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Probate is the legal process that takes place after someone dies to determine how their assets will be distributed. The laws of every state vary, so it is a good idea to consult an attorney to determine whether a probate proceeding is necessary.
This article aims to provide a general summary of the probate process, including what it means to prove the will, post a bond, locate the decedent’s assets, notify creditors, prepare a final income tax return, and distribute assets to heirs. It is not meant to be legal advice. The process and timeline will vary depending on the state.
If you are the personal representative, or executor, named in the will, and are not familiar with the task and responsibilities involved, it is recommended that you consult a probate attorney or invest in a self-help legal resource for executors.
Proving the Last Will and Testament
Upon the death of an individual (the decedent), their last will and testament should be found and given to a probate lawyer or any other lawyer with experience in estate planning or family law. The will needs to be filed with a local state court because probate law (or estate law) is part of state law. The court will then prove the will, which in most cases means that as long as it appears to be valid, the decedent followed appropriate rules for executing the document, and there are no challenges to it from others who claim it to be outdated or fake, it will be accepted as valid.
In the case that there is no will, the state in which the decedent passed’s intestacy laws (laws governing the property of those who have died without a last will and testament) will control how the decedent’s property will be distributed to their heirs. In this case, the court will appoint an executor or personal representative (the individual tasked with fulfilling the last wishes of your loved one as described in their will).
Some individuals may wish to avoid probate, for a number of reasons: probate can be slow, probate is a public process and probate is a fairly complicated process if the estate is very large or the assets are complex. Some ways to avoid probate for certain or all of an individual’s assets would include using “pay on death” accounts so that the beneficiary is listed on the account and will transfer to them automatically upon the death of the account holder. Another strategy is to use a trust or a living trust. Trusts and trust law are complex and vary from state to state. Please consult an estate law attorney if you are interested in avoiding probate or creating a trust.
Posting a Bond
By posting a bond, the estate in effect gains an insurance policy that can reimburse the estate (and eventually the heirs) in a situation in which the executor commits any grievous errors, whether intentional or unintentional. The level of the error is usually set by a state’s probate laws and may vary from state to state.
Locating the Decedent’s Assets and Valuables
One of the most important tasks of the personal representative is locating the decedent’s assets and valuables. This can include anything from real estate, publicly traded equities (stocks), or other financial assets. Many last wills and testaments include a list of all assets and valuables and where they can be located. Having a list of assets is more important than ever, especially with the growth in electronic documents, online bank accounts, and even cryptocurrency (such as bitcoin) wallets.
Once all of the decedent’s property has been accounted for by the personal representative, they will then try and determine the value of all the property at the time of the death. This may seem straightforward, but in cases in which the decedent had a large and complicated estate, it may take months or years to find all the assets, in which time they may have greatly increased or decreased in value (another reason to make this process simple by listing all assets in a last will and testament).
Identifying and Notifying Creditors
The next step in the probate process is to identify any and all creditors of the decedent (read Closing Utility Accounts of a Deceased Loved One). In another article we explain how you should not close any email or telephone accounts of the deceased, even if they had lived alone, to give creditors a way of contacting you or the personal representative. If other accounts have not already been closed, then final bills can be paid and accounts closed one by one until all creditors are satisfied. Usually, an executor will also be required by state law to post in a public place or forum (a number of local newspapers usually) to let any creditors know that they have a specific amount of time to contact the personal representative to settle any outstanding debts or bills. Once the deadline has passed the creditor will no longer be able to collect on any outstanding bills or accounts.
Preparing and Filing an Estate Tax Return
A final tax return will have to be filed on behalf of the estate with the federal government and any state and local taxing authority that is relevant. The federal estate tax exemption is $11.4 million for a single person and $22.8 million for a married couple (the first to die can transfer or “port” their exclusion to the surviving spouse, effectively doubling it) for the tax year 2019. This means the decedent would not have to pay any taxes to the federal government on any assets given to their heirs less than $11.4 million (or $22.8 million for married couples). Make sure to consult an accountant and an attorney before making any tax or estate law decisions. The estate tax can change at either the federal or state level from year to year.
Many states also levy an estate tax on individuals who have died as residents of the state in question. Make sure to discuss residency and domicile with your tax accountant and estate or probate attorney.
Distributing the Estate to the Heirs
Once all the creditors and taxes, if any, have been paid, the remainder of the estate is distributed according to the last will and testament, if there is one, or by intestate succession laws of the state the will was probated in. Heirs are commonly family members but can be friends, charities or other organizations. If the deceased person had no family and no will, then the estate may default to the state.
Probating a will can be a complicated process depending on the complexity of the estate of the decedent and the details of the last will and testament. While many people have small estates and straightforward wills, it is always best to consult an attorney and an accountant, especially if you are the personal representative or maybe an heir to your loved one.
The information provided does not, and is not intended to, constitute legal, accounting or tax advice; instead, all information, content, and materials available on this site are for general informational purposes only.