You may have heard that when someone dies, their estate must “go through probate,” or “be probated.”
But what is probate, and how is a deceased person’s property “probated?”
In this article you’ll get an overview of probate, including what gets probated, and how the probate process works.
Let’s start with the answer to, “What is Probate?”
Probate is the legal process through which a deceased person’s heirs or beneficiaries receive the assets from their estate, and creditors of their estate are paid.
Depending on the size of the estate, and whether the person whose estate is being probated died less than, or more than, two years prior to the probate (more on this later), a probate can include the following:
- The Will (if the deceased has one) is filed with the court and then admitted to probate by the probate court judge;
- A personal representative (also called an “executor” in other states) is appointed;
- Beneficiaries are notified;
- Creditors (known and unknown) are notified so that they can make claims against the estate;
- Any creditor’s claims are paid;
- Assets are distributed to beneficiaries; and
- The estate is closed and the personal representative is released (“discharged”) from his or her duties.
Don’t worry – we’ll go through each of these steps later in the article.
But first, its critical to understand what constitutes an estate for probate purposes.
What is an Estate?
Your estate is all of the property that you own.
It includes real property, such as a person’s home, or any other houses or land they own.
Personal property such as clothes, home furnishings, silverware, art, books, etc. are also part of a deceased person’s estate.
Financial accounts such as checking and investment accounts, insurance and retirement accounts are part of a person’s estate.
Vehicles, such as automobiles, motorcycles, and watercraft are also part of a person’s estate.
Even your pets are part of your estate.
However, part or all of your estate may not go through probate.
If you have a fully funded revocable living trust (meaning that you have transferred all of your assets into the trust), then your estate will not go through probate. But, if you didn’t transfer all of your assets into your trust, then those assets that you didn’t transfer will be probated.
And any accounts which allow you to name a beneficiary – such as life insurance or retirement accounts – and on which you have named beneficiaries, will not go through probate. These are called “payable on death” accounts. But, if you didn’t name beneficiaries on these accounts, then these accounts will also go through probate.
In Florida, there are also special rules for homestead (your primary residence) and probate. We’ll go over those rules in a separate article.
Everything else is subject to probate.
And when you die, all of that property is used to pay any creditors of your estate, and the remainder is distributed to your beneficiaries (the people that you want the property to go to) during probate as stated in your Will. And If you don’t have a Will, then the government decides who gets it pursuant to Florida law.
Types of Probate
There are two types of probate: formal administration, and summary administration.
TIP: Don’t be confused by the term “administration.” We’re still talking about probate. Formal and summary administration are just the two forms of probate in Florida.
Summary administration is a shortened process for probate in which no personal representative is appointed. This type of probate is reserved for those situations in which:
The assets to be probated are less than $75,000.00; or
The decedent (the person whose estate is being probated) has been dead for more than two years.
Smaller estates can be simpler to probate. And the estate of a decedent who died more than two years prior to the probate doesn’t have to worry about creditors – creditor claims against an estate must be brought within two years of the decedent’s death.
And dealing with creditor’s claims can complicate things. There are also more hoops to jump through if there are creditors, or if the time to file claims hasn’t run yet.
In all other cases, a formal administration is required.
Overview of the Probate Process in a Formal Administration
All probates follow the same general procedure. Depending on the individual circumstances, and if complications arise, additional steps may be needed. What follows is the general procedure in an uncomplicated formal administration.
The Petition for Administration
Probate begins with the filing of a petition which asks the court to validate a Will (if there is one), appoint a personal representative for the estate, and open the probate. The person who files the petition is usually the personal representative named in the Will. And the original Will and a death certificate must also be filed.
The Judge Admits the Will to Probate/Personal Representative is Appointed
The probate court judge will review the petition and determine whether the Will is valid (again, if there is one), and should be accepted by the court and admitted to probate.
