What’s the probate process?
1. File any Will and Petition the Court for Appointment of Personal Representative (the “PR”). 2. Send Notice of Appointment of PR to Beneficiaries, Heirs, and Other Interested Parties. 3. Collect & Manage (& possibly Sell) Property 4. Pay Debts. 5. Determine & Settle Any Taxes Due. 6. Distribute Remaining Assets. 7. Close the Estate
What does “probate” mean?
Probate means “to prove,” from the Latin verb “probare.”
What is being proved by probat?
The Will of someone (the “Decedent”) who has died leaving a valid Will (ie, died “testate”). Specifically, what is being proved is that:
- The Will
- Was signed by its maker (its “Testator” (male) or “Testatrix” (female)), and
- Is the most current Will of the Testator/trix (ie, it has not been revoked).
- The Testator/trix was legally competent to make a Will:
- A person
- Of sound mind (ie, having “testamentary capacity” and lacking “insane delusions”)
- Who has attained the age of 18 years.
- The Will was made under lawful circumstances:
- Witnessed by at least two competent witnesses who subscribed their names to the Will while in the presence of the Testator/trix at his/her request, and
- Not made by mistake, restraint (duress), fraud, undue influence, or forgery.
For what purpose is the Will being proved?
What is being proved to the Court is that the Personal Representative (in other states, called the “Executor” (male) or “Executrix” (female)) that Decedent nominated in the Will can be appointed by the Court and authorized to carry out Decedent’s desires, as expressed in the provisions of his/her Will:
- By collecting and managing Decedent’s property;
- By paying Decedent’s debts, last illness and funeral expenses, and any taxes due; and ultimately
- By distributing Decedent’s property to Decedent’s named recipients (the “Beneficiaries”), who “take under the Will” or “take by testate succession.”
In summary: To ensure that Decedent’s bills are paid and Decedent’s property is accounted for, transferred to, and retitled in the names of Decedent’s Beneficiaries.
What happens if somebody dies without a valid Will?
Without a Will to prove or a named Personal Representative to appoint, the Court turns not to the terms of a Will but, instead, to State law and:
- Appoints a Personal Representative (in other states, called an “Administrator” (male) or “Administratrix” (female)) according to a prioritized list provided by law; who ultimately
Distributes Decedent’s property in shares to a prioritized list of recipients, the “Heirs” or “Heirs-at-Law”, provided by law, who “take by inheritance” or “take by intestate succession.”
What are the practical differences betwen “testate” and “intestate”?
|No Valid Will
|Will Signed by Testator
|A “Testate” Decedent, having a “Testate” Estate
|An “Intestate” Decedent, having an “Intestate” Estate
|Petition for Probate of Will & Letters Testamentary
|Petition for Letters of Administration
|“Executor” of Will
|“Administrator” of Estate
|Personal Representative Named in Will
|Personal Representative Appointed according to Priority List in State Statute
|Distributees are “Beneficiaries”
|Distributees are “Heirs” or “Heirs-at-Law”
|Distributees Named in Will
|Distributees Specified in State Statute
|Beneficiaries receive Whole Items
|Heirs receive Shares of Estate
What happens if Decedent has a valid Will but none of those named is able or willing to server as Personal Representative?
A Petition for Probate of Will & Letters of Administration With Will Annexed is filed, and an Administrator With Will Annexed is appointed:
- The Personal Representative is an appointed “Administrator,” but
- The Distributees are Beneficiaries, who take under the Will.
And to complete the picture: What happens if Decedent has a valid Will, naming a Personal Representative who is able and willing to serve, but all Decedent’s Beneficiaries predecease the Decedent?
A Petition for Probate of Will & Letters Testamentary is filed, and an Executor(trix) is appointed:
- The Personal Representative is a named “Executor(trix),” but
The Distributees will be Decedent’s Heirs, who take according to State statute.
What are “Letters” and how are they obtained?
Letters are the document issued by the Court, evidencing its appointment of the Personal Representative:
- If Decedent died testate, the Letters are known as Letters Testamentary.
- If Decedent died intestate (technically, without a named Personal Representative able and willing to serve), the Letters are known as Letters of Administration.
