Probate is the process in which a deceased’s will is deemed valid by the law and all of the deceased property are distributed among the rightful beneficiaries. Here’s everything you need to know about it.
What is Probate?
Probate is the process in which a deceased’s will is deemed valid by the law and all of the deceased property including real estate assets and cars etc. are distributed among the rightful beneficiaries. In case of an intestacy, a probate is also proceeded but only when the property owned by the deceased was of very high value.
Sometimes, probate can be required to be done within one’s lifetime, that is when some very high value assets or property are owned by an individual.
The process of probate usually takes about few months to more than year, depending upon the complexity of the case. Usually, the more prosperous the deceased was, the more complicated and lengthen out the entire process is, and hence most importantly, the higher the cost of the probate will be.
-If a person leaves behind a will, he or she is called a TESTATOR. When a testator passes away, the executor, the one which is selected by the testator in his or her lifetime is responsible for initiating the probate process.
-When a person dies without leaving behind any will, he or she is said to have dies INTESTATE. Here, the probate court will assess what assets need to be distributed among the legal heirs and how to distribute them according to the probate laws of the state as they are different in each state.
What is the Purpose of Probate?
Probate ensures that the ownership of property of a deceased is successfully passes on to the people mentioned in the former’s will. However, if there is no will, the ownership is transferred to the next of kin usually following the probate codes of different states.
When is Probate Required?
If the deceased person already had a will before they passed away, probate is a requirement. Sometimes, it is not even necessary for the individual to pass away, probate itself becomes a necessity if the individual is an owner of some high value assets.
Another thing to keep in my mind is to check if the deceased’s property was not jointly owned. If it was, then the assets will automatically pass to the surviving co-owner.
How to Avoid Probate?
In order to avoid probate, there are many ways, few are listed below:
1. Own the High-Value Assets Jointly
In this case, if one of the owners does passes away, automatically the property will pass onto the living co-owner.
This technique is very beneficial in the case when a house is jointly owned by a husband and his wife, consequently, in case of death of one partner, the probate and its overwhelming amount of paperwork can be avoided.
2. Write a will in Your Life
Consider dividing and entrusting your property to rightful beneficiaries.
This will spare your loved one’s multiple court meetings and their associated complications, including massive expenses of probate lawyers, linked with the process of determination of rightful inheritors (normally these are the deceased’s next of kin).
Having a written will, will also save you large sums of hard-earned money that will otherwise go to government in form of probate fees, keeping in mind that the probate proceedings can get quite expensive.
3. Transfer on Death
This beneficiary is especially designated to avoid probate and the long list of problems that accompany it. However, this benefit is only provided 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.
4. Create a Living Trust
One of the smoothest and problem free way to avoid probate is by creation of a living trust.
A living trust might be confused with a will. The major difference lies in the fact that in a living trust, all of your property including high-value real estate and cars etc. are entrusted to a “trustee”, who is then responsible for further dealings of the inheritance.
The major advantage of this is that you avoid the probate and its complications including the probate fees.
5. Pay on Death Financial Accounts.
In this, banks allow a person to designate someone as beneficiary in case of unexpected death.
Should Probate Be Avoided?
The answer to this question lies in which state do one reside. Sometimes probate is an absolute necessity while other times it may not be of some actual value.
Probate laws are different in every state. Few states have very minimal probate proceedings fees including that of the court itself and of the appointed executor. However, in some states there is statutorily mandated court or attorney fees.
The reason behind most of the probate proceedings being so long and complicated are as a result of tax laws and tax filing requirements. Keeping in mind that these cannot eliminated simply by avoiding probate. So, if one’s intention behind avoiding probate is this, they definitely should think twice.
Also, thinking that having a living trust is always going to avoid probate is not true either. Rarely though, but probate might become a requirement even if the deceased had a living fund.
Benefits of Avoiding a Probate
- The entire process of probate and its proceedings are comparatively fast and smooth with lesser complications and paperwork involved.
- Huge sums of money that otherwise will be spend paying off the court and executor’s fees can be saved. Sometimes these fees can be very huge especially if the executor is legally entitled to a certain percentage of the estate, such as in California.
- In probate court meetings, a lot of the times, the interested beneficiaries have to make public appearances and the process itself is tiring. When you avoid a probate, you keep your matters of will and family inheritance private.
- A lot of the stress and time of both the interested parties and the judge and associated executor can be saved. This saved time can be then spent on cases for which probate is an absolute necessity.
Which Assets Go Through Probate?
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:
- owned solely in the name of the deceased person—for example, real estate or a car titled in that person’s name alone, or
- a share of property owned as “tenants in common”—for example, the deceased person’s interest in a warehouse owned with his brother as an investment.
