Tag: probate

Common Questions About Probate Answered

In this article, we want to deal with some of the most common questions regarding probate.

What is probate?

Probate is the process by which an estate left by a loved one who dies or “decedent” is administered, process and ultimately transfered to the heirs and beneficiaries of the estate.

The estate is first inventoried, then any debts against the estate are paid, any moneys due to the estate are collected, and then the remaining assets are distributed to the beneficiaries and heirs.

What property is excluded from the probate process?

Any property that is held by the decedent and someone else jointly or as “joint tenants with right of survivorship,” any property in a trust account that are “payable on death (POD) or “transfer on death TOD)” to a named person or persons, and any insurance or retirement benefits that have a named beneficiary will not go through the probate process.

Why does the property have to go through probate?

The probate process exists to protect all parties involved. Probate endows the executor or personal representative for the estate to handle the assets legally. Then, probate allows creditors the opportunity to make claims against and collect debts from the estate before the property ownership is transfered to the heirs and beneficiaries.

What are the normal steps to the probate process?

The probate court will appoint an executor in the case of a will, or a personal representative or administrator in the case of no will involved. The executor or administrator will accomplish the following tasks: care for the property, receive payments due to the estate, pay all legitimate debts against the estate, gather name, addresses, and other pertinent information of interested parties, pay all outstanding taxes against the property, and finally, distribute the remaining assets to the heirs and beneficiaries.

What are the costs of probate?

Each type of document that is filed in probate has a separate cost associated with it, typically around $200 per document. There can be attorneys fees charged for handling each part of the process, but these fees mostly must be approved by the probate court. The executor or administrator can also be paid a percentage of the estate for handling the case.

How long can probate take?

The length of probate cases vary from case to case. If the estate is relatively small, does not require filing state income tax, and has no complex creditor issues, the case can be settled in as little as six months. However, several factors can stretch out the process. If the estate must go through a tax audit, or if someone contests the will for any reason, the process can be delayed up to several years. Most probate cases are resolved anywhere from nine months to one year.

What about a will?

It is always a good idea to have a will properly drawn up. A will will make sure that your assets and property end up with the person or persons you intend. You can also name your own executor and settle any matters of dependent children in the will. It is always a good idea to review your will with an attorney to make sure that it meets your current needs. If you do not make out a will, your property will be distributed according to the inheritance laws of the state where you live. Will or not, your property will go through the probate process; a will just gives you more control in the outcome.

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What Does Probate Involve?

Probate is the legal process of administering the property and assets left by someone when they die (the decedent). The probate process also oversees the payment of claims, debts, taxes and other related expense against the estate are all paid according to the law.

Probate property is defined as property in the decedent’s name alone and is distributed by the directions of the will or according to the law. The probate proceedings take place in the county where the decedent lived and owned the property. If the decedent also owned property in another state, additional probate court proceedings may be required in that state.

Some property owned by the decedent may not be considered in the probate process and is not known as probate property. Any property held by the decedent and another person jointly, any property held in a trust, any bank or other accounts that are “payable on death,” or “transfer on death” to a named beneficiary, and any insurance and retirement benefits that have a named beneficiary are not considered probate property. However, all property is considered estate property and is still subject to federal or state taxes, whether or not it is probate property.

The probate process is necessary to legally give the executor or personal representative of the estate the right to handle the decedent’s probate assets.

The process gives the executor the duty of safeguarding the assets and property of the estate for the benefit of the heirs and beneficiaries.

Probate then allows for the creditors against the estate to be able to collect any debts owed by the decedents before the remaining assets are distributed to the heirs. There are costs in the administration of this sometimes lengthy process that must be paid from the estate also.

What are the duties required by probate? The first task of the probate court is to appoint a person to administer the estate. This person is called the personal representative or administrator, or if so named in a will, the executor. The executor or administrator can be a single person, a trust company, or a bank.

The executor or administrator has many tasks to complete in the probate process. He or she must care for all of the property and assets of the decedent. He or she must receive any payments due to the estate from interest, income, or dividends of any sort and then collect and legitimize any debts due to the estate.

Then, all names, addresses, and pertinent information about the heirs and beneficiaries must be gathered. The executor or administrator must then collect and validate any debts against the estate and pay the outstanding debts, which includes filing state and estate tax returns and paying the taxes for same.

