Understanding the Probate Process
Probate is the legal process by which property in an estate is transferred to the heirs and beneficiaries of a deceased person (the decedent). Heirs are persons who are entitled to receive a decedent's property if the decedent died without a will. Beneficiaries are persons who are named in a decedent's will to receive property.
The probate process (also referred to as estate administration) begins by presenting to the judge the will of the decedent, or if there is no will, by presenting to the judge a list of the decedent's property and a list of the people to whom it is proposed that the property be given.
The person who will represent the estate and handle the probate process is given certain powers by the court to complete the estate administration. Traditionally, a person you name in your will to administer your estate was called your executor, and if you died without a will, an administrator was appointed by the court. In most states, the duties of the administrator and executor are very similar. The term personal representative is often used to describe the person handling the estate—whether there is a will or not. That term will be used in the articles that follow, but can be interchanged with executor or administrator.
Although each state will differ in the specific steps involved in probating a will, the following is a fairly representative outline of the process.
- A petition or application is filed with the probate court either asking that a will be admitted to probate or stating that a person died without leaving a will.
- A hearing is held in which the testimony of a family member, executor or witness to the will is presented to the court to establish proof of death, proof of the will, or if the person died without a will, proof of the heirs of the decedent. Sometimes a hearing is not required if the petition meets the requirements and there are no objections.
- An order is signed approving the petition, and some type of document is issued by the court giving the personal representative named in the will power to act for the estate. This may be called Letters of Administration, Letters Testamentary, Letters of Authority or something similar.
- Whether named in a will or appointed by the court, a person will be appointed as personal representative for the estate.
- The personal representative must meet the qualifications of the state statutes, which set forth who the state believes is competent to serve as personal representative.
- Unless the court grants permission, the personal representative must post a surety bond. Often, the will specifically waives this requirement.
- Notice of death is published or sent to the heirs and beneficiaries.
- A notice is sent to creditors or published in a newspaper to permit them to file claims against the estate.
- Actual written notice is given to banks, financial institutions, brokerage firms and creditors with whom the decedent had dealings.
- The personal representative must collect all of the assets of the decedent. This may include transferring title of the assets into the name of the estate until the assets are ready to be distributed to the beneficiaries and collecting life insurance policies, annuities, retirement plans, and the like, made payable to the estate. When such assets are collected, the personal representative must manage the assets during the estate administration.
- The personal representative inventories the personal property, such as household goods, personal effects, vehicles, etc., and must arrange for the safekeeping of such assets until their distribution to the beneficiaries.
- The personal representative collects income from the assets, such as interest, dividends, etc., during the administration of the estate.
- Assets are appraised to obtain a current fair market value.
- An inventory of assets and debts owed by the decedent is prepared and filed with the court.
- The personal representative must pay the debts of the decedent and the expenses of the estate administration, including attorney, accountant, and appraiser fees, probate costs, and the like.
- If claims are filed against the estate, the personal representative must review and analyze the claims to determine whether or not such claims are valid. The personal representative reports to the creditor and to the court whether or not he or she has determined the claims are valid.
- Assets are sold to raise cash to pay debts and expenses, if necessary.
- A final income tax return for the decedent is filed. The personal representative must make certain that all prior income tax returns have been filed and income tax liabilities have been paid.
- If there is more than $600 of income during administration of the estate, the estate must file an income tax return. If the administration of the estate continues for more than twelve months, the personal representative may have to file more than one income tax return for the estate. The personal representative will be responsible for paying any income tax liability of the estate during the administration as part of the debts and expenses of the estate.
- If the value of the state is in excess of the applicable credit amount ($5,430,000 for 2015), the personal representative must prepare and file a federal estate tax return within nine months of the decedent’s death. If federal estate tax is due it must be paid when the estate tax return is filed to avoid additional interest, unless an extension is granted.
- The personal representative must determine whether an inheritance or estate tax return must be filed under state law. Generally, inheritance or estate tax returns must be filed and any inheritance and estate tax paid within nine months of the decedent's death, unless an extension is granted.
- During the administration of the estate, the personal representative must file periodic accountings with the court detailing the receipts and disbursements of the estate. This requirement can be waived by the beneficiaries and heirs.
- To close the estate, unless the requirement is waived, a detailed final accounting of the assets of, expenses of, and income received by the estate during administration and distributions to beneficiaries made by the estate is filed with the probate court. Persons who have an interest in the estate (i.e., the heirs and beneficiaries) are notified of the accounting and a hearing is held by the court. Once the account is approved by the court, the personal representative may distribute the remaining assets to the beneficiaries.
- The personal representative's and attorney's fees are paid.
- The personal representative obtains a final discharge from the court to be relieved of his or her duties.