What is probate?
Probate is the Latin word for prove, which means that through the estate probate process a will is brought before a court to prove that it is a valid will. The courts charged with this responsibility are generally known as probate courts, which may actually supervise the administration or settlement of the estate. The probate process is governed by state statutes that are generally intended to accomplish three primary objectives: 1. To preserve estate assets. 2. To protect the rights of creditors in the payment of their claims before the estate is distributed to the heirs. 3. To assure that the heirs receive their inheritance in accordance with the terms of the estate owner’s will.
Once the estate’s personal representative is approved by the probate court and posts any bond that is required, the process generally proceeds as follows: The personal representative must “prove up” the will; prove that it is a valid will signed by the estate owner who was competent and not under duress or influence at the time of signing. Notice must be given by the personal representative to all creditors to make prompt claim for any money owed to them by the estate. The personal representative must prepare and file an inventory and appraisal of estate assets and must manage and liquidate estate assets to pay all debts, fees and taxes owed by the estate. The remaining estate must be distributed to the heirs in accordance with the estate owner’s will (or the state laws of intestacy if there was no will). Depending on the complexity of the estate, it is not uncommon for the estate probate process to take six months to a year or more before an estate is finally settled.
The tasks that follow are intended as general guidelines to assist in the efficient settlement of an estate.
Asset inventory/valuation/management: The executor should complete an inventory of all estate assets. This may require arranging for appraisals and/or managing certain estate assets, such as securities and real estate.
Business interests: The executor is responsible for managing and disposing of any business interests in accordance with the deceased’s will and any agreements, such as a buy-sell agreement, in effect.
Debts: The executor reviews all debts owed by the estate and pays those that are valid from the estate. This may require liquidating appropriate estate assets.
Life insurance: Obtain death claim forms for all policies on the deceased’s life, either from the insurance companies or the local agent(s).
Bank accounts: Verify the existence of all bank accounts of the deceased. If a surviving spouse had a joint bank account with the deceased, the account automatically passes to the surviving spouse. A bank representative should be contacted to make necessary changes. Any bank accounts held in the deceased’s name only will have to go through probate.
Credit cards: Pay any balance due from the estate and cancel any credit cards in the deceased’s name alone. On joint accounts, change the name to the surviving spouse only.
Social Security: If the deceased was receiving Social Security benefits, notify them of the death. A surviving spouse and dependent children may be eligible for survivor benefits. In addition, Social Security may provide the surviving spouse with a $255 one-time death benefit. Contact the local Social Security office.
Employer-provided benefits: If the deceased was employed at the time of death, contact the employer to determine benefits.
Tax returns: The executor is responsible for filing all required state and federal income and estate tax returns and paying the taxes due.
Specific bequests: The executor first distributes any specific bequests made in the deceased’s will.
Residuary estate: After specific bequests have been distributed, the executor distributes the remaining estate according to the terms of the deceased’s will. This may require changing the title on property, such as real estate, securities and automobiles, to the beneficiary’s name.
Identity theft: To minimize the possibility of having your loved one’s identity stolen, AARP recommends that you do not include details, such as the deceased’s address or month and day of birth in the obituary. You should also mail copies of the death certificate to all three credit reporting bureaus and to all credit issuers to cancel accounts in the deceased’s name.
Other considerations: The beneficiary of an IRA, retirement plan or annuity should explore distribution options and select the one that provides the best income tax results consistent with the beneficiary’s needs.
Holly Peterson is the owner of Elite Retirement Strategies and former radio show host. You can find her online at eliteretirementstrategies.com or by calling 208-252-4345.