How Does Probate Work?

1. File Petition
2. Take Inventory
3. Pay Debts
4. Transfer Title

1. File a petition with the probate court and give notice to any and all possible heirs, beneficiaries, and creditors.

Probate court is where a petition is filed to conduct a court hearing in order to 1) Appoint an administrator of the estate if there is no will or 2) admit the will, if there is one, to probate and appoint the executor. Notice of the court hearing is generally provided to all known heirs and beneficiaries.

Notice of the probate hearing is published in newspapers in an attempt to make any unknown creditors, heirs, or beneficiaries of the decedent, aware of the proceeding. If any heir or beneficiary wishes to object the petition, they will have the opportunity to do so at the hearing held at the courthouse of the county the decedent resided in or owned property in.

2. Once being appointed by the court, the personal representative must give notice to all known creditors of the estate and take an inventory of the estate property.

Once the probate hearing is completed and a personal representative is appointed, the personal representative is responsible for taking inventory of the decedent’s estate, including real estate property, cars, stocks, businesses, bonds, and bank accounts. The executor will collect all documentation regarding bank and investment accounts, as well as stocks and bonds in order to account for these. The executor is also responsible for locating any hidden assets, typically through a review of insurance policies, tax returns, and other legal documents.

The executor of the will is responsible for ensuring that property taxes are paid on all of the decedent’s properties, that property insurance is kept, and that all mortgage payments are made on time in order to prevent foreclosure so the property isn’t lost during the probate process. These payments are made from the decedent’s estate. The executor may take possession of other assets, such as collectibles or vehicles, placing them in a secure location.

In most states, immediate family members may ask the court to release short-term support funds while the estate is being probated. After some time, the court will grant the executor or administrator of the estate permission to pay the debts and taxes of the decedent and divide the rest of the assets among the people or organizations named in the will. Failure to notify beneficiaries of the decedent’s death can be grounds for a lawsuit from the beneficiaries who may wish to seek damages for assets they would’ve received had they been properly notified.

During probate, a court-appointed appraiser is hired to appraise non-cash assets, such as vehicles and real property. Other times the estate decides to hire an independent appraiser to evaluate the value of non-cash assets, such as vehicles and real property. This is all dependent upon the state laws of the probate court. The value of the decedent’s assets is determined by the date of death.

Many states require that the executor submit a written report to the court, listing everything the decedent owned along with each asset’s value, as well as a notation as to how that value was arrived at. The personal representative then provides written notice to creditors so that they may make a claim to the decedent’s estate. The time allowed for creditors to make a claim against the decedent’s estate is dependent upon state law.

3. All estate and funeral expenses, debts and taxes must be paid from the estate.

During probate, once all claims against the decedent’s estate have been made, the personal representative is responsible for determining which creditor claims are legitimate and must be paid. The executor may reject any claims believe to be invalid. When this happens, the creditor may petition the court to have a probate judge decide whether the claim should be paid.

Once all known inventory of the decedent’s estate the personal representative is responsible for paying all funeral expenses, debts, creditor claims, and taxes from the decedent’s estate. Lawsuits against the estate may also continue, and the estate may be required to pay out any judgments ordered from these.

The executor will file the decedent’s final personal income tax returns for the year they died. The executor must also file income tax for previous years if the decedent failed to do so. They’ll determine if the estate is liable for any estate taxes, and, if so, file these tax returns as well. Any taxes due are also paid from estate funds. This can sometimes require liquidating assets to raise the money. Estate taxes are usually due within nine months of the decedent’s date of death.

If there are not enough cash assets to pay debts, the personal representative is responsible for selling non-cash assets of the decedent’s estate in order to pay any debts that were not satisfied by the cash assets.

Additionally, the executor is compensated for performing his or her duties. This fee may be outlined in the will, but often each state defines a minimum amount the executor can collect from the estate.

4. Legal title in property is transferred according to the will. However, if the decedent did not have a will, property is transferred under the laws of intestacy and the court will determine the rightful heirs of the decedent’s estate in those cases. This decision can also be contested.

Claims against the estate must be made within a certain time frame. This time frame is dependent upon state laws. Once the waiting period allowing creditors to make claims against the estate has passed and all debts have been paid, the personal representative is then able to petition the court so that they have the authority to transfer the remaining assets to heirs and beneficiaries as directed by the decedent’s last will and testament. Via the executor, the beneficiaries can decide which types of property are transferred to whom, or if the property should be sold and the value distributed proportionally.

The executor will then petition the court for permission to distribute what is left of the decedent’s assets to the beneficiaries named in the will. This usually requires the court’s permission, which is typically only granted after the executor has submitted a complete accounting of every financial transaction they’ve engaged in throughout the probate process.

Some states allow the estate’s beneficiaries to collectively waive the accounting requirement but only if they are all in agreement that it’s not necessary. Otherwise, the executor will have to list and explain each and every expense paid and all income earned by the estate. Some states provide forms to make this process a little easier.

In cases where no will exists, the personal representative petitions to have the authority to transfer any remaining assets according to state intestate succession laws. Some states allow the estate’s beneficiaries to collectively waive this accounting requirement if they’re all in agreement that it’s not necessary.

If a trust for the benefit of a minor, spouse, or incapacitated family member is to be created, according to the will, money is then transferred to the trustee. The executor may also be responsible for setting up a trust to accept possession of these bequests because minors can’t own their own property.

The petition may include an accounting of how the assets were managed during the probate process; however, if allowed under the state law, beneficiaries of the estate may have the right to wave this requirement. After the petition is granted, the personal representative may draw up new deeds for any remaining property, transfer remaining stocks, liquidate remaining assets, and transfer remaining property to the appropriate recipients.

The benefit of a will, if properly drafted and updated regularly to account for life changes, along with an organized record of debts, personal property, and other assets simplifies the probate process and minimizes the costs of probate.