Estate Administration - What to Know About Probate
By Don Drake, Connelly Law Offices, Ltd.
"When someone passes away, their financial affairs must be properly handled, and their assets and property distributed to the beneficiaries. This process is called estate administration or probate," said professional fiduciary and certified elder law Attorney RJ Connelly III. "While the above definition is concise, there are many intricacies involved in this process that we will delve into in this blog. In cases where the deceased person did not leave a will, state intestacy laws are followed to determine who will receive the assets and property."
"Intestacy refers to the condition of an estate of a person who dies without a will who owned property with a total value greater than that of their outstanding debts," explained Attorney Connelly. "Additionally, a will that covers only part of an estate sometimes is intestate. In either of these instances, the probate court often distributes the deceased's assets."
"The person responsible for managing the estate administration process is commonly referred to as the personal representative or the executor. The estate administration may be carried out with or without the supervision of a court, depending on the estate planning strategies that were put in place beforehand," stated Attorney Connelly.
The Estate Administration Process
Typically, estate administration involves multiple steps, which include the following:
Probating the will.
Obtaining a death certificate.
Obtaining a tax identification number for the estate.
Identifying and locating the deceased person’s assets, including bank accounts, investments, individual property, real estate, and other assets.
Notify creditors and pay outstanding debts, taxes, and other liabilities from the estate assets.
Obtaining a court-issued document called letters of testamentary or letters of administration, giving the personal representative or executor the authority to act on behalf of the estate.
Inventorying and appraising the estate's assets and keeping accurate records of all transactions.
Filing any necessary tax returns and paying any taxes due on the estate.
Distributing the estate’s assets to the beneficiaries according to the terms of the will or state laws of inheritance.
Closing the estate by submitting a final accounting to the court and obtaining court approval to distribute the estate assets.
According to Attorney Connelly, the estate distribution process can vary slightly based on several factors, such as the size of the estate, the complexity of the issues involved, and whether the case is probated or non-probated. For larger estates, a probate court action may be necessary to confirm the legality and validity of the will and to provide oversight during the distribution of assets. On the other hand, non-probated estates are generally smaller and thus have fewer legal requirements to fulfill.
Planning for your estate is a crucial step to avoid the intricate and complex process of probate. Depending on the circumstances, your estate administration can occur outside of probate court (non-probate administration). To ensure that your estate plan aligns with your state's legal requirements, seeking guidance from an experienced elder law attorney is imperative. They can help you navigate your state's specific laws and regulations and provide expert advice to create a comprehensive estate plan that meets your needs.
State Law and Estate Administration
"The administration of an estate is primarily governed by state law across the United States, with only a few exceptions," said Attorney Connelly. "Each state has its unique set of laws and regulations concerning the probate process and the distribution of a person's assets after death. As these laws can differ significantly from one state to another, it is crucial to seek guidance from an elder law attorney well-versed in the laws of the state where the deceased person lived."
When managing an estate at the federal level, specific Internal Revenue Codes must be followed. These codes cover various essential topics, such as estate taxes, gift taxes, rules around transferring assets to grandchildren, and special valuation rules. It's essential to comply with these codes to ensure that the estate is responsibly managed and that all legal requirements are met.
"The probate process in each state involves several steps that must be followed," stated Attorney Connelly. "These steps typically include appointing a personal representative to oversee the estate, taking an inventory of all assets, and appraising them to determine their value. Once this is done, the assets are then distributed to the beneficiaries as per the instructions given in the will. However, as stated before, it's important to note that different states may have laws regarding how the will can be challenged or how the appointment of a personal representative or executor can be contested."
Probating an Estate
"The duration of the probate process relies on various factors such as the size of the estate, the intricacy of the issues involved, locating beneficiaries, and resolving family disputes or challenges to the will," Attorney Connelly pointed out. "Generally, the probate process can take several months to a year or even longer to finalize. If the estate is small and no disputes or challenges are involved, the process can move through the courts more quickly. However, larger and more complex estates will require more time and effort to settle and those being contested." The non-probate process is usually faster and can take several weeks or months to complete, so comprehensive estate planning often centers on minimizing the potential for probate.
"Certain states have specific laws that regulate the duration for the probate process and asset distribution after the death of an individual," according to Attorney Connelly. "To determine the approximate time frame for the probate process and asset distribution, it is advisable to seek the counsel of an elder law attorney who is well-versed in the laws of the state where the decedent lived."
