How Does Probate Work?
If you’ve recently lost a loved one, you may be trying to figure out the next steps even while still in the grieving process. Depending on the size of their estate, you might be feeling overwhelmed. Even if you realize that the estate must go through the probate process, you may be confused as to what that means for you if you are the executor or one of the heirs.
Understanding What Probate Means
Probate is a legal term for dissolving an estate – with or without a will. To go through probate means to complete a process which resolves debts and disperses the rest of the estate to the heirs as determined by the will or by the laws of the state if no will exists.
When an estate goes through probate, it must be processed through a court, which will oversee the work and ensure it is handled properly. Each state has its own laws regarding probate and how an estate is to be divided, but the basic process is the same.
How to Begin Probate
Probate begins by someone filing a petition to open probate with the court. This is generally the county court where the decedent was living when they died. It may also be the county where the majority of their property is located. A few states have their own probate court, which is separate from the county court.
The person who files may be the executor of the estate or an heir. It is usually at the same time that the death certificate is filed. Some states have limits on how long after a person’s death probate may be filed while other states simply state that it should be done in a timely manner. Once the petition is filed, a hearing date is set.
Testate vs. Intestate
You may hear an estate referred to as testate or intestate.
These are two important terms which will dictate how the estate is to be handled. An estate which is testate is one with a will that is recognized to be valid and legal. An intestate estate is one where there is no legal will found or the will has been proven to be invalid.
A will can be disputed by anyone involved in the estate. The probate court must review the information and testimony of the parties to make the decision as to accept the will or reject it and proceed with the estate intestate. For a will to be valid, it must be in writing. Oral wills no longer have any credibility. The will must be signed by the maker and dated. Two adults must have witnessed the signature and signed it as well. Each state has its own specific laws to verify a will, which may allow for the decedent to have created and signed the will with no witnesses present. These are known as holographic wills.
The probate court will only reject a will if it was determined to be invalid. There are a few ways the will can be deemed to be invalid.
This step is an important part of the probate process, and it will determine much of what happens next.
The First Hearing
During the first hearing, the probate court will determine whether to accept the will. Assuming there is no problem with the will, the court will either approve someone who is named in the will to be the executor, also known as a personal representative, or they will appoint someone if no one was named or if there is no will. It is at this time that someone may contest the appointment, or the person named may decline. Once a person is named to act as an executor or personal representative, they receive documents or letters testamentary to show they have authority to act on behalf of the estate. This paperwork allows them to make decisions regarding the estate, including paying bills, managing money and other assets, and even selling assets.
The Jobs of the Executor
Being an executor or personal representative is an often complicated, time-consuming task in the probate process. It can take up a great deal of their time, especially if the estate is vast. Many states have time limits on when certain actions must be completed to ensure probate continues to move forward.
Notify Heirs of Probate
The executor must notify anyone named in the will that the estate is in probate. While this may sound like a simple task, especially for family, it’s not always as easy as you might think. Some heirs may live far away or be in poor health and not know about the person’s death. They may not know they were included in the will.
Notify Creditors of Probate
Another job for an executor which must be completed right away is to notify any creditors of probate. Even though the person has died, their estate is responsible to pay those debts. Some states require the executor to mail notification to all known creditors while other states allow for publication in a local newspaper to be sufficient.
Creditors have a limited time to respond to the notification and present their claims. If they miss the deadline, they may not receive payment. If the executor disputes the validity of the claim, they may refuse to pay the debt. If the creditor wishes, they can file with the probate court, allowing the court to decide if the debt is legitimate.
Take Inventory and Secure Assets
During this time, the executor must take inventory of everything owned by the decedent. This task can take several weeks or longer if the estate is large. During this time, the executor must also secure those assets. They may need to move the assets physically to a secure location or ensure no one can gain access until they have been distributed. During this time, the executor is responsible for the assets of the estate.
Manage the Estate
During the probate process, the executor must manage the estate. What that will look like depends on what assets the deceased owned. It may mean paying the utilities to the home and keeping the grass mowed. If the decedent owned a business, the executor may need to approve various decisions on running the business and pay employees.
The executor must pay any credible debts of the deceased. This includes filing taxes and paying any federal or state taxes owed. As the creditors’ claims come into the estate, the executor will pay those as well. They must pay additional debts that come up from managing the estate.
