What is probate?
Probate is a legal proceeding to administer certain kinds of property (called probate property) owned by someone who has died (the decedent), to see that claims, expenses and taxes are properly paid, and to see that the remaining estate is distributed to those entitled to receive it under the terms of the decedent’s will or under Ohio law. Probate property consists of all property titled in the decedent’s name and not transferable on death. It is distributed according to the terms of the decedent’s will or, if the decedent died without a will (intestate), according to Ohio law. A probate proceeding takes place in the probate court of the county in which the decedent lived. If the decedent also owned real estate in another state, additional proceedings may be necessary in that state.
Probate vs Non-Probate Assets
When determining whether an estate must be open for an individual who has passed away, we must determine the following:
What are Non-Probate Assets?
Did the decedent's assets have beneficiary designations or "payable-on-death" or "transfer-on-death" status? If so, these assets pass directly to the person or persons named as beneficiary(ies). Probate Court intervention is not necessary. These types of assets may include:
- Bank accounts, Certificates of Deposit, IRAs, Annuities, Investment Accounts
- Real property when there is a Transfer on Death Designation Affidavit recorded, or a Joint & Survivorship Deed has been previously recorded.
- Automobiles when a Transfer on Death title has been secured prior to death.
What are Probate Assets?
Are there assets that do NOT have beneficiary designations transfer-on-death or payable-on-death status?
- Many times, stock certificates do not have a beneficiary designated.
- Savings Bonds.
- Any of the assets listed above: Bank accounts, Real Property, Automobiles, etc.
A probate estate must be opened if any assets are titled in the decedent's name ALONE, with no joint owner or beneficiary.
Why is probate necessary?
Probate is necessary to give the executor or administrator the legal authority to control, safeguard and distribute the assets of the decedent’s estate. Probate also provides a process for the payment of outstanding debts, taxes and the expenses of administration, and for the distribution of the remainder of the estate to the beneficiaries and heirs. When assets have not been assigned through an accepted legal process, probate protects both the wishes of the decedent and assures the beneficiaries receive their portion of the estate.
Who handles probating an estate?
Probating an estate requires that a person be appointed to conduct the administration of the estate. If there is a will, this person is usually named in the will and is called an executor. If there is no will or no person is named in the will, this person is appointed by the probate court and is called an administrator. The executor or administrator may be an individual, a bank or a trust company.
What does the executor or administrator do?
The executor or administrator manages the following tasks:
- Caring for the decedent's property;
- Receiving payments due the estate, including interest, dividends and other income;
- Collecting debts, claims and notes due the decedent;
- Determining the names, ages, addresses and degree of relationship of all heirs;
- Determining the names, ages and addresses of all beneficiaries, if there is a will;
- Investigating the validity of all claims against the estate and paying all outstanding obligations;
- Planning for all relevant estate and income tax returns when required and making the required payments;
- Carrying out the instructions of the probate court pertaining to the estate and distributing the assets of the estate to the heirs.
The probate court judge and support staff supervise the work of the executor or administrator. This work may require the preparation and filing of legal documents, providing of notices, attendance at court hearings, securing of an estate asset appraisal, filing of an asset inventory, completion of final income tax returns and possibly gift and estate tax returns, an accounting of funds, final transfer of all assets to beneficiaries, termination of the probate proceeding and discharge of the executor or administrator by the probate court.
Since these processes are often complex, many people seek the assistance of an attorney.
How does the probate process work? How long does probate take to complete?
To open the estate, the following items are required:
- Original Last Will and Testament. (Copies are not acceptable.) If the decedent did not leave a Will, the estate can still be opened in a different manner.
- Copy of the Death Certificate.
- A Surety Bond if there is no Will or if the Will failed to dispense with a bond. A surety bond is similar to an insurance policy and protects the heirs of the estate from the fiduciary (the person entrusted with the taking care of the money or other assets) unlawfully taking any or all of the assets.
Once the fiduciary (executor or administrator) has signed the appropriate forms, everything is filed with the probate court in the county where the decedent last resided. Proper notice must be sent to the heirs and next of kin. A waiver of such notice may also be filed to reduce court costs. The fiduciary is appointed by the court and the process then begins to collect a list of all assets. Within 90 days of the appointment of the fiduciary, an Inventory of all those assets must be filed with the court. Fiduciaries are precluded from transferring or disposing of any estate assets until the Inventory has been approved by the court. This is usually about 30-45 days after it is filed. Proper notice of the filing of the Inventory (similar to the notice of probate of will) is also required.
Creditors have six (6) months from the date of death to file valid claims against the estate. If any proper claim has been filed, it must be satisfied prior to the final accounting of the estate.
Once all valid debts have been paid, and all reimbursements made to anyone who advanced money to the estate, the fiduciary can then distribute the balance of the assets to the heirs. A Fiduciary Account, showing all receipts and disbursements, is then filed and the estate is eventually closed by the court after approval of the Account.
An average estate can be completed in 6-9 months. Sometimes, if real property is involved and the estate has difficulty selling the property, we can obtain additional time in which to do so.
However, if a federal estate tax return is required, the administration of the estate can last more than a year. (Estate taxes are not due until nine months after the decedent’s death.) If there is an audit of an estate tax return, the administration can take up to an additional year or more, and an executor or administrator cannot safely distribute all of the estate assets until released from personal liability for estate taxes after the audit has been completed. An extraordinary administration involving a contested will or complicated tax litigation may take several years to complete. In many cases, however, distributions of most or all estate assets do not necessarily have to wait until all probate matters have been completed.
There are certain circumstances where a full estate does not have to be opened, depending on the value of the asset(s) which is to be administered. For example, if the decedent made sure all assets had beneficiary designations, or were payable-on-death, but he forgot to title his car thais way, then the car would be the only asset that needed to go though probate. There is a process called Application to Relieve Estate from Administration. This process is paperwork heavy, but it is usually completed within two weeks. The court issues a judgment entry which orders the applicant to transfer or sell the asset and distribute the proceeds either pursuant to the Will, or if there was no Will, following the statute of decent and distribution.
Would a Last Will and Testament help my estate to avoid probate?
Unfortunately, having a Will alone may not allow your estate to avoid probate. Probate is about the transfer of assets, and any property titled in your name alone is subject to probate. A Will, with a named executor, guardian for your minor children and a provision to dispense with a surety bond can speed up the administration of your estate, but a well designed plan with correct titling of assets and trust creation, in addition to a Last WIll and Testament should be in place to avoid probate.
Creating a Last Will and Testament doesn't need to be expensive. Contact Hanahan & Hinton today to get started with your plan.