FAQ: Death & Probate

Answers To Your Probate Questions

• What is probate?
• What generally are the mechanics of the probate process?
• What must be done to “close” a probate?
• How long does probate usually take?
• What is estate administration?
• What assets are subject to probate?
• What are the disadvantages of the probate process?
• Is probate expensive?
• Can my heirs do the probate themselves, or do they have to hire a lawyer?
• Can my agent under a durable general power of attorney settle my estate without probate?
• If I avoid probate, do I avoid estate taxes?

What is probate?

Probate is the court-supervised administration of your estate. It generally has three purposes:

1. Marshaling all of your assets
2. Paying your bills and resolving disputed creditor issues
3. Overseeing distribution of your estate as you directed

What generally are the mechanics of the probate process?

If you have a will, a petition or application to admit your will to probate is usually the action taken to initiate the probate process. If you die without a will, then a petition to appoint a personal representative, usually called an administrator, is filed with the probate court. In either case, notice to all of your heirs and beneficiaries is generally required prior to the hearing. A notice is often published in a newspaper of general circulation within the county of your residence. As a practical matter, this means a delay of approximately 30 days between filing the petition for probate and a hearing. Until the hearing and court appointment, unless action is taken to authorize the immediate appointment of a special administrator, even your named personal representative (usually called an executor, if male, or an executrix, if female) is not empowered to deal with your estate affairs. Once a personal representative is appointed, the court will issue documents, often called “Letters of Personal Representative,” which evidence that person’s authority to take action concerning the estate.

Probate also requires a particular process to handle creditors. This process is designed to ensure that all creditors have notice of the death and have the opportunity to file creditor claims. Practically speaking, the process is unnecessary in the vast majority of cases. In most cases, the bills and creditors could simply be paid as statements are received.

Even if all the bills and obligations of the estate are paid immediately, most probate laws require that estates remain open for a minimum period of time, usually four to six months, to give all creditors time to file claims in the estate. During this time, the law generally restricts the ability of the personal representative to make distributions from the estate.

The personal representative is charged with gathering all of the assets of your estate so that they can be used to pay creditor claims and then the residue can be distributed to your heirs or beneficiaries. Most states permit estates with a limited amount of assets, for example, estates consisting of personal property under a value of $100,000 in California, to be collected by an affidavit procedure rather than requiring probate. Assets held in a living trust do not require probate administration.

What must be done to “close” a probate?

Before an estate can be closed, the personal representative must file with the court an inventory of all of your estate assets with an appraisal of the value of those assets. The inventory and appraisal which is filed with the court is public record. The intimate details of your estate are open to anyone who cares enough to open the court file. There is no screen to ensure that your estate records are only reviewed for legitimate purposes. If your estate is not liquid and there is a need to sell assets to pay claims or taxes, a potential buyer can inspect your probate file to gain negotiation advantage.

Once the assets are collected, the estate obligations are satisfied and the minimum waiting period is satisfied, your personal representative can file a final accounting and petition for distribution of your estate. The details of distribution, including who will receive what, are also public record.

How long does probate usually take?

Even though statutes allow estates to be closed in limited periods of time, for example, six months, experience demonstrates the actual time of close is much longer; 15 to 18 months is a realistic estimate of the time required to close an estate.

What is estate administration?

If a will is proved invalid or if a person dies without a will or without a proper will substitute, the technical term for the public, legal process which ensues is administration, not probate. However, the legal process of estate administration is equally as time-consuming and costly as probate, if not more so. Under administration, the disposition of the deceased’s assets is governed by state law, not by the deceased person’s desires, and thus there is greater opportunity for dispute and disagreement among heirs, family and friends.

For most purposes, one can treat the terms “probate” and “administration” as meaning the same thing. The primary difference between the two is that in probate a will has to be “proved,” whereas in administration, there is no will to prove.

What assets are subject to probate?