Assets That Don’t Need to go Through Probate
Usually many of the small estates owned by the deceased need not to go through probate. The real complication arises if the deceased owned some very high value assets. If the deceased person was married and owned most everything jointly, or did some planning to avoid probate, a probate court proceeding may not be necessary.
Following is the list of assets that don’t need to go through a probate:
- Retirement accounts—IRAs or 401(k)s, for example—for which a beneficiary was named
- Life insurance proceeds (unless the estate is named as beneficiary, which is rare)
- Property held in a living trust
- Funds in a payable-on-death (POD) bank account
- Securities registered in transfer-on-death (TOD) form
- U.S. savings bonds registered in payable-on-death form
- Co-owned U.S. savings bonds
- Real estate subject to a valid transfer-on-death deed (allowed only in some states)
- Pension plan distributions
- Wages, salary, or commissions (up to a certain amount) due the deceased person
- Property held in joint tenancy with right of survivor ship.
- Property 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 survivor ship. (allowed only in some community property states)
- Cars or boats registered in transfer-on-death form (allowed only in some states)
- Vehicles that go to immediate family members under state law
How Long Does a Probate Take?
A common assumption that a lot of citizens have in their mind is that probate proceedings are complicated and time-consuming. But that is not true necessarily.
“It all depends on your state’s probate laws. In Texas, if you’re an only child, there’s a will in place, and everything goes according to plan, you could go through probate in three weeks. However, most people are looking at a minimum of eight to 12 weeks to properly go through probate.
Besides, several other factors play a crucial role in determining the length of probate. These include,
1. The Size of the Estate
The more the high value assets, the more will be the paperwork and hence more will be the complications. More will be the legal personnel involved and most importantly, more will be the cost of the entire process.
For example, if the total value of an estate’s real estate is less than $100,000 in Arizona then you can simply submit a small estate affidavit to claim your inheritance.
2. State to State Laws
Every US state has its own probate laws, in some states for example Texas, the probate process is rather straightforward and quick and only takes an average of two or three weeks.
3. Availability of a will or Intestacy Situation
If the deceased left behind a will, the process of probate is very quick and less complicated. But if no will is there, then it is court’s duty to distribute the assets of the deceased to the next of kin and this process is itself accompanied by an overwhelming amount of paperwork and a lot of court meetings.
4. Authentication of the will and Conflict Among Claimants
This point plays an integral role if the deceased was the owner o some very high value assets.
In such a case, many relatives rush out and sometimes make fake wills claiming their right to inheritance. Other times, the beneficiaries mentioned by the deceased in his or her will are not accepted by the relatives of the deceased and they claim that the will is false.
That makes the matters ugly.
Step by Step Proceedings of Probate
The process varies, depending on state, so it can be quite challenging finding probate law information but frequently two scenarios are encountered.
One in which the deceased had a written will and second in which the deceased does not any written will and he or she passes away without leaving any relevant instructions as to who should inherit their high value assets, a situation we call as INTESTACY.
The proceedings of the probate can be very lengthy with an overwhelming amount of paperwork or very smooth and quick. This depends upon the will. If the will is unchallenged (uncontested), that is all of the interested parties including the relatives of the deceased agree that the will is valid and they don’t challenge it, probate court meetings are very few and short. Normally in such a case, probate is not a hassle and goes smoothly.
However, probate can become quite messy if more versions of wills start surfacing, each party claiming that theirs is valid and should be reviewed. In such a case, the judge and the executor become much more involved and the entire probate process can be dragged on for months sometimes a year, legally justifying the rightful claimant.
Probate Proceedings in Case of a Written Will
Step 1: Filing a Petition for a Probate in Probate Courts
This includes locating the will of the deceased, appointment of a probate lawyer and most importantly informing all the heirs and beneficiaries of the deceased.
This process normally take place in the same state where the deceased passed away. The court determines the authenticity of the will and once that is achieved, the court officially appoint the executor or administrator. Usually, the fees of the administrator is cut off from the deceased property.
The administrator or the executor is then required to locate the assets of the deceased and notify the relevant party. The relevant parties include individual or beneficiaries named in the will and close relatives which in majority of the states means “next of kin”.
Apart from that if the executor notices any important creditor while going through the deceased’s financial documents, they are required to inform that person as well.
Step 2: Check the Authenticity of the Property
This also include all real estate assess whether within the country or even outside the country.
This process can be quite straightforward for example just checking the bank balance and cars but sometimes the appointed executor is required to visit the property and evaluate its worth. The executor sends copies of the inventory to the probate judge and heirs.
