How Does Probate Work?
What is Probate?
Probate is the judicial process whereby a will is “proved” in a court of law and accepted as a valid public document that is the true last testament of the deceased, or whereby the estate is settled according to the laws of intestacy in the state of residence [or real property] of the deceased at time of death in the absence of a legal will. Wait, what?
In simpler terms, probate is the legal process through which a court or legal representative pays the debts of the decedent from the decedent’s assets and distributes any remaining assets to designated beneficiaries and heirs.
- validating the will of the decedent
- taking inventory of the decedent’s property
- having property appraised (if necessary)
- paying any debts and taxes of the decedent
- distributing any remaining property and assets as outlined in the will (or state law, if there’s no will).
If a will is present, once it is proven valid then its terms are executed, hence why the person assigned to administer the estate is called the executor. The executor acts as the personal representative of the decedent’s estate. If there is no will, the person assigned by the court to manage probate is called the administrator. (A court will also assign an administrator if the intended executor declines or is unavailable.)
The entire probate process typically takes several weeks (for small estates) to several months or years (for large estates) to complete. If you are facing the probate process, you may be asking the question, how does probate work? Sitting down with an experienced estate planning lawyer can help you understand the finer points of the probate process in your state. In the meantime, this article will outline the general process of how probate works.
Must the property go through the probate process?
The probate process is required unless the estate was set-up to avoid the probate process. Additionally, most states allow a certain amount of property to be transferred or sold without going through probate or to go through a simplified probate procedure if the value is less than a certain amount. Also, certain bank accounts, retirement funds, and life insurance policies with a payable-on-death beneficiary are transferred to the beneficiary upon the owner’s death without having to go through probate.
If probate is not required, the house can be transferred to the new owner much sooner. If you inherited a house in this way, you are able to move into the house, rent the house, or sell your inherited house without going through probate, but only if certain legal requirements are in place.
Also, the court will only probate property the decedent owned solely or as a tenant in common. For example, the court will not handle jointly owned property with right of survivorship or property held in a revocable trust.
Is there a will?
then someone, typically the spouse or adult child of the decedent, may request to be appointed as the administrator of the estate by the court in the county where the decedent resided or owned property. Most often, this job goes to the closest capable relative or the person who would inherit the majority of the decedent’s assets. The appointed individual isn’t obligated to serve in this manner. They can decline and the court will then appoint someone else.
If the decedent owned real estate in multiple states, an “auxiliary estate” must be opened in each state where the decedent was not a resident. Once someone has been appointed as the executor or administrator by the courthouse, then they become the legal representative of the decedent’s estate.
Contrary to popular belief, the law does not require that the court appoint a personal representative or executor of the estate in all probate matters. Small estates can often go through informal administration.
then that will must be authenticated. Depending on state law, this can easily be done if the will is notarized, or has been signed by at least two witnesses who are 18 years or older and who also sign the will in their capacity as witnesses. Many wills include “self-proving affidavits” in which the decedent and witnesses sign an affidavit at the same time the will is signed and witnessed.
In cases where a valid will is not available or the will is not accepted as valid by the probate court – due to an error in the document or because an heir successfully contested it this becomes an intestate estate. The most significant difference is that in the absence of a will that makes their wishes known, the decedent’s property will pass to the closest relatives in an order determined by state law.
Lacking this, however, one or more of the will’s witnesses might be required to sign a sworn statement or testify in court that they watched the decedent sign the will and that the will in question is indeed the one they saw signed.
Most states require that the person or entity (such as a law firm) that is in possession of the deceased’s will to file it with the probate court as soon as possible after the decedent’s death. An application or petition to open probate of the estate is usually done at the same time. It is sometimes necessary to file the death certificate at the same time as the will and the petition.
The will outlines who the executor or administrator of the will is. This person is responsible for making decisions on behalf of the deceased and is the final decision maker when it comes to any real estate that is included in the will. They will also distribute property to heirs and beneficiaries of the decedent.
