ESTATE PLANNING NEWS & ARTICLES
Probate Series (Part 1): What is Probate
Probate is a court supervised process that takes place after someone dies. The word “Probate” derives directly from the Latin verb probare, which means to try, test, prove, or examine. It is the first step in the legal process of administering the estate of a deceased person, resolving all claims and distributing the deceased person’s property under a will – or in the absence of a will, by state laws of intestacy. In Arizona, any estate property that is or should have been dictated by a Last Will and Testament goes through probate. The probate process is generally divided into four basic steps:
The Four Basic Steps to Probate
- Petition, appointment of administrator, and posting of bond
The probate process begins with the filing of a petition in probate court. Among other things, the petition is accompanied by (A) the death certificate to prove that person died and (B) that person’s will (if there is one) to prove what that person’s wishes were regarding his or her estate. The court will usually appoint the personal representative named in the will to administer the estate. In the absence of a will, or if the will does not nominate someone, the court will appoint an executor based on state law to administer the estate. Also, unless waived within the will itself, the court will usually require the administrator to post a bond commensurate with the estimated size of the probate estate.
- Notice to all known creditors/beneficiaries and inventory of estate property
In step two, the estate’s administrator notifies all creditors and beneficiaries in writing of the probate proceeding. Notice must also be published in a local newspaper so that unknown creditors and others might be notified. Depending on the state, creditors a have a specified amount of time to make a claim on the estate. Meanwhile, an inventory of all of the real property, stocks, bonds, business interests, among other assets, is taken. In some states, a court appointed appraiser values the assets. When necessary, an independent appraiser is hired by the estate to appraise non-cash assets.
- Payment of final expenses, funeral costs, debts, and taxes
The estate’s administrator must determine which creditor’s claims are legitimate and pay those and other final bills from the estate. In some instances, the administrator is permitted to sell estate assets to satisfy the decedent’s obligations. State law dictates the priority that these claims should be paid. Beware! If an administrator pays the wrong creditors in the wrong order and the estate is insolvent (meaning the estate does not have enough assets to cover all valid claims) the administrator could be personally liable for unpaid claims with higher priority!
- Final payout to beneficiaries according to the will or heirs according to the laws of intestacy (if there is no will)
Once all the bills and taxes are paid, generally, the administrator petitions the court for the authority to transfer the remaining assets to beneficiaries either by the will or by law. Once the petition is granted, the administrator may draw up new deeds for property, transfer stock, liquidate assets and transfer property to the appropriate recipients as required. If the will calls for the creation of a trust for the benefit of a minor, spouse or incapacitated family member, money is then transferred to the trustee.
In short, a properly drafted will, updated regularly to account for life’s changes, organized records of debts, personal property and other assets simplifies the probate process. The more organized your estate is the easier the process and the less it costs your estate and therefore your heirs. However, probate can be expensive, time consuming and fraught with potential liability for the person administering the estate – usually a family member or friend. Want to avoid probate, fees and other costs? Read our blog next week.