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What You Need to Know About Probate

Probate Tile

Probate is when a deceased’s will is deemed valid by the law, and their property is distributed among the rightful beneficiaries. Here’s everything you need to know about validating a will. 

Table of Contents

What is Probate?

Probate involves validating a will or allocating a deceased’s property in court. If the assessment comes out healthy, the decedent’s eligible real estate and personal assets go to the rightful beneficiaries. Alternatively, the court shares the deceased’s property according to the state probate laws if there was no will, didn’t leave a will — referred to as intestacy. Sometimes, beneficiaries don’t have to probate small property — estates worth below $15,000 in Michigan.

How Long Does A Probate Take?

Probate filings usually take about a few months to over a year, depending upon the case’s complexity. A beneficial rule of thumb is that the wealthier the deceased was, the more complicated and expensive the Probate.

Here are some key terms to learn: 

  • A testator is a person who leaves a will behind. When the testator passes away, his executor/personal representative — named in the will —  is responsible for distributing property to the heirs.
  • An intestate is someone who dies without leaving a will. The probate court appoints the surviving spouse or a qualified individual as the executor in such a case.

What is the Purpose of Probate?

Probate ensures a deceased’s property is successfully passed on to beneficiaries in a will or qualified persons if there’s none. Also, Probate validates a will and its executor who has the right to administer a decedent’s estate. 

When is Probate Required?

Essentially, Probate is a necessary procedure if you’re dealing with a deceased person’s assets. However, unless the decedent planned or owned a small estate, the process is only quicker — not avoided. Also, Probate is required if the deceased’s property is not jointly owned. If it was, then the assets would be automatically passed on to the surviving co-owner. But you’ll still need to file for probate. 

How to Avoid Probate

Couple learning probate laws of Michigan

Below are several ways to keep your valuables out of Probate when you’re estate planning. 

Own High-Value Assets Jointly

When the owner of a jointly-owned property dies, ownership of the estate is transferred to the surviving partner(s). It’s common for couples to buy prized possessions, like their house, jointly. It saves a mourning heart from going into unnecessary paperwork and expenses. 

Write a Will

Consider naming beneficiaries to your property while you’re here, especially if you own a sizeable estate. Of course, your loved ones will still have to go through probate, but it’ll be a lot faster and cheaper than without a will.  

Create A Transfer on Death (T.O.D.) Deed 

A transfer on death (T.O.D.) is a simple deed that transfers ownership to beneficiaries only upon the owner’s death. What makes it an excellent option is that it’s simple to create, and you can revoke it anytime. At the moment, though, it’s only valid in these states; 

Alaska, Arizona, Arkansas, Colorado, the District of Columbia, Hawaii, Illinois, Indiana, Kansas, Minnesota, Missouri, Montana, and Nebraska. Others include Nevada, New Mexico, North Dakota, Ohio, Oklahoma, Oregon, South Dakota, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.

Create a Living Trust

One surefire way to avoid Probate is by creating a living trust. A living trust means you designate someone to handle and distribute your property in the event of death or mental illness — making you a trustee. While it’s initially more expensive than writing a will, it’s a lot cheaper than Probate and stress-free.

Open Payable-on-Death Financial Accounts.

Pay-on-Death is a designation of a beneficiary to your account upon death. Unlike joint ownership, the other party has no right to your assets until a passing. The process is as simple as filling a form when opening an account at a bank or any financial institution. 

Should Probate Be Avoided?

The answer depends on your situation because Probate is unavoidable in some states. For one, Probate can gurgle up plenty of expenses between executor fees, appraisal fees, attorney fees, and more. And it becomes more costly the longer it takes to finalize the proceedings. Speaking of, Probate can drag on for years if it’s complicated or involves a contested will. And sometimes, you can’t avoid the delay since you’ll be dealing with tax laws and filing requirements. 

Also, having a living trust doesn’t always save you from going through Probate. Sometimes, property not included in the living trust will be distributed according to the state’s laws, more like Probate. 

Benefits of Avoiding a Probate

  1. Probate avoidance practices make the process comparatively fast and less expensive if you still have to.
  2. Save a ton in court and executor fees. Attorney fees in Michigan, for instance, costs about four to eight percent of the estate’s value. 
  3. In probate court meetings, selected beneficiaries frequently make public appearances, and all the materials go into public records. When you avoid Probate, you keep your matters of will and family inheritance private.
  4. Saves stress and time for both the executor and beneficiaries.

