Anthony S. Park

When someone dies, many folks are confused about who owns the house during probate, right after the death. Technically, the heirs own it immediately upon death, subject to debts and taxes of the estate. But, sometimes is not clear who the heirs are. The probate process decides who exactly are the heirs and places an executor in charge to sort out all those debts and taxes.

So, the heirs own the house, but if it is not clear who the heirs are, then you kind of need to wait to see who really owns it. Understandably, this is a bit confusing. We’ll cover common questions on who owns the property during probate.

Yes, multiple heirs can own the house either by will or deed. As you can imagine, having more than one heir inherit the house leads to a lot of problems.

The most common problem is when one heir lives in the house and won’t leave. Or maybe heirs can’t agree on how to manage the property. And, sometimes one heir wants to keep the property and the rest want to sell it. They might even disagree on how to buy each other out.

These conflicts often lead to a probate sale so everyone can take their share and walk away.

Does the executor have the power and authority to sell a house that is in probate? Yes, absolutely. Besides, selling the house is often necessary. Maybe the will instructs the executor to sell the house and divide the proceeds among the heirs. Sometimes the house has to be sold to cover the estate bills/taxes that the bank accounts can’t cover. Or, as mentioned above, the house has to be sold because multiple heirs can’t agree on what to do with the property.

Preferably, all the heirs should agree; that would make life easier! But they don’t necessarily have to agree.

If there is a court-appointed executor, then executor can make the impartial decision (if it’s a professional executor and not a family member). If the executor is a family member or one of the heirs, then the decision isn’t really impartial and there is potential for drama.

If multiple heirs are on the deed, then the house is technically not part of probate. If heirs are in conflict about the deed, then there will be expensive court proceedings to either bring the property back into the estate so the executor can decide, or a judicial partition where a judge decides. By the time these expensive court proceedings are over, there might not be much profit.

Naming multiple heirs on a deed is a variant of what we call the “beneficiary problem.”

We get these questions a lot, so hopefully this helps clear things up for our callers and listeners! To learn more about the ins and outs of probate, check out my book, “How Probate Works,” available on Amazon.

What are the risks of being an executor? An executor has a lot of power and responsibility during probate, but is correspondingly accountable for everything that happens within the estate.

We’ll cover how an executor has risk of even personal liability, how long that risk lasts, and how an executor can protect himself from these risks.

The executor has personal liability for debts, taxes, and anything wrong with the estate. If an executor makes an error, the court’s first reaction is to deny payment of the executor's commission. If the commission is not enough to cover the court-determined error, the executor’s PERSONAL assets (home, bank accounts, etc.) are legally at risk if court rules that the executor screwed up.

When someone chooses an executor and that person accepts the role, it's very possible that neither party is aware of the risks. The risks can be more than the executor forgetting to pay a tax bill and becoming personally liable for it. Some scenarios are a bit more nuanced. For example, the executor sells the real estate, but at the closing a few months later, the heirs dispute the sale price. The heirs might seek the difference in the price from the executor's commission or from him personally. Another example is when the executor fails to pay a “knowable” debt or tax or fails to take the steps to find out if debts exist.

Theoretically, the executor can be liable forever. There are some limits, but practically an aggressive lawsuit can get around those limits

Many states have laws that give creditors 7 months (or similar time limit) to submit verified claims. There is a specific legal procedure to become an official creditor or else the executor is not personally liable for that debt. However, even in absence of a formal claim, the executor can be held to have constructively known about the debt, or even should have known!

The best practice when closing an estate is to ask heirs to sign a receipt and release, which says the heirs accept their check as full and final settlement, and agree not to try to sue the executor later. Theoretically, the release is iron-clad protection for the executor. But practically, the heirs can get around it. An heir could claim that she signed the receipt and release because the executor failed to disclose information, otherwise she wouldn’t have signed it, etc.

The good news is that there are ways to protect yourself if you are an executor.

