An Overview of the Probate Process

Probate is a court-supervised process for transferring assets after death. While the term “probate” often describes the process by which the court administers a will, probate may be required for those who die without a will as well. The probate process seeks to ensure an orderly transfer of assets, all the while protecting the rights of creditors and heirs.

Assets Subject to Probate

Some assets transfer at death without the oversight of the probate court. These non-probate assets typically include retirement accounts with a valid beneficiary designation, life insurance payouts to a named beneficiary, assets with a payable on death or transfer on death designation, and assets held with another as a joint tenant with the right of survivorship. Additionally, assets properly titled and transferred into a trust are administered outside of the probate process.  

Intestacy

If a person dies without a will, then state law controls how the assets are distributed; this is called intestacy.

In most jurisdictions, a surviving spouse will receive at least half of the estate under the laws of intestacy.[i] If there are children outside of the marriage, then those children are usually entitled to another portion of the assets. If there is no spouse, then the children of the decedent typically inherit the assets. If there is no spouse or child, then living parents or siblings will generally inherit the property. The laws of intestacy attempt to find an heir. Most states allow for the transfer of property to the descendants of common great-grandparents if there are no other relatives that can be found. If there are no legal heirs, property subject to intestate laws will pass to the state through a process called escheat. This happens very rarely.

Wills

If a person dies with a valid will, then the assets remaining after the debts are paid are usually distributed according to the terms of the will. A person with a will is called a testator. Through a will, a testator can distribute assets to whomever they chose. There is no legal obligation to include children or blood relatives as beneficiaries.[ii]

Spousal Elective Share

Surviving spouses, however, are generally protected from being disinherited through a will or trust. Called elective share statutes, state laws entitle a surviving spouse to a portion of the testator’s assets, regardless of the provisions in the will.[iii] The proportion of the estate the spouse is entitled to claim varies from state to state, but the general range is one-third to one-half of the estate. Anyone wishing to provide for their spouse outside of a will or wishing to disinherit their spouse altogether must discuss their options with trusted legal counsel. Provisions in a prenuptial agreement waiving a spouse’s right to an elective share are generally enforceable.[iv]

Administration Process

The timeframe of probate administration varies from estate to estate, but state law establishes general timeframes. When a person dies with a will, any interested person can usually file a petition in the district court of the county where the decedent resided to admit the will to probate and request the appointment of an executor.[v] The court will usually appoint the executor named in the will unless that person is unable to serve. The court will then provide the executor with Letters Testamentary, which authorize the executor to act on behalf of the estate. If there is no will, a spouse, heir, creditor, or other person with a valid interest can petition the court to administer the estate. The court can appoint any qualified person as the administrator of the estate. The court will award the administrator of an intestate estate Letters of Appointment, demonstrating that the administrator has the power to act on behalf of the estate.

Executors and administrators are both called personal representatives in most jurisdictions. Until a personal representative is appointed, it may be difficult to access the accounts and assets of the decedent. The personal representative is tasked with organizing and locating all assets, creditors, and beneficiaries of the decedent’s estate. This can be a time consuming process, especially if it is hard to identify what assets the decedent had. If the decedent did not take the time to locate and organize assets before death, the personal representative usually must use tax statements, mailings, and credit reports to begin the search.

Once the assets are located, the personal representative cannot make any distributions to beneficiaries until a set amount of time has passed for any creditors to come forward and file their claims. The personal representative must provide notice of the probate estate in the newspaper and send personal notice to known creditors.  If the creditors fail to file a claim within the timeframe established by state statute, they will not be able to collect their debt from the estate or the beneficiaries.

After the personal representative has located the creditors, assets, and beneficiaries, they must file an inventory with the court. States will have a set timeframe for when this must happen, but courts will grant deadline extensions if the personal representative has a good reason. Once filed, a copy of the inventory will be given to all beneficiaries and creditors with a claim. The inventory is usually public record. If anyone has an issue with the inventory, they will notify the personal representative and the court. The inventory can be modified as additional assets are discovered.