Which Assets Go Through Probate? 

Lawyer_preparing_assets_to_go_through_probate_on_a_laptop

Here is a breakdown of the assets that go through Probate.

Assets That Need to go Through Probate

Only the following property is required to go through Probate:

  • Assets are owned solely in the name of the deceased.
  • Share of property held as “tenants in common.”

Assets That Don’t Need to go Through Probate

Depending on state laws, small estates worth between $50k to 250k usually don’t need to go through Probate. But avoidance becomes complicated if the deceased owns more valuable assets. Nonetheless, if the dead person was married, had joint properties, or planned ways to avoid Probate. 

Here’s a list of assets that don’t need to go through Probate:

  • Retirement accounts — I.R.A.s or 401(k)s.
  • Life insurance proceeds.
  • Earnings due to the deceased person, like salary or commission (up to a certain amount). 
  • Funds in a payable-on-death (P.O.D.) bank account.
  • Securities registered in transfer-on-death (T.O.D.) form
  • U.S. savings bonds registered in payable-on-death form
  • Co-owned U.S. savings bonds
  • House under a transfer-on-death deed (in eligible states).
  • Pension and annuity distributions.
  • Assets listed in a living trust.
  • Real estate is owned as a joint tenant with rights of survivorship (JTWROS).
  • Home owned as tenants by the entirety with a spouse (not all states have this form of ownership)
  • Property held in community property with right of survivorship. (allowed only in some community property states)
  • Vehicles registered in transfer-on-death form (in eligible states)
  • Automobiles transferred to immediate family members under state law

 

How Long Does a Probate Take? 

If you think Probate is a lengthy process, you’re right. It takes an average of seven months to close Probate in Michigan — and that’s if it’s straightforward. 

Sure, some estates may settle in a few weeks or months, but so can others drag on for months. Closing the probate process as fast as possible depends on several factors falling in place, like the executor living close to the attorney. For instance, court documents filed by the estate lawyer must be signed with the executor’s original signature. As a result, a meeting can easily be pushed back for weeks if he stays far away. Besides, several other factors play a crucial role in determining the length of Probate. 

Size of the Estate

The more valuable the assets, the more the paperwork, and the complications will be. It also means more involvement from your probate lawyer, hence higher fees. But smaller estates have swift probate proceedings or even qualify for exemption in some states. For example, if the total value of an estate’s real estate is less than $100,000 in Arizona, you can simply submit a small estate affidavit to claim your inheritance.

Debts

Every state has its own probate laws, deciding how to handle debts in Probate. In Massachusetts, for instance, the executor has to wait one year for creditors to claim debts, while it only takes four months in Texas. 

Availability of a will or Intestacy Situation

Probate is very quick and less complicated if the deceased left behind a will. However, the court distributes the deceased’s assets to the next kin or children without a will. This process is accompanied by overwhelming paperwork and court meetings.

Authentication of the will and Conflict Among Claimants

Authentication of the will would make more sense if the deceased owned some very high-value assets. In some situations, cunning relatives could rush out and make fake wills claiming their right to inheritance. The relatives of the deceased do not accept other times, the beneficiaries mentioned by the deceased in their will, and they claim that the will is false. It’s a situation like this that’d drag on the probate process. Fortunately, if you can prevent this if you write your will.

Step by Step Proceedings of Probate

Female_lawyer_happily_preparing_for_probate_proceedings

The process varies depending on the state, so finding probate law information can be challenging, but two scenarios are frequently encountered. Either the deceased wrote a will or passed without leaving one. That said, Probate can be a lengthy proceeding, riddled with paperwork and court meetings. But it can also be smooth if the will is clear and accepted.  

If the will is unchallenged (uncontested), i.e., all the beneficiaries accept its terms, probate court meetings are cut short. However, Probate can become quite messy if more versions of the will start surfacing, with each party claiming that theirs is valid and should be reviewed. In such a case, the judge and the executor get more involved, and the entire probate process can be dragged on for months, sometimes for years, to justify the rightful claimant.

Probate Proceedings in Case of a Written Will

Step 1: Filing a Petition for a Probate in Probate Courts

Opening the probate proceedings involves the executor filing a petition and informing all heirs and beneficiaries about the case. If you didn’t have a will, the court appoints an administrator who has the same function of settling debts and distributing the balance among beneficiaries. 

The executor appoints a lawyer who validates determines the authenticity of the will, and once that is achieved, the court officially appoints the executor or administrator. A commission is deducted from the deceased’s estate to pay the executor (unless he’s a family member and decides to waive the fee). 

