Probate is the court-supervised process of authenticating a last will and testament if the deceased made one. It includes locating and determining the value of the person’s assets, paying their final bills and taxes, and distributing the remainder of the estate to their rightful beneficiaries. Each state has specific laws in place to determine what’s required to probate an estate. These laws are included in the estate’s probate codes, as well as laws for “intestate succession,” when someone dies without a will. In cases where there is no will, probate is still required to pay the decedent’s final bills and distribute their estate. The steps involved are generally very similar, regardless of whether a will exists even though laws governing probate can vary by state. The Estate in a Probate case consists of all of the assets and all of the debts of the person who died – the decedent – that is that the Estate is in the Probate case.
Authenticating the Last Will and Testament
Most states have laws in place that require anyone who is in possession of the deceased’s will to file it with the probate court as soon as is reasonably possible. An application or petition to open probate of the estate is usually done at the same time. Sometimes it’s necessary to file the death certificate as well, along with the will and the petition. Completing and submitting the petition doesn’t have to be a daunting challenge. Many state courts provide forms for this. The hearing gives all concerned an opportunity to object to the will being admitted for probate maybe because it’s not drafted properly or because someone is in possession of a more recent will. Someone might also object to the appointment of the executor nominated in the will to handle the estate. To determine if the submitted will is the real deal, the court relies on witnesses. Many wills include so-called “self-proving affidavits” in which the decedent and witnesses sign an affidavit at the same time the will is signed and witnessed. This is good enough for the court. Lacking this, however, one or more of the will’s witnesses might be required to sign a sworn statement or testify in court that they watched the decedent sign the will and that the will in question is indeed the one they saw signed.
Appointing the Executor or a Personal Representative
The judge will appoint an executor as well, also sometimes called a personal representative or administrator. This individual will oversee the probate process and settle the estate. The appointed executor will receive “letters testamentary” from the court a fancy, legal way of saying they’ll receive documentation allowing them to act and enter into transactions on behalf of the estate. This documentation is sometimes referred to as “letters of authority” or “letters of administration.”
It might be necessary for the executor to post bond before they can accept the letters and act for the estate, although some wills include provisions stating this isn’t necessary. Beneficiaries can elect to unanimously reject the bond requirement in some states,5 but it’s an ironclad rule in others, particularly if the executor ends up being someone other than the individual nominated in the will or if they live out of state.
Locating the Decedent’s Assets
The executor’s first task involves locating and taking possession of all the decedent’s assets so they can protect them during the probate process. This can involve a fair bit of time and sleuthing. Some people own assets they’ve told no one about, even their spouses, and these assets might not be delineated in their wills. In the case of real estate, the executor is not expected to move into the residence or the building and remain there throughout the probate process to protect it. But they must ensure property taxes are paid, insurance is kept current, and any mortgage payments are made to prevent foreclosure so the property isn’t lost. The executor might literally take possession of other assets, however, such as collectibles or even vehicles, placing them in a safe location. They’ll collect all statements and other documentation concerning bank and investment accounts, as well as stocks and bonds.
Determining Date of Death Values
Date of death values for the decedent’s assets must be determined and this is generally accomplished through account statements and appraisals. The court will appoint appraisers in some states, but in others, the executor can choose someone. Many states require that the executor submit a written report to the court, listing everything the decedent owned along with each asset’s value, as well as a notation as to how that value was arrived at.
Identifying and Notifying Creditors
The decedent’s creditors must be identified and notified of the death. Most states require the executor to publish notice of the death in a local newspaper to alert unknown creditors. Creditors typically have a limited period of time after receiving the notice to make claims against the estate for any money owed. The exact time period can vary by state.
Paying the Decedent’s Debts
Valid creditor claims are then paid. The executor will use estate funds to pay all the decedent’s debts and final bills, including those that might have been incurred during the final illness.
Preparing and Filing Tax Returns
The executor will file the decedent’s final personal income tax returns for the year they died. They’ll determine if the estate is liable for any estate taxes, and, if so, file these tax returns as well. Any taxes due are also paid from estate funds. This can sometimes require liquidating assets to raise the money. Estate taxes are usually due within nine months of the decedent’s date of death.
Distributing the Estate
When all these steps have been completed, the executor can petition the court for permission to distribute what is left of the decedent’s assets to the beneficiaries named in the will. This usually requires the court’s permission, which is typically only granted after the executor has submitted a complete accounting of every financial transaction they’ve engaged in throughout the probate process. Some states allow the estate’s beneficiaries to collectively waive this accounting requirement if they’re all in agreement that it’s not necessary. Otherwise, the executor will have to list and explain each and every expense paid and all income earned by the estate. Some states provide forms to make this process a little easier. In other cases and with adult beneficiaries, deeds and other transfer documents must be drawn up and filed with the appropriate state or county officials to finalize the bequests.
An intestate estate is one where the decedent did not leave a valid will either they never made one or the will is not accepted as valid by the probate court due to an error in the document or because an heir successfully contested it. The most significant difference is that in the absence of a will that makes their wishes known, the decedent’s property will pass to the closest relatives in an order determined by state law.
