What is a ‘Probate’
A probate is a legal process in which a will is reviewed to determine whether it is valid and authentic. Probate also refers to the general administering of a deceased person’s will or the estate of a deceased person without a will. The court appoints either an executor named in the will (or an administrator if there is no will) to administer the process of collecting the assets of the deceased person, paying any liabilities remaining on the person’s estate, and finally distributing the assets of the estate to beneficiaries named in the will or determined as such by the executor.
BREAKING DOWN ‘Probate’
A probate is the first step taken in administering the estate of a deceased person and distributing assets to the beneficiaries. When a property owner dies, his assets are divided among the beneficiaries listed in his will. In some case, the testator or deceased does not leave a will which should contain instructions on how his or her assets should be distributed after death. Whether there is a will for guidance or not, the assets of a decedent’s estate may be required to go through probate.
Probate with a Will
When a testator dies, the custodian of the will must take the will to the probate court or to the executor named in the will within 30 days of the death of the testator. The probate process is a court-supervised procedure in which the authenticity of the will left behind is proven to be valid and accepted as the true last testament of the deceased. The court officially appoints the executor named in the will, which, in turn, gives the executor the legal power to act on behalf of the deceased.
The legal personal representative or executor approved by the court is responsible for locating and overseeing all the assets of the deceased. The executor has to estimate the value of the estate by using either the date of death value or the alternate valuation date, as specified in the Internal Revenue Code (IRC). Most assets that are subject to probate administration come under the supervision of the probate court in the place where the decedent lived at death. The exception is real estate. You must probate real estate in the county in which it is located.
The executor also has to pay off any taxes and debt owed by the deceased from the estate. Creditors usually have a limited amount of time from the date they were notified of the testator’s death to make any claims against the estate for money owed to them. Claims that are rejected by the executor can be taken to court where a probate judge will have the final say on whether or not the claim is legal.
The executor is also responsible for filing the final personal income tax returns on behalf of the deceased. Any estate taxes that are pending will come due within nine months of the date of death. After the inventory of the estate has been taken, the value of assets calculated, and taxes and debt paid off, the executor will then seek authorization from the court to distribute whatever is left of the estate to the beneficiaries.
Probate without a Will
When a person dies without a will, he is said to have died intestate. An intestate estate is also one where the will presented to the court was deemed to be invalid. The probate process for an intestate estate includes distributing the decedent’s assets according to state laws. The probate courts begin the process by appointing an administrator to oversee the estate of the deceased. The administrator functions as an executor, receiving all legal claims against the estate and paying off the outstanding debts, such as unpaid bills.
The administrator is tasked with locating the legal heirs of the deceased, including surviving spouses, children, and parents. The probate court will assess what assets need to be distributed among the legal heirs and how to distribute them. The probate laws in most states divide property among the surviving spouse and children of the deceased. For example, a resident of Arizona, New Mexico, California, Texas, Idaho, Nevada, and Washington who dies without a valid will have his estate divided according to community property laws in the state. Community property laws recognize both spouses as joint property owners. In effect, the distribution hierarchy starts with the surviving spouse. If unmarried or widowed at the time of death, assets will be divided among any surviving children, before any other relatives are considered. If no next of kin can be located, the assets in the estate will become the property of the state.
Close friends of the deceased will not normally be added to the list of beneficiaries under a state’s probate laws for intestate estates. However, If the deceased had a joint account with right of survivorship or owned property jointly with another, the joint asset will automatically be owned by the surviving partner.
Is probate always required?
It is important to know whether a probate is required following the death of an individual. The probate process can take a long time to finalize. The more complex or contested the estate is, the more time it will take to settle and distribute the assets. The longer the duration, the higher the cost. Probating an estate without a will is typically costlier than probating one with a valid will, however the time and cost required of each are still high. Also, since the proceedings of a probate court are publicly recorded, avoiding probate would ensure that all settlements are done privately.
Different states have different laws concerning probate and whether probate is required after the death of a testator. Probate is not required if the value of the decedent’s estate falls below a certain amount; an amount that varies from state to state. For example, probate laws in Texas hold that if the value of the estate is less than $50,000 then probate may be skipped. If an estate is small enough to bypass the probate process, then the estate’s asset may be claimed using an affidavit signed under oath by a beneficiary.
Some assets can bypass probate, meaning that probate is not required for the transfer of these assets to beneficiaries. Pension plans, life insurance proceeds, 401k plans, health or medical savings accounts, and individual retirement accounts (IRA) that have designated beneficiaries will not need to be probated. Likewise, assets jointly owned with a right of survivorship and property held in a trust are likely to bypass the probate process.
Because of the costs of court involvement in the probate process and the potential for involvement of lawyers who collect fees from the estate of the deceased, many people try to minimize costs associated with the probate process. There are tremendous legal and tax complexities in the probate process, so it is advisable to have a will and speak with a lawyer and financial professional in order to ensure that your loved ones are not left with the complicated and often messy task of distributing the assets of your estate upon your passing.