Probate

Probate

When a loved one passes, it’s a difficult time for their spouse, children, and family members, who are tasked with cleaning up financial and other matters while they are grieving. Unfortunately, that’s the exact time when some families are faced with the most daunting legal wrangling they’ll ever experience: the probate process.

For those of you who unaware, probate is a legal process of disseminating the deceased’s property and assets. While it may seem like that’s a simple and linear affair, it actually can cause huge delays, headaches, and even significantly erode the wealth that’s passed to heirs if not undertaken correctly.

So, the probate legal process affects just about all family members, decedents, and heirs, but too many people are overwhelmed or ill-prepared to navigate probate once a loved one dies.

But probate doesn’t have to turn into a prolonged legal hassle, nor should it siphon off a significant amount of the assets and property your deceased family member intended to pass down.

In this article, we’ll go over the fundamentals of the probate process, what you need to know, common mistakes, and where to get help and resources for probate.

Additionally, we’ll outline how the probate process works specifically in Florida.

Understanding Probate

What exactly is probate? It seems like one of those terms that a lot of people are somewhat familiar with but couldn’t really accurately explain it.

According to Investopedia, probate is “the term for a legal process in which a will is reviewed to determine whether it is valid and authentic. Probate also refers to the general administering of a deceased person’s will or the estate of a deceased person without a will.”

The Broad Definition of Probate

When someone dies, probate is a legal process that makes sure their assets, property, and possessions go to where they were intended – the right people. Through this process, any outstanding debts or taxes are also paid off.

Now, here’s the key point when talking about probate; if you have a valid (and written) will, that’s been executed (signed) correctly in the presence of a witness, the instructions in that document are easy for the courts to follow.

That’s the best-case scenario, and the heirs will receive the property, money, or items that they were intended to per the wishes of the deceased.

However, too often, the deceased person didn’t have a clear, written, signed, and correctly witnessed will, so the legal process of probate gets muddled and far more complicated.

When is Probate Necessary?

Probate is needed in all situations and cases when someone passes away. That’s true whether they have a clear will or no instructions or directives at all.

So, in each situation, probate dictates the distribution of property and assets to the beneficiaries named in the wills, whether those are a spouse, children, extended family, or other heirs.

Although probate may be necessary in all cases when someone dies and passes property to their kin, if there’s a will in place, the process generally runs exponentially smoother, faster, and costs a whole lot less.

Why Does the Probate Process Move so Smoothly When There’s a Will?

A probate judge oversees the whole process, making sure everything is conducted legally, correctly, and expeditiously.

When there’s a will on file, the probate judge’s job is far easier and the outcomes are measurably better for the family and heirs, too. With a will, the probate judge just has to:

1) verify its validity, and

2) legally authorize the directives in the will to be carried out.

It’s worth noting that the probate judge also works closely with a representative from/for the family or heirs, who can be a personal representative or the executor if there wasn’t a will.

So, when the probate judge validates the will, he or she grants legal permission for the executor to carry out the responsibilities that it covers.

The judge formally follows up with the executor of the will to make sure those directives were carried out and the wishes in the will are completed.

That’s it! Simple, right?

That all gets far more complex and arduous when the deceased person didn’t leave a will, and the probate process has far more steps.

The Probate Process When a Will Does Not Exist

We’ll explain this more in-depth further along in this article, but I wanted to demonstrate why it’s so important to have a will.

When someone passes away and there is NO will, here is a quick snapshot of the process:

First, the probate judge will appoint a personal representative from the family or heirs, who is the person that will handle legal affairs and communication with the court. This personal representative plays the same part as the executor when a will exists.

Next, the court carefully estimates the value of the entire estate, which is the value of all property, assets, investments, but also liabilities like debt and taxes.

The court will actively seek out any creditors to the estate as well as potential beneficiaries.

Since there is no will that directs the distribution of those assets, the court will also dictate a fair method of distributing anything of value to heirs.

That may not seem like a long, arduous process, but the probate process can take months and months, require significant time and energy, frequent communication with the court, and, just as importantly, chip away at the actual value of the property that finally is passed on to beneficiaries.

What Must Go Through Probate?

If you have certain items or classifications of assets documented in your will, the probate process may be simpler, easier, and faster. And if these same items or assets are NOT in your will (or, you don’t have a will at all), then the court’s probate judge has a longer path, consulting with your assigned personal representative before distributing them.

  1.  Sole ownership property

If property is held in the name of the deceased person only, and has no POD (Payable On Death) or TOD (Transfer on Death), the asset must go through the probate process to determine who will be granted ownership.

  1. Investment property held in a partnership

When two or more people are tenants in common, clear directives are needed or there may be complications and delays when someone passes. If no clear instructions exist, the property will have to go through the probate process to find a new beneficiary.

