Probate is an important legal mechanism that dictates where, when and how a person's assets are distributed after his or her death.
It's not always a clean and efficient process, but probate is a legal way to properly dispose of a deceased individual's property after death, with a requisite stamp of approval from a probate court.
How does probate court work and what does it mean to you? Like most legal and estate processes, there are some broader brushstrokes and finer points of detail to consider.
Let's take a look at the probate process and make sense of the issue, in real-life terms.
What Is Probate?
Probate is an estate-planning process that operates within the legal system, specifically within a probate court with a probate judge presiding over the proceedings.
Typically, surviving families and other interested parties trigger a probate process, to cover a host of issues relating to the deceased individual's estate settlement, including:
- The handling of a valid will from the deceased.
- Properly citing and categorizing the deceased individual's estate and property.
- Appraising the deceased individual's estate and property.
- Covering any of the deceased individual's existing debts, such as a mortgage, taxes, and other big-ticket items.
- Steering the deceased's property to the individuals or organizations cited in the (or, if there's no will, the probate court will direct the distribution of estate assets to the legal heirs on behalf of the deceased.
During this process, interested parties usually hire a lawyer to represent their interest. In many cases, the estate will pay for the legal fees out of a fund set aside to handle probate costs.
What Is Involved in Probate?
How do you get things rolling on a probate matter?
By and large, the executor handling the deceased individual's estate will kick things off and the legal end of the probate process takes over there, although much depends on the state where you reside.
Here's how it works:
Step 1: File a Petition
Your first step is to have the estate's executor file a request for probate in the city, county, or town where the deceased resided.
The executor will likely file a valid will and a death certificate with the probate court, as long as a valid will exists. Once the legal paperwork is filed, the probate court will assign a date to confirm the executor and, assuming that step goes off without a hitch, the probate judge will officially recognize and open the probate case.
Step 2: Get the Word Out
Once you've gotten approval for a court date and the probate process is officially underway, the executor - who is now acting on behalf of the estate - will need to send a notice that the deceased individual's estate is officially in probate to all applicable beneficiaries, heirs, debtors and creditors. In many cases, the estate will be required by the probate court to put a notice in the local newspaper.
Step 3: List All Inventory Assets
The estate must now gather, list and present a numerical value for all of the deceased's assets and deliver them to the probate court.
This list includes the following:
- All investment and banking accounts
- All real estate owned
- Any personal assets in the form of cars, jewelry, hobby assets - basically anything the deceased owned that has suitable value (i.e., you don't have to declare minimum value items like clothing or tools or things like that.)
There's an even larger list of estate assets that don't need to go through probate, including:
- Any property owned in a public trust or other trust.
- Retirement funds that are designated to a beneficiary.
- Property held jointly, with survivorship rights.
- Real estate or autos that are owned jointly.
- Life insurance policies with designated beneficiaries.
Step 4: Pay the Bills
Next, the executor will need to pay any outstanding bills or debts owed by the estate.
It's quite possible that the executor won't know all of the debts incurred by the deceased, and that a healthy dose of detective work will be required to find and pay all of the bills owed by the estate.
Also, if the amount of money in the estate won't cover all the bills that need to be paid, the probate court will likely step in and establish a priority list of which parties owed will be paid first.
Step 5: Handle Any Tax Returns
The estate may also have existing tax returns that need to be completed, signed and filed with the federal, state and local government, if needed. A good accountant can be hired by the state to handle any taxes due, or the executor may elect to file the taxes on his or her own.
Step 6: Pay the Heirs
With all the bills paid and all the proper tax forms filed, the executor can now distribute the remainder of the estate to any heirs, per the will's instructions. This is the last financial step that needs to be taken before closing out the estate.
Step 7: Close the Estate
With all the paperwork completed and all assets paid out, the executor will file all necessary paperwork with the probate court and file to close the estate. If all goes well, the court will close the estate and release the executor.
One more note on the probate process: Any executor handling an estate's financial assets will likely come across areas where big decisions will need to be made and creative strategies deployed.
For example, if cash assets are required to be distributed, and not enough cash is in the estate account to pay for the distributions, the executor has to sell off assets like a family auto or valuable collectible items (like paintings or jewelry) to cover the distribution payments.
If you're an executor immersed in the probate process, be prepared to think on your feet and take the steps needed to close the estate - even if it's messier and more complicated than you might have been led to believe.
How Long Will the Probate Process Take?
The answer to that question largely depends on the quality of the estate planning already in place before going into probate, or on the state where the probate process will play out. Basically though, expect the entire probate process to be completed within six to nine months, according to the American Bar Association.
The main factors that could extend or shorten the probate process include:
Tax issues. Any undue complications with an estate's taxes could add months or even years to a probate process.
The quality of your legal help. If you have a solid, experienced probate attorney working on your behalf, the probate process could be curbed significantly. Conversely, if you have an inexperienced attorney in your corner and mistakes are made, your probate experience could be extended significantly.
The quality of the executor. Yes, an estate executor's job is a tough one, given the high emotions flowing through the process after the death of a loved one and financial complexities of handling an estate. That said, if the executor is not up to the job, the process could take longer to play out. If the executor is organized, competent, deadline-driven, and has close ties to the deceased's family, the probate process could close out more quickly.
The state where the probate case is held. Make no mistake, every U.S. state has its own rules, many more unique than others, on the handing of a probate case. In California, the probate process is more extensive and can take up to eight or nine months to complete, in most cases.
In Florida, where the probate process is more streamlined and the process kicks off more quickly (10 days after the death, by state law) the probate process only takes six months. And in Texas, probate laws are written with speed and efficiency in mind, the probate process can be closed down in four months.
Can You Avoid Probate?
By and large, avoiding probate should be the goal of any estate executor or beneficiary.
After all, probate costs two precious commodities - time and money. It also makes certain details of the estate public by going through the court system.
So if you can, create an estate plan that avoids probate by using estate planning documents like a living trust - or if you give away your assets while you're still alive, you can actually bypass probate court.
You may also avoid probate by having an estate too small to qualify for probate, as many states offer an exemption for an estate valued below a certain asset figure (say, $150,000, for example.) You'll need to check with your state's probate office to find out what the estate value benchmark is.
You can also establish joint-ownership contracts with a spouse or family member that allows the transfer of assets without having to go through probate. A good estate-planning attorney can walk you through that and other "probate avoiding" financial moves thus saving the time, money and privacy that come with avoiding probate court.
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