Probate Information

What is Probate

Upon death, your will goes through probate. Probate simply means the process by which your last will is determined to be your final dispositive statement and which confirms the appointment of the person or institution you have named to administer your estate. The term probate is also used in the larger sense of probating your estate. In this sense, probate means the process by which assets are gathered, applied to pay debts, taxes and expenses of administration, and distributed to those designated as beneficiaries in the will.

The executor or personal representative named in the will is in charge of this process, and probate provides an orderly method for administration of the estate. The executor is held accountable by the beneficiaries (and sometimes is supervised formally by a probate court). The executor is entitled to a reasonable fee or commission. Probate law generally encourages or provides for partial distribution during the period of administration; assets may generally be distributed in kind rather than sold during this time. The tax laws generally focus the responsibility for death tax filings and payments on the executor under a will. Thus, the choice of an executor is an important one.

The basic job of administration and accounting for assets must be done whether the estate is handled by an executor in probate or probate is avoided. In the recent past, lawyers and other professionals have advocated the use of probate avoidance techniques (including revocable trusts) in states where the probate process was perceived as being too slow and too costly. Many states have simplified or streamlined their probate processes over the years. In such states there is now less reason to employ such probate avoidance techniques.

How is the Will probated?

The following is a VERY simplified outline the general probate process:

(1) The original of the Will is deposited with the Court (if any).

(2) The filing of the Petition for Probate first needs to be published in a local newspaper, before the Executor named in the Will (if one exists) or Administrator (if there is no Will) is appointed. Executors and Administrators are commonly referred to as Personal Representatives, so from this point forward in our outline, we will refer to Will Executors and Administrators simply as Personal Representatives.

(3) The Personal Representative then files a Petition for Probate of the Estate. Generally, for a period of four months from the date of publication of the Petition for Probate, creditors of the Estate can file claims against the Estate. This would include any prior creditors or judgment holders, debts resulting from last illness, funeral expenses, taxing authorities, etc.

(4) During this time period, the Personal Representative has to identify and collect assets of the Estate. To do this, the Personal Representative finds all bank and security accounts, debts owed to the Decedent, property owned by the Decedent, etc. The Personal Representative also has to maintain the assets in good condition, and to collect income for the Estate. This consists of maintaining insurance coverage, collecting rent, protecting assets from theft or damage, etc. The Personal Representative may also liquidate assets such as cars, real estate, etc.

(5) When the four month Claims period has expired, and when all assets have been collected, real property sold, and assuming no problems have presented themselves such as the Will being contested, the Personal Representative then files a petition with the probate court to allow a distribution of all remaining assets to the beneficiaries/heirs, and files a detailed accounting with the Court setting forth all monies received, monies disbursed, how assets were invested, and the proposed plan for distribution.

(6) If the Court approves the plan, the Personal Representative then divides the assets as instructed in the Will, or as required by statute if no Will exists. The minimum amount of time that the probate process can be completed is approximately six months, but it normally takes longer. Reasons for delays can include Will contests, property cannot be sold, one or more claimants not being notified in the original four-month Claim period so they end up having to be re-noticed, etc. This is among the reasons why it is important to have a good probate attorney; it reduces the chances of complications during the probate process.

Why is Probate necessary?

The primary function of probate is transferring title of the decedent’s property to his heirs and/or beneficiaries. If there is no property to transfer, there is usually no need for probate.

Another function of probate is to provide for the collection of any taxes due by reason of the deceased’s death or on the transfer of his or her property.

The probate process also provides a mechanism for payment of outstanding debts and taxes of the estate, for setting a deadline for creditors to file claims (thus foreclosing any old or unpaid creditors from haunting heirs or beneficiaries) and for the distribution of the remainder of the estate’s property to ones’ rightful heirs.

Does all of the decedent’s property have to go through probate?

No. Some process is a must to transfer legal title from the deceased’s own name to his or her beneficiaries or heirs. Most states also allow a limited amount of several types of property to pass to certain beneficiaries free of probate, or through a simplified probate procedure.

