How Does the Beneficiary Collect When the Loved One Passes?

By Heather Frances J.D.

Your loved ones may face a complicated estate process after your death, depending on the assets you own. Some assets, like life insurance, have a relatively quick collection process but others, like assets that must go through probate, may take years to collect. Probate is the court-supervised process in which an administrator for your estate gathers your assets, pays your debts and distributes your property to your beneficiaries. You can make it easier for them to collect their inheritances by keeping your documents organized and letting them know where everything is. You can even compile the forms and contact information they will need.

Your loved ones may face a complicated estate process after your death, depending on the assets you own. Some assets, like life insurance, have a relatively quick collection process but others, like assets that must go through probate, may take years to collect. Probate is the court-supervised process in which an administrator for your estate gathers your assets, pays your debts and distributes your property to your beneficiaries. You can make it easier for them to collect their inheritances by keeping your documents organized and letting them know where everything is. You can even compile the forms and contact information they will need.

Non-Probate Assets

Some assets are paid directly to your beneficiaries without having to go through any court process first. These are called non-probate assets and are typically paid to beneficiaries under the terms of a contract rather than the terms of your will. For example, life insurance is paid according to your policy’s terms. Thus, if you named a beneficiary on your policy, that person simply files some documents with your insurance company to collect the policy benefits. Typically, your beneficiary must provide a copy of your death certificate, though he may also have to provide your Social Security number and his driver's license. Each company sets its own process and requirements for payment.

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Starting Probate

Your state’s probate process distributes assets that must pass by the terms of your will rather than by contract.Typically, probate cases must be started in the county where you lived at the time of your death, but the exact probate procedures your estate must follow depends on your state’s laws. Your state’s laws also determine who can initiate the probate case for your estate. In some states, like Florida, any “interested person” can open a probate case; thus, anyone who could reasonably be expected to benefit from the outcome of the case can start it by filing certain paperwork with the court. This allows any of your beneficiaries to begin the probate process even if the administrator you named in your will declines to file the paperwork.

Paying Creditors

Beneficiaries generally cannot collect their share of your estate until your creditors are properly paid. Thus, after the court appoints an administrator for your estate, that administrator must publish a notice to your creditors informing them the probate case is open. Again, the exact requirements for this step vary between states. Creditors must submit their claims within a certain time period, usually a few months, as determined by state law. Your administrator must pay valid creditor claims, along with other expenses of your estate like taxes and court costs, from the assets in your estate before giving anything to your beneficiaries.

Beneficiary Distribution

If your estate has more debts than assets, your beneficiaries will not inherit any probate assets from you, though they can still inherit non-probate assets. If your estate has more assets than debts, your beneficiaries inherit under the terms you wrote in your will or, if you did not leave a valid will, according to state law. For example, if your estate has $40,000 in assets once all debts are paid and your will states that your spouse inherits half your estate and your two children split the other half, your spouse collects $20,000 and your children each collect $10,000. Your administrator can pay this in cash or in other assets.

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How to Settle an Estate in Kentucky

References

Related articles

Define Probate Law

Probate laws, which vary by state, govern the process used to distribute your assets when you die. Whether or not you make a valid will, your assets will likely have to go through the probate process to pay your final debts and distribute your assets to your heirs and beneficiaries. While some property, like life insurance or trust assets, transfers to your beneficiaries outside the probate process, other property can only be distributed after your estate's probate case is complete.

What Happens When a Will Goes to Probate?

If you have assets at the time of your death, they must still pass through the probate process so your outstanding bills are paid and the remaining assets go to your statutory heirs -- persons whom by the law in your particular state are deemed to have the right to inherit from you. If you leave a will, the process is overseen by your chosen executor.

Can a Creditor Demand That an Estate Be Established for the Deceased?

Your debts don’t die with you when you pass away. Instead, your creditors come after the assets in your estate – property you owned at the time of your death – to satisfy your debts. Your family may try to avoid this by not establishing an estate for you after your death, but your creditors are generally able to establish your estate even if your loved ones fail to do so.

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