Probate is a legal process that takes place after someone dies. It includes:
• proving in court that a deceased person’s will is valid (usually a routine matter)
• identifying and inventorying the deceased person’s property
• having the property appraised
• paying debts and taxes, and
• distributing the remaining property as the will (or state law, if there’s no will) directs.
Typically, probate involves paperwork and court appearances by lawyers. The lawyers and court fees are paid from estate property, which would otherwise go to the people who inherit the deceased person’s property.
How Does The Probate Process Work?
Probate usually works like this: After your death, the person you named in your will as executor or, if you die without a will, the person appointed by a judge—files papers in the local probate court. The executor proves the validity of your will and presents the court with lists of your property, your debts, and who is to inherit what you’ve left. Then, relatives and creditors are officially notified of your death. Your executor must find, secure, and manage your assets during the probate process, which commonly takes a few months to a year. Depending on the contents of your will, and on the amount of your debts, the executor may have to decide whether or not to sell your real estate, securities, or other property. For example, if your will makes a number of cash bequests but your estate consists mostly of valuable artwork, your collection might have to be appraised and sold to produce cash. Or, if you have many outstanding debts, your executor might have to sell some of your property to pay them. In most states, immediate family members may ask the court to release short-term support funds while the probate proceedings lumber on. Then, eventually, the court will grant your executor permission to pay your debts and taxes and divide the rest among the people or organizations named in your will. Finally, your property will be transferred to its new owners.
Probate Assets Versus Non-probate Assets
Probate is the legal process for paying a deceased person’s debts and distributing money and property to heirs. It begins with a petition filed in probate court and proceeds through a series of steps, including inventorying the estate, notifying creditors, paying bills, filing taxes, and getting court approval to distribute property to heirs. If you’ve been appointed as a personal representative (also known as executor or administrator) of a probate estate, one of your first tasks is to figure out what the deceased person owned. Some of those assets are considered probate property or assets that will be distributed to heirs based on the terms of a will or according to state law if there isn’t a will. Other assets are non-probate property. These assets bypass the probate process and go directly to beneficiaries or co-owners, no matter what the will says. A non-probate/probate property list can help you keep track of what’s subject to probate and show whether probate is even necessary.
Assets That Don’t Need to Go Through Probate
There are several ways in which assets can be handled to avoid probate and pass directly to chosen beneficiaries. Most life insurance and annuity contracts name a non-estate beneficiary that is paid directly upon receipt of a death claim (this is called operation of law or contract). The same holds true for many brokerage accounts and retirement accounts like IRAs and 401(k)s. Bank accounts that have payable on death (POD) or transfer on death (TOD) provisions are considered non-probate assets and pass directly to a named beneficiary as well. Joint accounts will usually pass to the other surviving owner(s) sans probate. Assets titled in revocable inter vivo trust agreements (also known as revocable living trusts) are administered and disposed of by successor trustees named in the trust documents. Real property (land and buildings) may also be titled to pass to an heir thereby avoiding probate. A certain type of property ownership called joint tenancy with rights of survivorship is a popular option for ensuring an owner’s stake in an asset, such as a home, passes directly to the surviving co-owner(s) after their death. Some states even allow the transfer of real estate with a TOD designation to a beneficiary.
Assets That Must Go Through Probate
Any property or assets that have only the decedent’s name on the title at time of death must go through probate. Only the probate court can change these titles according to the specifications laid out in the decedent’s will. For example, a home, car or bank account owned solely by the decedent cannot bypass probate. Even assets that are co-owned may be subject to the probate process if the nature of ownership does not include the right of survivorship. In short, anything that does not go directly to a beneficiary will be subject to disposal per the deceased’s will. All wills, as well as assets that do not pass by operation of law or contract, are subject to probate. Once the will has been probated and assets have been distributed to the rightful creditors and beneficiaries, you can do whatever you want with them.
Non-probate property includes:
• Assets titled in the name of a trust or designating a trust as beneficiary. Many people set up living trusts specifically to avoid probate. The trustee named in the trust is authorized to carry out the trust’s instructions, including distributing trust assets to beneficiaries.
• Property with a named beneficiary. Common examples include life insurance policies, IRAs, 401(k)s, and pensions.
• Bank accounts with beneficiaries. These do not go through probate if they have a payable on death (POD) designation. Other property such as real estate or vehicles is non-probate property if there’s a transfer on death (TOD) designation.
