FAQ’s – Probate a Decedent’s Estate
- What is probate?
- Is probate necessary?
- Does all property go through probate when a person dies?
- Should I choose the simplified procedures?
- Do life insurance or retirement benefits need to go through probate?
- Do living trusts go through probate?
- How much does probate cost?
- How long does probate take?
- Where will the probate hearing be?
- Who is in charge of the probate process?
- Who can be the personal representative?
- Who is not allowed to be the personal representative?
- Does the Court supervise the personal representative?
- What does the personal representative do?
- If I am named as executor in a Will, do I have to serve?
- If I serve as executor, will I get paid?
- What happens if the personal representative fails to perform his or her duty?
- Do I have to use a lawyer for the probate process?
- What if someone objects to the Will?
- Who can contest a Will?
- When can a Will be contested?
- What if there is no Will?
- What happens if we cannot find a Will?
- What if the decedent owned land in more than one state?
- How do creditors get paid?
- If I am a beneficiary and the estate does not have enough money, do I have to pay creditors out of my own pocket?
- How are taxes handled in probate?
- Am I responsible for paying the rest of my deceased spouse’s bill?
- How can I find out if there was a Will?
- What if someone dies and I have the Will in my possession?
- What is probate?
Probate is when the Court supervises the processes that transfer legal title of property from the estate of the person who has died (the “decedent”) to his or her beneficiaries.
Usually, you must fill out court forms and appear in Court to:- Prove to the Court that the Will is valid (this is usually routine),
- Appoint a legal representative with authority to act on behalf of the decedent,
- Identify and inventory the decedent’s property, and have that property appraised,
- Pay debts and taxes, and
- Distribute the remaining property according to the terms of the Will or to the decedent’s heirs.
- Is probate necessary?
If the person who died did not have any property to transfer, probate is usually not necessary. The deceased person’s survivors may decide to open a probate if there are debts owed or if there is a need to set a deadline for creditors to file claims.When there is property to transfer the probate process also provides for the distribution of the estate’s property to the decedent’s heirs.
- Does all property go through probate when a person dies?
No. The term “probate estate” refers to any property subject to the authority of the probate court. Assets distributed outside the probate process are part of a person’s “non-probate estate.”California has “simplified procedures” for transferring property for estates worth under a certain amount (from $20,000 to $100,000 depending on the circumstances and the kind of property).There is also an easy way to transfer property to a surviving spouse, property held in Joint Tenancy and life insurance and retirement benefits.
- Do life insurance or retirement benefits need to go through probate?
No. The benefits can be paid directly to a named beneficiary. Money from IRAs, Keoghs, and 401(k) accounts transfer automatically to the persons named as beneficiaries. Bank accounts that are set up as pay-on-death accounts (PODs) or “in trust for” accounts (a “Totten Trust”) with a named beneficiary also pass to the beneficiary without probate.
- How much does probate cost?
The cost of probate is set by state law. When all the costs are added up – these may include appraisal costs, executor’s fees, court filing fees and certified copies, costs for a type of insurance policy known as a “surety bond,” plus legal and accounting fees–probate can cost from 4% to 7% of the total estate value, sometimes more. If someone contests the Will, the costs could be significantly higher.
- How long does probate take?
California law says the personal representative must complete probate within one year from the date of appointment, unless s/he files a federal estate tax return. In this case, the personal representative can have 18 months to complete probate. If probate has not been completed by that time, the personal representative must file a status report to the court to explain what still has to be done and how much time that will take. If the personal representative does not report to the court, the beneficiaries can ask the court to order him or her to file an accounting or take other actions to close probate. The court can remove the personal representative and appoint someone else.Sometimes there are circumstances that can make probate take longer. If there is a Will contest (a claim filed with the court that all or part of the will is not valid), or the size and complexity of the estate requires extra time, or it is hard to find beneficiaries, the process can drag out. Some probate cases take years to resolve.
- Who is in charge of the probate process?
If there is a Will, the person named as executor will usually be appointed as the personal representative – this means s/he is responsible for managing the estate and following probate rules and procedures. The executor has no authority to act as personal representative until s/he is appointed by the court and formal “Letters Testamentary” are issued by the Court Clerk. If there is no Will, or if the Will doesn’t name an executor, or the person named as executor in the Will is unable to be executor or does not want to be executor, the probate court appoints someone called an administrator to handle the process. The Court usually chooses the closest living relative, or a person who will inherit some portion of the decedent’s assets.
- Who can be the personal representative?
The personal representative does not have to be a legal or financial expert. But, s/he must have reasonable prudence and judgment and be very careful, honest, loyal, impartial and diligent. This is called a “fiduciary duty” — the duty to act with good faith and honesty on behalf of someone else. The personal representative should have good organizational skills and be able to keep track of details. It is preferable if he or she lives nearby and is familiar with the decedent’s finances. This makes it easier to do tasks and find important records.
- Who is not allowed to be the personal representative?
