When somebody passes away, the process of administering their estate is often referred to as "probate".
Probate is the legal process of settling the deceased person's debts and financial obligations, and distributing their assets to their heirs. The probate process involves the payment of the debts of the estate, the authentication of the deceased person's will, the carrying out of any wishes included in a will, and the distribution of assets to the person's heirs.
The formal probate of an estate is a process that occurs in court, with the court supervising the probate process and approving the final distribution of the assets of the estate. The formal, supervised probate process involves the following steps:
- Opening an Estate - A petition is filed with the probate court in the state and county in which the deceased person was living at the time the person passed away, asking that an estate be opened and that somebody be appointed to administer the estate. The person who files the petition will often ask to be made the administrator of the estate. (Administrators are sometimes called "executors" or "personal representatives".) The petitioner will also file with the court a certified copy of the deceased person's death certificate and, if available, a copy of the person's will.
- Posting of a Bond - The administrator will normally be required to post a bond with the court, to protect the estate from any financial misconduct. The administrator may be able to seek a waiver of the bond requirement through the probate court. The requirement of a bond may also be waived in the decedent's will.
- Notice to Legal Heirs - The administrator of the estate will serve notice of the estate upon all known legal heirs, and will also publish an announcement of the estate in the local newspaper of record, a newspaper that is legally qualified to publish legal notices. The administrator will file proof with the court that required notices were sent and published.
- Notice to Creditors - The administrtor will mail notices of the estate proceedings to all known creditors of the estate, to allow them to make claims for payment of debts, and file proof with the court that the notices were mailed.
- Inventory of the Estate - The administrator will create an inventory of all of the assets of the estate, and the value of those assets. For some estates it may be necessary for the administrator to employ professional appraisers to assist with the process.
- Review Claims by Creditors - As creditors submit claims for payment, the administrator will review the claims and may approve or deny the claims. If a creditor's claim is denied in full or in part, the creditor may petition the probate court to review the administrator's decision.
- Proposal of a Final Distribution - The administrator will propose a final distribution of the estate's assets, including the payment of any remaining claims by debtors and the distribution of any remaining assets to the heirs. The administrator will notify heirs and interested parties of the proposed distribution and file proof of service with the court. The court will hold a hearing at which it reviews the proposal, and hears any objections to the proposed distribution. If all goes well, the distribution will be approved. Otherwise, it may be necessary for the administrator to amend the proposal.
- Transfer of Assets - The administrator will arrange the payment or transfer of assets to creditors and heirs, consistent with the terms of the court-approved final distribution.
- Closing of the Estate - Once the assets of the estate have been distributed, the administrator can petition the probate court to be released from further duties, and for the court proceedings for the estate to be closed.
During the probate process, the administrator will obtain a tax identification number for the estate, and file state and federal tax returns on behalf of the estate. The administrator must also ensure that any estate taxes are paid, and in some states must withhold inheritance taxes from distributions to the heirs.
Additional Forms of Probate
All states have now created simplified probate processes for smaller estates, although the criteria for qualifying for simplified probate vary enormously from state to state. The simplified process requires that the value of the estate be less than a legally defined amount, and may also require that the estate not include any real property. Some states have more than one form of simplified probate.
- Informal Probate - Where there are no disputes between heirs or with creditors, states that have adopted the Uniform Probate Code will normally allow for an informal probate process in which the administrator files documents with the court, but in which no hearings occur in court. It remains necessary to file a final accounting with the court, describing how the estate will be distributed, and a closing statement confirming that the debts of the estate have been paid, and the remaining property distributed to the heirs.
- Independent probate - Some states allow for probate to occur without direct oversight by the probate court, but that is largely otherwise similar to formal probate. This process may be called independent probate or unsupervised formal probate. Court permission may be required for major financial actions, such as the sale of real estate. In state that allow informal probate, an administrator may choose unsupervised formal probate if there are issues that will require a court decision, such as a dispute over the value or distribution of assets, or if there is no will and the court must approve a distribution under the laws of intestate succession.
- Small estate affidavit - A few states allow the transfer of assets from very small estates to be made by affidavit, where the person seeking the transfer of an asset such as a car completes an affidavit attesting that the estate has very little value, and that the person is the only heir who has a claim to the property to be transferred.
