What is Death Probate?
When you think about it, probate is not difficult to understand. At your death, your assets need to be distributed to your heirs, your debts need to be paid, and any loose ends need to be looked after. Obviously, you can't sign the deeds, write the checks, or handle your business affairs after you are gone. The probate court takes over those duties.
The probate process is a long, complicated, officious nightmare for most families. The following are the five basic steps to settling an estate through Death Probate:
Step One: Recording the Will and Gathering Material
The original Will must be submitted to the court, along with a filing fee, to begin the probate process. One of the probate court's first jobs is to approve or appoint someone to handle the affairs of the estate. This person is called the executor, administrator or personal representative, depending upon the rules of the state and whether the decedent dies with or without a Will. In Pennsylvania, this individual is referred to as a personal representative if the decedent dies without a Will, and an executor if the decedent has a will when he or she dies. For our purposes, we will refer to this person as the personal representative. Generally, the first thing the personal representative does is hire an experienced probate attorney. Although having an attorney is not always a legal requirement, it has become a practical necessity because probate paperwork and filing procedures can be very complex.
Step Two: Publishing Notice to Creditors
The second major job of the probate court is to ensure that the decedent's creditors are notified so that they can present their claims to the court for payment. This requires the time-consuming task of cataloging all of the decedent's liabilities. The creditors are notified either by notices in the local newspaper or directly by mail. The law sets a time that the probate proceeding must be left open in order to allow creditors the chance to present their claims. In Pennsylvania, the creditor period is several months long.
Step Three: Inventory and Appraise Assets
During probate, all of the assets in the estate are usually frozen so that an accurate inventory and appraisal can be made. During this period, none of the assets can be distributed or sold without permission from the court. The court will often require formal written appraisals for many items, such as real estate, antiques, collectibles, automobiles, furniture, and other valuable assets. Appraisal fees can be expensive and, like all expenses, are paid for out of the estate.
Step Four: Payment of Debts, Claims and Taxes
Once all of the debts and claims have been submitted and approved, they are presented to the court for approval to pay them from the assets of the estate. Some estates may also have death tax liability and they must stay open until those taxes are paid.
During the entire probate process, disgruntled heirs or those who disagree with the provisions in the Will, can bring a lawsuit in the probate court. These suits are referred to as Will contests. Will contests can prolong the distribution of the estate, and are often used to intimidate heirs into settling cases that have no merit.
Step Five: Final Distribution and Closing of Estate
Finally, after the court is satisfied that all legal requirements have been met, it will allow all debts, claims, taxes, attorney's fees, the personal representative's compensation, and any other miscellaneous expenses to be paid. If there is not enough cash in the estate to pay these substantial claims, the judge can order that assets be sold at public auctions or estate sales in order to defray these costs. These transactions are often conducted in a depressed market or under the banner of Adistressed sales.
After all of the liabilities and fees are finally paid, the probate court will allow final distribution of whatever is left of the estate to the beneficiaries named in the will; or, if there is no will, to the designated heirs at law. The court then closes the file.
How much does Probate cost?
Despite what probate lawyers say, probate is expensive. The average cost of probate may rise to over seven percent of the gross value of the estate. The probate lawyers usually take sixty percent of the cost, and forty percent goes to personal representatives and others. One legal scholar who urges a reform in the probate system remarked that Athe cost of probate expands to consume the money available. There just isn't that much to go around. Remember, every dollar that goes to pay probate costs is a dollar that could benefit your family.
What happens when my real estate is located in another state?
Probate proceedings must be instituted not only in the state where you lived, but in every state where you owned real estate. This is called an Aancillary probate. Each state has probate jurisdiction over the real property located within its borders. This means that your family will have to file a new probate in each state and hire local attorneys to represent the estate. This will add to the expenses that must be paid before your family members receive their share.
Are there any other problems with a Death Probate?
Yes. Perhaps the most significant disadvantage of death probate is that your family loses control of the estate. During probate, your family may not be able to sell assets without court approval even if they need the money. Opportunities can be lost because the cumbersome probate system moves slowly.
Your family may pay an emotional price in probate as well. Because the process takes so long, it can be a constant reminder of the loss of a loved one. It can also foster arguments among family members who would normally seek support from one another. It is common to see family members taking out their frustration about the system on one another, especially if one of the family members has been named the personal representative of the estate.
Does Joint Tenancy avoid a Death Probate?
Yes and no. In the case of a husband and wife who own their assets in Joint Tenancy, there is no death probate when the first spouse dies because title passes automatically to the surviving joint tenant spouse. However, when the surviving spouse dies, there will be a complete probate on the entire estate.
The fact that Joint Tenancy ownership avoids a death probate at the first spouse's death is a small reward for the many other disadvantages of Joint Tenancy ownership. It can lead to huge unexpected liability when parents and children own assets together. It can create unintended beneficiaries and often causes gift and death tax problems. For these reasons, estate planning experts agree that Joint Tenancy is a poor planning tool.
Does a Will avoid a Death Probate?
No. Rather, a Will guarantees probate. The word Aprobate actually comes from Latin and means Ato prove the Will. All property that is controlled by a Will must go through the probate court. Once an estate enters the probate process, it is trapped in the system until the court releases it.
Does a Revocable Living Trust avoid a Death Probate?
Yes. All assets transferred to a Living Trust completely avoid the probate process, both during your lifetime and at the time of your death. Living Trusts are not new. They have been successfully used in one form or another since the Middle Ages. Both then and now, a Living Trust requires that the owner of assets transfer title from his or her name to the name of the trust. Practically speaking, this means changing the title to your property. For real property, it means you will sign and record a new deed. For other assets, you will sign special transfer documents changing ownership to the name of your trust. Once the process is complete, all of your assets will be owned by the trust.
Almost nothing will be owned by you personally. Your Living Trust has title to the assets, but don't worry! You (or you and your spouse if you are married) have complete control of the trust while you are alive. You may amend the trust, or even revoke it, whenever you desire. When you die, there are no assets in your name, so there is no need to go through the tedious probate process. The trust contains your written instructions directing your agent, the successor trustee, about how you want your estate distributed.
With a Living Trust, there is no need for help from the probate court or probate lawyers. Your trust will completely eliminate these unnecessary costs. Moreover, your estate can be distributed instantly at the time of your death. There are no courts to consult. Your trustee merely follows your instructions in distributing your estate according to your wishes.
