What is Probate?
Probate is the legal process in which a court examines a recently deceased person’s will to determine whether it is authentic and legally binding — and then the will’s executor or administrator carries out the will’s instructions.
When a person passes away, their assets and belongings pass to their descendants or to other designated parties. A person uses their last will and testament to explain which assets should be given to which people and to make other arrangements that may be necessary after their death. Probate is the process in which a court examines the will, ensuring that it is legally binding and was genuinely created by the deceased when they were of sound mind. Probate further refers to the process in which the will’s executor or administrator follows through on the deceased’s wishes to the extent possible.
Consider a scenario where a parent’s will specifies that their son should inherit their home, and their daughter should inherit their summer home plus the money remaining in the parent’s retirement account. Both houses and the retirement account will become part of the parent’s estate when they pass away. If probate determines that the parent’s will is valid and binding, the executor of the estate transfers ownership of the assets to the children as the will specifies.
Probate is like a referee reviewing a play during a football game…
When a play happens, sometimes the referee goes back and looks at the evidence to determine what happened during the play, and if all the calls made by the officials were correct. Like the process of a referee reviewing a play, probate is meant to keep things fair and legal, and make sure everyone gets what they’re due.
During probate, a court considers the last will and testament of someone who has recently passed away. During the process, the court ensures that the document was genuinely created by the deceased, that it accurately reflects the deceased’s expressed wishes when they were of sound mind, and that the will is legally valid.
Probate also includes the process of the will’s executor or administrator handling the estate and disbursing the estate’s holdings to its inheritors in a way that can be verified by the court.
Probate is an essential part of handling a will because it provides a set of checks and balances to the process. In some scenarios, people may be coerced into making changes to their will or taken advantage of while in a declining mental state. Probate gives the deceased’s relations a chance to uncover and rectify these issues.
Once a will is validated, the executor of the will has to deal with handling the estate. Most people have creditors, whether it be a mortgage lender, credit card company, or someone else. The estate is responsible for paying the debts of the deceased before the money is passed to the inheritors. Probate provides a legal process for handling the final outstanding charges and tax bills of the decedent before assets are distributed.
Probate starts with the legal process of authenticating a will and proving its validity — and ends with the disbursement of the estate’s assets to beneficiaries.
In most states, the person or group that holds someone’s last will and testament must file it in the probate court as soon as possible after the deceased passes away. Typically, they will also apply to open probate and may provide a death certificate at the same time.
Once probate is open, a judge will examine the will to confirm that the will is valid. This process usually involves a court hearing. All beneficiaries named in the will must be notified of the hearing. If the will does not specify recipients, those who are in line to inherit based on local law are notified.
To prove a will’s validity, courts often use a “self-proving affidavit.” In this scenario, the deceased and one or more witnesses signed an affidavit at the same time that the will is produced. Courts may also ask witnesses to the will to sign a sworn statement or to testify under oath that the will is the one the deceased wrote and signed.
During the probate hearing, anyone may object to the will or its clauses. Someone may object because the will was not correctly written and structured or because they have a more recent version of the will. People can also object to the executor named in the will if they have reason to believe the named executor cannot properly accomplish the task.
Once a will has been declared valid, the court will appoint an executor. The executor is responsible for managing the estate and following through on the wishes laid out in the deceased’s will. Most wills indicate the deceased’s preferred executor. If the will does not name an executor or the named executor declines, the court will appoint one, usually a surviving spouse or adult child.
No one is obligated to serve as the executor of a will. They can decline and have the court appoint someone else.
The court provides the appointed executor with letters testamentary (also called letters of authority or administration). These documents prove that the executor has the right to manage the estate.
In some scenarios, the executor must post a bond before he can accept the letters testamentary. The bond proves the executor’s willingness to execute the will accurately and without error. If the executor makes a mistake or acts in ways that damage the financial value of the estate, they will forfeit the bond, which is used to reimburse the estate.
The first thing that the executor must do is figure out where the decedent’s assets are. Assets include investment accounts, retirement accounts, bank accounts, securities, real estate, collectibles, and so on. This process could be easy if the deceased kept good records and tricky if they did not.
