By Team Tomorrow
Published September 5, 2019
Debt doesn’t just disappear when you die, and your assets don’t automatically give themselves to your beneficiaries. Probate court is where your final fiscal accounting is completed, sometimes with the help of a probate attorney.
When a person dies, everything is thrown into disarray. A hole is torn in the hearts of those who know you. It will heal, but it takes time. Grief is a long and difficult process.
You don’t want your family members and friends to go through a long, difficult process to access the assets you left behind for them, too. But that’s exactly what probate is.
After you die, your assets and debts must be handled. If you die intestate, or without a will, the probate process will happen in accordance with your state’s laws, regardless of what your desires were. However, if you die with a will, the aim of the probate process is to handle your debts and assets in accordance with your wishes.
If your estate is small enough, it may not have to pass through the probate process. For example, in Washington state, estates worth less than $100,000 do not have to go to probate court. These kinds of probate laws often reflect state requirements.
Probate can be a long process that varies from state to state. In general, though, this is what you can expect to happen as your estate makes its way through probate.
If you left behind a last will and testament, the administrator of your estate throughout the probate process will be the executor of your will. If you don’t have a will, the court will assign someone of its choosing.
This is just one reason why having a will is so important. You want to know that you can trust the person who will be handling the distribution of assets after you die, and you can’t do that if you have no idea who the executor will be. You also want to make sure you talk to the executor before giving them the assignment in the will.
They may not be willing to take on the job, and if they turn it down after first hearing about it after your death, the court decides and will assign literally anyone it wants.
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In order for the administrator or executor to be able to do anything with your will, it must first be proven valid in probate court. The laws surrounding validity are one of the biggest factors that change from state to state. They typically involve witnesses, signed documents and sometimes even notaries.
The hearing in probate court generally happens with the involvement of those who are required to assess the validity of the will, whether they be witnesses or notaries, in the presence of the heirs and beneficiaries. The heirs and beneficiaries do not have to be present in most cases; they just need to have the opportunity to voice any objections they may or may not have.
After the will has been proven valid, things can start to move forward.
Before your executor can begin on anything, they must post bond. This is actually a measure put in place to protect you; should the administrator do anything fishy with your money, that bond serves as a small piece of insurance against their behavior.
If you assign an executor in your will, your lawyer can also usually write in a provision removing the need for bond.
Once bond has posted and the will is determined valid, the executor has to take inventory of your assets — everything from real estate to retirement accounts, as well as personal property and brokerage accounts. These assets will also have to be appraised. This is like your postmortem wallet.
Before anyone can inherit anything, your debts need to be paid. Your executor is required to notify your creditors of your death. The creditors then have a set amount of time in which to bill the estate.
Part of notifying your creditors often includes posting a notification in the newspaper in case there are any creditors your executor isn’t aware of. This means your executor should go over each bill with great scrutiny, as there may be invalid claims.
If your executor does not receive a bill within your state’s set time frame after notification, creditors lose the right to bill your estate.
Now that your executor has a pile of bills, they have to pay them. If a deceased person owed more money than they held in their bank account, investments and insurance policies combined, it is possible to not have anything leftover to distribute.
Your executor will also file taxes for the year in which you died. This includes personal income taxes and also taxes on your estate. Again, it’s completely possible to run out of money before paying your taxes and debt in totality.
If you do have money leftover after debt and taxes, it will be distributed according to your will if you had one. If you did not, it will be distributed per the laws of your state. The executor/administrator will be the one ensuring this happens properly. However, in order to do so they often have to go back and get the court’s permission for each financial transaction along the way.
Along every step of the probate process, your estate is going to incur court fees, legal fees, administrative fees and more unexpected costs. It’s an expensive process, and one that can play out over a long period of time.
Not only that, but everything that happens in probate court is public record. Anyone who knows how to use your local court’s online database can find out the finer details of your postmortem financials. There is no privacy unless your will allocates assets to a trust fund.
You don’t, but your executor may think about hiring one. Probate lawyers assist executors through the probate and legal process. Each executor will decide if this added cost is worth it or not, but they’ll be billing against your estate. Make sure you have this conversation with them before you name them as your executor if avoiding legal fees is a big priority for you.
If this sounds like a nightmare to you—both because of the costs and the amount of time it would take your family to actually receive any inheritance—don’t fret. There are ways to avoid probate.
Having an estate plan can help prevent probate. One way is to set up a trust. What’s inside the trust and who it goes to is a private matter. Your estate can leave money to the trust, but the trust itself isn’t subject to probate.
Another method is to set your accounts and assets up to be payable-upon-death. This designation means the account passes ownership directly to the beneficiary when you die and does not have to go through the probate process.
Finally, you could try to avoid probate by giving your money away now, while you’re alive. You can give up to $15,000 per year to an individual without incurring a gift tax as of 2019. Gifts to your spouse aren’t subject to the gift tax or a dollar limit. This final method is probably best for those who know their passing is imminent.
Whichever method you choose, it’s usually in your best interest to protect as much of your money from the probate process as possible. Your loved ones will get more of the wealth you worked so hard to leave behind. They may still have to acquaint themselves with the probate process if any assets slipped through the cracks, but if you prepare to guard the vast majority of your wealth from probate, they’ll be so much better off, especially as they grieve.
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