CHAPTER 4:
THE INS AND OUTS OF THE PROBATE PROCESS – WILL OR NO WILL
If you are not presently (or imminently) dealing in court with the loss of a loved one, you can skip this chapter for now. It is not strictly necessary for your own planning. Still, it’s helpful to understand what your survivors will be facing.
This course is designed to provide the big picture. A few preliminary points are in order.
First, Probate is initiated in the county of the Decedent’s legal residence at death. The Probate Court is usually a lower level court in the state system, but it might be referred to by another name. Often it is called the Surrogate’s Court. Any clerk at your county courthouse can help you find the right office.
Secondly, contrary to a common misconception, a Will cannot be drafted in a manner to avoid Probate Court. (You need a Trust to do that.) If the estate is small, however, many states have expedited procedures so that Probate Court and the paperwork involved are as much of a “breeze” as going to court can be.
Thirdly, if your Decedent left no Will, the following process still applies. But instead of an Executor named in a Will, somebody must be named “Administrator” of the estate.
It’s basically the same role with slightly different paperwork. A surviving spouse will almost always be given priority when the judge appoints the Administrator. The term “Personal Representative” is used to refer to either the Executor or the Administrator of a Decedent’s estate.
If there is no willing and able surviving spouse, someone in the family will hopefully step up. Hopefully, too, the family will agree on whom that should be. If not, there is clearly the potential for a family argument and lasting bad feelings. The probate judge will probably hear everybody out and make a decision. Alternatively, the judge might decide that no one in the family is a good choice.
As a last resort, there is a Public Administrator – a neutral lawyer appointed by the court and paid by the estate. If that happens, the fee is money taken out of the family’s pocket. So it is in the family’s interest to reach an agreement.
The probate process is basically the same everywhere, but the devil is always in the details. Probate is often portrayed as an expensive nightmare and something to be avoided at all possible costs. Yes, it is almost always better to pass most of your property outside of Probate Court. But probate in most states is not “too” bad an experience – assuming everyone gets along and there are no “complications.”
In many states and situations, the Personal Representative can handle Probate Court without a lawyer.
Many county courts offer outlines of local procedures, frequently asked questions, and online official forms with instructions you can download.
The probate judge is usually an elected (non-partisan) official, and likely to be friendly to those who appear without lawyers. (Some people want just a brief attorney consultation to make sure their paperwork is filled out correctly.) But there are some notable big exceptions. California, New York and Florida come immediately to mind. You’ll almost surely need a lawyer there.
And if family squabbles break out – in any state – all bets are off. Probate could then turn into a family feud. It’s a shame. Many of these battles could have been avoided if the Decedent had done proper planning with family communication.
The Big Picture
Significant details of the probate process vary greatly by state, but three basic steps remain constant for Personal Representatives everywhere:
- Take inventory. Manage and protect the Decedent’s property during the probate process – e.g., keep up insurance.
- Pay the Decedent’s lawful debts and taxes.
- Distribute whatever is left of the probate estate according to the terms of the Decedent’s Will, or if there is no Will, according to state law.
In theory, it’s all fairly straightforward. Remember the non-probate methods of property transfer discussed earlier? They are not the “official” responsibility of the Personal Representative.
Simply as a courtesy, however, the Personal Representative frequently assists to facilitate the payment of insurance policy proceeds or a transfer on death (TOD) account to the appropriate person, for example.
This is not a legal duty in most states, but it may be necessary as a practical matter to ensure that the Decedent’s wishes are carried out.
Filing for Probate
The probate process begins with the filing of a Petition for Probate of Will and Appointment of Executor or Administrator (the Personal Representative). The proper form in your state will have a similar name.
This is a short document asking for basic information such as the Decedent’s Social Security number, date of death, next of kin and probably a brief description of the Decedent’s probate property.
Again, this can often be done without the help of a lawyer. But don’t forget to bring money for filing and other administrative fees when you go to the courthouse. This first step is usually taken by the soon-to-be Personal Representative.