Step 3: Check for any Owned Debts or Unpaid Bills of the Deceased
This is a vital process and include a lot of things.
These include 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 the Debts
In case that the deceased did owned some debts, the payments of any such debts are done by selling the some of the deceased assets, enough to pay off the debts and all unpaid bills.
However, if any close relative of the deceased is willing to pay down the debts of the deceased, the selling of the assets can be avoided.
Step 5: Distribution of the Assets
In this, the deceased assets are distributed either to the beneficiaries named in his or her will.
If the individual name in the will is not a minor, this process is rather straightforward and quick. But if the deceased named a minor in his or her will, this process can be very complicated and long. Minors (individuals below 18), are unable to inherit anything directly.
The process that has to be followed in their case is that, their inherited assets are placed in a trust for safekeeping and only when they surpass the legal age that is 18 in majority of states, are they allowed to make use of that inheritance.
Once, all the assets have been distributed to the mentioned beneficiaries and the court and the executor’s fees has been paid off, a petition is then filed, requesting for the termination of the probate process.
Probate Proceedings In Intestacy
Each state has its own laws governing intestacy.
The distribution of intestate property is generally administered by the court with jurisdiction over the property (generally the situs of the property for realty and the decedent’s last domicile for tangible and intangible personality). Intestate property will generally pass to the decedent’s spouse and lineal descendants, if any, as provided by state statute.
Frequently Encountered Complications with Probate
Here is a list of frequently encountered complications with probate.
1. Probate and Mortgage
If the deceased owned a bank or any other high society a mortgage, under usual circumstances, the bank’s first decision is to pay the mortgage by selling some of the deceased’s property. However, if some close relative is willing to continue paying down the mortgage, then this can be avoided. The real complication arises when the mortgage or any other debts owned by the deceased out weights his or her property.
– In such a scenario, usually two outcomes are possible. One that the probate is not further proceeded and is terminated. Second, a relative who is willing to pay the mortgage, is asked to do so.
-Rarely, another complication is also encountered. This happens when the deceased owns an individual or a particular company a certain amount of money, but when the debtor unexpectedly passes away, this debt does not surface, neither are any claims from the lender are received. In such a case, in most US States, a period of a year is allotted in which the lender can claim. Once this period is over, no claims by any such party are deemed relevant.
2. Probate and Condemned Property
-Privately owned property can be condemned privately by the probate law. After condemning the property, 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.
-Filing a complaint in the probate court in the country in which the property is located is typically the first step for the condemnation process to start. Probate court must set a date for a meeting after the complaint is being filed.
-In US, the federal government has the right to condemn the property but if the owner does not agree with the process of compensation, he has got the right to take the matters to the court.
3. Probate and Minor Beneficiaries:
If the individual named in the will is under eighteen that is, they are minor, in almost all US states they are not able to DIRECTLY inherit anything. In fact, what happens is that a suitable, reliable trust with good repute is selected and the inherited money and all the property is entrusted to them for safekeeping.
When that minor reaches the legal age that is eighteen in most of the U’S states, the trust then entrusts all of the assets to that individual and the individual then becomes legal owner of all of that property including any real estate assets. He or she can now she those assets to his or her benefit.
4. Probate and Real Estate
Real Estate of the deceased includes the house he or she owned, any vacation houses he or she owned whether in the same state or a different state. An interesting thing about real estate to keep in mind is that any real estate property owned by the deceased in another country will also be considered in the probate proceedings and sometimes they have to be visited by the probate lawyer.
Apart from these, any other shops or houses that the deceased owned and was renting out should also be cleared out of the temporary residents and included as assets to be distributed.
How to get a Will
When creating a will, it is vital that one is very well aware of the probate laws in his or her state. The reason for that is that probate laws are different for every state. Moreover, creating a will is crucial for a much smoother and quick probate. Question is how does one create a will. Following are a set of instructions that one must follow in a chronological order to get a will:
1. Fill You will Form
Every state has its very own specific will form that can be easily found on respective state’s website. Make sure that you fill this form completely and all information provided in it absolutely correct.
2. Decide Who you Want Your Executor to be
The executor or the administrator or sometimes even called as the personal representative is an individual who administers you will according to your wishes. 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)
3. Name the Beneficiaries
These are the people whose names are written in your will following your wishes as someone who will receive property including real estate assets or money under your will. If one doesn’t designate anyone in their will, the court then determines who receives your property according to the state probate laws.
4. Decide who you Want to be Guardians for Your Minor Kids
This step is very crucial and needs to be acted upon with extreme care.
Choose someone who you completely trust, someone your family including your kids have a smooth bond with, someone you know will treat your kids and pets with utmost care and willingness if an unexpected tragedy strike.
