Perhaps the most familiar term in handling estates is the term "probate." Probate is the court administered process of carrying out the terms of your will.
- Overview: Although the probate process varies from state to state, in general, the process is the set of state law procedures that your executor follows in gathering your assets, paying the necessary debts and expenses, and distributing the remaining assets to your heirs and beneficiaries.
- Initial Procedures: Admitting your will to probate court is the first step in the probate process.
- Closing the Estate: The probate court must receive certain documents before distributions can be made to beneficiaries.
- Avoiding Probate: Due to delays and privacy issues, you may wish to avoid probate.
Overview
The probate process has procedures that apply to carrying out the terms of a will. It also has procedures that can be used to distribute your property if you have no will and have not used a living trust or other appropriate means of designating who should receive your property. Some states have "short-form" procedures that can be used in certain circumstances.
With a Will...
If you have a will at the time of your death, you are said to have died "testate", and the court administered probate proceedings are known as "testate proceedings." Your will is submitted to the probate court, at the time of your death, and the executor (or personal representative) named in your will is officially designate to act for your estate. Your executor becomes the central figure in the probate process by carrying out the asset gathering, debt paying, and distributing tasks. Thus, your will influences the probate process by naming your executor. Just as important, your will influences the probate process by choosing the beneficiaries who will receive your assets.
Without a Will...
If you do not have a will at the time of your death, probate may still be required. Because you have died without a will, you are said to have died "intestate," and the court administered probate proceedings are known as "intestate proceedings." Without a will, you have not named an executor. Therefore, the probate court appoints an "administrator" who has the same asset gathering, debt paying, and distributing tasks as an executor. However, with no will to explain your intended beneficiaries, the administrator must follow the intestacy laws of your state in distributing your property to your heirs and spouse (if you have one).
Short-Form Probate
Some states have short-form probate procedures that can streamline or modify the probate process if certain requirements are met. These requirements often focus on the size of the estate and to what extent most (or all) of the property will be distributed to a spouse.
Initial Procedures
Upon your death, your will must be "admitted to probate" so that the court can administer the terms of your will. As part of this process, the court appoints the executor (personal representative).
Admitting the Will to Probate
The original copy of your will must be located and delivered to the appropriate court in your state that handles probate administration. Generally, the will must be accompanied by a petition to the court that includes information about you, your death, and your will. Delivery of the will to the probate court transforms your will from a private document into a public document. The will can be reviewed by anyone who is willing to make the effort to go to the courthouse (or similar location) and review the court file that now includes your will.
Appointing an Executor
The petition submitted with your will also includes a request that the executor (personal representative) you’ve chosen be appointed to handle your estate. Although not strictly obligated to do so, the probate court will generally appoint your choice of executor. When appointing the executor, the probate court will also look at whether you have selected a non-resident executor, as well as the bond requirements. These initial proceedings also include providing notice to heirs and creditors, resolving challenges to the will, obtaining a federal identification number, and opening a checking account in the estate’s name.
Executor Duties
- Gathering Assets
Once the executor has been appointed, his/her first substantial task is to collect and inventory the assets that are subject to probate. This includes reviewing records, determining which assets are subject to probate, taking physical custody of probate assets, valuing the property, and filing an inventory listing.
- Payment of Debts and Expenses
Before making distributions to the beneficiaries, the executor must determine what debts and expenses should be paid. The executor is also responsible for resolving claims, paying executor and attorney fees, filing death tax returns, and filing other tax returns. To pay these various costs, the executor may have to liquidate assets.
- Distribution of Assets
After the debts and expenses, including taxes, have been paid, the executor needs to make proper distribution of the remaining assets. This is done through distributions to beneficiaries and establishing trusts.
Closing the Estate
After making final distributions of the assets, and sometimes immediately prior to making final distributions to the beneficiaries, a final report and/or accounting must be filed with the probate court. Generally, the beneficiaries are given the opportunity to object to any items of the report or accounting that they believe are incorrect or inappropriate. It is also their opportunity to raise any final issues they may have regarding the executor’s handling of the estate.
After resolving any issues and making any appropriate adjustments, the court approves the closing of the estate. Generally, the beneficiaries must sign receipts indicating that they have received their distributions. The executor must file these receipts with the court before being discharged as executor.
Avoidance Techniques
While the probate process has certain advantages and is intended to provide for the orderly distribution of the estate under appropriate supervision, there also are disadvantages to this process that cause many individuals to seek methods of avoiding probate, referred to as non-probate transfer methods.
Advantages of Probate
The main advantage of the probate process is that it is supervised. The court’s monitoring of the executor’s activities provides some assurance that the estate is properly administered by the executor. The probate court's procedures for handling will challenges and claims of creditors provide a means for resolving disputes. Challenges and claims that are not timely filed during the specified notice period (or not raised at all) are barred. Challenges and claims that are raised are resolved. Thus, the beneficiaries have more assurance that they have received clear title to the property that is distributed to them.
Disadvantages of Probate
The probate process is criticized as costing too much, taking too long, and for the loss of privacy.
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