Step 2: Check the Authenticity of the Property

This includes real estate assets, whether within or outside the country. Plus, it’s pretty straightforward, for example, just checking the decedent’s bank balance and cars. But sometimes, the appointed executor visits the property to evaluate its worth. Then, finally, the executor sends copies of the inventory to the probate judge and heirs.

Step 3: Check for Debts or Unpaid Bills of the Deceased

This is a vital process and includes a lot of things, including late mortgages, property taxes, storage fees, car and boat loans, federal and state income tax, condominium fees, loans against insurance policies, credit card bills, and personal loans. Others are student loans, lines of credit, cellphone bills, and even utility bills.

Step 4: Payment of Debts

Another crucial step in the proceedings is when the executor checks for and informs creditors. If the deceased was in debt, his assets are sold to pay off his creditors. However, if any close relative of the deceased is willing to pay down the deceased’s debts, selling the assets can be avoided.

Step 5: Distribution of the Assets

As it implies, this step involves sharing assets among the beneficiaries. If there are no minors, this process is relatively straightforward and quick. But if there were, the reverse is the case. Since minors — anyone under eighteen — can’t inherit anything directly, their share of the inheritance has to enter a trust for safekeeping until they come of age. Only then can they use the inheritance. Finally, the executor must file a petition to close the probate process when it’s all said and done. Else, though rare, all could be lost.  

Probate Proceedings In Intestacy

Every state has its laws governing intestacy — some might overlap, but there are subtle differences. Remember, intestacy is when a person dies without a will. Traditionally, a court within the jurisdiction of the property handles the distribution of the departed’s assets. All things being equal, they’ll be passed on to the surviving spouse or lineal descendants — children, grandchildren… if any — as provided by state statute.

Frequently Encountered Complications with Probate

Here is a list of complications people commonly encounter with Probate.

Probate and Mortgage

If the deceased owed a bank or financial institution mortgage, the lender’s first action is to clear the debt by selling off their property. However, issues arise when the decedent’s debts outweigh assets. 

Solution 1

In such a scenario, usually, two outcomes are possible. For one thing, Probate could be altered. Or better, a relative steps in to pay off the mortgage. Sometimes, though rarely, another debt complication could come to life. The deceased owed some money, but no claims were received from their creditor(s). 

Solution 2

Aside from paying the debt, the only solution is to wait out the creditor. In most U.S. states, the lender has a few months or one year to lay a claim. Anything outside this timeframe is rendered irrelevant, and Probate continues.  

Probate and Condemned Property

Solution 1

Privately owned property can be condemned privately by probate law. After condemning the property, the probate court should issue the notice within seven days of the commissioner’s report. It is estimated by a survey done that the probate court charges an estimated amount of forty-five dollars for land or property condemnation.

Solution 2

Filing a complaint in the probate court in the country where the property is located is typically the first step for the condemnation process. The probate court must set a date for a meeting after the complaint is filed. 

Solution 3

In the U.S., the federal government has the right to condemn the property, but if the owner disagrees with the compensation process, he has the right to take the matters to court.

Probate and Minor Beneficiaries

Minors — Children under the age of eighteen (18) — can’t directly inherit anything in the U.S.A. But that doesn’t mean you can’t will your property to your children. 

The solution: 

Appoint a reliable trust — someone you can entrust with your assets — who’ll safely keep the inheritance till the kids come of age. When the minor beneficiary clocks eighteen, the trust transfers ownership of all the assets.

Probate and Real Estate

A decedent’s real estate includes their house, vacation home, or buildings they owned locally, nationally, and abroad. Also, any other shops or houses that the deceased owned and rented out should be cleared out of temporary residents, including assets.

How to Write a Will

writing _a_will_for_smooth_probate_

When you’re creating a will, you must be aware of the probate laws of your state of residence. That said, the following are a set of instructions that one must follow in chronological order to get a will:

Fill the Form

Today, states make will forms readily available that you can download or fill on the official government websites.  So, you’d want to start from here. As you proceed, take your time to fill the form with only genuine information.

Select A Trusted Executor

An executor is your representative who administers the will according to your wishes. So it’s ideal to appoint someone you trust with your life. A common trend in executor selection is that majority of people choose their spouse, friend, or their adult child (a child who is above 18 years of age).