• Property owned jointly, with survivorship rights. This means that, if one owner dies, the other owner automatically gets the deceased owner’s interest in the property. Married couples often own their home this way. Look for the words “joint tenancy with right of survivorship” or “tenancy by the entirety” in the title documents. If you live in a community property state, your state laws may also provide a right of survivorship.
In most states, the personal representative must list all probate assets with their values and file the list with the probate court. You can also think of this as a list of assets for the will. Some assets, like bank accounts, are easy to put a value on. Others, like antiques, jewelry, and collectibles, may require an appraisal.
Probate assets include:
• Real estate, vehicles, and other titled assets owned solely by the deceased person or as a tenant in common with someone else. Tenants in common don’t have survivorship rights. The owners can bequeath their share of the property to someone else.
• Personal possessions: Household items go through probate, along with clothing, jewelry, and collections. The inventory should include the decedent’s personal belongings that remain after death.
In some states, probate isn’t required if the estate’s value is below a certain dollar amount. Some states also have a simplified probate procedure for small estates or when all property is transferred to a surviving spouse. But even when probate isn’t required, going through the process can have advantages. Sorting through property and accounts can be tedious, and it’s not always easy to tell what’s subject to probate and what isn’t. It’s best to get legal advice if you have questions or aren’t sure what property to list with the probate court.
When Do You Have to Go Through Probate?
Leaving a will behind when you die is the responsible thing to do. But leaving a will doesn’t always mean that there’s no need for probate. An estate may undergo formal probate for many reasons including when a will is contested, unclear, or invalid, or when the assets are held only in the deceased’s name. And when there’s no will, probate is often required to oversee the distribution of the deceased’s property.
When There’s A Will
Determining if a will needs to go through probate depends on the laws of your state and the property you hold at death. Some states do not require probate to be filed. Other states base the need for probate on the value of the estate. Common situation when you have to go through probate with a will include:
• Will Contest: Disputes can arise because family members are unhappy with the deceased’s estate plan. Death can cause old family tensions to resurface causing disputes over insignificant family property. A beneficiary may contest the validity of a will’s construction. If someone who could take under the will protests the division of property, you must probate the will. All challenges are handled in probate court.
• Value of the Estate: Smaller is better when it comes to probate. It’s common practice to allow estates falling below a predetermined value to avoid probate.
• Assets Held Only in Deceased’s Name: Probate is not just about distributing property. It also initiates the legal transfer of title to that property. If a person dies and owns real estate, regardless of value, either in his/her name alone or as a “tenant in common” with another, a probate proceeding is typically required to transfer the property. However, many states offer quicker, less expensive probate-alternatives for transferring title to cars.
When There’s No Will
When a person dies without a will, they are said to have died “intestate”. The laws of the state where you reside will determine how your property is distributed upon your death. However, probate administration when there’s no will is similar to when there is one. When you die, your property is classified as either probate property or non-probate property.
• Determining the Estate’s Heirs: If no Will exists, the property is divided among the person’s heirs. In Utah, if the person has a spouse and or children, the property first goes to them. If there is no spouse or children, the property goes to the person’s next nearest relatives. The laws of intestate succession are very state specific.
• Transfer of Assets: When there is no will, probate is frequently required to determine the deceased owner’s probate assets, assess their value and distribute them to creditors and heirs. It’s not uncommon for property transferred under intestacy to be counter to what the deceased would have chosen if living. Probate transfer title to the heirs with the closest family relationship to the deceased. Special provisions, such as the small estate exemption, also apply to an estate without will.
Steps in the Probate Process
Beginning Probate by Requesting Appointment as Executor
When you probate a will, you start by asking the probate court to name you executor or personal representative, whichever term is used in your state. If there’s no will, in some states you’ll ask to be the “administrator.” To make this request, you will probably need to file an application, death certificate, and the original will (if you haven’t deposited it with the court already) with the local probate court in the county where the deceased person was living at the time of death.
The document in which you make your request will probably be called a petition or application. It must contain certain information, such as the date of death, names of surviving family members and of beneficiaries named in the will, and so on. Many courts provide fill-in-the-blanks forms; if yours doesn’t, you’ll have to type something up from scratch. (Every probate court has its own rules about the documents it requires.) If the deceased person owned real estate in more than one county in the same state, you can handle it all in one probate. There’s no need to conduct a separate probate proceeding in the other county.
