Why an Estate Needs to Be Probated
You may think that probate happens automatically. However, there is no arm of government that starts the probate process when you die. The probate process begins when someone, usually your chosen executor or a close family member, files the necessary papers with the probate court in the county where you die. The best way to understand probate is to learn why an estate needs to be probated. There are several reasons:
You owned property in your individual name.
You had unpaid bills and debts that are not paid by your survivors.
There is a dispute about how your property will be distributed.
You died with a minor child or children and there is no surviving natural parent.
Your individually owned assets exceed your state's minimum threshold.
The primary purpose of probate is to distribute your assets in accordance with the law and to pay your outstanding bills. It may be the best route for you to take, even with some expense.
Property Owned in Your Individual Name
If you own property that was titled in your individual name, such as real estate, stocks, bonds, cars, boats, and so on, and you die, there needs to be someone who can sign your name after you are gone to transfer the title from your name to someone else's. If you had a checking account, a savings account, or some other financial account in your individual name, there must be someone who can sign your checks or withdraw money after you are gone. The only person who is legally authorized to sign for you is your executor. In some states the executor is called a personal representative. An executor is the person you name in your will to carry out the instructions contained in the will. If you do not have a will, the probate court will name an executor.
The second reason an estate might need to be probated is to pay your bills and debts after you are gone. The persons or entities to whom you owe money, such as credit card companies or the bank for the mortgage on your house or the debt on your car, are called creditors. If your creditors are not paid after you die, they are entitled to file papers with the probate court to open a proceeding if your survivors have not already done so.
The probate process allows a set time period, usually three or four months, for creditors to file a claim. If they do not file a claim during the period allowed, the debt may not be collectible from the estate.
When probate is opened, an announcement in a newspaper is required to let creditors know the time for filing a claim against an estate has started. If your loved ones have already opened a probate proceeding, the unpaid creditors will file a claim seeking an order to be paid. If all of your bills and debts are paid after you are gone, there will be no creditors who can open a probate proceeding.
Disagreements about Distribution
The third reason your estate might be probated is because your heirs and loved ones disagree on how to distribute your property after you are gone. If your family disagrees, one or more members of your family are entitled to file a petition with the probate court to resolve the dispute.
Naming a Legal Guardian
Another reason there might need to be a probate proceeding is if upon your death you leave a minor child or children and there is no surviving natural parent. If this occurs, there must be a probate proceeding to name a legal guardian for your minor child or children. If you have a will or document that names a legal guardian, the court will enter an order naming that person as legal guardian unless there is an objection to the person named. Relatives of the minor child or children, stepparents, foster parents, even a governmental agency, may object to the person selected by the court and may petition to be named as legal guardian. In some states, minor children over the age of fourteen, or a state-specified age, may object as well. If you haven't given written instructions, the court will hear testimony about the person or persons best suited to serve as the legal guardian. It does not matter whether you do or do not have a will; there will always be a probate proceeding when you die if you leave a minor child or children and there is no surviving parent.
When there is a dispute about how to divide your property after your death, those persons who disagree need to hire a lawyer to represent their interests in the probate court proceeding. At $250 to $300 per hour, imagine how expensive this can be! There also will be court fees that must be paid, either by those filing the suit or by the estate.
When families object to your plan for distribution of your property, the probate court judge will typically order your property sold and the proceeds from the sale of your property distributed to your family.
Assets Less than State's Threshold
Most states have a “small estate” exemption for assets below a certain figure. If your individually owned property is less than, for example, $50,000, you would not need to go through probate. Your executor would sign a statement that says your estate is below the minimum, and your estate would then be distributed without the probate court's involvement. State minimums vary, so your heirs should be alerted to check on your state's threshold.