ($5,000.00) of federal tax refund proceeds.
(k) An amount not to exceed Five Thousand Dollars ($5,000.00) of state tax refund proceeds.
(l) Nothing in this section shall in any way affect the rights or remedies of the holder or owner of a statutory lien or voluntary security interest.
MCA § 85-3-21 establishes the homestead exemption.
There are other exemptions that are set out in the cross-references to the code sections cited.
MCA § 91-7-117 requires the appraisers to set apart the exempt property.
As attorney for the estate, you have a duty to determine what assets need to be declared exempt and not included in it. In moderate estates it could mean the difference between survivors getting nothing and the survivors getting something.
Now re-read the first paragraph above. Do you see it differently?