Real and personal property owned as a joint tenant passes to the surviving co-owners without going through probate.

Other types of benefits, such as a life insurance policy or annuity payable directly to a named beneficiary bypass probate. Money from IRAs, Keoghs, and 401(k) accounts transfer automatically, outside probate, to the persons named as beneficiaries. Bank accounts that are set up as payable-on-death account (POD for short) or an “in trust for” account (a “Totten Trust”) with a named beneficiary also pass to that beneficiary without probate.

If a Living Trust holds legal title to some of your property, that also passes to the beneficiaries without probate. (The Trust is a legal entity which survives you after your death.)

Where is Probate handled?

Probate usually occurs in the appropriate court in the State and County where the deceased permanently resided at the time of his or her death. Such courts go by different names in various states. In many states the court is simply called the Probate Court. However, in some states they go by different names. In New York, for example, the probate court is known as the Surrogate’s Court while in California it is the Superior Court, Probate Division.

The probate court usually handles all the personal property the deceased owned, plus all of the real estate that the deceased owned that is located in that same state.

What if the decedent owned land in more than one state?

The laws of the state in which the deceased was a permanent resident or “domiciliary” govern who would receive all the deceased’s personal property, wherever it was located, and all the deceased’s real property located within the state. Thus probate almost always is undertaken in the home state.

If the decedent owned out-of-state real property, the laws of the other state govern who gets it (unless there is a Will). If there is a Will, after it is admitted to probate in the home state, it is usually must be submitted to probate in the other jurisdiction in which the deceased owned real property. That separate probate procedure is formally referred to as “ancillary probate”. Some states insist upon the appointment of a Personal Representative who is a local resident to administer the in-state property.

If there is no Will, Probate is usually required in each state where the real property is situated, in addition to the home state. Each state will have its own unique pattern for distributing the deceased’s real property. The real estate in State A all might go to the spouse, in State B it might go 1/3rd to the spouse, 1/3rd to the son and 1/3rd to the daughter, and in State C it might go 1/2 to the spouse and 1/4 each to the son and daughter.

Do we have to go through probate if there is a will? Why can’t we just distribute the assets as the will says?

Generally it is necessary to go through probate or, in the case of smaller estates, a less formal procedure that is still under the general supervision of the probate court, before the deceased’s property can be legally distributed.

Even if a person dies with a Will (which is known as dying “testate”), a court generally has to have an opportunity to allow others to object to the Will, and if there are any objections, to determine if the Will is valid, because it is always possible that

(1) there was a later Will (which, if valid, would replace the older Will), or

(2) the Will was made at a time the deceased was not mentally competent to make a Will, or

(3) the Will was the result of fraud, mistake or “undue influence” or

(4) the Will was not properly “executed”, or

(5) the so-called Will is actually a forgery, or

(6) for some other reason (such as a pre-existing contract) the Will is not fully valid, or

(7) there are other claims against the deceased’s estate that impact what the beneficiaries under the Will would receive.

For example, if the deceased owned real estate in his own name, no knowledgeable outside person would accept title to the property, and no bank would lend a new buyer mortgage money on it, unless the estate went through probate so “clear title” could be given the new buyer. Similarly, few outsiders would enter into any other transactions involving the deceased’s property before the Will is “admitted to probate” and/or someone is lawfully appointed to act for the estate.

Who is responsible for handling the probate process?

The Personal Representative (sometime also referred to as the “executor” or “executrix” if there is a Will, or the “administrator” or “administratix” if there is no Will) is appointed as part of the probate proceeding and has the responsibility for managing the estate through the proceeding, subject to established probate rules and procedures.

In many states, the probate court has a considerable amount of control over the activities of the Personal Representative, and requires that she or he obtain prior permission of the court before certain actions, such as the sale of real estate or business interests owned by the estate, may take place.

What are the main duties of a personal representative?

