What is probate?
Probate is a court-supervised, legal process that may be required after your death even if you die with a will and own property in your own name! When you die, (again…even if you have a will), everything you own individually will go through “probate” and the county courthouse first before your spouse or descendants can use any of it for themselves.
What happens during probate?
During probate, the court gives your executor or a personal representative (Executor) the authority to gather your assets, pay your final taxes and debts, and eventually, transfer assets to those who inherit them.
Why does probate take so long?
There can be SO many steps in probate and it can cost a fortune. What happens in the probate process includes:
- The court first must validate your original will. Copies may not work and may require further court involvement.
- The court authorizes the Executor named in your will to take charge of your assets and assume responsibility for paying your debts.
- Your Executor must locate, secure, safeguard and maintain your assets. This requires that the Executor enter your home (and any other real estate in your individual name), secure the premises, gather and create an inventory with estimated values of your personal property, clean the property and prepare it for transfer or sale according to your wishes, contact and pay for utilities, homeowners insurance, property tax, and mortgage, move personal property to storage units and pay for the storage, and gain access to your safes and safe deposit boxes, and bank and brokerage accounts.
- Your Executor also must notify the Social Security Administration (if you were claiming Social Security benefits or Medicare), the Veterans’ Administration (if you are entitled to any Veterans benefits), current and former employers, and life insurance companies of your passing to collect benefits to which you or your designated beneficiaries are entitled or to stop the receipt of benefits to which you are no longer entitled.
- Your Executor may need to get valuations or appraisals of your property (home and other real estate, furniture, jewelry, business interests, artwork and collectibles).
- Your Executor may need to publish the fact of your death in local newspapers.
- Your Executor will need to file an inventory with estimates of value of the probate assets. In some states (like Virginia), your estate will owe a probate tax based upon the value of the probate assets.
- Your Executor will need to open a checking account for your estate and transfer your personal checking account funds into the estate account.
- Your Executor must file annual accountings with the court, reporting every penny and the value of every asset that has flowed into or out of the estate and usually must attach detailed back-up information for the court to review. Then, the court will charge the estate for the privilege of reviewing the accountings and require that your Executor respond to court questions and update the accounting for any deficiencies, which can take months or years to complete. Usually, the Executor hires an attorney and/or CPA to assist with this process.
- If you owned real estate outside your state of residence, your estate may be subject to ancillary probate in the state where the property is located, requiring your Executor to hire an attorney in that jurisdiction to comply with local probate rules. The estate will incur additional fees and expenses for this privilege.
- The Executor may need to file an estate tax return, your final income tax return, and an estate income tax return for the periods following your death.
- In some states, the Executor may want to hold a “debts and demands” hearing to exonerate the Executor from future, undisclosed liabilities.
- After all the work above is done, your Executor finally can distribute the assets to the heirs, but even then the Executor must prepare special paperwork to ensure that assets can be refunded to the estate if unexpected, valid claims surface at a later date.
How long is long?
Frustratingly, probate can drag on for many, many months or even years. The most common reasons why probate takes so long:
1. Many Beneficiaries. In general, estates with a lot of beneficiaries with diverse interests take longer to settle than estates with just a few beneficiaries. Why? It takes time to communicate with everyone and, if documents need to be signed, there are always beneficiaries who fail to return their signed documents in a timely manner. Regardless of advances in modern technology and communications, it simply takes a long time to reach multiple beneficiaries, spread out across the United States or in a foreign country.
2. Complicated assets and liabilities. You may have many accounts at many financial institutions that must go through probate. You may have unusual assets, like art or collectibles, that require valuations. Estates with business interests take the longest to resolve, because appraisals usually are required. You also may have many liabilities in the form of mortgages, credit card debt, medical expenses, taxes and other liabilities that must be resolved before the estate can be closed and the assets distributed.
3. Angry Beneficiaries. Nothing delays the probate process like a family feud. When beneficiaries don’t get along or won’t speak to each other, the Executor may be forced to obtain court permission to do just about everything. That takes time and a lot of money.
4. Incompetent Executor. If you name an Executor who is not good with money, irresponsible, disorganized, or too busy with his job or family, probate will take a long time.
Why should I care how long it takes? I will be dead.
If you love your family and want to make it easier on them after you pass, the best gift you can give them is organizing your affairs so they don’t have to clean up your probate mess.
What, if anything, can be done to speed up probate?
The best way to speed up probate is to avoid it altogether. Otherwise, you are at the court’s mercy. Using a well-drafted and fully-funded revocable trust can avoid probate perils, costs, stresses, and delays. Estate plans with just a will still may require probate. As a result, assets end up at the mercy of the court, are open to public scrutiny, delaying distribution to your chosen heirs.