Letters are obtained by filing a Petition with the Court and having the Court open a probate for the Decedent, ie:
- Admit any valid Will of Decedent and
- Appoint a Personal Representative for Decedent’s estate.
Are all assets subject to probate?
The only assets that are subject to probate (Decedent’s “probate assets”) are those held in Decedent’s name without designated beneficiaries (other than his/her estate) on death.
Examples of Probate Assets:
- Decedent’s property inherited upon the deaths of his/her parents, as his/her separate property.
- Decedent’s home, as to his/her one-half interest in community property.
- Decedent’s interest in a vacation home, a boat, or an airplane, as a tenant-in-common (ie, not joint tenancy) with other joint owners.
- A life insurance policy owned by Decedent on his/her life and whose named beneficiary is his/her estate.
- Decedent’s IRA or a Keogh Plan for his/her benefit and whose named beneficiary upon his/her death is his/her estate.
Examples of Nonprobate Assets:
- Decedent’s car, as a joint tenant (ie, with right of survivorship).
- Decedent’s bank account, payable on death (“POD”) to one of Decedent’s children.
- Decedent’s securities account, transferable on death (“TOD”) to Decedent’s Trustee.
- Property subject to a valid Community Property Agreement, transferable to Decedent’s surviving spouse.
- A life insurance policy owned by Decedent on his/her life and whose named beneficiary is other than his/her estate (eg, his/her spouse or children).
- Decedent’s IRA or Keogh Plan for his/her benefit and whose named beneficiary upon his/her death is other than his/her estate (eg, his/her spouse or children).
- Property held in trust for the benefit of Decedent and whose named beneficiary upon his/her death is other than his/her estate (eg, Decedent’s Revocable Living Trust held for (i) his/her benefit during his/her life and (ii) his/her spouse or children following his/her death).
Nonprobate assets pass upon death to the named survivor or beneficiary “outside of probate.” The methods for making nonprobate assets (eg, joint tenancies, POD or TOD accounts, community property agreements, living trusts, etc.) are sometimes called “Will substitutes.”
How long does probate take?
That depends on whether the Personal Representative wants to take advantage of the Washington statutory Creditor’s Claim law. If its benefits are desired, the earliest a probate could close would be under these circumstances:
- Decedent dies.
- By the end of the first week, the Personal Representative obtains Letters.
- By the end of the second week, the Personal Representative first publishes his/her Probate Notice to Creditors, beginning the four-month (sixteen week) Statute of Limitations period.
- At the end of the eighteenth week, the Statute of Limitations expires. By then, the Personal Representative has verified that all Heirs and Beneficiaries are willing to sign a Receipt & Waiver in receipt of their respective estate distribution.
- The Personal Representative concurrently makes distribution and obtains the Receipts & Waivers and then files the Receipts & Waivers and a Declaration of Completion of Probate with the Court, and the estate closes.
That’s 4 1/2 months. Typically 6 months or less is quick, 6-9 months is more usual, and 9-12 months is common where you have a more relaxed PR, a more complex or problematical estate, or if an estate tax return is due (eg, why pay a tax before it is due?).
If the benefits of the Washington statutory Creditor’s Claim law are not desired, a probate could open and close in the same day.
How much does probate cost?
Each state has its own separate and unique probate laws that govern statutory costs.
What are its advantages?
- Many estates don’t need third-party oversight.
- Many estates don’t have disputes.
- Many estates don’t have debtor/creditor problems.
- Many estates could close sooner than 4 to 6 months after date of death.
- Probate is necessarily a public process, and many Heirs and Beneficiaries would prefer that the process be private.
- The home state (“domiciliary”) probate covers all of the Decedent’s personal property but only so much of Decedent’s real property as is located within that state. Consequently, an out-of-state (“ancillary”) probate is required in every state in which Decedent holds real property — an expensive, time-consuming, and inefficient process.
All of the foregoing disadvantages of probate (and more) may be remedied through the use of a revocable living trust as the vehicle for one’s estate plans.
What is a Trust?
