Wednesday, November 11, 2009

Today's Probate Answers

What is Death Probate?

When you think about it, probate is not difficult to understand. At your death, your assets need to be distributed to your heirs, your debts need to be paid and any loose ends need to be looked after. You, obviously, can’t sign the deeds, write the checks or handle your business affairs. The probate court takes over those duties. The probate process is a long complicated and bureaucratic nightmare for most families. Here are the five basic steps to settling an estate:

Step One: Filing Petition and Gathering Material

A formal written petition to the court along with a filing fee must be submitted to the court to start the probate process. One of the probate court’s first jobs is to approve or appoint someone to handle the affairs of the estate. This person is called the executor, administrator or personal representative depending upon the rules of the state and whether the decedent died with or without a will. To keep things simple, we’ll call this agent of the estate a “personal representative.” Generally, the first thing the personal representative does is hire an experienced probate attorney. Although having an attorney is not always a legal requirement, it has become a practical necessity because probate paperwork and filing procedures can be very complex.

Step Two: Publishing Notice to Creditors

The second major job of the probate court is to order that the decedent’s creditors be notified so that they can present their claims to the court for payment. This requires the time consuming task of cataloguing all of the decedent’s liabilities. The creditors are notified either by notices in the local newspaper or directly by mail. The law sets a time that the probate proceeding must be left open to allow creditors the chance to present their claims. In most states, the creditor period is several months long.

Step Three: Inventory and Appraise Assets

During probate all the assets in the estate are usually frozen so that an accurate inventory and appraisal can be made. This means that during this period none of the assets can be distributed or sold without written permission from the court. The court will often require formal written appraisals for many items, such as real estate, antiques, collectibles, automobiles, furniture and other valuable assets. Appraisal fees can be expensive and, like all expenses, are paid for out of the estate.

Step Four: Payment of Debts, Claims and Taxes

Once all the debts and claims have been submitted and approved, they’re presented to the court for approval to pay them from the assets of the estate. Some estates may also have death tax liability and they must stay open until those taxes are paid.

During the entire probate process, disgruntled heirs or those who disagree with the provisions in the will can bring a lawsuit in the probate court. These suits are called will contests. They can hold up the distribution of the estate and are often used to intimidate heirs into settling cases that have no merit.

Step Five: Final Distribution and Closing of Estate

Finally, after the court is satisfied that all legal requirements have been met, it will order all debts, claims, taxes, attorney’s fees and the personal representative’s compensation and any other miscellaneous expenses to be paid. If there’s not enough cash in the estate to pay these substantial claims, the judge can order that assets be sold at public auctions or estate sales. These transactions are often conducted in a depressed market or under the banner of “distressed sales.” Only after all the bills are paid will the probate court distribute the estate to the beneficiaries named in the will; or if there is no will, to the designated heirs at law. The court then closes the file.

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