Designate alternate guardians in case that the first chosen guardians pass away or are unable to fill that role because of any reason.
5. List Your Asset
Make a list of all the property owned by you, this step will help the executor in probate proceedings after one’s death.
The list of assets should include: most importantly the real estate assets that includes you home and any vacation houses that you own. keep in mind that the real estate assets are deemed worthy of distribution even if they are not in united states.
Apart from the real estate assets the list should include investment accounts, automobiles, checking accounts, saving accounts, valuable personal property like jewelry or antiques, personal family property with an emotional meaning for example any expensive jewelry or a piece of souvenir that you want someone in particular to have.
6. List Non-Probate Property
Not all the property that you purchase can be distributed among the beneficiaries that you named in your will. These properties require you to name someone when purchasing them that you wish that property will pass without any probate in case of your sudden death.
7. Enlist Your Debts
Make another list in which you add all of the debts that you have incurred during your lifetime.
Ensure that you keep this list close to your will. Moreover, if you’re in your old age and you want the entire probate proceedings to be less complicated for your loved ones, make sure that you pay your loans and pays along the way.
Try not have a long list of unpaid bills whether they are utility bills or credit card bills or something bug for example some income tax problem. If you owe some mortgage, try to pay them back in your lifetime
8. Review your Will and Inform Your Loved Ones
Also, if you feel like you might need to add something or update a few things about your will, all US states allow you to do so. So, don’t hesitate in updating your will with time.
How Much Does a Probate Cost?
The answer will be different for different states depending upon how much legal work is required to be done and how much assets does the deceased owned. Typically, the more assets the deceased owned, the more expensive and complicated the entire probate can become.
Lawyers usually use one of three methods to charge for probate work: by the hour, a flat fee, or a percentage of the value of the estate assets. Your lawyer may let you pick how you pay—for example, $250/hour or a $1,500 flat fee for handling a routine probate case.
1. Hourly Billing
Small town rates may be as low as $150/hour; in a city, a rate of less than $200/hour would be unusual. Big firms generally charge higher rates than sole practitioners or small firms, unless a small firm is made up solely of hot-shot specialists. Many lawyers bill in minimum increments of six minutes (one-tenth of an hour). So, if your lawyer (or a legal assistant) spends two minutes on a phone call on behalf of the estate, you’ll be billed for six minutes.
2. Flat Fee
It’s also common for lawyers to charge their probate clients a flat fee. That way, they don’t have to keep down-to-the-minute records of how they spend their time. If you agree to pay a flat fee for legal work, make sure you understand what it does and does not cover. For example, you may still have to pay separate court filing costs, fees to record documents, or appraiser’s fees.
3. Percentage of the Estate’s Value
The worst way to pay a probate lawyer—from the estate’s point of view—is to pay a percentage of the value of the estate as the fee.
This is customary only in a few states. And even in those states, lawyers are not required by law to collect a percentage fee. Usually, the lawyers are paid very high in relation to the amount of work that they perform.
State law allows lawyers to charge a set percentage fee in: Montana, Iowa, Arkansas, Missouri, California, Florida, Wyoming.
-These fees are often high under the circumstances because they are calculated based on the gross value of the probate assets, not the net value. For example, if you’re handling an estate that includes a house worth $300,000, with $175,000 left on the mortgage, the lawyer’s fee would be based on $300,000—not the $125,000 of equity the estate actually owns.
And the probate paperwork for a 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?
Probate Codes for Different U.S. States
Since every US state has different probate laws, it is vital to know which state you reside in and what are their laws. The probate rules and regulations for few of the important states are listed down with relevant links. (below is probate code which if googled will lead you to rules of respective state)
Uniform Probate Code in United States
Although the UPC was intended for adoption by all 50 states, the original 1969 version of the code was adopted in its entirety by only sixteen states.
These include Alaska, Arizona, Colorado, Florida, Hawaii, Idaho, Maine, Michigan, Minnesota, Montana, and Nebraska. Others are New Mexico, North Dakota, South Carolina, South Dakota and Utah.
The remaining states have adopted various portions of the code in a piecemeal fashion. In any case, even among the adopting jurisdictions, there are variations from state to state, some of which are significant.
A person attempting to determine the law in a particular state should check the code as actually adopted in that jurisdiction and not rely on the text of the UPC as promulgated by NCCUSL. In general, the UPC has not been as successful a standardization of the law as the uniform commercial code has been.
In conclusion, in majority of the probate cases are rather long and complicated procedures that should be avoided for one’s own benefit.
Finest way to achieve this is by writing a will within your lifetime, thus saving your loved one’s unnecessary wastage of time and money because life is just too uncertain, isn’t it?