First, get the tax clearance. Don’t distribute estate funds until the IRS and state have confirmed you’re good to go. Although painfully slow, they have procedures to formally release an executor from personal liability. If you fail to get the tax clearance (or even fail to search for tax that is owed), the taxing authorities have and will slap you with large and completely unexpected tax bills.

Second, when closing an estate, do a full accounting with receipt and releases. The accounting is composed of the books and records of the estate in court-approved format. It provides full disclosure to the heirs and gives heirs/creditors less wiggle room to argue that the executor failed to inform them.

Next, keep a reserve. Hang on to a small percentage of the estate funds to pay those surprise debts or taxes, just in case.

Of course, the reserve will be paid out to the heirs eventually. But, give yourself some time to make extra sure that the estate doesn’t owe any debts or taxes. No matter how good an executor is and even though the estate is closed, things tend to come up down the road. If you have a decent reserve, then you won’t have to hunt down the heirs asking them to pay back the debt. And believe me, the heirs will not return your calls and you’ll be out of luck.

Lastly, you can protect yourself by not being an executor: hire a professional! Even with a good probate lawyer, amateur executors are prone to making poor decisions that leave them open to risk. Why not have an experienced professional making those risk cost-benefit decisions, instead? Even a small mistake could leave an executor open to risks.

For those of you who are considering being executors or for those who are thinking about who to name as your executor, it is useful to know what an executor has to go through. To learn more, check out my book, “How to Hire an Executor.”

A letter of instruction will likely fail for your bitcoin inheritance plan and should have only a marginal role in your plan, if any.

Search for “bitcoin inheritance” and you will probably find lots of people advising you to write a letter of instruction for your heirs. We talked about this and even provided a sample letter of instruction. Now, having spent a bit more time delving into different approaches to bitcoin inheritance, we’re de-emphasizing a letter of instruction.

Note: this applies to self-custodied bitcoin, not held through a third-party.

A letter of instruction is a subcategory the general approach: I'll just educate my heirs! Some folks set up a fairly complicated bitcoin inheritance plan, but assure themselves, “I’ll make sure to educate my (spouse, son, etc.) on self-custody.”

Like any other educational endeavor, you must have an eager and willing student, or it just won’t stick. You can educate them on self-custody as hard as you want, but unless your heir is self-motivated to learn, it probably won’t work well. They may appear to understand in the short term to appease you, but that “knowledge” will leak out of their heads almost immediately. Think back to when you started your Bitcoin journey: if you weren’t that interested and someone started discussing self-custody and hardware wallets, your eyes probably glazed over.

You could blame the lack of self-motivation to learn on the ever-evolving status of bitcoin, but this is not the case. We see it all the time with other legacy assets like art, collectibles, and especially small businesses. Take, for example, a father who spent his life building his profitable small family business to pass on to his children. Sometimes the heirs aren’t interested in running the family store after dad passes. No matter how much that father tries to teach them how to run the business, they just don’t care enough to learn.

You don’t want to rely on your heirs’ knowledge of Bitcoin to make sure it passes properly, because self-custodied bitcoin that doesn’t have a transfer of custody upon your death is basically lost bitcoin.

Even if you are the Shakespeare of letters of instruction, you still won't be able to write a perfect letter to make your heirs understand how to successfully gain custody of your bitcoin. We’ve seen it with even legacy assets: letters of instructions don’t really help.

Why not? Your situation and your assets change over time, and people overestimate their ability to keep these letters up to date. It’s a lot to remember and to actually update your letter every few months.

On the flip side, most heirs (and most humans) are terrible at reading, comprehending, and following instructions. Some people struggle with IKEA furniture instructions... Just imagine how hard it will be to understand a letter of instruction especially after the death of a family member or friend. On top of that, your letter probably won’t be one page long; it will be several pages of difficult things for an amateur to comprehend.

It’s not because your heirs are dumb; it’s the emotional circumstances. We see heirs struggle with even basic assets that they are super familiar with (bank, brokerage accounts, etc.). Self-custody bitcoin would be a HUGE hurdle for a non-bitcoiner to deal with, especially relying only on your letter of instruction.

