The probate process may be a familiar phrase to many people, but few actually understand the intricacies involved. Until they find themselves in the situation.
Probate is basically a fancy word for the legal process whereby a court oversees the division and distribution of the property of a person who has died (decedent) to that person’s heirs or beneficiaries. It also involves settling any debts the deceased (decedent) owed, as well as paying federal estate and income taxes.
The whole process is administered by a party known as the executor (details later).
The process varies from state to state, but the general aspects of it are almost similar.
In this blog post, we seek to shed light on the probate process and when it actually comes into play.
Is Probate Mandatory?
Most people think probate only happens if the decedent did not leave a will. However, probate can happen with or without a will, in the latter case if there are assets that need to be distributed under the law of inheritance (what’s known in legal circles as the state intestacy law).
The whole idea of probate – whether there is a will or not – is to distribute the decedent’s property legally.
The good thing with probate with a will is that the process is made easier (and shorter) since the will clearly states who gets what and what goes where.
To break it down better for you, probate will be necessary in the following cases:
- A valid will exists.
- An existing will has issues – e.g. will has mistakes, will was drafted when decedent was of unsound mind, will was fraudulently executed and so on.
- There is no will in place and thus the assets of the deceased have to be properly (read legally) distributed.
- When all assets are solely in the decedent’s name.
- When there are no beneficiaries named or they happen to predecease the decedent.
- When decedent jointly owned property (what’s known in law as tenant-in-common).
Instances in which Probate is not necessary
Yes, in some few instances, it is possible to forego the probate process. Let’s highlight the most common ones, shall we…
For one, smaller estates are exempt from the whole probate rigmarole. It’s true that most states recognize the process can be costly and time-consuming.
That in mind, most states have a requirement that simplifies the process if the decedent’s property qualifies as small estate. In Illinois, small estate is property worth less than $100,000 – as is in California and West Virginia. The threshold in Florida is $75,000, while small estate in Wisconsin is valued at $50,000 or less.
If the estate is larger than the threshold stipulated in your state, you can also avoid probate through careful planning. How? By establishing a living trust, that’s how.
In such a case, what you do is transfer majority of your assets into a trust while you are still alive and appoint a successor trustee to run the trust when – you know – finally cash in your chips.
In part 2 of this post, we shall look at the other complexities involved in a probate process.
Until then!
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