When an incapacitated person is age 18 or older, the court can appoint someone to serve as guardian or conservator to handle the person’s care and finances. When a child (someone under the age of 18) is entitled to receive assets, for example, from a car accident injury settlement, an adult must open a guardianship of minor’s estate case in the probate court to approve and oversee the child’s funds.
Once an executor is appointed, they will receive “letters testamentary” from the court. This is a fancy, legal way of saying they’ll receive documentation allowing them to act and enter into transactions on behalf of the estate. This documentation may also be referred to as “letters of administration” or “letters of authority” depending on the state the probate is beig processed in.
It might be necessary for the executor to post bond before they are able to accept the “letters of administration” and act for the estate, although some wills include provisions stating this isn’t necessary. The bond acts as an “insurance policy” that will be used to reimburse the estate if the executor makes a mistake in the distribution of assets that financially harms the estate, and, by extension, its beneficiaries. The insurance bond is typically paid from the decedent’s estate.
In some states, beneficiaries may elect to unanimously reject the bond requirement, but in other states it is a legal requirement. This is especially true if the executor ends up being someone other than who was nominated in the will or if the executor lives in another state from which the probate is being processed.
Probate: If the decedent’s estate will be probated, there are typically just four simple steps to follow
- File Petition
- Take Inventory
- Pay Debts
- Transfer Title
- File a petition with the probate court and give notice to any and all possible heirs, beneficiaries, and creditors.
Probate court is where a petition is filed to conduct a court hearing in order to 1) Appoint an administrator of the estate if there is no will or 2) admit the will, if there is one, to probate and appoint the executor. Notice of the court hearing is generally provided to all known heirs and beneficiaries.
Notice of the probate hearing is published in newspapers in an attempt to make any unknown creditors, heirs, or beneficiaries of the decedent, aware of the proceeding. If any heir or beneficiary wishes to object the petition, they will have the opportunity to do so at the hearing held at the courthouse of the county the decedent resided in or owned property in.
- Once being appointed by the court, the personal representative must give notice to all known creditors of the estate and take an inventory of the estate property.
Once the probate hearing is completed and a personal representative is appointed, the personal representative is responsible for taking inventory of the decedent’s estate, including real estate property, cars, stocks, businesses, bonds, and bank accounts. The executor will collect all documentation regarding bank and investment accounts, as well as stocks and bonds in order to account for these. The executor is also responsible for locating any hidden assets, typically through a review of insurance policies, tax returns, and other legal documents.
The executor of the will is responsible for ensuring that property taxes are paid on all of the decedent’s properties, that property insurance is kept, and that all mortgage payments are made on time in order to prevent foreclosure so the property isn’t lost during the probate process. These payments are made from the decedent’s estate. The executor may take possession of other assets, such as collectibles or vehicles, placing them in a secure location.
In most states, immediate family members may ask the court to release short-term support funds while the estate is being probated. After some time, the court will grant the executor or administrator of the estate permission to pay the debts and taxes of the decedent and divide the rest of the assets among the people or organizations named in the will. Failure to notify beneficiaries of the decedent’s death can be grounds for a lawsuit from the beneficiaries who may wish to seek damages for assets they would’ve received had they been properly notified.
During probate, a court-appointed appraiser is hired to appraise non-cash assets, such as vehicles and real property. Other times the estate decides to hire an independent appraiser to evaluate the value of non-cash assets, such as vehicles and real property. This is all dependent upon the state laws of the probate court. The value of the decedent’s assets is determined by the date of death.
Many states require that the executor submit a written report to the court, listing everything the decedent owned along with each asset’s value, as well as a notation as to how that value was arrived at. The personal representative then provides written notice to creditors so that they may make a claim to the decedent’s estate. The time allowed for creditors to make a claim against the decedent’s estate is dependent upon state law.
- All estate and funeral expenses, debts and taxes must be paid from the estate.
During probate, once all claims against the decedent’s estate have been made, the personal representative is responsible for determining which creditor claims are legitimate and must be paid. The executor may reject any claims believe to be invalid. When this happens, the creditor may petition the court to have a probate judge decide whether the claim should be paid.
