What is Probate?
Probate is the process of distributing a deceased person’s assets to any beneficiaries, heirs, or creditors.
What Happens to the Deceased Person’s Assets Upon Death?
Upon the deceased person’s passing their assets become part of what is known as their estate. The deceased person may also be referred to as the decedent.
Is a Will Necessary for the Probate Process?
No, probate can take place whether there is a will or not.
How does probate work if there is a will?
A will can be greatly beneficial to ensure that the intentions of an individual’s assets are best distributed according to their wishes. The individual who makes the will is known as the testator. A qualified attorney can be very helpful with estate planning for a testator in order to achieve the most favorable outcome for their heirs and beneficiaries.
The will names the beneficiaries of the estate who are entitled to receive deceased person’s assets. The will usually also names an executor for the estate. The executor is representative of the estate and is responsible for ensuring that the decedent’s assets are properly distributed according to the will. If the named executor is unwilling or unable to carry out the necessary functions of the process, the probate court will appoint an administrator to oversee the distribution of the deceased person’s assets. In most cases this would be a close family member such as an adult child or surviving spouse.
What happens if there is not a will?
A decedent who did not leave a will is considered intestate. In such cases a probate court will determine the rightful heirs to the deceased person’s estate according to state law. The probate court will also appoint an administrator to oversee the distribution of the decedent’s assets, again this would most likely be a close family member
The executor or administrator is entitled to a fee for their services, which is usually a small percentage of the estate’s value. The amount may be specified in the will or could also be determined by a state law
The Role of the Executor or Administrator
Affirming the Will
The executor or appointed administrator, either of whom can be considered the representative of the estate, presents the testator’s death certificate to the probate court and presents the will to the probate court to have it affirmed. The court needs to determine the will’s validity by determining that the testator was of sound mind and that the will was properly witnessed, signed, and that there are no other wills drawn by the testator that would present a conflict with the will being presented for probate.
Locating Beneficiaries and Creditors
The estate’s representative is also responsible for locating and contacting the beneficiaries named in the will to inform them of the decedent’s passing. The representative is also required to locate any creditors of the deceased individual.
To determine the assets of the estate, the representative needs to locate any bank accounts, stocks and bonds, retirement accounts, or other financial assets that were owned by the decedent. As a legally appointed representative, the executor or administrator is granted access to these accounts for the purpose of distributing them to the beneficiaries, heirs, and creditors of the deceased person. The representative also needs to locate and list the value of any real estate or personal properties that belonged to the decedent. In some cases, this may involve a title search for the deceased person’s financial assets as well as appraisals of their real estate, automobiles, jewelry, heirlooms, or any other items of value.
Determining Debts and Liabilities
The representative will need to contact any known creditors of the decedent so that they can claim their debts from the estate. They may include, but are not limited to, holders of mortgages or leases; car loans; student loans; credit cards as well, as any utility companies or service providers. Along with informing the known creditors of the decedent, the estate representative must also publish public notice of the decedent’s passing. This is often published in a local newspaper. This is so that any creditors unknown to the representative have an opportunity to make a claim against the estate. There is generally a one-year statute of limitations in which a creditor not directly notified by the executor can make a claim against the estate
Distribution of the Estate
Debts Owed to Creditors
Once the assets and liabilities of the estate are determined, the executor or administrator is required to first pay off the estate’s creditors. The representative must file a final tax return for the deceased individual and possibly a tax return for the previous year if one had not been filed. Any taxes owed by the estate must be paid to the federal or state authorities before any other entity. If necessary, the representative has the authority to sell or liquidate any of the decedent’s assets to pay creditors who have made a claim against the estate. Funeral expenses are often paid out of the estate unless other arrangements, such as an insurance policy, are made.
Distribution to Heirs and Beneficiaries
After all debts owed by the decedent are paid, the remaining property and monies are paid to the heirs of beneficiaries of the estate
Distribution Under a Will
The will may specify certain amounts or percentages of liquid assets or property be given to a particular beneficiary such as a set amount or percentage to cover expenses for college, or for medical needs. In other cases, the will might call for the remaining amount to be shared evenly among the beneficiaries. A will can name a guardian to oversee a minor’s share of their inheritance if there isn’t a surviving spouse or parent available to do so.
In many states there may be laws that require a share of a decedent’s estate be paid to a spouse or child who has not been named, or has been excluded from, the will. In such cases the excluded individual may need to challenge the will to receive their share.
Distribution Without a Will
In the event that there isn’t a will or if a will is determined to be invalid the deceased person’s assets will be distributed to their heirs according to state law. This will in most cases be the surviving spouse and children of the decedent. If there are no living heirs any remaining assets will go to the state.
Distribution of Assets Outside of Probate
In many cases, assets of the decedent can be passed to their heirs outside of probate. This is usually to the advantage of the decedent’s heirs. By minimizing assets in the estate, probate can be less costly and time consuming and even more importantly, allow for assets to pass directly to a decedent’s heirs without being subject to the claims of the estate’s creditors.
Ways to Keep Assets Apart from the Estate
Living Trust - Assets can be transferred into a trust, which is held by a trustee. The trustee is responsible for maintaining the assets under the terms of the trust and transferring the assets to specified beneficiaries.
Account Beneficiaries -