Many people have heard about or know of someone whose estate has gone through probate. The stories range from it being a short and straight-forward process to it being a nightmare that took several years. This is of particular concern to the segment of the population about to hit retirement age. This group is in possession of approximately $3 trillion dollars in individual retirement assets alone. Much of that wealth exists with the expectation it will likely be passed on to heirs. Combine this fact with a general lack of understanding about the process and probate takes on an almost enigmatic quality. What exactly is probate? It's the process that administers a person's estate at their passing. The court's purpose is to make sure that happens in accordance to decedent's wishes. The main problems most people face are: not fully understanding it what the process is and not having adequate planning in place to make it an efficient transition. For the purposes of this article, we will concentrate on the probate process itself. The first duty of the probate court is to settle the debts of the estate. This usually means: paying creditor claims, paying taxes and making distributions to beneficiaries. It is the job of the court to make sure that all proceedings are legal and to decide when the estate is closed. They may also reside over claims that are made against the estate during probate. Remember: a will is a public document and therefore can be contested. Because of this, when there is a claim it is the court's function to mediate. Not all property held by someone needs to go through probate and most states set a qualifying amount. However, this number is usually low enough that most end up needing to go through the process. For example: in the state of Illinois a probatable estate is anything in excess of $100,000. The first step is opening the estate. Papers need to be filed in the jurisdiction where the decedent lived. Usually this is started using an attorney and sometimes, an attorney is mandatory. If there is a will an order must be made file the original document with the court. They can then determine that it is legal and proper to aid in administering of the estate. Finally, another petition must be used to appoint an executor or personal representative to act on the estate's behalf. If there isn't a will in place that designates one, a spouse or family member, will need to petition the court to appoint one. This is decided based on whom the court believes will uphold the wishes of the decedent. A common misconception is that a will avoids probate. This is not the case; it merely simplifies the probate proceedings and gives clearer instructions as to how the estate is handled. Once the executor is assigned they must begin gathering the estate's assets. The most difficult part of this involves showing what was owned and under what legal title. Once this has been established the person of beneficial interest is determined and the executor must make sure that the assets are distributed to the correct person or entity. The executor must also inform all creditors that the estate is open to ensure that once closed a creditor can't come back to make a claim. If there is a claim, there are two options: It can either be paid or contested. In paying it, a release should be sent from the creditor acknowledging payment and releasing the estate of its liability. But, if contested, the estate must file an objection. It's important to remember that the cost of fighting a claim (i.e. court and attorney fees) must be weighed against the cost of paying outright. After all claims and taxes have been settled, the remaining assets can then be distributed to beneficiaries. Once finished, procedures can start to close out the estate. A petition is filed and the court must see releases from all creditors. It must also see paperwork showing that all tax liability on the federal and state level has been resolved. Finally, receipts and releases from all beneficiaries must be submitted and the court can then rule that the estate has been closed. Some points to remember about the probate process are the potential for great cost and a large loss of time. There is also the fact that since it is overseen by the court it is a public process. There are precautions that can be taken to avoid much of the hassle associated with probate so consider consulting with an attorney and financial professional. They can help you make the most informed decisions. With a little bit of education and planning you can make sure your final wishes are carried out and the bulk of your estate passes to your heirs. In no way does this article take the place of the advice of professionals. Always consult with a financial professional and/or attorney regarding matters specific to the state in which you reside. |