A letter of instruction is too often a “treasure map” to various seed phrase shards or wallet locations. Turning it into a treasure hunt is a terrible idea. It’s an even more complicated and worse version of a letter of instruction. We’ve seen treasure maps and letters of instruction fail for simple things like the keys to a storage locker or the location of important original documents. What happens if things get moved around or your letter isn’t up to date? It’s a dead end more times than not.

For these reasons, we highly discourage relying on a treasure map for any part of your bitcoin inheritance plan. Of course, you can still have a letter of instruction, but it should not be a featured piece of your estate plan. At a later date, we’ll discuss what should be the features of your bitcoin inheritance plan.

In the meantime, check out my book, “How Probate Works,” available on Amazon. It will help you understand the steps of probate before you further complicate it with Bitcoin.

I do serve as a professional trustee, not just executor, or our Solo Ager clients. We’ll cover why our Solo Ager clients are looking for a professional trustee, why they don’t use banks, and how much it costs to hire a professional trustee.

Why are our Solo Ager clients looking for a professional trustee? The main reason is because of potential disputes between the trustee and the beneficiaries. Unfortunately, this kind of conflict is very common, even more so than between heirs and executors.

A trust creates a much longer relationship: an estate lasts a year, worst case 2-3 years. Even with tax issues and selling the estate assets, there is at least a finite relationship where the heirs can see the finish line. The heirs and executor can probably learn to put up with each other, because they know that there is an end in sight. Whereas, a trust can last decades. It usually deals with the duration of someone’s life.

A trustee usually has to make more discretionary decisions than an executor. Often, trusts are written so that the trustee can decide how and when to distribute money to a beneficiary. For example, a trustee can make a “distribution for the health and education or comfort” of the beneficiary. This can get very awkward if heirs and trustee all know each other (siblings, friends, cousins, etc.), and the heirs have to prove to the trustee why they need the money. The heirs may not want to disclose certain health or financial issues to a trustee who is close with them. Even discussing the heirs’ standard of living means that the trustee will know what the heirs spend their money on. There could be a lot of details that you wouldn’t share with your family or friends otherwise. This is why having a professional trustee could make the situation easier.

With an estate, the heirs are the people named in the will or the intestate heirs named by law if there is no will. A trust has multiple layers of beneficiaries. There are beneficiaries of the income of the trust and also beneficiaries who receive whatever is left when the trust maker dies. Those are very different incentives: the income beneficiaries want as much income generated and paid out to them as possible, whereas the beneficiaries at the end do not want the trust money to be spent or distributed so that they can still receive some. This can be a difficult balance even for professional trustees, so imagine how dicey it would be for a trustee who has a relationship with the heirs.

Why not name a bank, trust company or other fiduciary company as trustee? Some of our Solo Agers have shared their experiences with us, and they tell us it often doesn’t work well because of minimums or bureaucracy.

Many of these institutions have minimum trust size requirements to qualify, or else they will just reject you. Surprisingly, these minimums can be quite high, because they only want to deal with people who have a lot of money. Even if your trust meets the minimum right now, make sure you have a sufficient amount to qualify by the time you actually need the bank to act as your trustee. For example, the bank’s minimum requirements might increase at a rate that outpaces the growth of your trust assets. If that happens, your trust may no longer be eligible and your trust won’t have a trustee anymore. Another example is when you need to use the trust money during your lifetime to pay the income beneficiaries or medical bills. Taking too much money out of the trust could also disqualify you from using the bank as your trustee.

What about the bureaucracy? We’ve heard from many folks that it is a frustrating and lengthy process just to get approved by the bank. This doesn’t necessarily relate to the minimum requirement; it just takes so long to get your application approved. You’d think it would be the other way around: a person entrusting an institution with their life savings should be vetting the banks! It feels more like asking the bank for a loan rather than asking them to be your fiduciary. On top of that, there is no guarantee you will talk to the same person each time. Whereas with a professional trustee, you know exactly who you hired.