Common Assets That Go Through Probate
If the estate is set up correctly, it may not need to go through probate regardless of what assets are owned. In most cases, this would involve creating a trust that would own all the assets instead of the person. Additionally, assets with a direct beneficiary may not need to go through probate. For instance, a life insurance policy with a named beneficiary would go directly to that person without the need for probate. Certain assets do commonly go through probate. If the deceased person was the sole owner of a piece of property, such as a vehicle or home, that asset would need to be included in probate. Their name would be the only one on the title. Property owned with another person as tenants in common would be included in probate. An example would be if the deceased owned a rental property with a partner. Their share in the property would be probated to determine who would own it in the future.
Items that don’t come with a title may also need to go through probate if they have enough value. This includes furniture, appliances, household items, and personal items. Many times, the combined value of these items won’t be enough to mandate probate, but they would be added to the inventory of probated items if other assets exist that must be included.
There are always exceptions to the rules, and this is the case with probate. There are some uncommon assets that may need to be part of the probate estate. In these situations, you need to know what to do with the assets. A prime example is what would normally be a direct transfer of property, but the beneficiary has died. For instance, a person lists a sibling as the beneficiary of their bank account as payable upon death. That sibling passes away and the account owner didn’t change the listed beneficiary before they died. Because the person listed as beneficiary is no longer living, the bank account will have to be included in probate.
Assets That Don’t Need to Go Through Probate
Many assets don’t need to go through probate because they can be directly transferred to a beneficiary. This means that someone has been listed on the proper documents as the beneficiary for that asset. Some examples include the following:
• Retirement accounts where a beneficiary is listed
• Life insurance
• Pension plans
• US savings bonds with a payable-on-death form
• US savings bonds that are co-owned
• Bank accounts with payable-on-death forms
• Securities that are POD
• Assets in a living trust
• Wages or commissions due to be paid to the deceased
Real estate and other property may also be left out of probate if it meets certain conditions. In some states, real estate owned by the deceased person can go to the person named on the transfer-on-death deed. Property that is held in tenancy with the right of survivorship will automatically go to the second person named on the title. Some states allow for property that is owned as tenants by the entirety with a spouse. This means that the property will go to the spouse if both people owned it. In some states, vehicles and boats can be transferred on death if the proper form was filled out. Other states allow for vehicles to go to immediate family members. Household goods may do the same under certain state laws. One type of asset listed can almost completely remove the need for probate, which is the living trust. If the person placed all their assets in a trust, they transfer them to the beneficiary of the trust after the person’s death. Most people who set up a trust will place the majority of assets in the trust while others may only place certain types of property, such as real estate, in the trust.
How the Value Determines the Need for Probate
Another factor which determines the need for the estate to be probated is the value. Most states offer an option to formal probate for smaller estates. Every state has its own name for this more informal version of probate, but they follow the same principle. If the total value of the estate is below a certain dollar amount, the executor can file for simplified probate or summary probate. No hearing is necessary for this type of probate, but it is limited to a specific dollar amount for the value of the estate. That amount will vary based on the state.
The first step to determine if an estate qualifies is to find out the limits in the state. Then, the executor must list all the assets and their dollar value to submit with the petition to file for summary probate. Creditors are still given time to file a claim against the estate, but it is usually much shorter. Some states allow for an affidavit which would enable the beneficiaries to take ownership of the property. This only works if there are no disputes made against the estate. If the will is contested or other disputes arise, the estate would have to go through the normal probate process.
One important fact to consider is how the value is determined. You may need to get an appraisal for certain assets to know the worth at the time the owner died. However, any assets that don’t need to go through probate, such as those with a listed beneficiary, won’t be included in the value to determine if the estate needs to go through probate.
For example, a person had a home that is titled tenants in common with right of survivorship with their daughter. They also had bank accounts that were payable on death to the daughter. The person also owned a couple of nice cars that totaled $30,000. Only the cars would need to go through probate and their value would be all that is considered to determine if it qualifies for a small estate.
Filing a Will vs. Filing for Probate
There are several instances where you may not need to file a petition for probate with an estate. However, that doesn’t let you off the hook completely. You are still required to file the will with the court if one exists. If you know a will exists and don’t file it with the court when a person dies, you could be liable for damages to any party that would have received something from the estate. This liability can be civil and criminal. If you fail to file probate when it’s required, the assets cannot be legally transferred to the name of the heirs. This can pose quite a problem, especially if the asset is real estate or a business. Probate can be quite confusing from knowing if and when you need to file to handling the tasks that come with a probated estate. If you aren’t sure of the next steps, you can contact a probate attorney who will help you go through the process. Working with legal counsel can alleviate the worries of whether you need to file based on your particular situation and the state where the estate is located.
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It’s not a matter of if, it’s a matter of when. Legal problems come to everyone. Whether it’s your son who gets in a car wreck, your uncle who loses his job and needs to file for bankruptcy, your sister’s brother who’s getting divorced, or a grandparent that passes away without a will -all of us have legal issues and questions that arise. So when you have a law question, call Ascent Law for your free consultation (801) 676-5506. We want to help you!
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Estate Planning And Retirement Benefits