Probate, Probate Court, and the Personal Representative
The only way you can beat the lawyers is to die with nothing.— Will Rogers
Probate has several main objectives:
- it allows creditors of the decedent to file claims for payment;
- it distributes the decedent's property according to law, if the decedent was intestate or otherwise according to the will;
- part of the transfer process involves transferring property titles to the beneficiaries — since the owner is dead, titled property can only be transferred by court order;
- it resolves disputes or challenges to the will.
Common law allows the probate of an estate at any time, but state statute may limit the time. The UPC, for instance, provides that probate cannot be initiated more than 3 years after death.
Property That Does Not Pass through Probate
Nowadays, most property does not pass through probate, but is, instead, passed directly to beneficiaries or joint owners:
- Life insurance proceeds go directly to the beneficiary.
- Most bank or brokerage accounts have pay-on-death designations, allowing the account owner to specify the beneficiaries when the account is opened, or later.
- Retirement accounts also allow the designation of specific beneficiaries.
- Property held in irrevocable trusts also avoids probate, since the trust owns the property, and not the grantor.
- Joint tenancy is a form of ownership where each owner receives an equal portion of any deceased owner, with the final survivor owning the entire property.
- Most states now also allow property of minimal value to be passed directly to beneficiaries either without probate or with a simplified probate procedure.
Because these transfers avoid probate, they are called nonprobate transfers.
Outline of Probate Procedure
- Determine if there is a valid will. If there is, and it names a personal representative, then the personal representative will manage the estate process under court supervision. If no personal representative is named, or the named personal representative does not wish to serve, then the court will appoint an administrator to carry out the probate process.
- Identify the heirs. If there is no will, then the heirs will be determined by the state statutes governing the intestate distribution of property. If there are minor children involved, and no legal guardian has been appointed for their supervision, then the court will appoint card guardians or conservators.
- All probate property must be located and appraised.
- All expenses, debts, and taxes must be paid out of the assets of the probate estate. Expenses include the expenses of administering the estate, hiring attorneys or appraisers, and the final expenses of the decedent. Notices must be published in a local newspaper about the person's death, so that creditors can be deemed to be notified of the death. Generally, creditors have 6 months from the publication of the notice to file a claim against the estate; otherwise, they will be forever barred. The estate representative must also file all tax returns and pay any due tax.
- Resolve any disputes as to the interpretation of the will or that may arise from heirs, creditors, tax authorities, and other parties that may object to the will. Generally, the probate court will resolve any disputes but the representative may need to hire an attorney to resolve legal disputes.
- Only after all expenses, debts, and taxes are paid and all disputes are resolved can the property be distributed to heirs, which usually takes at least one to 2 years, but may be longer if there are disputes.
To pass property through a will or by intestacy means that it must pass through probate, which is the jurisdiction of the probate court.
The process of probate begins when the death certificate is presented to the probate court (sometimes called chancery court, orphan's court, surrogate's court, or the probate division of the district court) that has primary jurisdiction (aka domiciliary jurisdiction), which is the jurisdiction of the decedent's last address.
Personal Representative (Executor or Administrator)
The decedent's estate is administered by a personal representative. If the will names the personal representative, then he or she is called the executor of the will. If the person dies intestate or the will does not appoint an executor or the named executor declines the appointment, then the probate court will appoint an administrator who will execute the decedent's estate.
The personal representative is most often a close relative or friend of the decedent, and must post a bond if the will does not waive it, although most usually do. The court then issues letters testamentary to an executor named in the will or letters of administration to an administrator selected by the court, which legally allows the personal representative to act on behalf of the estate.
The probate process can involve many steps, depending on the size of the estate and the variety and types of property within it. All of the assets of the estate must be determined and its value, if not easily determined, must be appraised. The estate must file the decedent's last tax returns and pay any tax liability. As the estate is a separate taxable entity, the personal representative must also file a tax return for the estate and pay for any liability out of the estate's assets.
The personal representative must also notify all creditors of the decedent so that they can file a claim with the estate for payment. Known creditors of an estate must receive actual notice of the death of the decedent and that a claim should be filed with the estate with the personal representative within the statutory time. For unknown creditors, a notice in a local or other pertinent publication is generally sufficient. Creditors must file a claim within the deadline set by law or they will be forever barred from attempting to collect it. In most states, this time limit for filing claims applies only to probate property and not to trusts. However, some states, such as California, also limit the time for creditors to file claims against trust property.
If the estate has real estate, then it may be necessary to continue paying mortgages, or real estate may have to be sold or leased. If the property must be sold, then the personal representative may need to get a court order to allow the sale of the real estate and to give notice of all offers received, and may even require court approval for the final sale to the highest bidder.
Probating an estate that has real property located in another state requires ancillary administration, by petitioning the court that has jurisdiction over the property. Sometimes the ancillary administration must be conducted by a state resident, usually an attorney, who will then be entitled to an executor's or attorney's fee. Ancillary administration is necessary to ensure that the jurisdiction's laws are followed in transferring the property and to give creditors who have a lien on the property a notice of the transfer so that they can file their claim with the estate.
Fees, which usually require court approval, must be paid to attorneys, appraisers, and any other professional that was necessary to probate the estate, and the personal representative is paid a commission, although it may be waived if the personal representative is a close relative.
After all liabilities of both the estate and the decedent are paid, the remaining assets are distributed to the beneficiaries.
Probate can be formal or informal. Formal probate (aka notice probate, solemn form probate) requires that the personal representative get permission from the court to do everything, which includes property appraisals, debt payments, payment of fees, and the actual distribution of property. This, of course, greatly increases both the time necessary to probate the estate and the cost.
The purported purpose of formal probate is to prevent fraud, but, for years, probate courts and attorneys have used probate to extract fees out of the estate, which is why one of the main objectives of estate planning is to avoid probate.
Informal probate (aka ex parte probate, common form probate) allows the personal representative to administer the estate without going to court. He has the same powers that a trustee has over the trust.
Obviously, informal probate is much faster and cheaper than formal probate, but informal probate depends on trust, so it is only allowed if the personal representative is a close relative of the decedent and most of the beneficiaries are also relatives. Common law has allowed any party in interest to petition the court for a formal probate at any time, which greatly increased the cost and time for probate, but states have limited probate challenges to a fixed time.
Closing the Estate
The probate process ends when the personal representative gives a final accounting to the probate court. After everything has been done — creditors and taxes paid, property distributed to the beneficiaries, and so on — the personal representative must petition the court for a discharge to be relieved of any further fiduciary responsibility as the personal representative of the estate.
If you are the beneficiary of an account specifically titled to you, then you may access the account outside of probate, on your own, following the procedures stipulated by the company holding the account, such as by presenting the death certificate of the account owner. However, assets held by a trust must be distributed by the trustee and assets in an estate must be distributed by the personal representative of the estate. You may not access financial accounts or other assets not specifically titled to you, even if you know or receive the passwords for those accounts.