One of the great mysteries in estate planning is probate. Many people believe that if you are married a probate is unnecessary. Others believe that probate can be avoided by having a Will. Although probate can be avoided, being married or having a Will isn’t enough when there is title to an asset or the asset is in someone else’s control, such as a bank or brokerage. So, for bank accounts and stock, the holder of the asset needs to have a court order to disburse it for the sole owner. For real estate, vehicles, the title ownership must be transferred through a probate unless there is an estate planning contract in place prior to death.
Assets can be transferred by contract to avoid probate; however, any assets that are not controlled by a contract of some type are part of the probate estate. Examples of contracts that control property on the death of the owner are: beneficiary designations, joint tenants with right of survivorship, revocable trusts, and community property with survivorship agreements. In this way probate is the last resort for the administration and distribution of the affairs and property of the deceased. However, caution should be taken before using any of these non-probate methods of transfer or the owner may be subject to unintended and avoidable taxes and management and asset protection issues.
- What is the probate process?
Probate is the process by which a deceased person’s property, known as the “estate,” is passed to his or her heirs and legatees (people named in the will). The entire process, supervised by the probate court, can be as short as four months, but usually takes about a year. However, substantial distributions from the estate can be made in the interim.
- What property is subject to the probate process?
The probate estate includes all property held in the decedent’s name. Certain kinds of property, such as property owned jointly by the deceased and another person, life insurance, and property held in trust, are not part of the probate estate and are not subject to the probate process. For example, jointly owned bank accounts pass automatically to the surviving joint owners upon the death of one of the owners without going through probate. The nonprobate property, however, is part of the decedent’s taxable estate (see below).
- How is the probate process started?
First, a petition for probate of the will must be filed with the probate court, along with the original will and a certified copy of the death certificate. Notice must be mailed to all of the decedent’s heirs at law (usually the surviving spouse, children, and children of any deceased children), to those named as beneficiaries in the will, and, if a charity is involved or there are no heirs at law, to the Attorney General. Notice must be also published in a local newspaper. If no one objects by a deadline set by the court, the executor named in the will is appointed by the court.
- What does the executor or personal representative do?
The executor is responsible for collecting the probate property and for paying any debts of the estate. The executor must file with the probate court an itemized list, known as an “inventory,” of the probate property, including the value of each item. The executor must file an estate tax return within nine months of the date of death. This is true even if no estate tax is owed, if the decedent owned real estate or the executor wants his or her final accounting (see below) allowed by the probate court. Creditors of the estate have one year from the date of death to bring claims against the estate. Executors generally wait until this claim period has expired to complete distribution of the estate according to the terms of the will. As his or her final responsibility, the executor must file an accounting with the probate court showing the income and expenditures of the estate administration.