The person who files for probate should also have on hand multiple certified copies of the death certificate with raised seal. No one will honor an ordinary photocopy. Death certificates are issued by a government agency such as the local health department, but funeral homes often get them for the families they serve as a courtesy.
Ask for about a dozen. They’re easier to get right away. You will need the death certificate in almost all situations related to settling the estate, such as dealing with financial accounts and the Social Security Administration.
Check the death certificate carefully right away!
My stepmother went to the Social Security office after my father’s death to ask about her benefits. But she was surprised to discover that his death certificate listed him as a widower!
I’m embarrassed to say I had not noticed the mistake either. The incorrect information had already been entered into official records, so there was a delay in making the correction and starting the benefits. My fault.
Admitting the Will to Probate and Appointing the Executor
In most states, a brief trip to court is required soon after the initial Petition for Probate is filed. At that time, a judge inspects the Will (if there is one) to see if it appears genuine and valid on its face. Is it signed? Witnessed? Does it look like it was intended as a Will?
If everything appears to be okay, the court issues an order “admitting the Will to probate,” or a similar proclamation that the Will is accepted – it’s “official.” The judge also formally appoints the Executor named in the Will. This appointment confers full authority on the Executor to handle the Decedent’s accounts and other affairs.
The Executor is given a certified court document, often called “Letters Testamentary.” It is a “badge of authority” that will be honored by financial institutions and others.
If there is no Will, the Petition for Probate simply requests someone’s appointment as Administrator. They will be given “Letters of Administration,” which is likewise a badge of authority.
The law in most states requires notice of the proceedings to the public and next of kin by newspaper (online or in print) or mail. This starts a clock for the Decedent’s creditors or family members with a claim or other gripe to come forward or be barred forever.
In some states, this notice is taken care of by the court clerk and the cost is included in the filing fee. In other states, the Personal Representative must arrange for this notice and provide proof to the clerk that you’ve done so.
Just make sure to ask the clerk how to handle this extremely important detail. If legal notice is not given as prescribed by law, the “creditor clock” never starts; Claims could come in years later.
Maybe you are not the person seeking to be the Personal Representative, but you have a potential interest in the Decedent’s estate (e.g., you’re next of kin). If you feel the need, you can keep important transactions from happening behind your back; File a written “Demand for Prior Notice” with the court.
Such a filing (by whatever name) is authorized in most states and compels the Executor to alert you in advance of any action regarding the estate, such as a property sale or the distribution of funds. This gives you time to object if appropriate, before it’s a “done deal.”
Duties of the Executor or Administrator
As soon as practical after their appointment by the court, the Personal Representative should:
- Determine whether a streamlined probate procedure is available if the estate is limited in value or the number of beneficiaries.
- Close all credit card accounts.
- Obtain an Employer Identification Number (EIN) from the IRS. The estate is a distinct entity for all tax and legal purposes even if no tax is due and even if the estate has no employees. This can easily be done online, and you won’t get very far without it.
- Present the Letters Testamentary or Letters of Administration to financial institutions and any other party with whom estate business must be conducted. This will enable your Personal Representative to take inventory and control of the Decedent’s assets.
- Open an estate checking account to use for paying bills and as a collection pot for various accounts or sale proceeds. The EIN from the IRS will be needed to open this account. The Personal Representative should never, ever deposit estate funds into their personal account, even briefly. The estate account may, however, be used to reimburse the Personal Representative for any proper estate expenses paid out of pocket.
- Arrange for the upkeep and insurance of estate property, such as the Decedent’s house.
- Request a formal appraisal of all real estate to establish its value as of the date of death.
- Review final bills and other claims against the estate as they come in. Pay those deemed valid. But you can negotiate with credit card companies; They don’t want to chase the estate for a few thousand dollars.
The Personal Representative of a Decedent’s estate can be a time-consuming position, even if proper planning has been done. But in no situation is the Personal Representative responsible for paying the Decedent’s debts out of pocket – as long as he or she has not distributed estate assets too early.
But keep in mind that if your own name is on a loan to the Decedent, for example, you remain personally on the hook.