If a deceased person has properly executed a will, that person's assets must normally be distributed in accord with the terms of the will. While for a very small estate, it may be that the assets are distributed with little or no court involvement, the expectation remains that the distribution will be made in accord with the decedent's will.
In some states a person who is in possession of the will of a deceased person must file the will with the probate court, whether or not an estate is opened. In all states, a person who is possession of a deceased person's will is expected to provide it to the heirs or administrator of the estate.
When a person passes away without a valid will, the laws of intestate succession are applied to determine how the person's assets will be distributed to heirs. Intestate is a fancy word that simply means that the deceased person did not have a will. Succession is a term that refers to the process of inheritance.
In simple terms, the laws of intestate succession represet the state's best guess as to what somebody would do if they wrote a will. It's better to write your own will and specify how your assets will be distributed, but if you do not do so the state uses these laws to direct your assets to likely heirs.
If a deceased person has a surviving spouse and children, including adopted children, they will receive shares of the estate. If a person passes away with no surviving spouse or children, shares of the estate may go to their surviving parents, surviving siblings and half-siblings, and possibly to more distant relatives if there are no surviving close relatives.
Some assets of a deceased person are not part of a probate estate, because they are said to pass outside of probate. Common examples include:
- Jointly owned real estate with a right of survivorship;
- Banking and investment accounts with a pay on death or transfer on death provision naming a beneficiary;
- Life insurance policies with named beneficiaries; and
- Retirement accounts with named beneficiaries.
Some assets that pass outside of probate, such as the assets held in a revocable living trust, may remain subject to claims by creditors of the estate after a person passes away. For some jointly held assets, even with a right of survivorship, it may be possible for a creditor to make a claim against the decedent's share of the asset. However, many assets will pass to beneficiaries without being subject to the claims of creditors. For example, a named beneficiary to an insurance policy will receive the distribution without its being subject to creditors' claims.
Although in most probate cases there is no dispute as to the validy of a will or its provisions, sometimes a challenge will be made to the validity, authenticity or terms of the will. The process of challenging or disputing a will is commonly referred to as contesting the will.
Challenges to the Validity of a Will
When a will is presented for probate, common grounds used to contest the will include challenges to its validity. These challenges may be to the will itself, or to the circumstances under which the will was prepared and executed. Common grounds for a will challenge include:
- Mental Incapacity - It is alleged that at the time the will was executed, the deceased person lacked the mental capacity to execute a will. Although all adults are presumed to have testamentary capacity, the ability to knowingly draft and execute a will, the will may be challenged on the basis of evidence that at the time of its execution the person lacked the necessary mental capacity to form a will, for reasons such as mental illness or infirmity, lack of mental capacity, or intoxication.
- Forgery - It is alleged that the will that has been submitted to probate is a false will, signed by somebody other than the deceased person.
- Fraud and Undue Influence - it is alleged that somebody tricked, pressured, intimidated, coerced or otherwise caused the deceased person to sign a will that the person would not have signed but for the improper acts or pressure.
- Revocation - It is alleged that the will submitted to probate was revoked by the deceased person, either directly or as the result of being superseded by a newer will.
- Improper Execution - It may be alleged that the will was not properly executed, or lacks valid witness signatures.
Sometimes a will contest is brought by a person who claims to be a legal heir, but that the testator forgot to include the person in the will. An heir asserting this type of claim is sometimes called a pretermitted heir, a fancy way of saying that they were inadvertently omitted.
Such a claim might be made by an illegitimate child who, although perhaps acknowledged by the deceased person during his life, was not included in the will or received only a small bequest with no further explanation of the omission or for the child's being treated differently than the decedent's other children. Sometimes the claim will be asserted by a child who was born after a will was executed, where a parent did not update the will before passing away. A spouse who is not included in a deceased person's will may be treated as a pretermitted spouse.
If an heir succeeds in convincing the court that the deceased person accidentally omitted the heir from the will, the court will attempt to adjust inheritances in a manner consistent with what the deceased person would likely have chosen, had the oversight not occurred.
Opting Against the Will
Although not actually a contest of the will, states protect the rights of surviving spouses by allowing them to elect statutorily specified inheritances instead of an inheritance as described in a will. Thus, if a surviving spouse receives a smaller bequest than the spouse could receive under state law, the spouse may "opt against the will" and choose the larger, statutorily defined inheritance instead of the inheritance descrbed in the will.