In Florida, Wills can be “self proved” – meaning that the Will is valid without further evidence – if it contains a self-proving affidavit. The self-proving affidavit is attached to the Will, contains the sworn statement of two witnesses who saw the “will-maker” sign the Will, and is notarized.
If the Will is “self proved,” then the judge will admit the Will to probate. Otherwise, witness testimony is needed to prove the Will’s validity. And if the Will was executed a long time ago, it may be difficult to procure this testimony. So its important that a Will includes a self-proving affidavit.
The judge will also appoint a personal representative. If the personal representative nominated in the Will is qualified to act as the personal representative, and that person has requested to be appointed as personal representative, then the judge will normally appoint that person.
If there is no Will, the judge will will open the probate without one, and can appoint a person who has requested to be personal representative if that person qualifies. Usually, this is the same person that filed the petition to open the probate.
Letters of Administration are Issued
After admitting the Will (or just opening a probate if there is no Will), and appointing the personal representative, the probate judge will issue Letters of Administration.
Letters of Administration state that the personal representative is qualified to act in that capacity and has been appointed by the court. The Letters of Administration also state that the appointed personal representative has the authority to conduct the actions necessary to probate the estate.
The Letters of Administration can be presented to financial institutions, companies and other organizations the personal representative must deal with during the probate to show that he or she has authority to act on behalf of the estate.
The Personal Representative Sends Legal Notices
After his or her appointment, the personal representative must send notices to interested parties so that they know that probate has begun. A Notice of Administration must be sent to all beneficiaries of the decedent. A Notice to Creditors must be sent to the decedent’s known creditors, and must also be published in a local newspaper to put unknown creditors on notice of the probate and the deadline for them to file a claim.
Gathering Assets and Filing an Inventory
The personal representative is responsible for all assets of the estate, and must take control of them during the probate.
The personal representative must also file an inventory with the court which provides sufficient detail of the assets included in the estate. If any new or additional assets are identified after the inventory is filed, then the personal representative must amend the inventory.
Opening An Estate Bank Account
The personal representative must obtain a tax identification number for the estate from the United States Internal Revenue Service, and open a bank account for the estate. All of the decedent’s bank accounts must be transferred into this account and creditor payments and expenses of the probate must be paid from this account. In addition, the proceeds of the sale of any property from the estate must be deposited into this account.
Prior to distribution of the estate to the beneficiaries, the personal representative must pay any valid creditor claims according to the priority of such claims as identified in the Florida probate statute. Upon payment of each creditor, the personal representative should ensure that each creditor files a release of the claim with the probate court.
In Florida, most estates do not owe estate taxes. Florida does not have an estate tax, and the federal estate tax exemption (the total value of an estate has to exceed this exemption amount before a tax is imposed), is so high that very few estates owe any tax.
However, the decedent may owe individual income taxes. So it’s important that the personal representative ensures that a final tax return is completed for the deceased.
Distributions to Beneficiaries
After any creditors are paid and tax returns filed, the personal representative will distribute the remainder of the estate to the decedent’s beneficiaries pursuant to his or her Will or Florida law if there is no Will.
The personal representative should have each beneficiary receiving a share of the estate execute a receipt confirming that he or she received their distribution.
Final Documents Are Filed and the Probate is Closed
After all of the foregoing is completed, then the personal representative can file the documents necessary to close out the estate.
The first step, is to file a final accounting showing all of the expenditures, income, and distributions to beneficiaries. However, if all of the beneficiaries have all agreed to discharge the personal representative without a final accounting, then this step isn’t necessary.
After the final accounting is filed, then the personal representative will file a petition for discharge which seeks an order from the court confirming that the personal representative has carried out all of his or her duties, that the beneficiaries have received a final accounting, or have waived the final accounting, and which discharges the personal representative from further responsibility for the estate. Once the order is received from the court, the personal representative is discharged and the estate is closed.
If you have questions about probate or Estate Planning in general, be sure to download a FREE copy of 8 Critical Estate Planning Questions Answered. You can also contact Steve at 904-201-4149 or by filling out a contact form.