Understanding the phases of Probate
By Matt DeLine
The Phases of the Probate Process
An executor of an estate will face many challenges, with the most pressing being communicating with co-heirs. Of course, the most pressing question among those beneficiaries often relates to the timing of the process and the ultimate distribution of assets. The following is a brief summary of the process that can provide the executor with a framework for creating reasonable expectations. The reader should keep in mind that jurisdictional procedures vary; however, the typical process follows three common steps.
- Pre-Petition for Probate
Though expressly named in a will, an executor has no power or authority to act for the estate until a court order is issued. After an acceptable Petition for Probate is filed by counsel, (accompanied by the will itself), the court will issue Letters Testamentary for the executor. This court-embossed document is the bona fide proof of the executor’s authority to act on behalf of the estate in relation to third parties.
The preparation of the petition and the issuance of the Letters is a time-consuming process because of over-burdened court calendars and an attorney’s schedule, which may delay issuance of court-ordered authority for weeks or even months. (This time may be accelerated in cases of emergency, such as pending foreclosure on a family residence; however, this costly option should be discussed with legal counsel.)
In the meantime, much work is required of the executor, who must gather all important documents related to the initiation of the probate case. First, an original of the will should be secured. Secondly, the executor should obtain a certified copy of the decedent’s death certificate. (In most cases, this certificate is provided by a mortuary or cemetery which handles the decedent’s services.)
Further, the executor must review all documents related to the financial affairs of the decedent. These include monthly bills from creditors, mortgage documents, deeds, and bank statements. The court will require a full disclosure of all assets and debts, and these documents will assist the executor and attorney to properly prepare court documents for that purpose.
If a residence is included in the estate’s assets, the executor should ensure that the residence is handled to ensure its best value even before the petition is filed. An executor should maintain the property in its best condition, including the retention of utility services and performance of minor maintenance. This also includes the pursuit and retention of a certified probate real estate agent, who can begin the process of analyzing options related to what is commonly the estate’s most valuable asset.
- Administration of the Estate
Upon receipt of Letters Testamentary, the executor can go about the business of settling and dissolving the estate for disbursement to beneficiaries. This business includes liquidating assets, paying outstanding debts, and filing a final tax return (and estate return as needed for large estates). For this purpose, an executor should open an estate bank account to keep record of monetary transactions. In most cases, the decedent’s bank will accommodate a transfer of the decedent’s existing bank balance to an estate account, (though it will require the executor to provide a certified copy of the Letters).
Further, the executor should maintain a documented running inventory of all assets and debts, which will provide comfort to both the court and co-heirs regarding the disposal of assets. This includes not only large assets, such as the residence and portfolio holdings, but also personal property, like heirlooms and jewelry.
The proceeds from most life insurance policies will distribute by contract. (That is, checks will be issued directly to named beneficiaries without going through the probate process.) It is the responsibility of the executor to contact each insurance carrier to administrate that disbursement. The executor should also disclose these proceeds to legal counsel for proper accounting before the court.
In many cases, the residence will be liquidated in order to pay the relevant mortgage and other debts, including taxes, and to simplify the disbursement to co-heirs. During this process, the executor is duty-bound to maximize the value of the residence, and therefore must exercise great care in selecting a qualified professional for assistance in the probate sale from the very outset.
Probate sales may function like traditional sales, but are rife with subtle differences in contracts, forms and disclosures, which vary from court to court. Indeed, in some jurisdictions, a sale cannot close without court confirmation. Failure to understand or implement the proper procedures can cause delay or even the collapse of the sale itself. Accordingly, an executor should work in concert with the estate’s attorney and probate real estate agent to ensure competent analysis and performance of all necessary requirements. After consulting with these professionals, an executor can provide a reasonable time-line to co-heirs for the sale of the home.
After the sale and satisfaction of existing mortgages, the executor should direct proceeds to the mentioned estate bank account for payment of remaining debts and tax obligations. Final distribution to beneficiaries must be approved by the court.
- Closing the Estate
Having liquidated all assets and paying all obligations, the executor has performed most obligations required. As a result, the estate’s attorney may file final documents. (The final documents include verification of transactions made during the term of the estate, and the executor will have been well served by maintaining the inventory and accounting documents suggested above.) Also included will be a request for disbursement of remaining funds to co-heirs, thereby closing the estate and terminating the responsibilities of the executor.
Again, the timing of this process depends on the attorney’s actions and the court’s calendar. Nonetheless, the executor should consult with counsel to obtain an estimated date for disbursement and communicate that information to co-heirs.
- A Closing Thought
All too often, a departed loved one’s financial matters can cause tension, resentment, and suspicion among the surviving beneficiaries. To ease those concerns, an executor can do no better service to co-heirs than to perform the necessary duties with diligence, speed and professionalism; and, to best achieve that end, the executor should communicate completely and often, based on the professional guidance of a team of trusted professional advisers.
Call me to see how we can help.
Matt DeLine, CPRES, CPE
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