Name Beneficiaries

Beneficiaries are the people who will benefit one way or another from your estate. It’s your responsibility to name and reward them according to your wishes in your will. If there are no beneficiaries (almost impossible if there’s a will), the court distributes your property according to state probate laws.

Choose A Guardian for the Children

When it comes to parenting, it’s general knowledge it requires patience and care. Choose someone you completely trust, someone your family, including your kids, have a smooth bond with, who you know will treat your kids and pets with utmost care and willingness if an unexpected tragedy strikes. Designate alternate guardians in case that the first chosen guardians pass away or are unable to fill that role for any reason.

List Your Assets

Make a list of all the property you own to make allocation hassle-free for your executor in probate proceedings. The list of assets should include: most importantly, the real estate assets that include your home and any vacation houses that you own.

Other possible assets to list in your will include: 

  • Bank and investment accounts.
  • Automobiles. 
  • Valuables like jewelry or antiques.

List Non-Probate Property

Not all the property you purchase can be distributed among the beneficiaries you named in your will. These properties require you to name someone you wish to pass on without Probate when purchasing them.

Don’t Hide Debts

If you mean well to your beneficiaries, you should do this right. Create a separate list that consists of all the debts you’ve incurred during your lifetime. That said, doing this right makes the probate proceedings much less complicated for your loved ones than it already is. In the spirit of listing bills, try to pay them up — anything from utility bills, credit card bills, mortgage, or income taxes. 

Review your Will and Inform Your Loved Ones

Also, if you feel you need to update the details in your will, it’s approved in all U.S.A. states to make sure your will is done — pun intended.

How Much Does a Probate Cost?

It varies among states depending on how much legal work is required and the deceased’s assets. Basically, your lawyer can charge you for Probate in three different ways, from which you’ll pick from. 

Hourly Billing

Most probate lawyers will charge by the hour. If you’re in a small town, you can expect an average of $150 per hour or $200/hour in a city. Keep in mind that these are the barest minimum. Rates vary by the experience, firm, and specialty of the lawyer. For instance, big firms charge more than sole practitioners or small firms. Also, trust or estate lawyers whose specialty is working on probate cases will command a higher hourly price. However, compared to general practitioners, they can work more efficiently and finalize the process faster. Oh, and most lawyers bill in increments of six minutes (one-tenth of an hour). So, if your lawyer (or a legal assistant) spends two minutes working on your estate, you’ll be billed for six minutes.

Flat Fee

Some lawyers hate to keep track of their billable hours, so they charge a flat fee for the whole procedure. However, the fee still comes around to an hourly rate because they can estimate how long a probate case will last from its complexity. 

On the bright side, it also relieves you of paying pesky six-minute interval charges. Like with all contracts, you should establish common ground with the lawyer on what your payment covers or does not. For example, you may still have to pay separate court filing costs, fees to record documents, or appraiser’s fees.

Percentage of the Estate’s Value

Arguably the worst way to foot the bill for Probate is to pay a percentage of the estate’s value. The single reason: it’s costly compared to the amount of work a lawyer performs. And the worse part is that the rate is calculated based on the gross value of an estate.So, for instance, if your house is worth $500,000 and the deceased only paid half on their mortgage, you’ll still be charged on its total value. 

State law allows lawyers to charge a set percentage fee in Montana, Iowa, Arkansas, Missouri, California, Florida, Wyoming. And the probate paperwork for transferring a $1 million house is basically the same as it is for transferring a $150,000 house. So why should the fee be so different?

Finding Probate Codes for States in the U.S.A. 

Since every U.S. state has different probate laws, you should know the probate codes of the state you reside in. Ordinarily, you’ll find them in a section of the state’s website under various names. But you can also use Find Law, a directory of estate and probate laws for all fifty states. 

Uniform Probate Code (U.P.C.) in the United States

Although the uniform probate code (U.P.C.) was drafted for all 50 states in the U.S., only sixteen states have adopted it. These include Alaska, Arizona, Colorado, Florida, Hawaii, Idaho, Maine, Michigan, Minnesota, Montana, and Nebraska. New Mexico, North Dakota, South Carolina, South Dakota, and Utah. The remaining states use portions of the code piecemeal. Even among the adopting jurisdictions, some variations still occur.

All in all, always check individual state codes, not the general U.P.C. promulgated by the National Conference of Commission on Uniform State Laws (NCCUSL). In conclusion, Probate can drag on and become more complicated than it needs to be. All it takes is planning your estate ahead, writing a will to pass on your legacy to your kin without them suffering to get it. 

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