Most people buy their homes, but sometimes, a home may be passed from one family member to another. Probate is one of the ways that real property is distributed to beneficiaries after a loved one’s death. It’s important that the process is done properly according to each state’s statutes. Otherwise, there may be a question to an heir’s right to take ownership or sell the property.
Here’s what the process of probate typically looks like.
What is probate?
Probate is the process of proving a will and executing it according to the decedent’s wishes. A decedent is a person who has passed away with assets to pass to family members.
What does a probate proceeding look like?
How those assets are dispersed is determined by a probate judge. If a will left by the decedent is proven to be legally sound, it will direct the probate. Throughout the process, the terms of the will may be contested by individuals who think they may have a right to the assets.
Here is a breakdown of what the probate process entails:
- Will of the decedent is found and verified to be legal
- An executor or personal representative is appointed
- Probate bonds are posted
- Receive Letters of Administration from the court
- Assets are located and protected
- Assets are appraised
- Publish notice to creditors
- The decedent’s debts are paid off
- Tax returns are prepared and filed
- The remaining assets are distributed according to the will
Are you a real estate professional interested in learning more about probate’s impact on your closing? Watch our webinar: Principles of Probate for Real Estate Professionals!
Filing and verifying the last will and testament
Most states have specific laws requiring anyone in possession of a will to file it as soon as possible. In the state of Florida, a will must be filed with the local circuit court within 10 days of learning about the death whether or not probate is necessary. During the same time as the filing, an application or petition to open probate of the estate.
In some places, it’s also required to record the death certificate as well.
The petition form and process may vary from state to state. In Florida, there is an option to accelerate the probate process with a Summary Administration if the estate is worth less than $75,000 or if the decedent has been deceased for more than two years.
Otherwise, a formal administration petition is filed.
When there is a will, the probate judge will determine if it is valid. There are four main requirements to create a valid will:
- The will must have been executed with “testamentary intent,” meaning that the person signing the will is of sound mind and memory, under no duress, and free of fraud.
- The signer of the will must also have the capacity to know and understand the nature of making the will, know the nature and extent of his or her property, and what it means to leave it to someone.
- The will must be signed and dated. Most courts take a liberal interpretation of what constitutes a signature. This could range from a nickname to even an “X” by an illiterate person.
- Witnesses must be present at the signing of the will, and it must also be signed by the witnesses.
Not all states require a will to be notarized to make it valid and legal. However, you can make your will “self-proving” if you and your witnesses go to a notary and sign an affidavit proving each person’s identity and acknowledgment of the will. This can be done at the time the will is signed or later.
Self-proving affidavits will help speed up the probate process since the court can accept the will without contacting the witnesses who signed it.
A personal representative is appointed
In most cases, a personal representative will be named in the will to carry out the execution of the will on behalf of the decedent. This person is sometimes referred to as the executor or administrator of the will.
If there is no one named in the will as personal representative, the court will appoint one.
The following documents (some of which may not apply in every situation) will be signed by the Personal Representative and notarized in the state of Florida:
- Petition for Administration (Formal or Summary)
- Acceptance as Personal Representative and Designation and Acceptance of Resident Agent
- Oath of Personal Representative
- Oath of Witness to Will
- Affidavit of No Florida Estate Tax Due (Some states, like Washington, Oregon, and New York have an estate tax)
- Notice of Administration
- Notice to Creditors
- Form SS-4 Application for Taxpayer Identification Number
Probate bonds are posted
This is a type of court bond that ensures an appointed representative will appropriately fulfill their duties by complying with state laws, and the terms of the will, trust or court order.
If you are appointed as the personal representative, your county court may require the bond to guarantee that all the estate debts will be satisfied and that the remaining assets will be properly distributed to the appropriate heirs.
Different types of probate bonds include:
- Administrator Bond
- Personal Representative Bond
- Estate of Court Bond
- Conservatorship Bond
- Trustee Bond
- Executor of court
- Fiduciary Bond
The cost of a bond is usually based on the total amount of the estate that is to be managed by the representative.
Many wills drafted by an attorney will waive the requirement of the bond. Sometimes, the heirs of the will may agree to waive the bond, but if not, a probate bond is needed. All these bonds essentially act as a surety bond to protect the estate and the family of the deceased from any fraudulent or illegal actions on the part of the personal representative.
Receive Letters of Administration from court
An estate checking or brokerage account is set up by either an attorney of the personal representative. An Employer Identification Number (EIN) may need to be obtained from the Internal Revenue Service. A copy of the Death Certificate, the EIN, and a certified copy of the Letters of Administration are taken to a bank to open an Estate account.
