By Merri Rudd, appeared June 29, 2006, Albuquerque Journal, Business Outlook
Reprinted with permission

Editor's note: This column may not be quoted or reproduced in whole or part without express written permission of the author.

Q: I am appointed personal representative in my father's will. I showed the bank the original will and everything. Why won't the bank honor my appointment?

Your question illustrates a common misconception. Naming, nominating, or appointing a personal representative in a will does not automatically give that person the power to act on behalf of the estate. You must ACTIVATE that power.

Activating the appointment of personal representative requires a court probate proceeding. In an informal probate, when the district or probate court receives an application to open a probate case, the court admits the will (if any) to probate and signs an order appointing the personal representative.

After the personal representative is appointed and has submitted an "Acceptance" of the duties of the office, the court issues Letters Testamentary or Letters of Administration. Those Letters give the personal representative the power to conduct business on behalf of the decedent's estate. If you present proper, court-issued Letters to the bank, the bank should then cooperate in settling your father's estate.

Formal probates have a few more requirements, including giving notice to interested persons and holding a hearing before a personal representative is appointed.

Keep in mind that if no probate is necessary for a decedent's estate, the appointment or nomination of the personal representative in a will may be merely honorary.

Q: My mother-in-law has a will wherein she states that 1/3 of her estate goes to her grandsons. She has a separate brokerage account that is a transfer on death (TOD) account, dividing the assets between her son and daughter at her death. Does the will override the TOD account, or is this TOD account separate from whatever is divided under the will? D.K.C.

As prior columns have discussed, assets held in joint tenancy, payment on death (POD) accounts, transfer on death (TOD) accounts, other beneficiary accounts, transfer on death deeds, and trust property pass without a court probate proceeding to the named survivor or beneficiary.

A will does not affect these types of property since they pass "outside" of the will without a court proceeding. The TOD account is considered a non-probate asset. In other words, the TOD beneficiary designation "trumps" the will in your example, assuming that the TOD beneficiaries survive the account owner. Many, many people do not understand this very important point!

One-third of your mother-in-law's "probate estate," if any, would pass to her grandsons upon her death. If all of her assets had beneficiary designations, there would not be a "probate estate."

A creditor might be able to reach the TOD account if the probate assets of your mother-in-law's estate were insufficient to cover her debts or to pay the family and personal property allowances.

© 2006, Merri Rudd & Albuquerque Journal, All Rights Reserved