When you die, you leave behind your estate. It consists of your assets — your money, real estate, and worldly belongings. Your estate also includes your debts, expenses, and unpaid taxes.
After you pass on, somebody must take charge of your estate and settle your affairs. This person will take your estate through probate, a court-supervised process that winds up your financial affairs after your death. The proceedings take place in the state where you were living at the time of your death. Owning property in more than one state can result in multiple probate proceedings. This is known as ancillary probate.
How does probate start?
If your estate is subject to probate, someone (usually a family member) begins the process by filing an application for the probate of your will. The application is known as a petition. The petitioner brings it to the probate court along with your will. Usually, the petitioner will file an application for the appointment of an executor at the same time. The court first rules on the validity of the will.
Assuming that the will meets all of your state's legal requirements, the court will then rule on the application for an executor, the person you choose to handle the settlement of your estate, typically a spouse or close family member. If the executor meets your state's requirements and is otherwise fit to serve, the court generally approves the application.
What does an executor do?
Typically, the executor should be someone you trust will be able to carry out your wishes as stated in the will. The executor has a fiduciary duty — that is, a heightened responsibility to be honest, impartial, and financially responsible. Now, this doesn't mean that your executor has to be an attorney or tax wizard, but merely has the common sense to know when to ask for specialized advice.
Your executor's duties may include:
- Finding and collecting your assets, including outstanding debts owed to you;
- Inventorying and appraising your assets;
- Giving notice to your creditors (e.g., credit card companies, banks, retail stores);
- Filing an estate tax return and paying estate taxes, if any;
- Paying any debts or other taxes;
- Distributing your assets according to your will and the law; and
- Providing a detailed report of how the estate was settled to the court and all interested parties.
Few executors who are friends or family members carry these duties out on their own. Generally, they get help from other financial professionals who have detailed records of your finances, such as your accountant, estate attorney or financial advisor.
The probate court supervises and oversees the entire process. Some states allow a less formal process if the estate is small and there are no complicated issues to resolve. In those states allowing informal probate, the court may be involved only indirectly. This may speed up the probate process, which can take years.
What if you don't name an executor?
If you don't name an executor in your will, or if the executor can't serve for some reason, the court will appoint an administrator to settle your estate according to the terms of your will.
If you die without a will, the court will also appoint an administrator to settle your estate. This administrator will follow a special set of laws, known as intestacy laws, that are made for such situations.
The intestacy process can be extremely complex and time-consuming. And it could lead to your assets being distributed in a way you didn’t intend. That’s why it’s very important to complete your will and review it every few years to make sure it still reflects your wishes and your living situation.
Is all of your property subject to probate?
Although most assets in your estate may pass through the probate process, other assets may not. It often depends on the type of asset or how an asset is titled. For example, many married couples own their residence jointly with rights of survivorship. Property owned in this manner bypasses probate entirely and passes by "operation of law." That is, at death, the property passes directly to the joint owner regardless of the terms of the will and without going through probate. Other assets that may bypass probate include:
- Investments and bank accounts set up to pass automatically to a named person at death (payable on death)
- Life insurance policies with a named beneficiary (someone other than the estate)
- Retirement plans with a named beneficiary
- Assets held in a trust you establish for the benefit of your heirs or one or more charitable organizations
- Other property owned jointly with rights of survivorship
In many cases, finding ways to bypass probate can speed up the distribution of your assets and it can also reduce the legal and other costs of the probate process. If you have any questions about probate or other estate planning issues, consult with an estate planning attorney or qualified financial advisor.
This material has been provided for general informational purposes only and does not constitute either tax or legal advice. Although we go to great lengths to make sure our information is accurate and useful, we recommend you consult a tax preparer, professional tax advisor, or lawyer.
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Joelle Spear is a financial advisor and Partner located at Canby Financial Advisors, 161 Worcester Road, Framingham, MA 01701. She offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. She can be reached at 508.598.1082 or jspear@canbyfinancial.com
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2021. Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual's personal circumstances.