What Families Should Know: Steps of Probate
This is the second in a series about probate. See our previous blog post to learn more.
When it comes to the probate process, some states have adopted a Uniform Probate Code (UPC) and adhere to a general set of laws. Other states have a different set of requirements and processes. Yet, a general outline of probate includes:
Appointing a Personal Representative
This role is usually referred to as Executor or Administrator and is the fiduciary put in charge of settling the decedent’s estate. If there is a Last Will, the probate judge will typically appoint the Personal Representative named in the will as the Executor, unless the will is contested or the representative does not qualify on legal grounds, such as being convicted of a felony. If a Personal Representative is not named, the judge will appoint one based on specific guidelines established within each state.
Inventory of Documents and Assets
Individuals should locate their state requirements for inventory of assets, but in general the decedent’s estate planning documents such as the Last Will and Testament, funeral instructions and living trust, should be organized for the estate attorney. In most cases, set aside three years of tax returns and locate a 3 month inventory of all personal account statements, such as checking, savings, cd’s, retirement accounts and brokerage accounts. Stock and bond certificates are required, as well as life insurance policies and the beneficiary designations for payable on death accounts such as insurance and IRAs, real estate deeds, titles for automobiles and other recreational vehicles, corporate records, household and utility bills, medical bill and funeral bills. The Executor must also try and identify all creditors and outstanding debts. A list should be made of what the decedent owned as well as what they owed
The next step is determining the value of the estate at the time of death. For all items listed on the inventory, this is typically the fair market value of the asset at the time of death. Bank and retirement accounts are listed per the most recent statements. Real estate may be listed at its value as assessed for real estate taxes. For other property, fair market value is normally “the price at which the property would change hands between a willing buyer and a willing seller in the retail market.” Appraisals are often required and the cost of appraisal or advice of accountant in these matters is usually allowable as an administrative cost of the estate.
Again, refer to local requirements, but in most cases the Executor will send out formal written notices of the probate to heirs, beneficiaries, and creditors and then provide proof that such notices were sent.
Paying Bills and Taxes
An account is typically set up for the estate and used to pay estate management expenses and pay the decedent’s outstanding debts. Careful records of all transactions must be kept. Typically, Estate taxes must be filed within a specific time frame and it is advisable to seek the experience of an estate tax attorney or CPA, who can help determine state and federal liability
After all else is done, the executor will distribute the decedent’s assets to the beneficiaries named in the Last Will, or if there was no will, according to decedent’s heirs at law. The estate is closed by filing a “final accounting” with the court. The Executor also files a “closing statement,” that indicates all taxes and debts have also been paid and all property distributed.
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