The following people cannot be the personal representative:- a minor,
- a person subject to a conservatorship or otherwise incapable of performing the duties of personal representative,
- a surviving business partner of the decedent, if an interested person objects (unless the Will names the partner as executor), or
- a non-resident of the U.S. (unless the Will names the non-resident as executor).
- Does the Court supervise the personal representative?
Not usually. But, in some situations the Court requires the personal representative to ask the Court’s permission to sell real estate or business interests owned by the estate. The personal representative cannot do any of the following things without the Court’s permission:- pay fees to himself or herself,
- pay fees to his or her attorney,
- make a preliminary distribution of property to beneficiaries (with a few exceptions), or
- close the estate.
If the personal representative lives outside of California, the court will require that s/he get a surety bond (an insurance policy that protects the estate beneficiaries in the event of the personal representative’s wrongful use of the estate’s property), even if the Will waives this requirement.
- What does the Personal Representative do?
The Personal Representative must:- decide if there are any probate assets;
- locate the decedent’s assets and manage them during the probate process. This could take up to a year or longer and may involve deciding whether to sell real estate or securities owned by the decedent;
- receive payments due to the estate, including interest, dividends, and other income (e.g., unpaid salary, vacation pay, and other company benefits)
- set up an estate checking account to hold money that is owed to the decedent — for example, paychecks or stock dividends;
- figure out who is going to get what and how much under the Will. If there is no Will, the administrator will have to look at state law (Probate code Sections 6400 – 6414, called “intestate succession” statutes) to find out who the decedent’s heirs are and determine each heir’s share of the estate;
- value or appraise the estate’s assets;
- give official legal notice to creditors and potential creditors of the probate proceeding and the deadlines for creditors to file claims, according to state law;
- investigate the validity of all claims against the estate;
- pay funeral bills, outstanding debts, and valid claims;
- use estate funds to pay continuing expenses — for example, mortgage payments, utility bills and homeowner’s insurance premiums;
- handle day-to-day details, such as disconnecting utilities, ending leases and credit cards, and notifying banks and government agencies — such as Social Security, the post office;
- file tax returns and pay income and estate taxes – including a final state and federal income tax return covering the period from the beginning of the tax year to the date of death;
- after getting the court’s permission, distribute the decedent’s property to the people or organizations named in the Will, or to the decedent’s heirs if there is no Will; and
- file receipts for distribution and wrap up any closing details for the estate.
- If I am named as executor in a Will, do I have to serve?
No. If you choose not to serve, the Court will probably appoint the alternate executor to be the personal representative. If there is no alternate executor, or if that person doesn’t want to serve, the Court will appoint someone to serve. The Court usually appoints a capable family member or an independent professional fiduciary. If you decide to be the personal representative, you can resign at any time. But, you may have to give an “accounting” to the Court for the time you served.
- If I serve as executor, will I get paid?
Yes. In addition to your out-of-pocket expenses to manage and settle the estate, personal representatives usually earn a statutory fee of 2% – 4% of the probate estate. The percentage decreases as the size of the estate increases.The Court must approve all fees and expenses. And, in extraordinary circumstances, the Court may allow other fees. Fees are taxable as ordinary income and must be reported on your personal income tax return. So, if you are the personal representative and the sole beneficiary of the estate, it usually does not make sense to take any fees. But, the money you get as beneficiary from the estate is income tax free.
- What happens if the personal representative fails to perform his or her duty?
The court may lower or deny compensation and can replace the personal representative with someone else. The personal representative may even have to pay for any damages he or she caused. A personal representative may be held liable for:- improperly managing the assets of the estate,
- failing to collect claims and money due the estate,
- overpaying creditors,
- selling an asset without the authority to do so, or at an inappropriate price,
- not filing tax returns on time,
- distributing property to the wrong beneficiaries, or
- distributing property to beneficiaries before all creditors have been paid, etc.
- Do I have to use a lawyer for the probate process?
No. However, a lawyer can help you meet all deadlines and avoid mistakes and delays. A lawyer can also help avoid disagreements among family members over minor or major issues. But the lawyer represents the interests of the personal representative, not the beneficiaries.
- Who can contest a Will?
Only a person with “standing” can contest a Will. This means the person must have a personal financial stake in the outcome. Examples of people with standing to contest a Will are:- a child or spouse who was cut out of the Will
- a child who receives one third of the estate if a sibling receives two thirds,
- children who feel that the local charity should not get all the parent’s assets,
- anyone who was treated more favorably in an earlier Will.
Sometimes, there is a Will contest because someone wants a different person, bank, or trust company to serve as personal representative for the estate, or as a trustee of trusts created by the Will.
- When can a Will be contested?