Understanding What Happens at the First Probate Hearing
The probate court will schedule a hearing to give interested parties a chance to object to your appointment as executor. Before the hearing, you’ll need to send formal legal notice to beneficiaries named in the will and to heirs under state law (the people who inherit if there’s no valid will). You’ll also send notices to creditors you know about, and publish a legal notice in a local newspaper to alert others. In most cases, the hearing is a formality; you probably won’t even need to show up. If your request is approved, the court will issue documents that authorize you to act on behalf of the estate. In most places, these papers are called Letters of Authority or Letters Testamentary, or Letters of Administration if there’s no will. They’re often referred to just as “letters.” If you live in another state, you may have some more requirements to fulfill. For example, you may need to file a document with the court in which you appoint a local resident as your “agent.” This person can accept legal papers on your behalf and is subject to the authority of the court.
Posting a Bond
The probate court may require you to post a bond—a kind of insurance policy that protects the estate from losses you causes it, up to a certain dollar amount. Many wills specifically say that no bond is required. If the will doesn’t address this issue, it’s up to the judge. If all the beneficiaries under the will agree, in writing, that it’s not needed, the judge is unlikely to order it. But some courts always require a bond if the executor lives out of state or if the person serving as executor isn’t the person named in the will. If bond is required, its amount will depend on the size of the estate. Bonding companies, most of which are divisions of insurance companies typically charge a fee of about 10% of the face amount of the bond. You can pay for the bond from estate funds.
Proving the Will’s Validity
If there’s a will, you must prove that it’s valid. Usually, all you need is the statement of one or more of the will’s witnesses, in one of these forms:
• a notarized statement, called a “self-proving affidavit,” which witnesses signed when they witnessed the will
• a sworn statement signed by a witness now, or
• court testimony from a witness.
While the probate case is pending, you can gather assets and open a bank account in the name of the estate, and use the account to pay creditors. This includes obvious bills (outstanding credit card bills, utilities, funeral expenses, and so on), as well as taxes. Probate cases must also stay open for several months about four to six, in most states to give creditors a chance to come forward. You’ll probably need to give the court a list of the deceased person’s property and, if necessary, get assets appraised. If you want to sell real estate or a business, you might need to get court permission. (But many wills authorize executors to proceed under a law called the Independent Administration of Estates Act, which gives executors freedom to pay creditors’ claims and sell estate property without prior court approval.
As executor, you will also be responsible for filing tax returns and paying tax bills on time. Below are possible tax returns you might need to file:
• federal and state income tax returns for the final months of the deceased person’s life (see Filing a Deceased Person’s Income Tax Return)
• the previous year’s federal and state income tax returns if the deceased died before filing them (for example, if the deceased died in March 2020 before filing 2019 income tax returns, you will have to file returns for 2019 as well as 2020)
• federal and state income tax returns for the estate itself, if the estate receives more than a minimum amount of income during the probate process
• a federal estate tax return (for estates worth over $11.58 million)
• a state estate tax return (applicable only in about a dozen states, for estates worth over a certain amount), and
• a state inheritance tax return (applicable only in six states).
Giving Property to Beneficiaries Early
You can’t give beneficiaries their inheritances until you’re sure the estate has enough assets to pay debts and taxes. As long as you keep enough money to pay final taxes and expenses, however, you may be able to distribute some assets before the probate proceeding ends. State law might limit the amount you can give, and you might also need prior court approval. There can be good reasons for distributing property sooner rather than later, especially if the estate clearly has plenty of money to pay debts.
Distributing Property and Closing the Estate
When the creditors claim period has passed, you’ve paid debts, filed all necessary tax returns, and settled any disputes, you’re ready to distribute remaining property to the beneficiaries and close the estate. Closing the estate releases you from your duties as executor. Along with your request to close the estate, you’ll need to give the court an accounting of your activities. The accounting shows where all the estate assets are going and shows that you’ve paid creditors. It also documents any income the estate assets received during probate and any losses to the estate—for example, if an asset declined in value. Some courts provide fill-in-the-blanks accounting forms. If yours doesn’t, you can look at documents filed in other cases (probate records are public) to get an idea of what’s required.
Individuals who are considering drafting a trust or a will may wish to consult with an estate planning lawyer. He or she can explain the advantages of using a trust as well as a will. He or she can make recommendations based on the specific considerations of the client. He or she may even recommend using both documents, such as by using a pour-over will that places any property owned at the time of the testator’s death into the trust.