  1. Property without title

Less substantial material possessions or assets are called non-titled property, and they often don’t have paperwork that documents ownership. Non-titled property can be appliances, furniture, electronics and media, household goods, and sporting equipment, for example. If they were not documented in the will, probate will be necessary.

  1. Inheritance if the named beneficiary has already passed away.

What happens if a wife passes away, for instance, and leaves everything to her husband, but he died previously? Of course, in that scenario, we’re assuming that the will wasn’t updated when her husband died, so he’s still named as the beneficiary of her will. In that case, the probate court will intercede and determine the best way to divvy up assets and property to remaining family members. This is why it’s so important to update your will periodically, and definitely with consideration for major life events like births, illnesses, etc.

Not All Things Have to Go Through Probate

It is possible to circumvent the probate process for certain goods and items if you plan ahead. Here are some things you can keep out of probate:

  1. Items that have beneficiaries named

If an asset or property already has a beneficiary clearly named in a will or other document, it does not have to go through the probate process. One common example of this is life insurance, which has a designated beneficiary stated within the policy.

  1. Property that was held jointly and with Survivor’s Rights

If a property had a different person’s name on the deed or title already, they have a clear path to receiving ownership once the owner dies, without having to take this to the probate court.

  1. Payable On Death (POD) and Transfer On Death (TOD) items

When a property’s title or deed designated POD or TOD beneficiaries, the property can be passed to that person without going through probate. The rules on this vary from state to state, but you typically find this used with cars and vehicles, bank accounts, real estate and property, stocks, and retirement investment accounts.

  1. Any item held in a Living Trust

When property or items are held in a living trust, these assets are legally owned by the trust itself, and not just the person who set it up and passed it away. With a living trust, these items do not need to go through probate court because they still belong to the trust.

Understanding the Probate Process Timelines

Just how long will the probate process take? That’s often the most pressing question for families, descendants, and heirs who are hoping for a timely and efficient transfer of assets.

The answer is, of course, “it depends.” There are several factors that go into the probate timeline, but we do have some guidelines based on different circumstances.

For instance, if the deceased did have a will (and no family member or other person tries to contest it – which is an important distinction!), the probate process typically takes six to nine months (approximately 180 to 270 days.)

Yes, you read that correctly – the process usually takes six to nine months in the best-case scenario when a will exists.

Needless to say, the timelines are stretched much longer if a will does not exist, and the probate process is much more involved.

It’s nearly impossible to accurately pin down the timeline for probate if there is no will, as there can be so many delays and steps along the way, especially if the situation is contentious (such as with competing family members).

It that case, it’s not unheard of for the probate process to take two or three years or longer to complete. Again, you read that correctly – we’re talking years!

And the family/beneficiaries are paying for attorneys and court fees, etc. the entire time. Now you see why a will could save your family significant time AND money when you pass!

And it’s important to note that this process is not hands-off for descendants who are (not-so) patiently waiting for their share of the inheritance. The executor or personal representative needs to stay active with secure and maintain vacant properties, rental properties, pay bills and utilities, and otherwise manage the assets as needed the entire time!

Probate Costs and Fee Structure

Aside from “how long will it take,” the most common question with probate is “How much will it cost?”

The answer also depends on many factors, including the state the deceased was living in, the size and value of the estate, and the amount of legal work that’s needed along the way, and possible complications if the proceedings are contentious between family members.

But we do know some typical costs and fees from the probate process:

  • Compensating executors and personal representatives

As we outlined, the personal representative and executor play a pivotal role in the probate process and one that comes with significant time, energy, and work. To fairly consider that burden, the court compensates that person for their efforts, which can typically be minimum hourly pay or a set percentage of the estate’s value. Of course, the payment is taken directly out of the estate, and the allocation is transparent to all.

  • Probate Bond (also called Fiduciary Bond or Executor Bond)

Depending on the state you live in (or the state the deceased lived in), you may be required to pay for this Probate Bond, also referred to as a Fiduciary Bond or Executor Bond. It also may be mandatory unless there are specific instructions otherwise. The bond is usually a percentage of the amount covered by the bond, so a bond with a premium of 0.5%, for instance, would cover $500,000 but only cost $2,500 out-of-pocket.

  • Court filing fees

This fee will vary depending on the state and even the county where your probate is filed, but it’s easy to know the specific amount ahead of time just by looking it up or asking your court representative.

  • Attorney retainer or fee

In some states, only attorneys are allowed to navigate the probate proceedings, but most states do not make legal representation mandatory. If you do have to (or want to) hire an attorney, there will be applicable fees, of course.

  • Fees for Creditor Notices

At some point, part of the process is taking out notices in local newspapers or the like to alert any creditors or potential beneficiaries about the death of your loved one. Those fees for taking out notices will apply.

There may be other various fees and charges through the probate process, so check with your attorney, local court, or legal resources.

8 Steps to the Probate Process

There are eight major steps or landmarks along the probate process. No matter what state you live in, whether there’s a will in place or what the other circumstances, the probate process is similar for the first three steps, and then can deviate.