Beware of fraudulent claims! When I was settling my father’s estate, I got a final credit card bill for a gold purchase allegedly made from a legitimate company. But I knew there was zero chance my dad had ever invested in gold – especially after he died.
After a few minutes of arguing, I told the credit card lady I wasn’t going to pay and to have a nice day. That was the end of it. But I never figured out how the fraudster was able to make the charge. This was decades ago; Online criminals are much more sophisticated today, so watch out.
The Executor (or Administrator)-to-be officially has very limited authority until their formal appointment. But as a practical matter, if possible, they should take care of things that need immediate attention, always in good faith. Real estate and insurance coverage should be maintained, for example.
If the Personal Representative spends personal funds to do so, reimbursement from estate funds is permitted later. To avoid misunderstandings, just keep everybody in the loop. But if you reimburse yourself for any proper estate expenses paid out of pocket, or time spent on estate business, keep track of every dollar spent. Others are likely watching very closely.
Financial and Real Estate Distributions to Estate Beneficiaries
Much or all of a Decedent’s accounts and real estate often passes outside of probate through beneficiary and Transfer On Death designations, for example. The Personal Representative has no authority over the distribution of this property, even though they might help in arranging its transfer.
The Personal Representative may begin to sell real estate and personal property as soon as practical. But if the Personal Representative is an Administrator (i.e., there was no Will) court approval is usually required to sell real estate. When there is an attorney-prepared Will, it always gives authority to the Executor to sell real estate, so no court approval is necessary.
Of course, everyone will want their money immediately. But state law provides a waiting period to allow time for final bills, and all creditor claims or lawsuits to surface. Three to six months is typical, after which anyone who brings a claim is almost surely out of luck.
The Personal Representative can make partial distributions as long as sufficient money is available to pay any such timely claims. But if the Personal Representative has distributed everything before that waiting period and timely claims are then presented, they can be held personally liable.
Whether there is a Will or not, most states provide an allowance to be set aside for a surviving spouse and children, if any. These survivors take a specified dollar value off the top of the estate before any creditors or anyone else gets their share. These allowances vary greatly among states but are usually in the low to mid-five figures.
After paying these set-asides and settling all other claims, the Personal Representative can begin making final distributions. They simply honor the instructions set forth in the Decedent’s Will if there is one.
If there is no Will, state laws vary, but they very strictly dictate who the Personal Representative must pay, and in what order. Understandably, a surviving spouse and children are at the top of the list.
A Special Note About Dividing Household Property
This situation, of course, is almost universal, whether there is a Will, Trust or neither one. So give some thought to household items – things like furniture, jewelry, photos, etc., etc.
A key duty of a Personal Representative or Trustee often is to divvy up household property among several children. For this chore alone, the person chosen – often a child of the Decedent – should have the skills and patience of a referee. Keep this in mind in making your choice.
This might seem like a trivial issue, but very often it is anything but. While this portion of an estate is often relatively small in financial terms, it has divided families and triggered deep, lasting resentment. The potential divisiveness of candlesticks, china, and family photos can be easy to overlook.
I once had a client who insisted on paying me to drive 100 miles to argue in court over a few items like a wristwatch and even a tissue box cover – seriously. I tried to explain that a 99-cent piece of plastic wasn’t worth arguing about. But my client cherished it because it covered the tissues his mother had used to wipe her eyes while chopping onions!
So off I went into courtroom battle. (There were, of course, other much more significant instances of Executor misconduct at issue.) The Executor (my client’s evil brother) was a jerk, so reasonable discussion and compromise was not an option.
I won the argument. The judge disqualified the opposing lawyer from the case, and I was even awarded my attorney’s fee for the hearing, which is not common. But the brother-Executor then reported that the two aforementioned items could not be found. They had mysteriously “disappeared.”
They were obviously stolen from the estate by the brother. But my client still hates me because I failed to get the SWAT team to drop in by helicopter, secure the house and prevent any pilferage! He didn’t understand that law enforcement (almost) never gets involved in estate matters. Those are civil, not criminal, cases – even if somebody is indeed acting like a crook.