Anything you own in your own name alone or as a tenant in common with others (including community property) is subject to probate and administration. Beneficiary designation property for which the “estate” is named as the beneficiary also goes through probate. If a beneficiary designation should have been made but was not, it is assumed that the estate is the beneficiary and therefore that property will be subject to probate.

Property held in joint tenancy with right of survivorship (including tenancy by the entirety) or in a living trust or property distributed by beneficiary designations (as long as the beneficiary is not your estate) does not go through probate. Property held in a life estate, in which you are entitled to the use of the property and all its income only during your life, also does not go through probate since the life estate dissolves automatically at death.

What are the disadvantages of the probate process?

The disadvantages of death probate proceedings include:

Loss of privacy. When your estate goes through probate, you lose all privacy. Your will, your assets and your liabilities all become public record just like any other litigation at the courthouse. (Con artists have been known to submit false claims against a probate estate and use the probate record to target heirs and beneficiaries for their next swindle.)

Will contests. Wills can always be contested and set aside — it happens frequently. When a will is contested, the estate is frozen and the assets cannot be transferred to loved ones except by specific court order. It is easy for any disgruntled heir to file a will contest since the will is already in probate court.

Costs. The court charges the estate a fee relative to the size of the estate. In addition, attorneys, executors, guardians and any other fiduciaries acting within the realm of probate (or administration) charge their own fees. The total cost of probate can easily range from 3 to 10 percent of the gross estate — or more. For example, if a person dies owning a house that has a fair market value of $300,000 and other assets amounting to $100,000, the value of the gross estate is $400,000. A conservative estimate of the probate costs would be 5 percent of that gross amount, or $20,000. If the house was mortgaged for $200,000, the value of the net estate is $200,000. Thus, the probate costs could actually amount to 10 percent of the net estate!

Multiple probates. There must be a probate proceeding in every state in which the decedent owned real property (i.e., land).

Delays. Probate can last from several months to several years. This only adds to the frustrations and anxieties of a grieving spouse and family.

Lack of portability. In our highly mobile society, it is often necessary (indeed, it is advisable) to have your will reviewed by a lawyer in the state of your new residence to be sure your will complies with and takes advantage of local laws. Often, a move to another state will necessitate a complete revision of your will.

Probate has been defined as “the lawsuit you bring against yourself with your own money to benefit your creditors.” This description is quite accurate, but people usually come to appreciate its veracity only after undergoing the probate of a family member or close friend.

Is probate expensive?

The two authors of “The Living Trust Revolution,” Robert A. Esperti and Renno L. Peterson, commissioned a scientific survey of probate costs for that book. They also compared the results of this study to a 1990 report by the American Association of Retired Persons (AARP). They came to the conclusion that the attorney fees for probate are usually about 3 percent of the gross estate. If the personal representative or the executor of the estate is also paid a fee, the total cost, including both sets of fees, is 5 to 6 percent of the gross estate.

Can my heirs do the probate themselves, or do they have to hire a lawyer?

They may be able to do it themselves, especially if the estate is small and there is no real estate involved. But even a modest-sized estate usually requires a somewhat more formal process (even though in many states it is categorized legally as either “formal” or “informal”). This process is exceptionally complicated to those not familiar with it, so in almost all cases, if your family must probate your estate, they will have to hire a lawyer. The ability for heirs to do the probate in Connecticut (less formal) is easier than, for example, New York or Massachusetts (more formal).

Can my agent under a durable general power of attorney settle my estate without probate?

No. By law all powers of attorney automatically terminate at the death of the grantor of the power.

If I avoid probate, do I avoid estate taxes?

No, your taxable estate includes pretty much everything you own at death (or had too much control over). So your gross estate will include joint tenancy property (except the half owned by your U.S. citizen spouse, or any portion to which any non-U.S. citizen spouse contributed), your half of community property, the entire value of life estate property, everything in your revocable living trust and life insurance proceeds from policies you own.

In addition, if you have the power under a trust someone else created to take some assets out of that trust for yourself, the value of those assets would also be included in your gross estate, even if you never exercised that power.