  1. The death certificate must be submitted to the court

To start the probate process, an official copy of the death certificate will be given to the county court, which can be delivered by a relative, the family’s attorney, or the executor.

  1. The will must be validated by the court

If a written will exists, the executor or representative must submit that document to the court for examination. They will certify its validity and confirm it was signed and dated properly in the presence of a witness.

  1. Name someone to act as the chief representative in the probate process.

The personal representative or executor doesn’t necessarily have to do all the legwork themselves, as they can grant authorization to be the chief representative who’s tasked with the day to day activities and communication.

  1. Post bond

Depending on the state you’re in, the executor or personal representative may be mandated to post a probate bond, which guarantees that assets are doled out fairly, accurately, and by the directives left in the will – or the per the court. What the bond actually ensures is that any errors made by the executor or representative during the probate process, whether they are mistakes or intentional. But a bond may be waived by the executor or receiver of the estate in some states, or the will may specifically waive the use of the bond.

  1. Legally notify creditors and beneficiaries

Part of the role of the personal representative or executor is to locate and notify any beneficiaries about the death, as well as any potential creditors. Any organization, institution, or person who is owed money or has an outstanding debt must be alerted and paid off by the estate. Often, this is a simple step, but it can slow down the process significantly and take a lot of legwork if there are outstanding creditors who are not apparent at first.

  1. Assess the value of all property in the estate

With the help of the personal representative or the executor, a formal assessment of the estate will be ordered. This assessment assigns value to everything in the estate, or everything that the deceased person owned, from real estate and property to assets, household goods, and vehicles, etc. Of course, a professional appraiser is often used for this task, and the court will determine the total worth of the estate based on this information.

  1. Pay off all fees and debts

Now that the value of all property and assets in the estate has formally been calculated, the executor or personal representative will “settle the affairs” of the deceased by paying off all outstanding taxes, debts and creditors, medical expenses, funeral costs, and more. It’s critical to dot the i’s and cross the t’s during this step because if not done correctly and with legal confirmation, creditors may go after the beneficiaries for debts later on!

  1. Distribute the deceased’s remaining estate

The eight and last step in the process is to distribute the remaining assets of the estate. This includes transferring real estate titles and deeds to beneficiaries, transferring funds from liquidated investments and assets, and other distribution of monies now legally belonging to the beneficiaries. Of course, the executor and personal representative are closely involved with making sure this happens correctly according to the wishes outlined in the will, with the supervision and eventual sign-off from the probate judge.

Real Estate and Probate

In many cases, when a loved one passes away, they leave the property or real estate. And their heirs and family may wish to sell that property, recouping the equity and receiving the financial windfall.

When that happens, the real estate sale out of probate can be Intestate or Testate.

Intestate Real Estate and Probate

When the deceased person did not leave a will, the real estate is considered Intestate. The estate will go through the probate system, which means the court will supervise and control the offer process and sale of the home, as well as allocating proceeds.

Depending on the state you’re in, the rules, restrictions, and process for selling probate real estate intestate may differ, although the same framework is in place.

  1. The executor or personal representative orders a home inspection and enlists the help of a real estate agent (ideally, one who is familiar with probate). It’s a good idea to look for a Realtor who has the Certified Probate Real Estate Specialist (CPRES) designation.
  2. The agent will list the home for sale and market the house like he or she would with any other listing. However, some states may mandate that the home sale is also announced in local newspapers.
  3. The process of gathering and assessing offers varies widely depending on which state you’re in. In some states like California, they try to move the process along by mandating the home is sold within a certain timeframe.
  4. Other states have a fairly complicated bidding process for probate real estate, which includes other buyers coming forward to outbid the first-place buyer, even once their offer was accepted! Certain “over-bidding” laws apply to regulate that process depending on your state.
  5. To finalize the sale, there’s usually an additional month-and-a-half or so while the court approves the sale. But those timelines are written into the home sale contract and the buyer and sellers are fully prepared.

Testate Real Estate and Probate

In some cases, your state may allow a sale without the supervision and control of the probate court if a will is on-file. This will happen if the heirs petition the court to do so. In some states like California, that’s referred to as an “informal” probate process since the court isn’t active in the sale.

Of course, this will be a far easier process than if the court was involved and there wasn’t a will. It also will save you (or the estate) money since the typical court fees and other expenses won’t apply.

However, each state’s laws may differ, so check with a probate attorney and the court before you make any decisions with selling real estate.

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It’s worth noting that the probate process also creates golden opportunities for real estate investors, as families and heirs are often highly motivated to unload homes as quickly as possible and usually look for solutions that will help them get proceeds as quickly and smoothly as possible.

No matter who you are or how you are involved with probate, we recommend you consult a qualified attorney, access your county court’s resources, and get to know your state’s laws and regulations.