Everything You Should Know About Probate
What should happen to your assets after your passing? Many people want their belongings to be divided a certain way after they pass over. This task can be accomplished by writing a will and having it approved by some witnesses during your life.
A survey shows that almost one-half of Americans have created a will as well as other estate planning documents. However, all wills pass through a court process called probate, in which their validity is determined. This blog explains everything you should know about probate. Learning how to undergo probate can make the distribution of your assets easier for your heirs.
What is probate?
In legal terminology, probate means probing a deceased person’s estate to verify their legitimate inheritors. This court-supervised procedure takes place whether you’ve written a will or not. This process won’t take long to conclude if you have a will. However, when you die without a will (i.e., intestate), this process can go on for some time.
In both cases, you must bring certain documents to the court on the day of your hearing and present them before a judge. These documents vary from state to state (as different places have unique legal requirements for probate). Some general probate documents by state laws include the following:
- A will
- List of debts
- Death certificate
- Life insurance policies
- Beneficiary designations
- Medical and funeral expenses
- Pre- and post-nuptial agreements
- A living trust (irrevocable if possible)
- The contact information of all beneficiaries
- Appraisal valuations for expensive stuff, e.g., jewelry
Major probate terms
Some other terminologies you should be familiar with include the following:
- Executor: the deceased person appoints this person to carry out the instructions of the will
- Administrator: if there’s no executor, the court will appoint an administrator to do the job
- Notice of probate: the executor/administrator will issue this notice to creditors and all alleged heirs.
- Letters testamentary: a probate court will give the administrator this letter to authorize them to follow the will’s instructions.
- Summary probate/administration: this document lets you decrease the duration of probate or even skip it altogether if the estate falls below a certain value
What goes through probate?
Non-titled property and solely-owned property will go through probate. Similarly, if a beneficiary passes away without any secondary beneficiary named, that property will also undergo probate.
However, assets are exempt from judicial scrutiny, e.g., property having a named beneficiary. Similarly, if a property has been set as “payable on death” or “transferable on death,” it is probate-free in some states. Jointly-titled property can bypass probate since it just transferred to the other person alive.
The best way to avoid this process is to create a living trust. A living trust is better than a will because of the following reasons:
- A trust’s contents are private, but a will’s contents are public
- A trust doesn’t go through probate, but a will always goes through probate if the estate is big enough
- A trust becomes applicable the moment the person making it signs it, but a will becomes applicable after the person’s death.
What are the costs of probate?
Legal experts will tell you that probate costs 3% to 7% of the estate’s total value. However, these costs vary from state to state, and the percentage given here comes from the County of Santa Clara. If you live in Canada, you’d be pleased to know that Manitoba has eliminated probate fees. But…
- Beneficiaries have to pay bond fees even if they’re minors
- Appraising high-value objects like jewelry will require some fees
- There are executor fees
- An attorney can charge even “extraordinary” fees for ultra-probate services
- If you’re filing estate tax returns, you may have to pay accounting fees too
A step-by-step guide to probate
- Determine if probate is needed: There’s a simple way to determine which assets need to change hands. If the deceased person must be removed from a title and the estate doesn’t fall below $100,000 then you need probate.
- File documents and open probate: Since probate has become necessary, a petition will be filed in court. The deceased’s will will be submitted to the court to determine its soundness. Also, other relevant documents shall be submitted.
- Notifying everyone of the person’s death: In some states, the heirs must notify creditors and others of the person’s death by publishing a “death notice” in a newspaper. After the death notice, everyone who thinks they deserve a portion of the estate can make their claim.
- Valuing the estate: The executor or the court-appointed administrator will start a delicate process of evaluating the estate and determining its fiscal worth. Also, the executor has to ensure nobody steals a portion of the estate before all legal heirs can be identified.
- Paying all legitimate taxes: The executor will then pay state and federal states on the estate. A new law says that states valuing less than $11.2 million don’t have any federal taxes. You can get more tax cuts when it comes to state taxes; consult a good estate attorney to find out how.
- Pay off the debts: Before these assets can be distributed among valid heirs, all the deceased person’s debts must be paid off. For this, the court requires publishing a list of debts and a death notice so creditors can come forward and make their claims.
- Distribute the assets: In this step, the executor divides the assets among the beneficiaries. This distribution is easier when all valid heirs are adults. When it comes to minors, they cannot inherit the money directly, and a trust has to be established for any underage inheritors.
- Close the estate: Finally, the petition can be closed as all the taxes have been paid, all the debts were collected, and the heirs got their heirlooms. But all the legal proceedings are a part of the public record now. Also, beneficiaries have a small window to file a claim against the executor.
Probate determines a recently deceased person’s legal heirs and their claim to the assets left behind. You should contact a lawyer to help you undergo this process or go online to make a will or trust. Time in probate can be difficult for your heirs, so take all measures to ensure your loved ones get their rightful share without hassle.