Once all known inventory of the decedent’s estate the personal representative is responsible for paying all funeral expenses, debts, creditor claims, and taxes from the decedent’s estate. Lawsuits against the estate may also continue, and the estate may be required to pay out any judgments ordered from these.
The executor will file the decedent’s final personal income tax returns for the year they died. The executor must also file income tax for previous years if the decedent failed to do so. They’ll determine if the estate is liable for any estate taxes, and, if so, file these tax returns as well. Any taxes due are also paid from estate funds. This can sometimes require liquidating assets to raise the money. Estate taxes are usually due within nine months of the decedent’s date of death.
If there are not enough cash assets to pay debts, the personal representative is responsible for selling non-cash assets of the decedent’s estate in order to pay any debts that were not satisfied by the cash assets.
Additionally, the executor is compensated for performing his or her duties. This fee may be outlined in the will, but often each state defines a minimum amount the executor can collect from the estate.
- Legal title in property is transferred according to the will. Of if the decedent did not have a will, property is transferred under the laws of intestacy and the court will determine the rightful heirs of the decedent’s estate in those cases. This decision can also be contested.
Claims against the estate must be made within a certain time frame. This time frame is dependent upon state laws. Once the waiting period allowing creditors to make claims against the estate has passed and all debts have been paid, the personal representative is then able to petition the court so that they have the authority to transfer the remaining assets to heirs and beneficiaries as directed by the decedent’s last will and testament. Via the executor, the beneficiaries can decide which types of property are transferred to whom, or if the property should be sold and the value distributed proportionally.
The executor will then petition the court for permission to distribute what is left of the decedent’s assets to the beneficiaries named in the will. This usually requires the court’s permission, which is typically only granted after the executor has submitted a complete accounting of every financial transaction they’ve engaged in throughout the probate process.
Some states allow the estate’s beneficiaries to collectively waive the accounting requirement but only if they are all in agreement that it’s not necessary. Otherwise, the executor will have to list and explain each and every expense paid and all income earned by the estate. Some states provide forms to make this process a little easier.
In cases where no will exists, the personal representative petitions to have the authority to transfer any remaining assets according to state intestate succession laws. Some states allow the estate’s beneficiaries to collectively waive this accounting requirement if they’re all in agreement that it’s not necessary.
If a trust for the benefit of a minor, spouse, or incapacitated family member is to be created, according to the will, money is then transferred to the trustee. The executor may also be responsible for setting up a trust to accept possession of these bequests because minors can’t own their own property.
The petition may include an accounting of how the assets were managed during the probate process; however, if allowed under the state law, beneficiaries of the estate may have the right to wave this requirement. After the petition is granted, the personal representative may draw up new deeds for any remaining property, transfer remaining stocks, liquidate remaining assets, and transfer remaining property to the appropriate recipients.
The benefit of a will, if properly drafted and updated regularly to account for life changes, along with an organized record of debts, personal property, and other assets simplifies the probate process and minimizes the costs of probate.
Once probate is complete, many decide to sell the properties they inherited through probate.
Selling the house you inherited is often full of emotions. As difficult as it may be, selling your inherited house will remove any legal and financial responsibility related to owning the house. And alleviate the stress that often accompanies inheriting a property through probate.
When selling your inherited house, you may wish to consider the hassles and costs associated with selling a house on the market:
- Finding a reliable and reasonably priced contractor to complete necessary updates
- The months spent and the total costs to fix up the house to get it ready to sell for top dollar
- Holding costs – such as keeping up with the monthly mortgage payment and utilities while you fix the house up to sell and while it sits on the market once finished waiting to be sold.
- Realtor commissions – often 6% of the total price
- Closing costs
- And Seller Concessions – often at least 3% of the total price that buyers often ask sellers to cover
We buy houses inherited through probate. If you are considering selling the house you inherited from probate, but don’t want to be bothered with the hassle of listing it on the market, let us help you make an informed decision. We work with sellers of inherited property regularly and would love the opportunity to answer any questions you may have.
This probate article is for educational purposes only. It is written to provide general information and a general understanding of the probate process, not to provide specific legal advice. This page should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.