The main tasks of a Personal Representative are to:

(1) determine if there are any probate assets;

(2) identify, gather, and inventory the assets of the deceased;

(3) receive payments due the estate, including interest, dividends, and other income (e.g., unpaid salary, vacation pay, and other company benefits);

(4) set up a checking account for the estate;

(5) figure out who is going to get what and how much under the Will (if there is no Will, the state’s “interstate succession laws” apply);

(6) value or appraise the estate’s assets;

(7) give legal notice to potential creditors (the procedure and deadlines for creditors to file claims vary from state-to-state);

(8) investigate the validity of all claims against the estate;

(9) pay funeral bills, outstanding debts, and valid claims;

(10) pay the expenses of administrating the estate;

(11) handle various paperwork, such as discontinuing utilities and charge cards, and notifying Social Security, Civil Service, and Veterans Administration of the death;

(12) file and pay income and estate taxes;

(13) distribute the remaining property in accordance with the instructions provided in the deceased’s Will; and

(14) close probate.

I was named as the executor in my sister’s will. Do I have to serve?

No, it is your choice to serve or decline to serve. If you choose to serve as Personal Representative you can later resign, although you may have to provide an “accounting” for the period you served. If you decline to serve, or resign after serving, the alternate Executor named in the Will typically is then appointed by the probate court.

If no alternate is named in the Will, or the named alternates die or are unwilling to serve, or a person dies without a Will, the probate court will appoint someone to serve.

Unless state laws require that another family member or beneficiary wishing to serve be appointed, and such family members or beneficiaries are qualified, willing to serve and readily available, it is not unheard of for a probate court to select a “political crony” or a trust company that has made contributions to the judge or her political party to serve as the Personal Representative as the fees sometimes can be quite lucrative.

If I serve as an executor, do I get paid?

Yes. In addition to all out-of-pocket expenses in managing and settling the estate, Personal Representatives generally earn a fee of about 2% of the probate estate for their work. (This varies moderately from state to state, and generally decreases as a percentage as the size of the estate increases.)

All fees and reimbursed expenses are subject to court approval. Additional fees may be allowed by the court in cases of unusual difficulty or extraordinary circumstances. On the other hand, if a Personal Representative is derelict in duty, the court may reduce or deny compensation, and the Personal Representative may be held responsible for any damages s/he caused.

If a person is both the sole beneficiary of the estate, and the estate is not subject to Federal Estate Tax, it usually does not make sense to take any fees as all fee income is subject to income tax. (The money a beneficiary receives from the estate is income tax free.)

What happens if the personal representative fails to perform his or her duty?

An executor or administrator who is derelict in his or her duty is personally liable for damages caused in the administration of the estate.

Liability may arise from improperly managing the assets of the estate, failing to collect claims and moneys due the estate, overpaying claimants, selling an asset without the authority to do so, or at an inappropriate price, neglecting to file tax returns on time, distributing property to the wrong beneficiaries, etc.

This means that the Personal Representative might wind up paying for the loss out of his or her own pocket.

What goes on in the probate of an uncontested will?

Typically the person named as the deceased’s Personal Representative (a more formal term is “Executor” or “Executrix”) goes to an attorney experienced in probate matters, who then prepares a “Petition” for the court and takes it, along with the Will, and files it with the probate court.

The lawyer for the person seeking to have the Will admitted to probate typically must notify all those who would have legally been entitled to receive property from the deceased if the deceased died without a Will, plus all those named in the Will, and give them an opportunity to file an formal objection to admitting the Will to probate.

A hearing on the probate petition is typically scheduled several weeks to months after the matter is filed. Depending on the state, and sometimes who the named beneficiaries are, how long before the death the Will was signed, whether the Will was prepared by an attorney, who supervised the “execution” of the Will, and/or whether the Will was executed with certain affidavits, it may be necessary to bring in the persons who witnessed the deceased’s signature on the Will.

If no objections are received, and everything seems in order, the court approves the petition, appoints the Personal representative, orders that taxes and creditors be paid, and requires the Personal Representative to file reports with the court to assure all the deceased’s property is accounted for and distributed in accordance with the terms and conditions of the Will.

Can I handle probate without a lawyer?

