PROBATE & ESTATE ADMINISTRATION INFORMATION CENTER 

 

Overview

The estate is all assets and property owned by the decedent upon his or her death.  Estate administration occurs when an individual dies and leaves property, assets and debts to be disposed of.  The executor of the Will or estate administrator takes care of these issues.  The executor can be held liable if he or she mismanages the estate assets in anyway.

The Executor/Duties

The creator of the Will (the testator) names an executor to carry out his or her wishes after death.  After the individual’s death, the executor is responsible for notifying Social Security, annuity and/or pension providers of the death.

His or her other duties include collecting, inventorying and appraising assets (i.e. jewelry, collectibles), paying outstanding debts, filing and paying the estate taxes and distributing assets to the decedent’s beneficiaries.  The executor is required to act in the best interests of the estate.  Finally, the estate will be closed once the court receives copies of notices to concerned parties, copies of paid debts to creditors and evidence that assets have been distributed to named beneficiaries.

An important part of the executor’s duties is to try to preserve assets for distribution by reducing estate taxes.  The executor should take into consideration whether the administration expenses and casualty losses would benefit most on the estate tax return or the estate income tax return.  The executor should see if there are any tax savings opportunities available in filing a joint income tax return with the surviving spouse.  The executor must make sure that the assets are distributed prior to the date of disposition, which is six months after the individual’s death.

The executor is entitled to compensation for his or her time and expenses.

Initiate Probate

Once the executor opens up the estate, he or she should hire an attorney to represent the estate.  The attorney notifies parties involved, obtains the death certificate and original Will, handles any contested Will matters and finally closes the estate.  The attorney is paid from estate monies.

Probate/Process

Probate is the process to determine if a Will is valid or invalid.  Probate assets include assets that do not have a named beneficiary.  Probate is regulated by state laws.

Upon an individual’s death, his or her estate is submitted to the probate court.  If the decedent left a Will, the court will determine if it is valid.  Once the determination is complete, the court will oversee the executor of the estate.  If there was no Will left or the Will was invalid, the court will appoint an administrator to distribute the property. 

The process includes first petitioning the court, sending a notice to beneficiaries and creditors, collecting, inventorying and appraising all assets, paying outstanding debts, filing appropriate taxes and distributing remaining assets to those named in the Will.

Small estates can be probated more quickly than large estates.  A small estate can be probated before the administrator instead of a probate court.  This decreases the costs of probate and time spent for the process.

Disadvantages of Probate

The probate process can be expensive and take from six months to two years before the beneficiaries receive the property left to them in the Will.  Probate costs and fees are taken directly out of the estate.  If the Will is contested, it can increase the process somewhat.  There is a lack of privacy because probate issues are part of the public record.

Intestacy

An individual dies without a Will or with an invalid Will.  The person died ‘Intestate’.  The state government distributes the property to the surviving spouse and children first, and then close relatives according to the state default rules. 

Non-Probate Assets

Non-probate assets are not required to go through probate.  Examples of non-probate assets are property owned in joint tenancy or by right of survivorship.  Also included are bank accounts marked ‘Payment on Death’ and securities that ‘Transfer to another on Death’.  Life insurance policies and retirement plans that name a beneficiary do not require probate court.  These items are distributed quickly to the rightful beneficiary.

Joint Tenancy with rights of survivorship

An asset is owned by two or more owners.  When an owner dies, his or her ownership passes to the remaining owner or owners automatically. 

Payment on Death Bank Account (POD)

A contingent beneficiary is named when the bank account is first opened.  There is no ownership of this account until the account owner dies.

Transfer on Death Securities (TOD)

The account does not belong to the named beneficiary until the owner of the account dies.

Revocable Living Trust

A revocable living trust is very much like a Will except it limits the amount of property subject to probate.  It allows the individual (the testator) to transfer title of ownership of property to the trust.  The testator, while alive, is in control of his or her assets and can do whatever he or she wants with them.  The testator can change or terminate the trust at any time.

Since property is now owned by the trust and not the decedent, it is not a part of the probate estate.  The trustee named in the revocable living trust will administer the property to the beneficiaries named in it.

Contesting a Will

Contesting a Will by any interested party is challenging the validity of the Will.  A Will does not always guarantee that the decedent’s property will be distributed according to his or her wishes.

Incapacity

In order for a Will to be valid, the decedent must have been of sound mind at the time it was made.  Did he or she have the ability to understand the nature and extent of the property to be disposed and the relationship with those who would benefit from the Will?  In order to prove incapacity, the decedent must have been mentally ill or under the influence of drugs or alcohol when the Will was written.

Most Recent Will

The most recent Will, if it conforms to legal requirements, will always replace an earlier Will.

Execution

A Will must conform to the state’s requirements and be properly executed in order to be valid.  The Will must be signed by the testator, witnessed or notarized.

Undue Influence

The Will was made under duress, coercion or fraud according to another individual’s wishes.  This would cause the Will to be invalid on the grounds of undue influence.

Forgery

If the Will is forged, it is invalid.  This includes the signature of the testator or any witnesses. 

Time to Contest

State statute has limited the time an interested party has to contest a Will.  If the Will is contested successfully, the probate court may not allow that part of the Will that was challenged or allow an earlier Will if one was made.  The court may determine the decedent died intestate and distribute the assets according to the state laws.

Conclusion

Being an executor of a Will can require a lot of time and patience.  A contested Will can be expensive and time-consuming.  If you have been appointed an executor and do not understand probate and tax laws, it is wise to hire an experienced probate and estate administration attorney.

 

Links to additional information

Cornell University Law School identifies the states that have adopted, at least in part, the Uniform Probate Code.  Visit their website at http://www.law.cornell.edu/uniform/probate

H.E.L.P. organization provides an Estate Administration Overview on the responsibilities of a good executor.  Visit them at http://www.help4srs.org/legal/estateadmin.htm

Visit the Internal Revenue Service to learn more about estate tax laws.  Their website can be found at http://www.irs.gov

Do not know how to start your estate planning?  Visit Smart Money to learn everything you need to know.  Click on http://www.smartmoney.com/personal-finance/estate-planning/

AARP has an Estate Planning Guide with information on creating an executing a successful Will.  Visit their website at http://www.aarp.org