The unexpected loss of a loved one can leave a family not only with a huge emotional loss but also in financial straits. The purpose of the Nevada Probate Code, as found in Title 12 of the Nevada Revised Statutes, is to accomplish the speedy settlement of a decedent’s estates at the least expense to the parties involved. See NRS 132.010.
A major concern of the Probate Code is the continued care of the surviving spouse and minor children. There are several family friendly provisions that allow for: 1) the set-aside of estates to surviving spouses and minor children despite the presence of creditor claims, 2) the vesting of a homestead in the surviving spouse, 3) the vesting of community property in the surviving spouse, 4) family allowances during the pending probate administration, 5) preservation of estate assets through temporary restraining orders, and 6) the recognition of true ownership of estate assets. Each of these topics will be addressed below:
Set-aside of Small Estate (NRS 146.070)
NRS 146.070 provides for the set-aside of small estates where “the gross value of which after deducting any encumbrances does not exceed $100,000” to the surviving spouse and/or minor children. Id. The statute specifically instructs that the estate must not be administered upon, but that the court retains discretion to direct payments of debt that seem just. However, the court is not required to direct payment of any debts and if the court finds it is in the best interest of the spouse and minor children the entire estate may be set-aside for their support and the debts, if any, are discharged.
Although the $100,000 ceiling for the set-aside procedure is not indexed for inflation, during the recent 74th legislative session in 2007 the Nevada State Legislature raise the dollar amount from $75,000 to $100,000.
Probate Homesteads (NRS 146.050 and NRS 115.060)
The main asset of most families is their home. Before today’s market, most of a family’s wealth and equity was locked up in the home. As such, an important part of the probate code is to allow a surviving spouse and minor children to remain in the home despite creditor claims and other charges against a decedent’s estate.
NRS 146.050 provides that if both or either spouse recorded a homestead on their residence during their marriage, then the home vests on the death of either spouse “absolutely in the survivor.” Id. If the property which the parties recorded the homestead on was community property, it is exempt from execution from both the decedent’s creditors and the surviving spouse’s creditors. If the property which the homestead was recorded on was the separate property of the decedent, the property is protected from execution from the decedent’s creditors but not the survivor’s subsequent creditors. See NRS 115.060.
Even if the parties did not select a homestead during the decedent’s life, the probate court can set a homestead aside to the surviving spouse and minor children if “deemed advisable considering the needs and resources of the family and the nature, character and obligations of the estate.” NRS 146.050. However, the homestead cannot extend beyond the life of the surviving spouse or the minority of minor children, whichever is longer. The homestead is specifically exempted from the payment of “any debt or liability exists against the spouses” unless the debt is secured by a mortgage or other lien on the property.” Id.
Set-aside of Community Property (NRS 123.250)
In Nevada, as a community property state, upon the death of one spouse, and in the absence of a premarital or post nuptial agreement to the contrary, the community property vests one-half in the surviving spouse automatically as his or her sole and separate property and one-half in the decedent’s estate subject to the decedent’s testamentary disposition. In the absence of such disposition the decedent’s community property goes to the surviving spouse.
As previously mentioned, if the decedent dies intestate his or her one half of the community property vests solely in the surviving spouse and is not subject to intestate succession as found in NRS chapter 134. NRS 134.010 specifically clarifies that “the provisions of this chapter apply only to the separate property of the decedent.” Id.
In estates where the decedent died leaving only community property or the bulk of the estate as community property, the estate may be set-aside to the surviving spouse without the added expense and time necessary for a full probate administration.
Family Allowance during a Pending Probate Administration (NRS 146.030)
Oftentimes with the loss of a spouse, the surviving spouse’s income is drastically reduced and the access to funds for daily expenses may be restricted due to the probate process. After the filing of the inventory (60 days after the issuance of letters of administration) in the probate proceeding or at anytime thereafter during the pending probate administration, an “interested person” or the court on its own motion may set-aside to the spouse and minor children all personal property of the decedent’s exempt from execution (See NRS 21.090 for statutory exempt property). If this set-aside property is insufficient for the family support the court “shall make such reasonable allowance out of the estate as is necessary for the maintenance of the family according to their circumstances during the progress of the administration …” However, the family support may only be paid for up to one year after the granting of letters of administration. NRS 146.030.
Furthermore, the family allowance paid by the personal representative takes priority over all other charges against the estate, except funeral expenses, expenses of last illness and administrative expenses. NRS 146.040.
NRS 146.040 also provides for the apportionment and allocation of the family allowance to those individuals who are most in need, after taking into consideration other assets available to the various family members.
The family allowance provisions are a specific personal right and not a property right to inheritance, so a showing of specific need is required. Once this need is established, the court retains discretion to allow for the granting of the family allowance, which is generally given to assist in the difficult time of transition during the probate administration.
Preservation of Estate Assets through Temporary Restraining Orders (NRS 155.123)
Routinely, upon the passing of the decent, there is an initial period where an estate may be faced with liquidity issues due to possible will contests, irregularity in granting of letters of administration, transfer of assets outside of probate (i.e. life insurance, POD and TOD account, accounts, Totten trusts, etc.) and other unforeseen circumstances that may cause the estate to be temporarily unable to met its financial obligations as they become due. Such delays may jeopardize certain estate assets (decedent’s home secured by a mortgage, decedent’s business, or investment property). The personal representative has the duty to marshal and safeguard estate assets but occasionally may not have immediate access to liquid assets to keep expenses paid and current, causing a catch 22 situation.
Taking the delinquent mortgage payment as an example; in the shadow of impending foreclosure, or other threat to estate assets, a personal representative may find recourse in NRS 155.123 which provides: “in accordance with the provisions of NRS 33.010 and the Nevada Rules of Civil Procedure, and upon such terms and conditions as the court deems just and appropriate, the court may issue a temporary restraining order or an injunction to preserve and protect assets of the estate or trust.” Id.
In order to merit the granting of a temporary restraining order, the personal representative would be required to show the court that there is some irreparable harm or imminent threat to the estate assets and that the granting of the temporary restraining order or injunction is necessary to avoid such harm or threat.
Such relief, while it is temporary, may provide enough time to solve liquidity issues in an otherwise solvent estate and preserve estate assets for the benefit of a surviving spouse, minor children, heirs or beneficiaries.
Recognition of True Ownership of Estate Assets. (NRS 148.410)
Often a decedent will die holding property that may not belong in his probate estate. One example of this situation is where a decedent creates a revocable trust during his or her life to hold assets for the decedent/trustor’s benefit and to avoid probate upon his or her passing. On occasion the decedent may not properly transfer all assets to the trust or inadvertently remove assets from the trust, (a common occurrence during the refinancing of a home), leaving the specific asset subject to the probate process and frustrating the decedent’s intent.
NRS 148.410 provides that the personal representative or “interested party” may petition the court for the transfer of such property from the decedent’s estate to the legal owner. The petition must state the facts upon which it is based and the names and addresses of each person entitled to notice of the petition. Generally, with sufficient proof of the decedent’s intent, through trust documents, assignments of assets, and or affidavits of the drafting attorney, the relief sought is granted and the probate process avoided, effectuating one of the main purposes of the revocable trust.
The provisions of the Nevada Probate Code mentioned above are a few of the many sections designed to insure for the continued care of a decedent’s family during a pending probate proceeding and beyond.