Most challenges to Wills are by potential heirs or beneficiaries who got little or nothing. Will contests must be filed in Probate court within a certain number of days after receiving notice of the death, or petition to admit the Will to probate, or issuance of Letters Testamentary to a personal representative. Examples of reasons to challenge a Will are:- there is a later Will which, if valid, would replace the earlier Will;
- the Will was made at a time the decedent was not mentally competent to make a Will;
- the Will was the result of fraud, mistake or “undue influence”;
- the Will was not properly “executed” (signed by the decedent);
- the so-called Will is actually a forgery;
- for some other reason (such as a pre-existing contract) the Will is invalid.
If there is a Will contest, the probate court may invalidate all of the Will or only the challenged portion. If the entire Will is found invalid, the proceeds will probably be distributed according to the state laws of intestacy, unless there is a prior revoked Will that is revived and admitted to probate.
- What if there is no Will?
If a person dies without a Will (known as dying “intestate”), the probate court appoints a personal representative (known as an “administrator”).The major difference between dying testate and dying intestate is that an intestate estate is distributed according to state law (known as “intestate succession”). A testate estate is distributed according to the instructions left by the decedent in his or her Will.
- What happens if we cannot find a Will?
If a Will is lost or can’t be found, the specific facts and circumstances and state law will determine what happens. For instance, if the Will is missing because the decedent intentionally revoked it, an earlier Will or the laws on intestate succession would determine who gets the decedent’s estate. Or, if a Will is missing because it was stored in a bank vault destroyed in a fire, the probate court may accept a photocopy of the Will (or the lawyer’s draft or computer file), if there is evidence that the decedent properly signed the original.
- What if the decedent owned land in more than one state?
The probate laws of the state in which the decedent was a permanent resident determine who will get the decedent’s personal property (wherever it was located) and the decedent’s real property located within the state. This is why probate is almost always filed in the decedent’s home state. If the decedent owned real property in another state, that state’s laws determine how the real property will be distributed. There will be probate in each state where there is real property, in addition to the home state. Each state has its own method for distributing the decedent’s real property. Even if there is a Will, the Will is first admitted to probate in the home state, then it must be submitted to probate in each state in which the decedent owned real property. The extra probate procedure is called “ancillary probate.” Some states insist upon the appointment of a personal representative who is a local resident to administer the property in that state.
- How do creditors get paid?
Part of the probate process is to notify creditors of the death. Notice requirements vary. In some cases, you must provide direct notice. In others, you must publish a notice in a newspaper in the city where the decedent lived. Creditors must file a claim with the court for the amounts due within a fixed period of time. If the executor approves the claim, the bill is paid out of the estate. If the executor rejects the claim, the creditor must sue for payment. If there is not enough money to pay all debts, state law determines who gets paid first. The personal representative most likely will sell property to pay approved creditor claims. Remaining claims are paid on a pro-rata basis.
- If I am a beneficiary and the estate does not have enough money, do I have to pay creditors out of my own pocket?
Generally, no. The law says you cannot be made responsible for others’ general debts without your consent. Unless the decedent gave away his or her assets to someone shortly before dying, or otherwise acted in concert with them to defraud the creditors, the beneficiaries should not have to pay the creditors just because they are beneficiaries. There may be nothing left in the estate for the beneficiaries after paying the creditors. But, the beneficiaries will not owe the creditors money. Still, if the children or beneficiaries took property or benefits from the decedent or the estate, or assumed liability for care given the decedent, or guaranteed payment, they can be liable for some or all of the decedent’s debts separately.
- How are taxes handled in probate?
For federal and state tax purposes, death means two things:- It marks the date of the close of the decedent’s last tax year for filing an income tax return, and
- It establishes a new, separate entity for tax purposes, the “estate.”
For federal taxes, you may have to fill out and file one or more of the following forms. (It depends on the decedent’s income, the size of the estate, and the income of the estate):
- Final Form 1040 Federal Income Tax return (the decedent’s personal income tax return)
- Form 1041 Federal Fiduciary Income Tax returns for the estate
- Form 709 Federal Gift Tax return(s)
- Form 706 Federal Estate Tax return
For California taxes, the executor must file any needed state income tax return, state fiduciary income tax returns during the probate period, estate tax and gift tax returns.
There may be other taxes, too, like local real estate and personal property taxes, business taxes, and any special state taxes.
The executor must also check for taxes owed for years prior to the decedent’s death.
- Am I responsible for paying the rest of my deceased spouse’s bill?
Maybe. If you and your spouse shared the same bank account and credit cards, checks, etc., then you may have to pay the bill. If the credit cards or accounts were opened with only your spouse’s information as reference, then you may not be liable. Creditors usually collect their debts from the estate before the remainder is divided among the heirs. Each case depends on the circumstances.
- How can I find out if there was a Will?
First, check with the Probate Court in the county of the state where the decedent lived. If the Will was filed, it will likely be available to the public for viewing. And, you can purchase a copy. Or, you can hire a local lawyer or legal service bureau to do a search and get a copy for you. But many people, even with substantial assets, die without a Will. And, if the decedent held all property through a living trust or a joint ownership arrangement, there may be no need to probate the Will.