Don't Wait To Probate
In the U.S., probate is a critical step to ensuring that a loved one's debts are resolved and assets are transferred. Not doing the work can lead to complications.
One of the many roles I play that I don’t often speak about is that of family advisor. I’m not exactly sure when I was given that position but, between the experiences caring for my mother and the duties of leading a family business, more often than not, I am on the other side of the phone line from a cousin seeking advice on any number of issues.
No one calls me for family recipes unfortunately; it’s usually either regarding caring for aging parents, managing family disputes, or estate planning. One that comes up regularly is probate, or more specifically, a family member who has not closed their deceased parent’s estate and the problems that causes short-and-long-term.
Photo by Scott Graham on Unsplash
I was having this conversation recently with one cousin whose parent passed away a decade ago. At the time, it didn’t appear that their parent had any assets worth the legal fees and time commitment; now, however, there are assets that have come to light, but time has run out for the family to go through the regular process without having to engage an attorney to reopen the estate. With another set of cousins, the parent passed 8 years ago and they have yet to probate the estate. Now they have a family home in disrepair that they are unable to sell, unable to get a loan to renovate, and unable to pay the ever escalating property taxes on.
In other writings I’ve mentioned the need for, at minimum, a last will and testament, or, even better, an irrevocable trust. Those estate plans help simplify the probate process. But even without those documents in place, you need to be prepared to go through probate.
Disclaimer: Remember, while this blog aims to provide helpful information about estate planning and probate, it is not a substitute for personalized legal counsel. Always consult with a qualified legal professional for advice specific to your situation.
The Essentials of Probate: What Is It and Why It Matters
When someone passes away, you might hear the term "probate" being thrown around. But what is probate, and why does it matter to you? This legal process plays a crucial role in managing a deceased person's estate and ensuring their final wishes are carried out. Understanding probate can help you navigate the complex world of inheritance and estate planning with greater confidence.
According to the National Association of Unclaimed Property Administrators (NAUPA), there is currently about $49 billion in unclaimed property held by state governments across the United States. While not all of this is from unprobated estates, a significant portion does come from this source. The NAUPA estimates that 1 in 10 Americans has unclaimed property. This high frequency is often due to people being unaware of assets left behind by deceased relatives, especially when estates aren't properly probated.
Unclaimed property from estates can include: - Bank accounts - Stocks and bonds - Uncashed dividends or payroll checks - Insurance policies - Utility security deposits - Contents of safe deposit boxes. Photo by Vlad Deep on Unsplash
In this article, you'll discover the meaning of probate and its importance in the legal landscape as well as what happens if you don't probate an estate. By the end, you'll have a clearer picture of how probate works and how long it typically takes, empowering you to make informed decisions about your own estate planning.
What Is Probate?
Probate is the legal process that validates a deceased person's will and oversees the distribution of their estate. It's a court-supervised procedure to settle the affairs of someone who has passed away. The estate must often go through probate to inventory assets, pay outstanding debts, and distribute your loved one’s property according to their will.
The process begins when you file a copy of the death certificate with the probate court. If there's a will, you're required to file it within 30 days to three months after the person's death, depending on state laws. The court then examines the will to ensure it's legally valid.
Probate assets include individually-owned items, personal property, and tenancy in common property. These can range from real estate and vehicles to bank accounts and personal belongings. However, assets with designated beneficiaries (like bank accounts and insurance policies) or those held in trusts typically bypass probate.
The duration of probate varies, but it can take anywhere from a few months to over a year, depending on the complexity of the estate. Remember, probate laws differ by state, so it's crucial to understand your local regulations.
The Importance Of Probate
One key benefit of probate is that it provides a formal process to pay off any debts or taxes owed by the estate. This protects the beneficiaries from potential legal issues down the line. Additionally, probate helps to avoid confusion and disputes among heirs by clearly establishing the authenticity of the will.
Probate also serves as a safeguard for the assets. The court appoints an executor or administrator to manage the estate, giving them the legal authority to act on the deceased’s behalf. This person is responsible for inventorying assets, paying debts, and ultimately distributing what remains to the beneficiaries.
What Happens If You DON’T Probate The Estate?
Without probate, there's no formal legal process to transfer ownership of assets from the deceased to their heirs or beneficiaries. Photo by Devon MacKay on Unsplash
When an estate doesn't go through probate, several issues can arise:
Asset distribution complications: Without probate, there's no formal legal process to transfer ownership of assets from the deceased to their heirs or beneficiaries. This can lead to confusion and disputes among family members.
Unresolved debts: Probate helps ensure that the deceased person's debts are paid before assets are distributed. Without this process, creditors may have difficulty collecting what they're owed.
Title issues: For assets like real estate or vehicles, a lack of probate can create problems with establishing clear title. This can make it difficult or impossible to sell these assets in the future.
Increased risk of fraud: Without the oversight of the probate court, there's a higher risk of someone fraudulently claiming ownership of the deceased person's assets.
Tax complications: Probate helps in properly assessing and paying any estate taxes owed. Without it, heirs may face unexpected tax liabilities.
Legal challenges: Bypassing probate can leave the estate vulnerable to legal challenges from disgruntled heirs or creditors, potentially leading to costly litigation.
Difficulty accessing accounts: Financial institutions and other organizations may refuse to release funds or transfer ownership without proper documentation from the probate court. It's important to note that not all assets need to go through probate. Some assets, like those held in living trusts, joint accounts with rights of survivorship, or accounts with designated beneficiaries, can typically bypass probate.
When property remains unclaimed for a certain period (which varies by state and type of property), it "escheats" or reverts to the state.
Conclusion
For those planning their estates or dealing with a loved one's passing, grasping the basics of probate is essential. It helps to make informed decisions about estate planning and prepares individuals to handle the probate process when the time comes. While probate can be time-consuming and sometimes costly, it serves a vital purpose in preserving the integrity of estate distribution and honoring the deceased's wishes. In the end, probate provides a necessary framework to ensure fair and legal settlement of estates.
Very good points, Kerri. Here in the UK, to finalise my Dad's probate, I had all the details, used excel sheet and had support from a lawyer, and it still took me a year - that's considered fast!
An issue that's been reported several times in the news - any debts can rapidly accelerate with interest between the passing of the loved one and completion of probate.