The Probate Process
By: Nike Thorpe
The Henssler Financial Group Position Paper

Probate is the court supervised legal process that includes determining the validity of a Last Will and Testament (Will); gathering assets; paying debts, taxes, and the expenses of Will administration, and then distributing the remaining assets to those entitled to them. After the Will is validated, usually through a self-proving affidavit or affidavit of due execution, the executor can begin the process of determining what property must pass through probate. If no executor is named or there is no Will, then the court will appoint an Administrator to govern the estate. In a case where there is no Will, the court will determine who the rightful heirs are, according to state law.

Probate Property

A decedent's assets can be divided into probate and non-probate assets. Probate property is property that must go through probate before it can be distributed, and includes:

  • Property held in the individual's name;
  • Property owned jointly as tenants in common, where two or more people own property concurrently, and each person's share of the property passes to their heirs or according to terms of a Will, not surviving tenants;
  • All retirement accounts, life insurance policies and annuities that have the decedent's estate named as the beneficiary; and/or
  • The deceased's share of community marital property, in some states.

Non-probate property includes:

  • Pensions;
  • Retirement accounts;
  • 401(k), IRAs and Roth IRAs;
  • Life insurance policies where a person or institution is listed as beneficiary;
  • Assets owned jointly with rights of survivorship or jointly as tenants in entirety; and/or
  • Property held in trusts.

When is Probate Necessary?

Probate is not always necessary and can be avoided in cases where the size of the estate is small. However, an "insignificant size" differs from state to state.

The main advantage of probate is that probate court supervises the entire proceedings, and probate laws are followed. This is especially beneficial if heirs are challenging the validity of a Will, questioning if the Will represents the deceased's most current wishes, or if there are claims from creditors on the estate. Also, if the estate of the deceased is large and complex, probate is used to ensure that all the property is accounted for and distributed legally, according to the wishes of the deceased. Last but not least, going through probate ensures that all beneficiaries are located and all liabilities settled before final distribution of the assets.

Each state has their own set of probate rules and regulations. Some states have significantly decreased the costs, time and complexity of probate while others remain fairly complex. The following are some advantages and disadvantages of the probate process:

Some advantages include:

  • The Will is validated in court.
  • If an executor is not named in the Will or there is no Will, the court will appoint an Administrator to settle the estate.
  • Creditors are required to file any claims by a specified time period.
  • Objections to a Will are addressed and settled in probate court.
  • Probate ensures that all property is legally and properly distributed to the rightful beneficiaries and heirs.

Some disadvantages include:

  • All information relating to a decedent's Will becomes public record.
  • The probate process may be time-consuming, depending on Will disputes and the complexity of the estate.
  • The probate process can be costly. Executor, court and attorney fees are paid through the estate. In some states, executor fees may be reduced by authorizing that the executor serves without bond. This, however, does not affect the amount of actual compensation an executor may charge for administering the estate.
  • The court can freeze assets of the deceased at the beginning of probate for a period of time to satisfy any debt of the deceased, e.g., creditors, funeral expenses and other bills related to the deceased. However, in most cases, the court will give an allowance to immediate survivors to cover day to day needs.

While the probate process can be time-consuming and costly, it helps if you, as the owner of the assets, maintain an updated inventory of assets and liabilities and update your beneficiaries. Most importantly, you should prepare a Will and have it updated it regularly. Talk to your estate planning attorney to determine ways to make the process easier for your survivors. For more information regarding this topic, please contact The Henssler Financial Group at 770-429-9166 or comments@henssler.com.

All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing.
 
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