Probate 101

What Is Probate?

Probate is a legal process that occurs after a person dies. Probate will require paperwork, court sessions, and legal fees. These expenses are paid from the estate of the deceased. The probate process consists of:

-- establishing proof of a valid will for the deceased person.
-- identifying and appraising the property of the deceased.
-- paying any outstanding taxes or debts.
-- dividing remaining assets according to the instructions of the will. If no will exists, state law determines how assets are distributed.

How Does the Probate Process Begin?

Upon a person’s death, the executor of the will files papers with the local probate office. If no will exists, the probate court appoints a person (called an administrator) to initiate the probate process. The administrator is usually a close and capable relative. The executor or the administrator gives the court a description of the deceased’s property, a list of the deceased’s debts, and a list of the deceased’s heirs designated in the will.

What Is the Role of the Executor During Probate?

The executor is in charge of managing the deceased’s assets during probate. This might include:

-- Paying bills
-- Paying off debts
-- Closing utilities and paying off these accounts
-- Selling real estate
-- Selling property
-- Arranging for appraisal of property

The executor has the authority to make decisions such as selling property in the estate to pay outstanding debts of the deceased.

The executor may be reimbursed for personal expenses incurred while handling the estate. Reimbursement comes from the estate and is approved by the court.

Do All of the Assets in an Estate Go through Probate?

Some of the deceased’s assets may be exempt from the probate process. Some states have a monetary limit up to which assets can be excluded from probate. Property may also be transferred to a spouse. Processes such as joint tenancy, or the existence of a living trust, may exempt assets from the probate process.

What Are the Advantages of Probate?

Probate is a good option if you suspect that your heirs may need the presence of a professional to assist them with the distribution of the estate after your death. It is also a good choice if your estate is complex and if there are issues such as debt repayment that are not covered by estate assets.

What Are the Disadvantages of Probate?

Probate is time consuming and can often take up to a year for completion. It can also be costly and the expenses for attorneys, appraisers, accountants and the probate court are fees that your beneficiaries will end up paying from the estate property.

Should I Plan to Avoid Probate?

If you are not sure if you should avoid probate, consider the following factors:

-- Your age: If you are still young, setting up a probate avoidance plan (such as a living trust) may mean you will have to update it and redo it later. It will need to be reorganized as you age and as your financial situation changes. The best option may be to stick with your will and the probate process for now. However, you may want to consider alternatives to probate if you are at least 50 years old, are in bad health, or are at risk of chronic disease. The living trust, an alternative to probate, may be a more attractive option in this case.

-- Your property ownership: If you own very little property, probate makes more sense than a living trust. The living trust lets you (the trustee) transfer assets to beneficiaries while you are still alive. With a large estate, transfer of assets through a living trust is generally easier than dealing with a probate process.