Potential Problems
As stated previously, several problems can occur when administering an estate. These include:
Beneficiary Disputes
If the decedent's will is ambiguous or contains contradictory clauses, it may become difficult to determine the rightful beneficiaries entitled to inherit the assets. Moreover, if multiple beneficiaries are involved, the possibility of disputes arising over the distribution of assets becomes more likely. In such cases, the parties may need to seek the guidance of legal professionals to resolve any issues and ensure that the assets are distributed in accordance with the decedent's wishes.
Challenges to the Will
There are several reasons why someone might challenge a will. One common reason is lack of capacity, which means the person who made the will did not have the mental ability to understand what they were doing at the time. Another reason is undue influence, which occurs when someone pressures or manipulates the person making the will into leaving certain assets or property to them. Lastly, fraud can also be a reason to challenge a will, which means that someone lied or deceived the person making the will in order to benefit themselves. These are all serious issues that can arise regarding wills, and it's essential to address them fairly and justly.
Lack of Assets
In the event that the debts and other financial obligations owed by a deceased individual surpass the total worth of their assets, there might not be enough resources available to compensate both the creditors and the beneficiaries. This situation is commonly referred to as an insolvent estate, and it often requires the involvement of a court-appointed executor or administrator to oversee the distribution of available assets fairly and equitably. In some cases, the creditors may need to accept a lesser amount than what they are owed, while the beneficiaries may receive only a portion of their expected inheritance. The specific outcomes in such cases depend on a range of factors, including the nature and extent of the debts and assets involved, as well as the applicable laws and regulations in the relevant jurisdiction.
Probate Process Delays
If an estate is not closed promptly, ongoing expenses, such as property taxes or mortgage payments, may need to be paid. In addition, creditors may file claims against the estate, which can further delay the process and potentially reduce the amount of assets available for distribution. Furthermore, if beneficiaries are left waiting for an extended period of time to receive their inheritance, it can lead to tension and conflicts among family members. This can be particularly problematic if there are disputes over the distribution of assets or if some beneficiaries urgently need their share of the estate. Overall, it's important to prioritize the timely closure of an estate in order to avoid the potential negative consequences that can arise from delays or complications in the process.
Tax Issues
The estate may be subject to taxes at the federal and state level, which can be complex and require the help of a tax professional.
Not Following the Law
In some cases, there might be discrepancies in the distribution of inheritance, leading to beneficiaries receiving lesser amounts than they had expected to receive. This could be due to various reasons, such as unclear or outdated wills, disputes arising between family members, or legal challenges to the will's validity. In such situations, the distribution of assets may not be in accordance with the deceased person's wishes. It can be an emotionally charged situation for all involved parties and may require the intervention of legal experts or mediators to resolve the matter. Ultimately, the outcomes of such cases would depend on various factors, including the specific circumstances of the case and the applicable laws and regulations.
Not Keeping Accurate Records
Not keeping accurate records of all estate transactions and assets can lead to confusion and beneficiary disputes, which do nothing more than increase the time it will take to close the estate.
When managing an estate, it is recommended to have the guidance of an experienced elder law attorney to handle the legal proceedings and navigate any potential complications that may arise. Seeking the assistance of a trusted attorney can bring peace of mind and ensure that all affairs are handled fairly and lawfully.
Closing the Estate
Estate administration concludes when the following occurs:
The personal representative distributes all assets according to the terms of the will or state laws.
The personal representative closes any financial accounts, such as bank and investment accounts belonging to the estate.
The personal representative files all final tax returns for the decedent and the estate.
The personal representative files a final report with the probate court, including an accounting of all assets and debts of the estate and any beneficiary distributions.
The personal representative obtains court approval and discharge, closing the estate.
Once these tasks are complete, the estate administration process concludes, and the deceased person’s assets have been properly and legally distributed according to the decedent’s wishes or state laws.
A Final Word
"Estate administration can be a complex and overwhelming process, as each estate has its own unique set of circumstances and requirements," said Attorney Connelly. "Seeking the guidance of an experienced elder law attorney to develop an organized and comprehensive approach can significantly reduce the burden on the family and make the entire process much more manageable."
Please note that the information provided in this blog is not intended to and should not be construed as legal, financial, or medical advice. The content, materials, and information presented in this blog are solely for general informational purposes and may not be the most up-to-date information available regarding legal, financial, or medical matters. This blog may also contain links to other third-party websites that are included for the convenience of the reader or user. Please note that Connelly Law Offices, Ltd. does not necessarily recommend or endorse the contents of such third-party sites. If you have any particular legal matters, financial concerns, or medical issues, we strongly advise you to consult your attorney, professional fiduciary advisor, or medical provider.