For these two reasons, many clients have reported that they just gave up trying to deal with the financial institutions.

In most cases, there is no cost now, because most trusts are usually revocable or a testamentary trust. So, you won’t need a professional trustee until you pass away. Since no one is doing the job now, there is no cost now.

Once a trustee is needed, the cost for a professional trustee is the same as an amateur. Just as with an executor, the trus...

If you hold bitcoin, 2022 may be the time to make your New Year resolutions to get your Bitcoin estate planning in order.

Everyone approaches crypto differently: Entry level people will probably be on exchanges; more intermediary users may have their own software or hardware wallets. Hardcore bitcoiners probably have hardware wallets, cold storage and maybe even paper wallets – most likely in a multisig structure.

Newer bitcoiners most likely hold their crypto on exchanges (Kraken, Binance, Coinbase, etc.). The most important question is: does your exchange allow beneficiary designations? This means filling out a form which says that, upon your death, your account should go to a certain person. (This is similar to naming a beneficiary on your IRA or life insurance). Some exchanges appear to be slowly adopting beneficiary designations. Having a beneficiary is a great way to make sure that someone knows that you own crypto!

If beneficiary designations are allowed, are yours up to date? Does it reflect your current wishes, or is it still in the name of your girlfriend from ten years ago? This would not make your current spouse very happy; believe me – we've seen it before! No need to leave those emotional messes for your grieving family.

It’s very important to make sure your beneficiary designations are up to date on all accounts, not just your crypto.

Intermediate bitcoiners usually have multiple accounts and hardware wallets/devices. These bitcoiners have self-custody, which means they have more control over their bitcoin than if they were using an exchange.

If you have self-custody, check whether you have a basic letter of instruction. This letter tells your heirs/family that you have cryptocurrency, where the accounts are held, and where any wallets are located. If you have software wallet, let your heirs know the name of the software wallet or app. They might think Kraken is just a video game on your phone! Be sure to continually update your letter of instruction because the wallets you have this year may be different from a year ago.

If you haven’t touched your wallets or nodes in a while (which is totally normal for “cold storage”), there is a chance that those versions and firmware are not up to date. The latest security standards may not be in place. Less savvy heirs/family may be stressed about locating and accessing your bitcoin. It will be much harder for them if they find out they have to run updates before they can proceed.

A lot of hardware wallets rely on batteries. Check in every once in a while, to make sure the batteries are able to power up.

I am not a hardcore user, so bear with me on this one. Advanced bitcoiners may have a multisig recovery and inheritance plan. That means that there is no single key to access their hoard of bitcoin; there are layers of protection. For example, you will need 2 out of 3 keys, etc. in order to access the account.

As discussed above, make sure you have updated versions of everything and that everything still works. Imagine how hard it is for someone new to crypto to wrap their head around “multisig,” “hardware wallet signature,” etc.

Another important thing to do is make sure all of your signers are alive. For example, you have a 2 of 5 multisig. You have at least 3 of the keys, your spouse has one, and your cousin has another. That way, if anything happens to you, your spouse and cousin can put their keys together with yours and be able to access the account. But, is your cousin still alive and able to perform his duties? Is he still a valid keyholder? Does he still have his key, and does it still work? You can’t just check your own keys; you have to check everyone’s, because otherwise it’s pointless.

Multisig is new to me, so I am not sure how to confirm that a multisig actually works. Do you really need to do an annual test with all the keyholders, or do you assume that their keys work if yours do?

It would be a shame to go through the trouble of setting up a multisig and then for some reason it fails upon your death. I would love to hear from someone more technologically advanced to help answer these questions.

If you want to learn more about probate in general, please check out my book, “How Probate Works.” I don’t have a Bitcoin chapter yet, but you will get a sense of how the probate process applies to your Bitcoin situation.