Personal representatives are responsible for caring for the assets and paying the debts and taxes of the estate. Unless the will gives specific permission, the personal representative must seek court approval to sell any assets during the administration process. Interested persons who disagree with the way the estate is being administered may seek a hearing in front of the probate court. Eventually, the judge will order debts paid, administrative fees paid, and the remaining assets distributed. The personal representative then files a final report and seeks discharge from further obligations.

Probate Costs

Court oversight costs money. Probate court costs depend on the jurisdiction. For example, in Iowa the court will receive .2% of the estate value.[vi] Beginning in 2022, this value does not include non-probate assets such as retirement accounts with a valid beneficiary designation.[vii] In South Carolina, there are set amounts based on the value of the estate until the estate is big enough, then an additional percent of the estate is owed.[viii]  In Arkansas, there is one set fee that is equal to filing any other type of civil action.[ix]

Attorney fees and personal representative fees are in addition to the court costs. These fees are generally limited to “reasonable fees,” although state statutes and courts vary as to what comprises reasonable. In Iowa, personal representatives and attorneys are each typically allowed a fee in an amount up to two percent of the value of the gross assets of the estate, excluding life insurance.[x] Many personal representatives, however, waive their right to a fee if they are beneficiary under the will. And, personal representatives are free to negotiate the fees of the estate attorney. Often times, the attorney will bill on an hourly rate.[xi] Personal representatives should complete this negotiation before formally engaging the attorney to represent. Court costs and fees are generally paid before taxes, debts, and beneficiary distributions, although each state has a specific order for the priority of payments.[xii]

Benefits

The probate process has several important benefits. First, it ensures that the beneficiaries can receive assets free of clouds on the title. In the majority of circumstances, the beneficiaries will receive the assets outright. Probate rules shorten the timeframe for creditors to make claims and recover debts. This provides certainty to the beneficiaries, and facilitates the efficient transfer of property, especially real property.

Second, probate has a well-designed process for settling disputes among heirs and interested parties. Although the executor administers the estate, a court reviews and approves the actions. Those contesting a will or alleging impropriety can get their day in court. Once these matters are resolved the heirs and beneficiaries can move forward with certainty about their rights to the property.

Finally, the probate inventory provides a public record of the fair market value of the assets on the day of the decedent’s death. This can be especially useful for estates that are not required to file federal estate tax returns. Beneficiaries wishing to sell their assets later on can access a public record of the stated value or basis of the asset they inherited.

Smaller Estates & Alternative Probate

If all beneficiaries agree on how to administer the estate and what assets comprise of the estate, “informal” probate may be an option. Some states offer a “simplified estate” process. These procedures require less court oversight.[xiii] Most of the time an alternative administration process requires a certain asset limit.[xiv] In Iowa, for example, that limit is $200,000. The costs associated with simplified probate are generally lower than the costs of standard probate.  

In some jurisdictions, there is also the ability to transfer assets via affidavit if the total value of the estate is low enough and there is no real property. [xv] In Iowa, $50,000 is the limit for transferring estate assets by affidavit. In this situation, the assets are distributed to the individual after a set amount of time has passed after the individual’s death and no probate file has been opened. An individual uses the affidavit to obtain the asset and distribute it instead of obtaining Letters of Appointment from Court. In some jurisdictions, the affidavit must be filed with the court, but no judge oversees the process. Instead, the affidavit is there in case a creditor of the decedent’s tries to collect. As noted above, the affidavit method is generally not available for estates with real property transferring outside of joint tenancy.[xvi]

The Necessity for Probate

There is no state or federal agency that ensures you have properly notified all parties about the death of a loved one. A lawyer should be contacted within a month after an individual passes. For more information what to do when someone passes, see our checklist. If costs are a concern, state bar associations and LegalAid programs may be able to provide support and resources to a surviving spouse or relative.

If a family chooses to ignore probate responsibilities or move forward without knowledgeable legal counsel, beneficiaries will have difficulty proving their ownership. This could plague the family for generations and ultimately deprive them of ownership. For more information on this topic, read “The Problem with Heirs’ Property.”