While there is no requirement to use a probate lawyer, probate is a rather formalistic procedure. One minor omission, one failure to send Great Aunt Maggie a copy of the petition, or a missed deadline, can cause everything to come to a grinding halt or expose everyone to liability.

The death of a family member or friend sometimes tends to bring out the very worst in some people. Experience shows that even in close families there is a tendency to get overly emotional about relatively trivial matters at the time of a loved one’s death, such as who gets the iron frying pan and who gets the kettle. Such minor matters, or any delays or inconveniences can be upsetting, pose issues of fairness, and create unfounded suspicion among family members. Thus it generally is a very good idea to “let a lawyer do it”.

What if someone objects to the will?

If someone files an objection to the Will, or produces another Will, what is known as a “Will contest” has begun. While Will contests are not that rare, and while few people actually win one, they can be extraordinarily costly and create incredible delays.

It is not just anyone that can contest a Will. For example, if you feel your recently deceased next door neighbor’s out of state children are awful people who didn’t give her proper respect and they do not deserve to get anything, that does not cut it. To properly contest a Will a person must have “standing” to object.

If, a person has proper standing to contest a Will — such as a child who was cut out of the Will by an angry parent, or even by a kindly parent who felt that the local charity, not his children, should get his assets, that child would have standing to bring a “Will contest”. If a Will gives the one sibling 2/3rds of a parent’s estate and the other 1/3rd, the one receiving less has standing to bring a Will contest. Similarly, if a later Will is less favorable to someone than an earlier Will, or no Will at all, that person has standing. A Will contest sometimes is launched to have a different person, bank or trust company serve as Personal Representative for the estate, or as a trustee of Trusts created by the Will.

What is the basis for a will contest?

Most of the challenges to invalidate Wills are by potential heirs or beneficiaries who got little or nothing. Questions on the validity of a Will must be filed in probate court within a certain number of days after receiving notice of the death or petition to admit the Will to probate.

The typical objections and unhappiness is not one of them are:

(1) the Will was not properly drawn, signed or witnessed, according to the state’s formal requirements;

(2) the decedent lacked mental capacity at the time the Will was executed;

(3) there was fraud, force or undue influence; or

(4) the Will was a forgery.

If the Will is held invalid, the probate court may invalidate all provisions or only the challenged portion. If the entire Will is held invalid, generally the proceeds are distributed under the laws of intestacy of the probating state.

Needless to say, if there is even the possibility of a Will contest, an experienced probate lawyer is a must.

What if there is no will?

If a person dies without a Will (known as dying “intestate”), the probate court appoints a Personal Representative frequently called an “Administrator” or “Administratix” to receive all claims against the estate, pay creditors, and then distribute all remaining property in accordance with the laws of the state.

The major difference between dying testate and dying intestate is that without a valid Will an intestate estate is distributed to beneficiaries in accordance with the distribution plan established by state law; a testate estate is distributed in accordance with the instructions provided by the decedent in his/her Will.

What happens if a will cannot be found?

Missing Wills raise all sorts of interesting legal issues which often turn on the specific facts and circumstances, and the law of the state in which the deceased resided.

The Will may be missing because the deceased intentionally revoked it, in which case, depending on state law, an earlier Will or the state’s rules on interstate succession would determine who gets the deceased’s estate.

Alternatively, the Will may be missing because it can be proven the Will was stored in a bank vault that was destroyed in an explosion and fire. In that case the probate court may accept a photocopy of the Will (or the lawyer’s draft or computer file), together with evidence that the deceased duly signed the original.

How can I find out if there was a will?

The first place to check is with the probate court in the County of the State where the deceased lived. In almost every case the Will, if filed, will be available to the public.

Anyone can get to see it, and for a modest fee, obtain a copy. If you are far away, a local lawyer or legal service bureau often can arrange to do a search and get a copy for you, at a relatively modest fee.

