Probate law is its own field. There are attorneys who practice solely in this complex, multi-faceted field of law, and they know the ins and outs. These estate planning attorneys are the ones you should contact to set up an estate plan, as opposed to joining online sites like LegalZoom to do it yourself.
In this article, we will walk you through a day in the life of a probated estate. For each “step,” there are many sub-topics and sub-steps, as well as ways to avoid probate. This overview should not replace setting up an appointment with an estate planning attorney.
What is Probate?
If you make a will, probate is the way you can authenticate it. Probate court is the legal body that supervises the distribution of your estate and payoff of creditors. If you die intestate (without a will), your estate still goes through probate, but the court will determine all of the distribution factors. Here is an example of step-by-step probate process.
Step One: Authentication
Whoever has your will must file it with the state after your death as soon as “reasonably possible.” What is “reasonable” or not will be determined by the court. The person with the will also will file a petition for probate, which is a request to kick off the process.
Authentication means ensuring that the will is properly-made, accurate, and not forged. Each state has its own authentication mechanisms and laws, and the possessor of your will must be sure to follow the court’s rules on authenticating before probate can really get going.
Step Two: Appointments
After authentication, the court will appoint someone to administrate your will. This person is known as an executor. The executor is in charge of conducting transactions on behalf of your estate (including paying off creditors and distributing assets).
Step Two-and-a-Half: Bond
Sometimes, an executor will have to “post bond” before he or she can distribute the estate. Bond acts as an insurance policy in case the executor leaves or commits grievous errors in administrating the estate. Not all states require bond for executors.
Step Three: Find the Assets
Identifying and listing the estate’s assets is a tedious process. The will may include many of them, but there might be “hidden assets.” The executor can find “hidden assets” through reviewing insurance policies or tax returns.
Step Four: D.O.D. Values
Date-of-death values are the appraisals of the assets—basically, how much an asset is worth on the day the person died. The court can appoint someone to make the appraisals, but the executor can also do the appraisal appointments him- or herself.
Step Five: Creditors
Next, creditors, which are the people to whom you owe debts, must be identified and notified of your death. In many states, an executor must post an ad in the paper to let creditors who are unidentified know that you have died. Usually, once they know you’re dead, creditors will swoop in to try to collect payment.
Step Six: Pay Debts
And once all the creditors have lined up, it is time for the executor to take the values accumulated in your estate, add them up, and start using the value to pay off debts. Creditors come first in probate, not your family.
Step Seven: Tax Returns
Next, the executor must file tax returns for your estate for the year up until your death. The IRS is considered a creditor, and sometimes, it is necessary to liquidate assets to pay off unpaid taxes.
Step Eight: Final Distribution
Your family gets what is left, if there is anything after paying off creditors. The executor will look to your will for guidance on the distribution.
If this sounds terrible, that’s because it can be. There are ways to legally minimize your tax burden and avoid probate court, and an attorney can help you do that. Probate court is a lengthy, difficult process, but it does not have to be that way.