The last task of the administrator is to distribute the remaining assets to the heirs and beneficiaries according to the will and the laws of the court.

The probate court judge and the probate court task supervises the entire process. Each separate action requires that the appropriate paperwork and numerous documents be filed in a timely and lawful way.

Each step of the process can be tricky and time consuming. As an executor or personal administrator, he or she may want to consult an attorney specializing in probate matters and a certified public accountant to handle the tax issues.

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Why Probate is Better Than Foreclosure

If you are trying to make a profit in the business of foreclosures, you have probably found out how hard it is. It seems as if the market is flooded with people who are working to get a piece of that market. In many areas, this task is almost impossible, even for the most hard-working.

When you work in foreclosures, you often have to deal with sellers who are desperately unhappy. They do not really want to sell to you, and may view you as a vulture, preying upon their misery in a time when they are losing property they may still want.

The people in foreclosure are often losing their homes, the very roof over their heads. Can we blame them if they sometimes get irritated or downright nasty during the proceedings?

In probate, the situation is very different. The sellers in probate are usually eager to sell, and the house in question is probably not their primary residence. You are dealing with people who are motivated to sell and to be cooperative, not highly stressed people just trying to “get through” a bad time in their lives. It makes a huge difference in the way they will deal with you.

Many heirs are actually very eager to sell to you so they can quickly settle the estate. A friend of mine recently lost his mother and he inherited her house. During the next few weeks, he was required to travel back and forth, about 50 miles each way, to deal with the various legalities and hassles of property ownership.

My friend confided in me that if someone would just offer him a reasonable price for the house, he would probably take it. He even said that he would not dicker too much over the offer, because he would just want to complete the deal quickly and easily and liquidate the asset.

When someone you love dies, you not only inherit all of their property, but also all of their problems too. No one who is going through the grieving process for a loved one wants to take on a very large project at the same time. If you can offer these people a simple and fast solution of “What to do with Mother’s house,” they will take it, so probate is ideal.

Also, often after the estate goes through probate, several siblings or relatives will inherit jointly, which can cause all types of problems. Maybe the siblings live in different places or do not get along. Getting rid of property you own but do not live close to is sometimes difficult.

In most of these types of cases, none of the parties involved want the property, so they don’t want to buy each other out. Instead, they just want to split the money from the sale of the property. This fact is especially true if there are outstanding debts against the property, and also if they are going to have to pay a lot of inheritance tax on it, but can’t actually get at any cash. This is where you can step in to supply the heirs with a solution to what can be a difficult problem.

Another factor can come into play with this situation. Many senior citizens, 65 years or older, defer their property taxes until after their death in what is called a “senior deferral.” Once the senior citizen passes away, these taxes come due.

If the heirs to the estate inherit the property, they also inherit the past due taxes. Most people just want to get these taxes paid as quickly as possible, so that they can pay them and any other outstanding debts to the estate, and then see what is left over. They are eager to sell and resolve the matter, and pay off the hefty tax bill.

In conclusion, probate is better that foreclosure. The market is easier to work in because fewer people are buying in the probate market, and the sellers are more eager to sell to you. It’s much better to buy from people who are looking at you as a hero rather than a vulture swooping down to pick over their carcass and rob them of their home.

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A Probate Glossary

There are many confusing terms and commonly used phrases that are related to the probate process and estate planning in general. Here are some definitions to help the layperson understand the sometimes complex process of probate.

AB Trust- This is a trust designed to take advantage of the personal estate tax exemption. It also allows the surviving spouse use of the assets, no matter what, for the remainder of his or her life.

Administrator- This person is appointed by the court to manage and oversee the court process for the estate of a deceased person or “decedent” who has died without leaving a will.

Attorney-in-Fact- This person is designated to act as an agent for the executor of the will.

Basic Will- The basic will is designed to give everything to the spouse, if living, or the children who are 18 or above.

Beneficiary- The beneficiary is the person who receives property or other assets from a will, insurance policy, or contract.

Durable Power of Attorney for Health Care- This is a written document that gives someone the power to make medical decisions for another person in case that person becomes incapacitated in some way.

Durable Power of Attorney for Property- This is a written document that gives someone the power to make property and financial related decisions for a person who has become incapacitated in some way.

Estate- The property and assets of an individual, including all real estate, bank accounts, life insurance policies, stocks and bonds and personal property.