Once the Letters of Administration are received, the personal representative may put any real property on the market for sale. However, closing on the property must take place after the expiration of the creditor period.
Note: It’s important for real estate agents to check a vesting deed to determine if an individual has the right to sign a listing agreement. Only the personal representative may act on behalf of the decedent.
Assets are located and protected
Once the personal representative of the decedent is appointed, the first and often most difficult task is to take stock of all the decedent’s assets in order to protect them.
This process usually requires combing through insurance policies, tax returns, and other documentation left behind. Sometimes an asset may not be named in the will, so this step can take a good amount of detective work.
When it comes to real property, the personal representative is charged with ensuring the property taxes are paid, insurance policies don’t lapse, the property is secured against break-ins if vacant, and mortgage payments or association fees are paid so that the property doesn’t go into foreclosure. The personal representative is not expected to take literal possession of the property during the probate process.
All bank accounts, investment portfolios, collectibles, vehicles, and other assets must be placed in exclusive control of the personal representative and protected. Insurance on all assets is verified with existing insurance companies (car, home, etc.)
Assets are appraised and an inventory is filed
Once all the assets have been accounted for, many states require the personal representative to submit a written report listing everything along with its appraised value, noting how the value was calculated. The inventory of assets is filed with the Probate Court and depending on your state’s statute, a copy may be required for the Department of Revenue.
In some states, the appraiser is court-approved while in others, the representative may choose someone.
Publish notice to creditors
The decedent’s creditors must be identified and notified publicly of the death. Most states still require this notice to be published in a local newspaper to alert creditors that may be unknown.
Creditors are given a limited time period after receiving the notice to make their claims against the estate. This time period can vary from state to state. In the state of Florida, it’s 90 days. In California, it’s 60 days.
The personal representative has the ability to reject claims believed to be unfounded. However, creditors also have the right to petition the court to allow the judge to decide the veracity of the claim.
The decedent’s debts are paid off
The personal representative is also responsible for liquidating and closing the accounts owned in the decedent’s name alone. All of the proceeds should be placed in the Estate account.
When the creditor period expires, documents proving that those with valid claims were paid will be filed with the Probate Court.
If there was real property waiting to be sold, a closing may occur at this time if it hasn’t been bequeathed to a living beneficiary. A Petition to Determine Homestead Status of Real Property is prepared as well.
Tax returns are prepared and filed
The personal representative must also file the decedent’s last personal income tax returns for the year in which they died. It will be determined at that time whether the estate is subject to any estate taxes, and if applicable, those tax returns are filed as well. A Certified Public Accountant may be required to help navigate the complexities.
Any taxes due will be paid from the Estate account.
Remaining assets are distributed according to the will
After all these steps have been done, the remaining assets are distributed to beneficiaries. Personal property, vehicles, heirlooms, and specific gifts under the will are usually the first to be distributed.
Generally, a Proposed Plan of Distribution is created as dictated by the decedent’s will that beneficiaries will agree on before assets are distributed.
What happens if the personal representative of an estate doesn’t follow probate proceedings?
A willful refusal to file the will may result in a court finding the person in possession of the original will in contempt of court. If you are an heir of an estate and potential beneficiary of a will, you can initiate a probate proceeding by filing a petition for administration with the circuit court in the county where the decedent resided at their time of death.
It’s possible that someone could challenge the appointment of a representative who fails to act in a timely manner. If a court finds the representative has been derelict in his or her duties and a new representative may be appointed.
If the executor or personal representative fails to timely administer the estate, any beneficiary of the will or creditors of the estate may have a legal cause of action against the personal representative. There are also potential repercussions from local, state, and federal governments if taxes are filed properly.
Remember the probate bond? A claim can be filed against your bond if someone believes you aren’t complying with the terms of the will, trust, or court order. Anyone can make a claim against the bond. The surety company that issued the bond will expect a representative to take care of the claim. If the claim goes unsettled, the surety company will investigate to determine the claim’s validity. If it’s found to be valid, the representative will be expected to compensate the claimant for financial loss or damages. The surety company may pay out the claim in some cases, but they will expect reimbursement for the settlement and legal costs incurred.
As you can see, the probate process is incredibly tedious and detailed, requiring an attorney’s guidance to ensure all the proper steps are taken. Any missteps in the proceedings can threaten beneficiaries’ rights to real property or a future owner.
If you or your family have specific questions regarding probate, find and contact a local probate attorney to walk you through the best course of action for your particular situation.