The number one question I get asked - what is probate?
Legally, probate is the process of getting judicial approval to manage someone’s affairs after they die. Basically, a judge will assign someone to manage your assets. Probate isn’t necessary if your assets are titled in someone else’s name or in a trust (learn more about estate planning).
However, if your house, accounts, or other assets are not co-owned with someone and not held in a trust, someone will need to obtain permission from a court, typically called the probate court, to sell or transfer them.
So then what happens?
If the person who dies, called the decedent, has a Will, it usually appoints someone the personal representative or executor of the estate. If the decedent has no Will, then usually a close family member will serve that role. The court will decide who will serve in that role based on state law. That person then files a Petition for Probate (and supporting docs) in the probate court in state where the decedent resided at the time of death.
If everything is in order, a judge will sign a court order appointing the personal representative, or PR, and in most cases issue something called, “Letters of Administration.” These are documents that banks and others can rely on that says the PR can transact business for the estate of the decedent. Interested parties are notified and a public notice is published in the newspaper to give creditors and others the opportunity to file claims with the court to seek repayment of debt.
At this point, the PR can start “marshalling” the assets, which is just a fancy way of saying locating and securing them. The PR might open up a bank account in the name of the estate and move the decedent’s money there. The PR might also sell or rent the decedent’s home.
The PR can also settle any claims that are filed and pay them with the assets of the estate.
The PR may need to file personal income tax returns for the decedent if the decedent would have otherwise been required to file. The PR may also need to file estate income tax returns, if they generated taxable income.
The PR is responsible making an inventory of the assets and typically files it with the court and notifies interested parties.
Once all the assets are secured and claims have been paid, the PR typically notifies the court that the case is ready to be closed. If the court accepts the statement of account, it will then close the case and the PR is free to make any necessary distributions.
Most probates take anywhere from a year to 18 months from start to finish. Of course, many people try to avoid probate by establishing a living trust to house their assets, but that is a different blog.