Depending on the assets, the executor may take possession of and store them or provide for their maintenance. For example, the executor is responsible for making sure that vehicles are maintained and kept safe and that property taxes are paid on real estate.
The executor also has to determine the value of each of the deceased’s assets on their death date. Date of death values are essential for tax purposes, such as determining the cost basis of inherited securities.
Executors can determine these values by looking through account statements or by hiring appraisers. After recording the values, the executor usually provides a report of the assets and their value to the court.
The executor of a will must inform any of the deceased’s creditors of the person’s death. Some states also require public notification of death, such as in a local newspaper, so creditors the executor does not know about can be alerted to the person’s death.
Most states have a time limit, after which creditors cannot make notices of claims against estates. The executor must deal with any notices of claim and ensure that they are valid. If an executor rejects a creditor’s claim, the creditor can petition the court for a ruling on whether its claim is valid.
Once all creditors are notified of the deceased’s passing, the executor must pay the obligations of the departed out of the estate’s funds. If the estate does not have enough funds to pay all of its debts, the executor is not responsible for the remaining balances unless they are already responsible (for example, as a cosigner or a spouse in a community property state).
The executor must file a submit tax return for the decedent’s estate, which includes a personal tax return for the year the person died. The executor also has to determine whether the estate owes estate taxes and file the relevant documents if so.
The final step in the probate process is distributing the estate to its beneficiaries. Before doing this, the executor must petition the court for permission to distribute the remainder of the estate. The court reviews the documentation provided by the executor to prove that he or she accurately executed the will and dealt with the estate’s remaining liabilities.
Once the court is satisfied and grants permission, the executor may begin disbursing funds and assets to the estate’s beneficiaries. If the beneficiaries are minors, the executor may need to establish trusts to transfer ownership of the assets and funds properly.
Probate does not require a lawyer, though legal professionals can provide valuable advice to executors who want help handling an estate.
A lawyer will be helpful during probate if an inheritor or family member has reason to believe that a will is invalid. For example, a lawyer can help prove that the decedent was coerced into writing the will to favor one person over another. A lawyer can also help executors handle unusual assets or large estates without making mistakes.
For small or uncomplicated estates, some executors can handle the process without legal advice.
The amount of time probate takes depends on the size and complexity of the estate. A small estate that belonged to someone with a couple of bank accounts and a few investments will likely take far less time to handle than the estate of a multi-millionaire with a charitable foundation and multiple trust funds.
In the majority of cases, probate will take less than a year as the court validates the will and executor handles the estate. It can take longer if someone contests the validity of a will, if the estate includes complicated assets such as family businesses, or if the estate is large enough to owe estate tax.
There are costs related to the probate process, including probate court fees and executor fees. These fees vary from state to state and can be waived in some scenarios. For example, an executor who is a close family member or who inherits from the will may waive the executor fee. Hiring lawyers to assist with the probate process also costs money.
There are also fees related to dealing with the estate. These fees include appraising the value of assets like collectibles, or accounting fees to determine the date of death values.
If a person doesn’t have a will at their time of death, they have died ‘intestate.’ When a court finds a will invalid, an estate is also called intestate. State law governs how intestate estates are handled.
Typically, the probate court appoints an administrator to oversee the estate and distribute the assets to the decedent’s legal heirs as determined by state law; often, this includes a surviving spouse, children, or parents.
Probate court is a special type of court where probate cases are handled. The judges and staff of probate courts are experienced with handling will validation, people challenging wills, and appointing executors or administrators of a will.
Probate is not always a required process, though the regulations vary from state to state. In most states, probate is not required if the estate’s value is below a certain amount. For example, Massachusetts allows a highly simplified probate process if the estate is worth less than $25,000.
Some assets avoid probate entirely. Often, pension and other retirement accounts, health or medical savings accounts, life insurance plans, and other financial accounts have designated beneficiaries. If they do, these assets can bypass probate.
For example, a bank account with a named beneficiary is called a payable on death (POD) account — Such an account will simply transfer ownership to the beneficiary upon the owner’s death, skipping probate entirely. Similarly, if you establish a living trust — while you’re still alive — with a designated beneficiary (say, your child), the assets can avoid probate after your death. Avoiding probate is generally considered a good idea when possible, to save your heirs time and money.
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