Understanding Probate

Probate is the court supervision of the administration of an estate or a person’s financial affairs after that person’s death. The court ensures that all debts are paid and assets transferred per the decedent’s will or state statutes. Probate can also involve managing the affairs of minors or persons with severe disabilities; however, this article deals with the probate process governing the administration of a decedent’s estate.

State laws govern probate, and state laws vary widely. In some cases, local court rules may also govern the probate process. These laws specify when probate is necessary, what process is required, and the duties and responsibilities of the person who administers the estate. Historically, probate was a complex, lengthy, and costly process, but many states have simplified probate so it takes much less time and cost. Whereas many estate lawyers once cautioned clients to avoid probate whenever possible, in states with simplified processes, an estate can go through probate within several weeks and with minimal costs for legal fees and court filing fees.

Background

An estate of a deceased person may be either testate or intestate. An estate is testate if the decedent had a valid will. The will states who is to administer the estate and who is to receive the decedent’s assets. If the decedent had no will, the estate is intestate. In the absence of a document that specifies the decedent’s wishes, a court decides who can administer the estate and who will receive the assets in the estate. The court makes its decisions based on state statutes.

There are three methods of administration of an estate, although some states use only two. Supervised administration is when the court approves a representative to administer the estate and requires the representative to get court approval for all necessary actions. Independent administration is when the court approves a representative to administer the estate and allows the representative to do so mostly without court approval. Small estate is when the estate has so few assets that they do not meet the state’s threshold for probate. In states with this method of administration, the decedent’s heirs or persons entitled to their assets may file an affidavit with the court to bypass probate and pay the decedent’s debts and transfer property without further court involvement.

Some states characterize probate proceedings as formal or informal. A formal probate proceeding can be used for any size of estate and involves greater court supervision than an informal proceeding. It typically is used when a will is disputed or other probate issues need to be resolved by a judge. An informal probate proceeding generally is used for an estate with assets below a certain value, such as $75,000, and requires minimal court supervision. An informal proceeding is similar to independent administration. Both typically require preparing and filing documents with the court, a court review of those documents, and one or two hearings before a judge.

Overview

The need for probate is determined by the value of assets and the title of assets in an estate. Probate is necessary for any estate that includes probate assets in excess of a value set by the state in which the person resided at the time of death. Generally, this value ranges from $75,000 to $150,000. Some states require that estates below this value go through a small estate probate process. Others require an affidavit to settle and close such an estate, but do not consider this procedure part of a probate process.

Probate assets are all assets that are part of the estate that pass through a will or that have not been transferred to other persons through other means. Nonprobate assets do not pass through a will and are transferred through other means, such as title transfers. Assets that do not pass through a will include assets in a living trust; assets with a beneficiary designation, such as for a life insurance policy or retirement plan; assets in a joint tenancy, such as property titled in two persons’ names with each person having the right of survivorship; and assets in payable on death accounts. Assets that transfer from an estate to a living trust via a pour-over will also are not subject to probate.

Traditionally, many people used estate-planning techniques to reduce the size of an estate or to allow for the transfer of property through trusts and other means to avoid the need to go through probate. In some cases, the desire to avoid probate was to allow for the quick transfer of assets following death so that the spouse or other family members had a means of support. For others, the desire to avoid probate was to minimize the time and costs of the court supervision of an estate. As most states have passed laws that allow for the immediate transfer of assets for living expenses and have simplified the probate process, there is less need to avoid probate today. Going through probate can ensure that an estate is properly administered and all assets transferred correctly.

For a testate estate, the first step is filing the will with the clerk of the court in the county where the decedent resided. Any person who has possession of the will is required to file it within a certain period following the decedent’s death. In most cases, this will be the executor of the estate, or the person named in the will to administer the estate.

The next step is opening probate. The executor named in the will files a petition with the court asking the court to admit the will into probate, to approve the executor, and to verify the heirs of the estate.

For an intestate estate, the first step is for any interested party, which usually is a family member or close relative, to file a petition with the court in the county where the decedent resided and request an administrator be appointed, the heirs be determined, and the probate estate be opened. The court holds a hearing during which it appoints an administrator and determines the heirs. It also issues a formal document that gives notice that the administrator has the legal authority to handle the finances of the estate.

The next step for both a testate and an intestate estate is for the administrator to collect the assets of the estate, inventory them, and safeguard them until such time as they can be distributed. For supervised and formal administrations, the administrator may be required to file the inventory with the court.

The administrator collects all claims against the estate and makes payment for all valid claims. The administrator is required to notify potential creditors that the estate has been opened and to publish a notice to creditors in a newspaper or other acceptable source. Creditors are required to file any claims against the estate within a certain period from the time the notice was published. Once that period has elapsed, no future claims can be made against the estate for any debts.

After all debts are paid, the administrator prepares an accounting. It shows the assets in the estate at death; assets subsequently added to the estate, such as from the sale of real estate or other property; and all liabilities, such as payments to creditors, as well as legal, accounting, and court fees to administer the estate. An income tax report for the estate needs to be filed and taxes due paid. The accounting typically needs to be filed with the court for review. Depending on the size of the estate and type of administration, the administrator may need to file several accountings during the probate process, with a final accounting before any distribution of assets can be made.

During this process, individuals can file petitions with the court contesting the will or the actions of the court or administrator. For example, during the probate of an intestate estate, an individual may file a petition contesting the administrator appointed by the court. For either an intestate or testate estate, an heir may file a petition claiming the administrator failed to protect the estate’s assets or otherwise breached the duties of an administrator. An heir may claim that there are hidden assets not shown in the estate’s inventory and may request that the court take action to identify or uncover those assets.

Any disputes extend the duration and costs of probate as they require additional procedures, including court hearings and gathering evidence, as well as greater costs for attorneys and court filings. Contested probate proceedings can extend over several years, although many courts attempt to resolve such cases within two or three years.

Once all assets and liabilities have been accounted for and any disputes resolved to the court’s satisfaction, the administrator distributes the assets to the beneficiaries or heirs and probate is closed.

Bibliography

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