1. The Probate Process
Probate is the court-administered process of distributing a deceased person’s estate to those entitled to receive the decedent’s assets. Although generally not a pleasant experience, it can not always be avoided. Most business people establish living trusts in order to avoid the need for a probate at their death. Those who do not have living trusts have their estates probated after they pass away. The probate process is lengthy (six months minimum from date of death to distribution of assets) and costly, but is required by law in many instances.
2. The Beginning Steps
It is a good idea to start the probate process as quickly as possible after the death of the decedent. Obviously, funeral and burial arrangements, and other family matters need to be addressed first. Once these personal matters have been taken care of, it is important to get the probate process started. The process begins by hiring a competent attorney who can handle the probate for you, leaving you with as little responsibility as possible with respect to the decedent’s estate.
3. Probate Administration
In general, all steps in the administration of the estate will be directed toward three goals: collection and management of assets, payment of debts and taxes, and distribution of the balance of the assets as provided in the decedent’s will. While it is the attorney’s job to take care of preparing all legal documents, conducting all legal filings, making all court appearances, and in general moving the probate toward a conclusion, it is the personal representative’s job to make sure all assets are found, a list of creditors is made and that proper disbursements are eventually made.
If you are appointed as personal representative of a decedent’s estate, you may be limited in the tasks you can accomplish without court approval. It is thus important to communicate with your attorney before doing anything related to the decedent’s property or creditors.
4. Document Initiative Process
The probate process includes numerous standardized forms and other hand-drafted legal pleadings which are required to be filled with the court and mailed out to various interested parties. From time to time throughout the process, documents are submitted to the probate court and reviewed by court representatives or the probate judge. If all materials are in order as required under your state’s Probate Code and local court rules, the court order will be prepared and submitted to the judge for signature without the need for a personal appearance.
5. Collection and Management of Assets
Once you have been appointed as personal representative of the decedent’s estate, you must take possession of all the decedent’s property. Your attorney should help you do this and will advise you on the management of estate assets. Securities, jewelry, deeds to real property, bank statements, and other assets must be collected and managed very carefully by the representative. Some assets do not go through the probate process. For example, life insurance, joint tenancy property and revocable trusts, generally do not go through the probate process.
It may become necessary to sell some of the estate’s property, either because an item should be disposed of to avoid needless expense or loss through depreciation in value, or to raise cash to pay expenses, taxes or legacies. Certain assets can be sold only with court authorization.
You may retain auditors, accountants, attorneys, or other tax experts for any action that may lawfully perform in computation, reporting or preparing tax returns, in payment of taxes, or in any negotiation or litigation that may be necessary.
As personal representative, you are required to invest all cash not needed to administer the estate in interest-producing investments. However, there are limitations on the kinds of investments you may make. A personal representative may deposit estate funds in accounts at banks or insured savings and loan associations or invest in United States obligations maturing in one year or less, or in certain common trust funds or mutual funds without court approval. With court approval, other investments may be made.
6. Handling Debts and Taxes
When the petition to admit a will is submitted to the court, a concurrent notice to creditors is mailed and published in the manner required by law. The notice must be published even if there are no known creditors.
In California creditors must present their claims within four months after the issuance of letters testamentary or letters of administration. Any claims not presented may forever be barred from collection. This includes claims you yourself may have, e.g. any sums you may have advanced to pay last-illness or funeral expenses. Claims should be made on special forms and be approved by both you and the court before you can make any payment.
Depending on the gross value of the estate, it may be necessary to file a Federal estate tax return. The Federal estate tax return and the tax are due nine (9) months after death. The estate has the option to value assets as of the date of death, or under certain circumstances as of six (6) months after death.
7. Distribution from the Estate
In California, it is possible to petition the court for a partial distribution of estate assets, once two months have passed after letters testamentary or letters of administration have been issued. If the interests of the beneficiaries and the creditors are adequately protected, the court will ordinarily grant such a petition.
Distribution of any portion of the residuary estate (but not specific gifts) will have income tax consequences, because such a distribution shifts taxable income from the estate to the distributees. The personal representative should confer with his or her attorney about the desirability of making such a distribution.
Final distribution of an estate can probably be made soon after the Federal estate tax return is filed (usually nine months after the date of death). When all debts and taxes have been paid the estate is ready for final distribution. A final account and report based on your record of receipts and disbursements will be prepared and filed with the Court. The account and report will also ask the court to order distribution of the remaining estate assets to the beneficiaries.
We hope that this general outline of your duties and the major events that will take place during administration of a probate estate will be useful to you.