A trust is traditionally used for minimizing estate taxes and can offer other benefits as part of a well-crafted estate plan.
A trust is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries. Trusts can be arranged in many ways and can specify exactly how and when the assets pass to the beneficiaries.
Since trusts usually avoid probate, your beneficiaries may gain access to these assets more quickly than they might to assets that are transferred using a will. Additionally, if it is an irrevocable trust, it may not be considered part of the taxable estate, so fewer taxes may be due upon your death.
Assets in a trust may also be able to pass outside of probate, saving time, court fees, and potentially reducing estate taxes as well.
Other benefits of trusts include:
- Control of your wealth.
You can specify the terms of a trust precisely, controlling when and to whom distributions may be made. You may also, for example, set up a revocable trust so that the trust assets remain accessible to you during your lifetime while designating to whom the remaining assets will pass thereafter, even when there are complex situations such as children from more than one marriage.
- Protection of your legacy.
A properly constructed trust can help protect your estate from your heirs’ creditors or from beneficiaries who may not be adept at money management.
- Privacy and probate savings.
Probate is a matter of public record; a trust may allow assets to pass outside of probate and remain private, in addition to possibly reducing the amount lost to court fees and taxes in the process.
Basic types of trusts
Marital or “A” trust
Designed to provide benefits to a surviving spouse; generally included in the taxable estate of the surviving spouse
Bypass or “B” trust
Also known as credit shelter trust, established to bypass the surviving spouse’s estate in order to make full use of any federal estate tax exemption for each spouse
Outlined in a will and created through the will after the death, with funds subject to probate and transfer taxes; often continues to be subject to probate court supervision thereafter
Irrevocable life insurance trust (ILIT)
Irrevocable trust designed to exclude life insurance proceeds from the deceased’s taxable estate while providing liquidity to the estate and/or the trusts’ beneficiaries
Charitable lead trust
Allows certain benefits to go to a charity and the remainder to your beneficiaries
Charitable remainder trust
Allows you to receive an income stream for a defined period of time and stipulate that any remainder go to a charity
Using the generation-skipping tax exemption, permits trust assets to be distributed to grandchildren or later generations without incurring either a generation-skipping tax or estate taxes on the subsequent death of your children
Qualified Terminable Interest Property (QTIP) trust
Used to provide income for a surviving spouse. Upon the spouse’s death, the assets then go to additional beneficiaries named by the deceased. Often used in second marriage situations, as well as to maximize estate and generation-skipping tax or estate tax planning flexibility
Grantor Retained Annuity Trust (GRAT)
Irrevocable trust funded by gifts by its grantor; designed to shift future appreciation on quickly appreciating assets to the next generation during the grantor’s lifetime
Revocable vs. irrevocable
There are many types of trusts; a major distinction between them is whether they are revocable or irrevocable.
Also known as a living trust, a revocable trust can help assets pass outside of probate, yet allows you to retain control of the assets during your (the grantor’s) lifetime. It is flexible and can be dissolved at any time, should your circumstances or intentions change. A revocable trust typically becomes irrevocable upon the death of the grantor.
You can name yourself trustee (or co-trustee) and retain ownership and control over the trust, its terms and assets during your lifetime, but make provisions for a successor trustee to manage them in the event of your incapacity or death.
Although a revocable trust may help avoid probate, it is usually still subject to estate taxes. It also means that during your lifetime, it is treated like any other asset you own.
An irrevocable trust typically transfers your assets out of your (the grantor’s) estate and potentially out of the reach of estate taxes and probate, but cannot be altered by the grantor after it has been executed. Therefore, once you establish the trust, you will lose control over the assets and you cannot change any terms or decide to dissolve the trust.
An irrevocable trust is generally preferred over a revocable trust if your primary aim is to reduce the amount subject to estate taxes by effectively removing the trust assets from your estate. Also, since the assets have been transferred to the trust, you are relieved of the tax liability on the income generated by the trust assets (although distributions will typically have income tax consequences). It may also be protected in the event of a legal judgment against you.
Deciding on a trust
State laws vary significantly in the area of trusts and should be considered before making any decisions about a trust. Consult your attorney for details.