A lot of people become confused about probate court and the processes required for estate settlement. While it's usually best to work with an attorney who specializes in estate planning and trusts, individuals can reconcile estates of their loved one as long as they are designated as the personal representative in the decedent's last will or by court appointment.
The purpose of filing Wills through probate court is to legally record the decedent's death; reconcile outstanding debts; and transfer inheritance gifts to heirs. Estate settlement is much easier and less time-consuming when estate planning measures are implemented prior to death.
If decedents prepare a will and testament the document is filed through the court to establish its validity. Other documents might be needed to open a probate estate, so it is important to become educated about the process to minimize delays and ensure all appropriate paperwork is filed with the court.
Once Wills are validated a probate judge authorizes the estate executor to commence with required duties. The duration of probate is determined by many factors. These include court caseload; types of assets to be probated; total value of estate assets; other types of estate planning procedures established prior to death; and family dynamics.
Family relationships can have a strong impact on probate if relatives do not get along or argue about inheritance property. Although Wills are legally-binding, people can file a lawsuit to contest the Will or lay claim to specific assets. Any time Wills are contested the probate process is prolonged while the court determines if there is any validity to the claim.
On the flip side, if decedents die before writing their last Will, then the estate is settled in accordance with state probate law. The personal representative undergoes court confirmation so they can be authorized to perform necessary tasks.
Estate executors need to gather important paperwork such as financial statements pertaining to bank, retirement, and investment accounts; stock and bond certificates; real estate deeds; motor vehicle titles; life insurance policies; and payable on death beneficiary designations for financial accounts.
Other paperwork required for estate settlement include any documents pertaining to a business owned by the decedent; legal contracts such as promissory notes or mortgages; copies of bills for outstanding debt; three years of tax returns; estate planning documents; and death certificate.
In order to reconcile the estate the personal representative must first determine if the estate is solvent or insolvent. Solvent means the estate holds adequate resources to pay off outstanding debts, while insolvent means there is not enough money to cover expenses. When estates are insolvent it is imperative for personal representatives to seek help from an estate attorney.
Specific documents are needed to open, reconcile, and close probated estates. These might vary by state, but usually include a petition for probate administration; acceptance of estate administrator; order to admit Will to probate; and letters of administration or testamentary.
Once these documents are filed and signed, the probate attorney or personal representative applies for a taxpayer identification number that will be used to record all financial transactions conducted on behalf of the estate. A tax ID is needed to open a checking account or secure a bond for the administrator.
After the estate is reconciled, the personal representative prepares a tax return and pays any income tax owed by the decedent, along with any estate tax.
The final step of probate involves transferring assets to rightful heirs in accordance with directives provided in the Will or probate law. Beneficiaries are required to sign forms stating they received inheritance gifts. Forms are provided to the probate court to show evidence that the estate is settled and can be officially closed.
At Craton and Switzer, we specialize in helping clients establish estate planning strategies to lessen tasks associated with probate, or avoid the process altogether. The worst thing people can do is put off estate planning. Those who don't take action will cause their loved ones to spend countless hours in probate court sorting through the details and filing mountains of paperwork.