Probate: What It is & How it works with or without a will
What is Probate?
Probate is the legal process for transferring someone’s assets after their passing, which may include bank accounts, real estate, and financial investments.
Typically, an executor is designated in the will, or an administrator is appointed in the absence of a will, to carry out the probate process. This includes gathering the deceased's assets to settle any outstanding liabilities on their estate and distributing the remaining assets to the beneficiaries.
How Probate Works
When a property owner passes away, their assets are often examined by a probate court, which makes the final decisions regarding the distribution and division of those assets among beneficiaries. Typically, probate proceedings start by determining whether someone has left behind a legally recognizable Last Will and Testament. In many instances, the person who passed has prepared documentation which outlines how their assets should be allocated after their passing. However, there are situations where no will exists. Below, we outline the unique circumstances associated with both scenarios.
Factors for Probate Law
Each state has its own specific laws and statutory requirements that dictate whether and how an estate must undergo the probate process. Common factors to consider include:
Size of the estate. In some states, anything more than $3,000 must be probated; in others the limit is as high as $200,000.
Whether the estate includes real estate.
Whether or not there is a surviving spouse.
The number of motor vehicles in the estate.
The presence of a will, and the number of named heirs.
Any liens, debts, or taxes due on the estate.
Probate With a Will
A testator is a person who has passed away and left a will. Upon the testator's death, the executor, usually a family member, is tasked with beginning the probate process. The will may also specify who the executor is.
The executor is responsible for submitting the will to the probate court. Different states have varying regulations regarding the timeframe for filing a will after the individual's death. This filing marks the start of the probate process, which is a court-supervised procedure that verifies the authenticity of the will, affirming it as the true final testament of the deceased. The court then formally appoints the executor named in the will, granting them the legal authority to act on behalf of the deceased.
The Executor
A will generally appoints a legal representative or executor, who must be approved by the court. This individual is tasked with locating and managing all assets belonging to the person who passed. The executor must assess the estate's value using either the date of death value or an alternate valuation date, as outlined by the Internal Revenue Code (IRC).
Most assets that fall under probate administration are overseen by the probate court located in the area where the person who passed resided at the time of death. However, real estate may require probate proceedings in any county where the property is situated.
The executor is also responsible for settling any taxes and debts owed by the deceased using the estate's funds. Creditors typically have a limited timeframe—approximately one year from the date of death—to file claims against the estate for any outstanding amounts. Should the executor reject any claims, these can be brought before a probate judge, who will determine their validity.
Additionally, the executor must file the final personal income tax returns for the deceased. Any estate taxes that are due must also be addressed within one year of the death. Once the estate inventory is complete, assets valued, and debts settled, the executor will seek court approval to distribute the remaining assets to the beneficiaries.
If the estate is deemed insolvent, meaning that the debts exceed the assets, the administrator may decide against initiating probate. Each state may have its own regulations regarding the statute of limitations for processing a will through probate, and they may also establish specific thresholds for probate filings.
Probate Without a Will
When an individual passes away without a will, they are considered to have died intestate. An intestate estate can also refer to a situation where a will submitted to the court is declared invalid. The probate process for such estates involves distributing the deceased's assets according to state laws. If the deceased has no assets, probate may not be required.
Typically, a probate court proceeding begins with the appointment of an administrator tasked with managing the deceased's estate. Acting as an executor, the administrator handles all legal claims against the estate and settles any outstanding debts.
The administrator's responsibilities include identifying the legal heirs of the deceased, which may encompass surviving spouses, children, and parents. The probate court will evaluate which assets need to be distributed among the legal heirs and determine the method of distribution. In most states, probate laws dictate that property is divided between the surviving spouse and the deceased's children.
The process of transferring assets to the government is known as escheatment. States generally impose a timeframe within which an heir must come forward to claim any assets.
Spouses as Joint Property Owners
Community property laws can identify both spouses as co-owners of property in cases of intestate succession. Typically, the distribution hierarchy begins with the surviving spouse. If the deceased was unmarried or widowed at the time of death, the assets are generally divided among any surviving children. After the spouse and children have been accounted for, other relatives may also be considered for distribution.
Close friends of the deceased are generally not included as beneficiaries under state probate laws governing intestate estates. However, if the deceased held a joint account with right of survivorship or jointly owned property with another individual, that joint asset would automatically transfer to the surviving partner.
Is a Probate Always Required?
Determining whether probate is necessary following someone's passing is crucial. The probate process can be quite lengthy to finalize. The more complex or contested the estate, the longer it will take to settle and distribute the assets; consequently, extended durations lead to increased costs.
Probating an estate without a will generally incurs higher expenses than when a valid will is present. Nevertheless, both scenarios can be costly and time-consuming. Additionally, since probate court proceedings are publicly documented, avoiding probate allows for private settlements.
Different states have varying laws concerning probate and whether it’s required after a testator’s death. Some states establish a specific estate value that mandates probate. For instance, Texas probate laws state that if an estate's value is below $75,000, probate may be avoided.
If an estate is small enough to bypass probate, its assets can be claimed through alternative legal actions, such as an affidavit. Typically, if a deceased individual's debts surpass their assets, probate may not be initiated, and alternative measures can be pursued. Certain assets can skip the probate process when beneficiaries are designated through contractual agreements. Examples include:
Pension plans
Life insurance proceeds
401(k) plans
Medical savings accounts
Individual retirement accounts (IRAs) with designated beneficiaries
Additionally, assets jointly owned with a right of survivorship can also bypass probate. A common strategy to avoid probate is by utilizing a trust.
How Much Does Probate Cost?
The expenses associated with the probate process differ based on your state and the attorney you choose. In certain states, lawyers may charge a flat fee or an hourly rate for processing estates, while in others, they may take a percentage of the estate's value. You will also need to cover any outstanding debts, court and filing fees, as well as the costs related to notifying creditors about the probate process. Additionally, an inheritance tax may apply. It is advisable to research the probate costs specific to your state as you embark on end-of-life planning.
Which State Has the Best Probate Laws?
While probate laws differ across states, at least 18 states have embraced the Uniform Probate Code (UPC), which provides a standardized process for distributing a decedent's assets. The states that have adopted the UPC include:
Idaho
Alaska
Arizona
Colorado
Minnesota
Montana
Nebraska
South Dakota
New Mexico
Utah
Michigan
Maine
Pennsylvania
South Carolina
Hawaii
North Dakota
New Jersey
Massachusetts
How Can I Avoid Probate?
Each state establishes its own threshold to determine the estate value required for the probate process. Smaller estates might qualify for a simplified probate process or allow heirs to claim assets through an affidavit. Additionally, certain assets—like living trusts and 401(k) plans—are exempt from probate. Given that the probate process can be costly, it's advisable to research your state's probate regulations as part of your end-of-life planning.
The Bottom Line
Probate law encompasses the regulations that govern how an individual's assets are allocated following their death. Each state has its own guidelines for the probate process, influenced by factors such as the estate's size, the nature of the assets, and whether a will exists. Given that the probate process can incur significant costs, it's advisable to explore various methods of structuring an estate to potentially circumvent it.
If you would like assistance with navigating probate or know someone who does, please fill out the form below and a Probate attorney from our office will contact you.