Liquidate Assets and Transfer Title
One of the biggest tasks for the executor is to liquidate any assets. What happens depends on how much cash the estate has and whether assets need to be sold to pay off debts or to provide cash for the heirs.
For instance, a business owned by the decedent may be closed and all assets sold. It may be transferred to one of the heirs or it may pass to a co-owner. In each of these situations, the executor must take different steps to follow the stipulations of the will.
Many times, the heirs won’t want the decedent’s home. The executor will sell the home, giving the proceeds to the heirs. In other cases, the heirs will want to keep the home, or the will may select someone to give it to. In this case, the executor will transfer the title to the heirs. They may transfer the title to vehicles and other assets to someone named in the will.
The Court’s Involvement in Executor Duties
How much the court is involved in the duties of the executor will depend on state laws and the size of the estate. Some states require direct oversight by the court, which means the executor can’t take hardly any actions without first receiving approval of the court. A few states even require an attorney to handle the estate in the probate process.
Other states allow the executor to manage the estate without much direct involvement by the court as long as no heirs object to what is being done. In this case, the probate process moves along much faster. The court may require an accounting at the end of the process to ensure everything was handled as it should be.
What is Informal Probate?
While most of the tasks remain the same no matter how probate is handled, there exists more than one type of probate. The exact details will vary based on state, but the general principle remains the same.
Most states allow for informal probate, which may also be called small estate administration. In this situation, a petition is filed to open probate as a small estate. There is a maximum dollar amount attached to a small estate before it must go through formal probate. Some states require there to be only one heir while others only allow small estate administration for personal property.
With a small estate, the court is usually not involved. The executor transfers property or liquidates it as needed. The process generally takes much less time than with formal probate.
Some states provide for an affidavit in lieu of probate. In this case, the interested party creates an affidavit to transfer all property to the sole heir. The requirement is that the estate be valued at less than a certain amount and only one heir to inherit to go through probate. This most often happens when the spouse or a child is the sole inheritor.
Disputing the Will or Replacing the Executor
If the probate process moves along smoothly, it can be completed in a year or less, depending on the timelines allotted by the state. However, two major issues can arise, which will delay the process and require the involvement of the court.
First, an heir may dispute the will. This generally happens when the will is first recorded with the court. However, it can happen at any time if a new will is discovered. In this situation, nothing else can happen with probate until the court has time to validate the new will. This will require a hearing for the parties to present their facts. Disputing the will can add at least a couple of months to the timeline of the probate process.
Another issue that may arise with the estate is that an heir may have an issue with the executor. They may claim that the executor isn’t acting in the best interest of the estate or that they aren’t meeting deadlines to complete tasks. For example, the executor is usually given a timeline in which to take inventory of all assets of the estate. If this process is delayed, the heirs may want someone else to take over.
A different concern with the executor is if they are using money from the estate for their own personal needs. Many times, an executor is one of the heirs, and they may be tempted to take a portion of the assets while managing the estate. While most states allow for the executor to receive compensation for their services, it must be handled in a specific way.
If there are any issues with the executor, the probate court must intervene. If it decides that the executor has not acted in the best interest of the estate, it may remove the person from the position and appoint someone else. Once again, this is another issue that will cause a delay in the probate process.
Distribution of Assets
One of the final tasks of the executor is to disperse the assets to the heirs as outlined in the will. This may include transferring title or selling the asset to provide funds to the beneficiaries. How long this takes will often depend on the type of asset. It takes longer to sell real property than to sell an automobile.
Once the executor has taken all the steps required to pay the debts of the estate and transfer the assets, they will usually need to provide an accounting to the probate court. This accounting shows the details of what was paid, what was sold, and other expenses. When the court approves the accounting, probate may be closed.
Probate doesn’t automatically close when all the work has been completed. The executor must file a petition with the court to close probate. If this step isn’t done, probate remains open. This can cause a problem in the future because many states allow someone to present a new will or take other actions to dispute the handling of the estate for a certain number of months after probate is closed. The timeline doesn’t start until the court receives the petition to close probate and grants it. If the executor fails to follow through with this step, they can become liable for any actions taken against the estate later on.
Seek Professional Guidance
These are the basic steps on how the probate process works. The exact probate process will vary by state and by situation. If you have questions about an estate, it is best to seek professional legal counsel from a probate attorney.