Probate is the legal process of administering the estate of a deceased person, known as the decedent, by resolving all claims of creditors, paying the appropriate taxes and finally distributing the remaining assets of the estate to beneficiaries and heirs. In the case of a small estate, or if the decedent left his assets in trusts or gifted them prior to his death, probate may not be necessary. Probate laws can vary from state to state.
Establishing the Executor, Beneficiaries and Heirs
The process of distributing the assets of the decedent is the responsibility of an appointed individual known as the executor or personal representative. If there is a will, there is typically a person named as executor in the will; the court typically appoints this named individual as executor. If there is no will, or if the will does not name an executor, the probate court will choose a person to serve as the personal administrator of the estate. Prior to the final distribution of the estate, the executor is required to protect the assets of the estate by staying current on monies owed such as taxes and mortgages. The executor must also obtain information with regard to all beneficiaries named in the will and any other potential heirs.
Before assets are distributed to beneficiaries and heirs, it is the responsibility of the executor to settle the decedent’s debts. Many states require the executor to publish a death notice in a local newspaper. In this notice, the executor invites potential creditors to present claims against the estate. Potential claimants normally have a few months to contact the executor and present their cases. If they fail to contact the executor within that time period, the potential claimants cannot collect on the debts.
The estate tax is a federal tax on a decedent’s right to transfer his property to his heirs. The tax is assessed based on the fair market value of all of the decedent’s assets as of the day he died. The tax is paid by the executor using the decedent's assets. As of 2012, the federal estate tax only applies to estates worth $5.12 million or more.
After the decedent’s debts have been settled, an executor will distribute the remaining assets according to the decedent's wishes as noted in his will. Beneficiaries named in a will can include family members, friends, or organizations. A will maker can also use a will to disinherit someone. This ability to disinherit is generally limited with regard to spouses and underage children.
Dying "intestate" means that a person dies without a will. In this situation, the probate court requires that the decedent’s property be distributed subject to the state’s intestate succession law. Intestate succession varies by state, but the basis of many of those schemes is derived from the 1990 Uniform Probate Code. Under the UPC, when a person dies, his property is divided among his heirs. Depending upon which family members are still alive, the property is generally divided among the decedent's spouse, children and parents.