D E A T H P
R O B A T E
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. Since you
can not 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:
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.
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 cataloging 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.
Inventory and Appraise Assets
During probate, all of 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
Payment of Debts, Claims and Taxes
Once all the debts and claims have been submitted and approved,
they are 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
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, attorneys 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 personal representative or 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.
HOW MUCH DOES PROBATE COST?
Despite what probate lawyers say, probate is very expensive. One critic
of the system says that the average cost is over 7% of the gross value
of the estate. A full 60% of the costs goes to lawyers and 40% to personal
representatives and others. One legal scholar who urges a reform in
the probate system remarked that, "the cost of probate expands
to consume the money available." Small estates are particularly
vulnerable because even reasonable fees can eat up a large percentage
of an estate's assets. There just isn't that much to go around. Remember,
every dollar that goes to pay probate costs is a dollar that could benefit
HOW ARE PROBATE FEES CALCULATED?
The way probate fees are calculated is exceedingly unfair to your family.
State laws sets the probate fees that attorneys and personal representatives
can charge. Many states, such as Massachusetts, allow attorneys to charge
any fee that the court considers reasonable, without any limitations.
Other states limit the fees to a fixed percentage of the estate. Under
either method, the fees can range from 4% to 10% of your familys
gross estate. Remember, probate fees are often levied at each spouses
death. Depending on how title was held on the date of death, a married
couple could pay some form of probate fees on the death of each spouse.
Not only are the fees excessive, but they are often based upon a valuation
of your estate which bears little resemblance to its actual value. In
states that use the percentage of the estate method, probate fees are
calculated on your estates gross value without deductions for
liens or encumbrances. This means that if you have property worth $100,000
but owe $90,000 to a bank, or some other financial institution, your
probate fees will be based on the full $100,000, not the $10,000 equity
interest you actually own. As you can see, this valuation method unfairly
increases the size of your estate and results in the payment of larger
HOW LONG DOES PROBATE TAKE?
The slow progress of your estate through probate can be very frustrating
for the family. Although this complex process usually takes at least
one and a half years to complete, many estates take years. Most people
assume that their estates are simple and will glide through the system.
Regardless of how simple an estate appears, it is very difficult to
close a full probate in less than a year. That's because of all the
steps that must be completed to the satisfaction of the court.
ARE THE DETAILS OF THE ESTATE KEPT PRIVATE IN PROBATE COURT?
No. All probate proceedings are open to the public. Anyone who has an
interest can pull your probate file and examine every detail of your
financial life. The file will disclose an inventory and appraisal of
every asset you owned at death. It reveals the name of all your creditors
and amount owed to each. It lays out the names of all your beneficiaries
and the amount and conditions of their inheritances. This information
is often compiled and sold to those who use the information to sell
products and services to vulnerable surviving family members. It can
be particularly damaging if you owned a business. Your competitors will
have a treasure trove of confidential business information at their
finger tips in the probate file.
WHAT HAPPENS TO THE REAL ESTATE LOCATED IN ANOTHER STATE?
A probate must be instituted not only in the state where you lived,
but in every state where you owned real estate. This is called an ancillary
probate. Each state has probate jurisdiction of the real property located
within its borders. That means that your family will have to file a
new probate in each state and hire local counsel to represent the estate.
Of course, this will add to the expenses that must be paid before your
family receives its share.
ARE THERE ANY OTHER PROBLEMS WITH A DEATH PROBATE?
Yes. Perhaps the most important disadvantage of death probate is that
your family loses control of the estate. During probate, it may not
be able to sell assets without court approval even if it needs the money.
Opportunities can be lost because the cumbersome probate system moves
so slowly. Your family may pay an emotional price in probate, as well.
Because the process takes so long, it can be a constant reminder of
the loss of a loved one. It can also foster arguments among family members
who would normally seek support from one another. It's common to see
family members taking out their frustration about the system on one
another, especially if one of the family members has been named the
personal representative of the estate.
DOES JOINT TENANCY AVOID A DEATH PROBATE?
Well, the answer is yes and no. In the case of a husband and wife who
own their assets in joint tenancy, there is no death probate when the
first spouse dies because title passes automatically to the surviving
joint tenant. However, when the surviving spouse dies, there will be
a complete probate on the entire estate. The fact that joint tenancy
ownership avoids death probate at the first spouse's death is a small
reward for the many other disadvantages of joint tenancy ownership.
It can lead to huge unexpected liability when parents and children own
assets together. In community property states it creates capital gains
tax problems. It can create unintended beneficiaries and often causes
gift and death tax problems. For these reasons, estate planning experts
agree that joint tenancy may be the poorest estate planning tool.
DOES A WILL AVOID A DEATH PROBATE?
No. In fact, a will guarantees probate. The word probate actually comes
from the Latin and it means "to prove the will". All property
that is controlled by your will must go through the probate court. Once
your estate enters the probate process, it's trapped in the system until
the judge releases it.
DOES A LIVING TRUST AVOID A DEATH PROBATE?
Yes. All assets transferred to a living trust completely avoid the probate
process, both during your life and at your death. Living trusts are
not new. They've been successfully used in one form or another since
the Middle Ages. Both then and now, the living trust has required that
the owner of assets transfer title from his or her name to the name
of trust. This really means changing the title to your property. For
real property, it means you will sign a new deed. For other assets,
you sign special transfer documents changing ownership to the name of
your trust. Once the process is complete, all your assets will be owned
by the trust. Almost nothing will be owned by you personally; your living
trust has title to the assets. This shouldnt worry, you, however.
You or you and your spouse, if you're married, have complete control
of the trust while you're alive. You can amend the trust or even revoke
it whenever you like. But when you die, there are no assets in your
name so there's no need to go through probate. The trust already has
your written instructions directing your hand picked agent, the successor
trustee, about how you want your estate distributed. With a living trust,
there's no need for "help" from the probate court or probate
lawyers. Your trust will completely eliminate these unnecessary costs.
Moreover, your estate can be distributed instantly at your death. There
are no judges to consult or bureaucrats to please. Your trustee merely
follows your instructions in distributing your estate according to your