Executor- The person or persons named in the will who will manage the estate of the decedent. He or she will inventory all properties, pay of debts and taxes, then distribute any remaining assets to the beneficiaries and heirs.

Fiduciary- The trustee who is identified in a trust, or an institution or person who is legally responsible for the distribution, management, or investment of funds.

Grantor- The person who gives assets to another, usually by way of a trust.

Inter Vivos Trust- A trust created while a person is still living that holds property in trust for the benefit of someone.

Intestate- When someone dies without a will.

Joint Tenancy with Right of Survivorship- This term refers to co-owning property. When one owner dies, the other owner is legally entitled to take possession of the property, no matter what the will says.

Living Trust- This is a trust that is established during a person’s lifetime that is used to place property. Because the basic living trust does not effectively use the personal estate tax exemption if the estate is large, then it is often recommended for married couple to set up AB Trusts.

Living Will- The document that outlines a person’s wished in regards to life-sustaining treatment should he or she become terminally ill or in a vegetative state.

Marital Deduction- A deduction set up by the government that allows one spouse to leave his or her estate directly to his or her spouse upon death without having to pay gift or estate taxes.

Pour-Over Will- Everything is distributed into a trust by this type of will.

Power of Appointment- A “general” power of appointment gives a person the unlimited power to distribute a decedent’s property. A “limited” power of appointment gives restrictions to the person on who may receive the property.

Probate- The process in court of reviewing, legitimizing, and processing claims against a will, or in the case of no will, settling the estate according to inheritance laws.

QTIP Trust- A trust that is set up that allows a person to leave his or her assets to his or her spouse for their use during their lifetimes, but still be able to control where the assets go upon the spouse’s death.

Trust- A written document that provides for property being held by someone for someone else.

Trustee- The person named in a trust who manages and distributes the property for and to the beneficiary.

Will- A legal document that states how property and assets will be distributed upon a person’s death.

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An Introduction to Probate

Probate is the legal process of processing and transferring property and assets upon one’s death. Although the customs and laws of probate have changed somewhat over the years, the purpose of probate has remained the same.

People itemize their intentions about the transfer of their property at the time of their death, usually in the form of a will. The property concerned is then inventoried, outstanding debts are paid from the estate, taxes are paid and the remaining property, and assets are distributed among the heirs and beneficiaries.

Today’s probate courts are endowed with the task of sorting out the legalities of the transfer of property when someone dies. The property we are talking about is any property owned by the deceased or “decedent” at the time of death, which does not directly pass to another person by ownership or designation, for example a bank account set up as “payable on death,” or a life insurance policy.

One common expression that is heard is “probating a will.” The process of probate is concerned with proving to the court that the decedent had a legal will when he died.

What is normally taught about probate nowadays is how to avoid it. The reason so many people are concerned with avoiding probate is to avoid the sometimes expensive probate fees.

In fact, it is quite possible to avoid the probate process completely, with a little advanced planning.

There are three common ways that people avoid probate: joint ownership of property with the right of survivorship, gifts, and revocable living trusts.

However, the probate system exists for a reason and can protect all parties involved.

What exactly happens in probate? The probate process can be contested or uncontested. Many probate cases are contested because a disgruntled heir is seeking more that his or her share of the decedent’s property and thus has to prove why he or she deserves more. The complainant will often argue that the decedent was not in his or her right mind when making the will (insufficient mental capacity), or that he or she was unduly influenced by someone else while deciding who gets what.

The complainant will often challenge the validity of the will by finding ways to prove that the decedent did not follow proper legal procedures when writing the will.

The majority of probate cases, however, are uncontested and follow the same basic procedure.

First, the probate court will appoint an executor or personal representative to oversee the court proceedings. The properties are collected and inventoried. Then, all debts, claims, and taxes against the estate are paid.

After that step, anything owed to the estate such as income, interest or dividends are collected. Next, any disputes are settled and the remaining assets and properties are distributed to the heirs and beneficiaries.

In this country, people may leave their property to whomever they wish and may make such provisions in their wills. There are occasions where the wishes of the decedent have been overridden by the courts.

The larger and more complex a case is, the longer and more expensive the probate process can be.

These are the basics of probate. To learn more, do your research online or the library-there are plenty of good estate planning and estate management resources available.

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