Probate is a court process many of your assets must first pass through before they can be distributed to your heirs after you die, unless you have created a proper estate plan. Like most court proceedings, probate can be time-consuming, costly, and is open to the public. During probate, the court supervises a number of different legal actions, all of which are aimed at finalizing your affairs and settling your estate. In most cases, going through all of these steps can be expensive, take a long time, and be highly inconvenient and sometimes even downright messy.
By implementing the right estate planning strategies, however, you can help your loved ones avoid probate all together, or at least make the process extremely simple for them. Here in this two-part series, we’ll first explain how the probate process works and what it would entail for your loved ones and then we’ll outline the different ways you can avoid probate with wise planning.
When Probate Is Required
Generally, individuals who have no estate plan at all, those whose estate plan consists of a will alone, and those who have a will that’s deemed invalid by the court are the most common cases to pass through probate court.
Dying without a will is referred to as dying intestate, and in such cases probate is still required to pay your debts and distribute your assets. However, since you haven’t expressed how you wish your estate to be divided among your heirs, your assets will be distributed to your closest living relatives based on our state’s intestate succession laws. These laws typically give priority to spouses, children, and parents, followed by siblings and grandparents, and then more distant relatives. If no living heirs can be found, then your assets go to the state.
Some states allow estates with a relatively low value to bypass probate and use an abbreviated process to settle the estate. For example, Texas law allows estates with a total value of less than $75,000 to skip probate. In those cases, beneficiaries can claim the estate’s assets using simpler legal actions, such as by filing an affidavit or other form. Additionally, when an individual’s debts exceed the value of their assets, or a person has no assets at all, probate is often not initiated and the estate is settled using alternative legal processes.
How Probate Works
How probate plays out is largely determined by whether or not you had a valid will in place at the time of death. However, even in cases where no will exists or the will is deemed invalid the probate process is quite similar.
1: Authenticating The Validity Of Your Will: Following your death, your executor is responsible for filing your will and death certificate with the court and thus initiating the probate process.
From there, the court must authenticate your will to ensure it was properly created and executed in accordance with state law. This may involve a court hearing, and notice of it must be given to all of the beneficiaries named in your will, along with all potential heirs who would stand to inherit under state law in the absence of a will. This hearing gives these individuals the opportunity to contest the validity of your will in order to prevent the document from being admitted to probate.
For example, someone might contest your will on the grounds that it was improperly executed (signed, witnessed, and/or notarized) as required by state law, or someone might claim that you were unduly influenced or coerced to change your will. If such a contest is successful, the court declares your will invalid, which effectively means the document never existed in the first place.
2: Appointing The Executor Or Administrator: If you created a will, the court must formally appoint the person you named in your will as your executor before they can legally act on your behalf. If you died without a will or your will was ruled to be invalid, the court will appoint someone, typically your closest living relative, to serve in this role, known as your personal representative or administrator.
In some cases, the court might require your executor to post a bond before they can serve. The bond functions as an insurance policy to reimburse the estate in the event the executor makes a serious error during probate that financially damages the estate.
3: Locating & Valuing Your Assets: Once probate begins, the executor must identify, locate, and take possession of all of your assets so that they can be appraised to determine the total value of your estate. This includes not only those assets listed in your will and other estate planning documents but also those you may have not included in your estate plan. Any assets the executor is unable to locate will end up in our state’s Department of Unclaimed Property. Across the U.S., there is more than $58 billion of assets stuck in state Departments of Unclaimed Property. This is why keeping a regularly updated inventory of your assets is so important.
For real estate, the executor is required to ensure that your mortgage, homeowners insurance, and property taxes are paid while probate is ongoing. These and all other debts can be paid from your estate.
4: Notifying & Paying Your Creditors: Your executor must notify all of your creditors of your death to ensure all of your outstanding debts are paid before your assets are distributed. In most states, any unknown creditors can be notified by publishing a death notice with your local newspaper.
Creditors typically have a limited period of time—usually one year—after being notified to make claims against your estate. The executor can challenge any creditor claims they consider invalid and in turn the creditor can petition the court to rule on whether the claim must be paid. From there, valid creditor claims are then paid. The executor will use your estate funds to pay all of your final bills, including any outstanding medical and funeral expenses.
5: Filing & Paying Your Taxes: The executor is also responsible for filing and paying any outstanding taxes you owe to the government at the time of your death, including personal income and capital-gains taxes, as well as state and federal estate taxes if your estate is valuable enough to qualify. That said, the federal estate tax exemption is currently set at $11.7 million for individuals and $23.4 million for married couples, so most families won’t have to worry about estate taxes. Any taxes due are paid from estate funds. In some cases, this may require liquidating assets to raise the needed cash.
6: Distribution Of Your Remaining Assets: Once the court confirms all of your debts and taxes have been paid—which typically requires the executor to file an accounting of all transactions they engaged in during the probate process—the executor can petition the court for authorization to distribute the remaining assets in your estate to the beneficiaries named in your will or according to state intestate succession laws if you didn’t have a will.
Once all assets have been distributed, the executor must file a petition with the court to close probate. If all creditors and taxes have been paid, your assets have been distributed, and there are no other outstanding issues to be addressed, the court will issue an order formally closing the estate and terminating the executor’s appointment.
Keep Your Family Out Of Court & Out Of Conflict
As your Personal Family Lawyer® firm, one of our primary goals when creating your estate plan is to keep your family out of court and conflict no matter what happens to you. Fortunately, it’s easy for you to spare your family the burden of probate with proactive planning. Next week, we’ll look at the ways you can do just that in the second part of this series. Until then, if you haven’t put an estate plan in place or have one that would force your family to go through probate, work with us, your Personal Family Lawyer® for a Family Wealth Planning Session.
This article is a service of Levi Alexander, Personal Family Lawyer®. We do not just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session™, during which you will get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.