The fact that a person died — even if he or she “owned” substantial assets — does not mean that he or she actually had a Will, or that the Will was duly filed with the Court. In fact, if the deceased held property exclusively through a Living Trust, or a joint ownership arrangement, there may not have been a need to file a Will, because the Trust did not “die” with the individual, and with certain forms of joint ownership, the property usually passes to the other joint owners automatically, by operation of law.

How much does probate cost?

The cost of probate may be set by state law or by practice and custom in your community.

When all the costs are added up – and the costs may include appraisal costs, executor’s fees, court costs, costs for a type of insurance policy known as a “surety bond”, plus legal and accounting fees, probate can easily cost from 3% to 7% of the total estate value, and more. If there is a “Will contest” all bets are off.

How long does probate take?

The duration varies with the size and complexity of the estate, the difficulty in locating the beneficiaries who would take under the Will, if there is one, and under state law.

If there is a Will contest, or anyone objects to any actions of the Personal Representative, things can really drag out. Some matters have taken decades to resolve.

How can I avoid probate of my estate?

One approach to reduce or eliminate the need for probate is through use of a Living Trust that holds legal title to some or all of your property at the time of your death. The Trust is a legal entity which survives you after your death.

My relative left only a very small estate. Is there anything easy?

Some states have what they think are “simplified procedures” to handle certain estates whose value is below certain dollar limits. The limits may be as low as $5,000 or as high as $100,000, depending on the state.

Whether the simplified procedure is available or even appropriate given the particular circumstances is something that a lawyer can discuss with you. For example, if there are debts against the estate, it may make sense to go through regular probate processes.

How are estate creditors handled?

As part of the probate process, creditors are notified of the death (specific requirements for notification vary from state-to-state, and may vary from a personal letter to a notice published in an obscure weekly newspaper).

Creditors must file a claim for the amounts due within a fixed period of time to either the personal representative or, in some states, with the court. If the claim is approved by the executor, the bill is paid out of the estate. If the claim is rejected, creditors must sue for payment.

If there are insufficient funds to pay debts, states have statutes of one kind or another establishing who gets paid first. Executors most likely will commence selling property to pay off approved creditor claims. Any claims remaining are pro-rated.

Do beneficiaries have to pay creditors out of their own pocket if the estate is insolvent?

Generally not. Just as you “can’t take it with you” you just can’t make others responsible for your general debts, at least without their consent. (Otherwise a person could run up lots of debts, name his worst enemy as his beneficiary, and saddle his enemy with those debts at his or her death.)

Unless the deceased had gifted away his or her assets to someone shortly before dying, or otherwise acted in concert with them to defraud his or her creditors, beneficiaries should not have any liability to the deceased’s creditors just because they are beneficiaries. Of course, the Estate may not have anything left for them, but the beneficiaries would not be in the hole.

Of course, if the children or beneficiaries took any property or benefits from the deceased or the estate, or had assumed liability for care given the deceased, or guaranteed payment, they could be held liable for some or all of the deceased’s debts separately, not because they are relatives or beneficiaries.

How are taxes handled in probate?

For federal and state tax purposes, death triggers two events:

(1) It ends the decedent’s last tax year for purposes of filing an income tax return, and,

(2) It establishes a new, separate entity for tax purposes, the “estate.”

For Federal tax purposes, it may be necessary to complete and file one or more of the following, depending on the decedent’s income, the size of the estate, and the income of the estate:

(1) Final Form 1040 Federal Income Tax return.

(2) Form 1041 Federal Fiduciary Income Tax returns for the estate.

(3) Form 709 Federal Gift Tax return(s).

(4) Form 706 Federal Estate Tax return.

For state purposes, an executor must file the appropriate state income tax return (assuming the decedent was required to do so while living) and any state income tax returns during the probate period, plus possible estate tax, inheritance tax and gift tax returns. (In many states, gift, estate and inheritance taxes have been eliminated for most small and medium-sized estates.) The requirements for filing and payment vary widely from state-to-state.

Other taxes require the attention of the personal representative in the probate process, such as local real estate and personal property taxes, business taxes, and any special state taxes.

The executor should also be alert to the possibility of issues arising from tax years prior to the decedent’s death.