Whether there is a Will or not, household property usually is supposed to be divided equally. So where’s the problem?
Let’s start with the word “equal.” Does it mean each beneficiary gets a batch of household goods of equal monetary value? Or that each gets the same number of things? Does a set of candlesticks constitute one item or two? Is Mom’s jewelry to be distributed as a collection or is each piece a separate item? Alternatively, should everything simply be auctioned off and the proceeds divided equally?
As a practical matter, the Executor usually is given some discretion in these choices.
But it is also wise to remind the child you’ve chosen as Executor to apply their diplomatic skills to the job. Even when no sibling rivalry is apparent, convene a family pow wow at the time you put your estate plan together. Get everybody on the same page. Determine whether any lurking issues need to be addressed while you are still around to do so.
The distribution of items of particular importance to one child or another are best directly addressed in the Will, of course – or they can simply be given as a gift now.
As for the rest of household items, I have often suggested an alternating selection process. Set the ground rules first; E.g., answer the question of whether a pair of candlesticks is one item or two. Then flip a coin or draw straws. Maybe everybody gets a turn choosing an item until everything is gone. The children can decide if they want an item of monetary value, something of sentimental value, or maybe just something they need.
Alternatively, the children can just distribute things by agreement – IF that’s possible without starting WW III. In my family, Dad died after Mom. I simply gave my sister all the expensive Waterford crystal my businessman father had been given over the years as Christmas gifts – as well as any of Mom’s stuff she wanted. Neither my brother nor I had any use for it. (I did keep my mother’s ankle bracelet, just as a memento.)
I gave my brother thousands of dollars’ worth of Dad’s woodworking tools that I had no use for. I took a coat and three or four of Dad’s many neckties – the only ones I’d be seen wearing in public. (I also swiped four Viagra pills from my 81-year-old father’s drawer – strictly for emergency medical purposes, of course.)
Monetarily, the distribution was far from equal, but my siblings and I got along well, and nobody had a problem with it.
If disputes arise at any point in estate administration, consider using a neutral, trained mediator to help resolve them. Of course, all parties must agree to do so.
Mediation is far less costly than a lawsuit, so everyone in the family can benefit. Perhaps more importantly, mediation gives everyone a chance to state their case informally. Then the mediator can – hopefully – help everyone bridge their differences
Many probate problems are really “people problems.” A judge doesn’t know your family or have all day to make decisions. So if you go to court, it’s likely that nobody will wind up happy.
Mediation is not binding, but a mediator is often in a better position to (hopefully) bring the opposing sides closer to understanding each other and reaching a compromise. Of course, if one party has a clear-cut, legitimate legal objection or legal right, the mediator can point that out before everyone wastes money fighting in court.
Final Accounting
When all bills, lawful claims, and beneficiary distributions have been made, the Personal Representative usually must submit a final accounting – a report for approval by the court. At this time, beneficiaries or other interested parties such as creditors can file objections to the final report. They can ask that the judge intervene and hold a hearing to settle the case.
This might happen if a beneficiary felt they had not received all to which they were entitled under the Will, or a creditor complained that the Personal Representative had ignored a valid bill.
Once approved, the estate is closed and the Personal Representative’s job is done. The degree of detail and formality required depends largely on how much is demanded by other interested parties, such as creditors or suspicious beneficiaries.
If there is no tension and all agree, this step can probably be taken care of in with just a short form – or even waived altogether.
But even if no formal final accounting is required, the Personal Representative should prepare an informal settlement statement. This will serve as a lasting record that the job was properly done – or bring to light any mistakes while they can more readily be corrected. Anyone who sees a mistake or has a complaint of any kind against the estate or the Personal Representative, should not wait to bring it up.
The law places great importance on finality. This is true in all kinds of cases in courts everywhere. People are responsible for keeping up with what is happening in legal matters that might affect them. The bottom line is that “if you snooze, you lose.”
So don’t stew about it for years before calling a lawyer to see what your options are. At that point, they would probably be zilch. (And even if you do still have a legal option in theory, the money to satisfy you is probably long gone.)