Probate is the court-supervised process of authenticating a last will and testament if the deceased made one. It includes locating and determining the value of the person's assets, paying their final bills and taxes, and distributing the remainder of the estate to their rightful beneficiaries.
Learn how probate works, when it is required, and what's involved in the probate process.
Definitions and Examples of Probate
Probate is a legal process that administers the distribution of a deceased person's assets. The process is overseen by a probate court. This court has the legal authority to decide matters related to wills and estates.
During probate, the court will determine whether the will is valid. They will also appoint an executor, locate and value assets, and pay the decedent's debts out of the estate. The residue will then be distributed to the decedent's beneficiaries and heirs.
- Alternate name: Probate process
Probate laws vary from state to state. For instance, in California, estates under a certain amount can be passed to heirs via a simplified process. If the property is worth less than $20,000, the heirs can ask the court to "set aside" the estate. This involves filling out a form.
If the estate is worth $165,250 or less, the heirs can make a declaration asking for the estate to be distributed to them. This is somewhat more complex than the process for a smaller estate. But, it is simpler than the full probate process.
How Does Probate Work?
Each state's laws say what's required to probate an estate. These laws are in the estate's "probate codes," as well as laws for "intestate succession," when someone dies without a will.
Authenticating the Last Will and Testament
Most states have laws in place that require anyone who is in possession of the deceased's will to file it with the probate court as soon as possible. A petition to open probate of the estate is usually done at the same time. Sometimes it's necessary to file the death certificate as well, along with the will and the petition.
Completing and submitting the petition doesn't have to be daunting. Many state courts provide forms for this.
If the decedent left a will, the probate judge will confirm it is valid. This may involve a court hearing. Notice of the hearing must be given to all the beneficiaries listed in the will as well as the heirs. The heirs are those who would inherit by law if there was no will.
The hearing gives all concerned an opportunity to object to the will being admitted for probate. For instance, the will may not be drafted properly. Or, someone may be in possession of a more recent will. Or, someone might also object to the executor named in the will to handle the estate.
To determine if the submitted will is the real deal, the court relies on witnesses. Many wills include so-called "self-proving affidavits" in which the decedent and witnesses sign an affidavit at the same time the will is signed and witnessed. This is good enough for the court.
Lacking this, however, one or more of the will's witnesses might be required to sign a sworn statement or testify in court that they watched the decedent sign the will. They will also have to attest to the fact that the will is indeed the one they saw signed.
Appointing the Executor
The judge will appoint an executor as well. Sometimes, this is called a personal representative or administrator. This person will oversee the probate process and settle the estate.
The decedent's choice for an executor is often included in the will. The court will appoint next of kin if they didn't leave a will. For instance, the court might appoint the surviving spouse or an adult child. This person isn't obligated to serve. They can decline and the court will then appoint someone else.
The appointed executor will receive "letters testamentary" from the court. This is a fancy, legal way of saying they'll receive documentation allowing them to act and enter into transactions on behalf of the estate. This documentation is sometimes referred to as "letters of authority" or "letters of administration."
It might be necessary for the executor to post bond before they can accept the letters and act for the estate. But, some wills include provisions stating this isn't necessary.
Bond acts as an insurance policy that will kick in to reimburse the estate in the event the executor commits some grievous error—either intentionally or unintentionally—that financially damages the estate.
Beneficiaries can elect to unanimously reject the bond requirement in some states, but it's an ironclad rule in others. This is particularly true if the executor ends up being someone other than the individual nominated in the will or if they live out of state.
Locating the Decedent's Assets
The executor's first task involves locating and taking possession of all the decedent's assets so they can protect them during the probate process. This can involve a fair bit of time and sleuthing. Some people own assets they've told no one about, even their spouses, and these assets might not be delineated in their wills.
The executor must hunt for any hidden assets, typically through a review of insurance policies, tax returns, and other documentation.
In the case of real estate, the executor is not expected to move into the residence or the building and remain there throughout the probate process to "protect" it. But they must ensure property taxes are paid, insurance is kept current, and any mortgage payments are made to prevent foreclosure so the property isn't lost.
The executor might literally take possession of other assets, however. They might place collectibles or even vehicles in a safe location. They'll collect all statements and other documentation concerning bank and investment accounts, as well as stocks and bonds.
Determining Date of Death Values
Date of death values for the decedent's assets must be determined and this is generally accomplished through account statements and appraisals. The court will appoint appraisers in some states, but in others, the executor can choose someone.
Many states require that the executor submit a written report to the court, listing everything the decedent owned along with each asset's value, as well as a notation as to how that value was arrived at.
Identifying and Notifying Creditors
The decedent's creditors must be identified and notified of the death. Most states require the executor to publish notice of the death in a local newspaper to alert unknown creditors.
Creditors typically have a limited period of time after receiving the notice to make claims against the estate for any money owed. The exact time period can vary by state.
The executor can reject claims if they have reason to believe they're not valid. The creditor might then petition the court to have a probate judge decide whether the claim should be paid.
Paying the Decedent's Debts
Valid creditor claims are then paid. The executor will use estate funds to pay all the decedent's debts and final bills, including those that might have been incurred during the final illness.
Preparing and Filing Tax Returns
The executor will file the decedent's final personal income tax returns for the year they died. They'll figure out if the estate is liable for any estate taxes, and, if so, file these tax returns as well. Any taxes due are also paid from estate funds.
This can sometimes require liquidating assets to raise the money. Estate taxes are usually due within nine months of the decedent's date of death.
Distributing the Estate
When all these steps have been completed, the executor can petition the court for permission to distribute what is left of the decedent's assets to the beneficiaries named in the will. This usually requires the court's permission, which is typically only granted after the executor has submitted a complete accounting of every financial transaction they've engaged in throughout the probate process.
Some states allow the estate's beneficiaries to collectively waive this accounting requirement if they're all in agreement that it's not necessary. Otherwise, the executor will have to list and explain each and every expense paid and all income earned by the estate. Some states provide forms to make this process a little easier.
If the will includes bequests to minors, the executor might also be responsible for setting up a trust to accept possession of these bequests because minors can't own their own property.
In other cases and with adult beneficiaries, deeds and other transfer documents must be drawn up and filed with the appropriate state or county officials to finalize the bequests.
An intestate estate is one where the decedent did not leave a valid will. It may be that they never made one. Or, the will is not accepted as valid by the probate court due to an error in the document or because an heir successfully contested it.
The most significant difference is that in the absence of a will that makes their wishes known, the decedent's property will pass to the closest relatives in an order determined by state law.
Alternatives to Probate
In many cases, it's possible to avoid probate, depending on state law and the types of assets involved. For instance, spouses may jointly own property as tenants in common. When one spouse passes, the other may become the sole owner of the property.
Insurance policies and investment accounts typically allow the naming of beneficiaries. In this case, beneficiaries are entitled to the assets in these accounts without going through probate.
Revocable living trusts pass to the successor trustee named in the trust documents. Any property that was transferred into the trust prior to the trust maker's death will not be subject to probate.
- Probate is a legal process that administers the distribution of a deceased person's assets.
- During probate, the court will determine whether the will is valid and appoint an executor.
- The executor is responsible for locating assets, paying debts, filing taxes, and distributing the estate.
- It may be possible to avoid probate, depending on state law and the types of assets involved.