Probate is the court procedure by which a will is proved to be valid or invalid and a process of winding up your affairs after death. Creditors of the estate are provided the opportunity to file claims against the estate and receive payment of those claims. After the administration fees, taxes and creditor claims are paid, any remaining assets of the estate are distributed to the beneficiaries.
The estate is the total amount of property owned by the decedent at his or her death. Once a person dies, the estate is submitted to the probate court. If there is a will, the probate court will determine if the will is valid and then oversee the administration of the estate by the executor (the person appointed in the will by the decedent to oversee the estate). If there is no will or the will is determined to be invalid, the probate court will appoint an administrator and the decedent's property will be distributed according to the state's laws of inheritance.
Many people associate probate with large costs and even bigger hassles and think that the smart thing to do is to avoid probate. Contrary to this popular belief, the probate of most estates runs smoothly. The court's supervision ensures that your outstanding debts, taxes, and claims against you are paid and that your remaining assets are divided among your heirs. Attorneys experienced in probate law can explain the probate process whether you are planning for the future or involved in probate right now.
When you die with a will, or testate, the court makes it's decisions regarding the winding up of your assets using your will as a guide. When you die without a will, or intestate, the court and the state make those decisions for you.
The court-supervised steps of probate include the following:
- Evaluating and deciding on the validity of your will, if you have one
- Gathering all of your assets, making an inventory of those assets, and appraising the assets. The assets that are included in your estate for purposes of probate are called your probate estate. Assets include solely owned property, as well as your interest in jointly owned property, the value of life insurance policies, trusts, retirement plans, annuities, collections, antiques and other miscellaneous household items, including cars etc. A small probate estate does not necessarily mean that your taxable estate will be as well. Just because an asset is not part of your probate estate does not mean that it is not part of your taxable estate.
- Paying your outstanding expenses, debts, and taxes. These are generally paid in the following order: costs and expenses involved with the administration of your estate, funeral expenses, debts and taxes, followed by all other claims.
- Distributing the remaining assets to the person(s) entitled to them
Probate takes place in the county that was your legal residence at the time of your death. Probate takes place in Probate (or surrogate) Court and is supervised by that court. It is a public process. There is little to no privacy regarding the details of your Will, your outstanding debts and extent of your assets.
Probate When You Have a Will
If you have a valid will, the probate process will likely proceed smoothly. Your will should name the person you want to act as executor of your estate. The executor will have your will declared genuine and valid. The court usually makes this declaration by "admitting the will to probate."
Once admitted to probate, the county clerk records the will. Some states require notice of the probate proceedings be published in the newspaper. All those who believe that they have a claim against the estate must make that claim within a specified period of time. If someone has a reason to believe that the will is not valid, they also must make that claim known to the court within a specified period of time.
The probate court will also appoint the executor of your estate. This appointment gives the executor the authority to handle your accounts. Banks and other institutions will know that your executor has the court's permission to act because the court will provide him/her with "letters of administration" or "letters testamentary."
The executor, having inventoried the assets, must act immediately to preserve and protect them. He/she then reviews the claims against the estate and pays those he/she deems valid and rejects the rest. Rejected claimants have a limited time in which to file a lawsuit against the estate.
The executor may sell real estate at any time after a state specified waiting period. The executor may sell any other property not specifically given to an heir to pay estate debts at any time after his/her appointment, but may not begin the final distribution of property and/or sale proceeds until after the state specified waiting period. Property specifically given to an heir may only be sold to pay estate debts.
Once all the debts, claims, taxes, and expenses have been paid, the executor distributes the remaining property according to the directions in your will. Unless you have specified otherwise, the executor may sell all assets and distribute the proceeds in cash.
The final report of the executor is the last chance for unhappy creditors and beneficiaries under your will to file objections. If objections are filed, a hearing may be necessary to settle the matter. With the court's approval of the final report, the executor's job is finished and your estate has been settled.
Probate When You Do Not Have a Will
Your heirs will not avoid probate just because you do not have a will. Your heirs will still have to have your estate handled through the probate court. Instead of you controlling the distribution of your estate, it will be handled without any input from you.
When you die intestate, the court appoints an administrator who will function in much the same way as an executor would if you had a will. The court appointed administrator is required to post a bond. The cost of the bond will be paid from your estate using any cash available. If there is insufficient cash available, the court will direct the sale of some of your property to cover this cost. Once the administrator is appointed and bond posted, the court will provide him/her with authorization to proceed. Similar to what the executor does if you die testate, the administrator gathers all of your assets, makes an inventory, get independent appraisals where appropriate, pays the taxes, debts, and claims, and then distributes the remainder, if any, to your heirs.
Without a will to spell out who you want to be your heirs, the Administrator must look to your state's laws of intestacy. These laws spell out who gets what. Generally, priority will be given to your spouse and children. Contrary to popular belief most states' intestacy laws do not provide that your spouse automatically gets everything you had. Your young children could receive sizable inheritances. When property passes to a minor through a state's intestacy laws, that child gains complete control over the property at the state's age of legal adulthood.
Probate is a court-supervised winding up of your affairs after death. Whether you die testate or intestate, your estate will go through probate. The probate process consists of three steps: 1) collection, inventory, and appraisal of your probate estate, 2) payment of taxes and creditors, and 3) transfer of the remaining assets to your heirs. While probate does have certain costs associated with it, avoiding probate will not allow you to avoid death-related estate taxes. Moreover, dying intestate can actually increase the costs associated with probating your estate. The advice and assistance of an experienced Wills and Trusts attorney helps you anticipate the requirements of your state's probate laws and create a Will that allows the efficient execution of your wishes after you are gone.