The strong emotions that come with a love one’s passing are often followed by bewilderment when survivors realize all of the financial and legal steps they must take to settle their affairs. The spouse who passed away may have handled all of the couple’s finances, leaving the other uninformed and overwhelmed. Or perhaps a caregiver must begin probating an estate which he or she knows little about. In some cases, the estate itself may be in disarray or scattered among many accounts.
Probate can be intimidating, but understanding how the process works and having some expert legal tips at your disposal will help you execute your duties confidently and correctly.
What is Probate?
Probate, or estate administration, is the process by which a deceased person’s property, known as their “estate,” is passed to the heirs and beneficiaries named in their will. A probate court supervises the entire process, which usually takes about a year, depending on the size and complexity of the estate.
The responsibility of overseeing this process ultimately falls to whomever was appointed executor or personal representative in the decedent’s will. Matters can be a bit more complicated when someone passes away without a will, because it may not be clear who should handle probate.
Tips for Starting Probate
- Secure Tangible Property. This means anything you can touch, such as silverware, dishes, furniture and artwork. Once probate formally begins, you will need to determine accurate values of each piece of property, which may require appraisals, so they can be distributed properly. If property is passed around to or taken by family members before you have the opportunity to take an inventory, this will become a difficult, if not impossible, task. To avoid problems, hold off on all distributions and secure property as soon as you can, even if you do not begin probate or the inventory process immediately. Of course, this does not apply to gifts your loved one may have made while they were alive, which are not considered part of their estate.
- Take Time. You do not need to take any other steps immediately. It’s important that you and your family have time to grieve. Most financial matters can wait, with one exception: Social Security should be notified within a month of death. If SS checks are issued following death, you will need to return them. (For more on Social Security’s death procedures, visit https://www.ssa.gov/pubs/EN-05-10008.pdf.)
Filing the will for probate soon after death will help prevent drawing out the entire process. Some states require that a will be filed with the probate court within 30 days of death. Take the time to grieve, but don’t risk additional stress and costs with a lengthy delay.
- Meet with an Attorney. When you’re ready, meet with an attorney to review the steps necessary to administer the estate. Bring as much information as possible about finances, taxes and debts. Don’t worry about putting the papers in order first; the lawyer will have experience in organizing and understanding confusing financial statements. Many families strive to avoid the probate process, but trying to navigate things on your own can become tricky very quickly and have serious implications down the road. A short consultation can determine whether probate is necessary, assess if there may be any problems or contentions, and offer priceless peace of mind.
A Quick Guide to Probate
The following steps offer a general guideline of what transpires during estate administration, but the exact rules differ from state to state. It is important to consult an attorney in the state where the decedent lived.
- File as an Executor. To be appointed executor or personal representative, file a petition at the probate court in the county where your loved one was living before they died. In the absence of a will, heirs must petition the court to be appointed “administrator” of the estate. The state will determine who is eligible to fill the role of administrator. Typically a surviving spouse is first in line, then adult children, parents, and so on. The person approved to handle the estate will receive legal documents, typically called “letters,” which certify their authority. You will also need to file the original will and death certificate with the court.
- Notify Creditors, Beneficiaries and Heirs of Probate. Each state has its own laws governing notification of parties who hold an interest in a person’s estate and the amount of time they have to file a claim against it. This notification may include a published obituary in the local newspaper and/or directly notifying interested parties by mail.
- Marshal, or Collect, the Assets. This means that you have to find out everything the deceased owned, create an inventory and file it with the court. This is where securing property early on comes in handy. It’s generally best to consolidate all the estate funds as much as possible. For simplicity and transparency, bills and bequests should be paid from a single, separate checking account. You can establish one for this purpose or request that your attorney set one up.
- Pay Bills. Unfortunately, just because a loved one passes away doesn’t mean their bills stop coming. Tackle these by making a list of all liabilities they have. Some, like utility bills, storage fees to secure belongings and mortgage payments are considered administrative expenses. These accounts must be kept current throughout the probate process. If you use any of your own money to pay these expenses, be sure to keep meticulous records. You may be able to use estate assets for reimbursement in some cases. Other liabilities, like medical bills and taxes, are considered final bills. These can only be paid once probate has concluded, and there is a particular order in which creditors are entitled to repayment.
- File Tax Returns. You must also file a final income tax return for the deceased person. If the estate earns income (through interest or dividends, for example) during the administration process, it will have to obtain its own tax identification number in order to keep track of the earnings and possible tax consequences.
Most estates do not need to file federal estate tax returns, but if one is needed, it must be filed and paid within nine months of the date of death. If you miss this deadline and the estate is taxable, severe penalties and interest may apply. If you do not have all the information available in time, you can file for an extension and pay your best estimate of the tax due. If you are unsure what federal or state tax consequences the estate will incur, it is wise to consult an accountant or attorney who is familiar with tax laws.
- Distribute Property to Creditors, Heirs and Legatees. Generally, executors do not pay out all of the estate assets until the period runs out for creditors to make claims, which can be as long as a year after the date of death. However, once you understand the estate and have processed and paid any debts and taxes, you can distribute most of the assets, retaining a reserve for unanticipated claims and the costs of closing out the estate.
- File a Final Account. The executor must file a detailed account with the probate court, listing all tax filings and payments, payments to creditors, and distributions of property and assets. Once the court approves this final account, you can distribute remaining funds in the closing reserve and finish your work.
Some of these steps can be eliminated through careful estate planning, but whoever is left in charge still has to pay all debts, file tax returns, and distribute property to the rightful heirs. Meticulous record-keeping and sound legal advice can make this process much easier and shorter for remaining family and can even reduce legal bills over the long term. It’s not an easy conversation to have, but addressing these matters in advance is beneficial to everyone in the family.