The 6 Steps of Probating an Estate0 USER TIPS ADD YOUR TIP
After a person dies, it can be difficult to know what is to be done with the property and possessions they left behind. Probate is the judicial process that ensures that the deceased person’s debts are paid and that any remaining assets or property are distributed properly to their heirs and beneficiaries.
If the person had a will, known as a last will and testament, it should name an executor, the person responsible for handling the estate (everything the person owns) after the person’s death. If not, or if the person died without a will, the court will appoint an executor during the probate process.
Probate can last months or even years, so it’s important to understand what it encompasses to ensure that an estate is properly probated. Here’s what the executor, or a close relative of the deceased person, will typically need to do:
Step 1: Inventory the estate
Before heading to probate court, locate all of the deceased’s estate planning documents, including the will, revocable living trusts, and burial instructions. You’ll also have to do a thorough and exhaustive inventory of all debts and assets before you can move on to steps 2 and 3.
That means gathering bank statements, brokerage account statements, credit card bills, mortgages, stock and bond certificates, corporate records, insurance policies, and titles for any automobiles or boats. You’ll also want to collect income tax returns for three years prior to the person’s death.
Step 2: Open the probate estate
The probate process, like estate planning in general, is governed by a person’s individual state. Many states have a specialized probate court that handles such matters and can be known by other names like Surrogate’s Court, Orphan’s Court, or Chancery Court. But essentially all probate courts handle matters in the same way and are there to make the distribution of an estate as seamless as possible.
Once you’ve figured out the appropriate state, city, or county court, the executor heads to court to open a probate estate. (Some executors may consult with a probate attorney at this point, but it’s not legally necessary.) The executor will present to the court the deceased person’s will, an original death certificate, and a lengthy and detailed list of their properties, debts, and who is to inherit what.
Keep in mind that you’ll likely need more than just people’s names at this point in the process. You may need beneficiaries’ mailing addresses, phone numbers and email addresses, as well as date of births and even Social Security numbers. The court will want to make absolutely certain that assets are being distributed to the correct beneficiary.
The court will determine (through a probate hearing) if the person’s will is legally valid. If the person died without a will, this is also the point at which you would petition the court to be named executor. Usually the court will appoint a surviving spouse or adult child of the deceased person.
Step 3: Value the estate’s assets
Now it’s time to determine the value of the person’s gross estate, which is the value of the deceased person’s assets and property before debts owed are deducted.
A date of death estate value is the fair market value of each asset and piece of property of the gross estate as of the person’s actual date of death. For most financial accounts, that simply means the balance on the date of death. For investments, determining the estate value involves averaging the day’s stock value. Assets like real estate, artwork, jewelry, and collectibles typically have to be professionally appraised.
If the estate is large enough to be subject to federal estate taxes (meaning greater than $5.49 million in 2017, or $10 million in 2018-2025), the Internal Revenue Code allows the executor to use an alternative valuation date. This calculates the fair market value of all assets within the gross estate six months after the date of death—especially beneficial if an asset has lost value following the owner’s death.
If this starts to feel overwhelming, an estate lawyer may be helpful. Also known as a probate attorney, this person can help you navigate the probate process and help ensure you’re meeting requirements to make a good faith effort to resolve all debts and execute the will effectively. Also, if someone dies without a will in place, an estate lawyer can be essential to figuring out who is entitled to receive what—particularly if there are family conflicts at play or a complicated family tree.
Step 4: Pay the final bills and expenses
After calculating the value of assets, the executor must then figure out what bills the deceased person (also known as the decedent) owed at the time of their death and pay those bills. This can be a time-intensive task, because there may be loans or debts that you didn’t know about, even as a close family member or friend.
Take your time sorting through the mail and email (if you have access) for any bills or payment notifications, and also ask at the bank or credit union where the deceased had accounts. You’ll want to make a good faith effort to uncover all outstanding debts before distributing assets. In addition to consumer debts and loans, the executor must make final payments for funeral and burial costs, as well as hospital bills.
In some cases, this may involve gaining access to the decedent’s financial accounts, in which case a Letters of Administration or Letters of Testamentary (signed by the probate judge) will come in handy. This document gives the executor access to all of the decedent’s accounts and information, and also makes it possible to transfer some of those accounts (such as the mortgage or utility bills) into the estate’s name.
Remember, it can sometimes take years to completely execute a will, and in the meantime the executor is responsible for paying ongoing expenses of the estate, including everything from utility bills on an existing property to accounting and legal fees. The executor cannot legally start distributing parts of the estate—such as selling the family home or passing along family heirlooms—until the probate process is complete.
Step 5: File taxes
The executor must also ensure that the estate pays whatever taxes are due. That includes final federal and state income tax returns, as well what’s known as an Income Tax Return for Estates and Trusts, if the estate has earned income while in probate.
Step 6: Distribute the remaining assets to beneficiaries
Only after all of these other steps are completed does the executor make distributions of the remaining assets of the estate to the beneficiaries and heirs named in the will. The will itself may be very specific, listing certain dollar amounts or items of property that are to pass to individual people. Or, it can be more vague, for instance, saying assets should be divided equally between all children. If there is no will, the assets are distributed according to state intestacy laws.
Many heirs may be surprised that receiving their inheritance comes at the tail end of a sometimes lengthy and intensive process. For most average estates, probate can last from six months to two years. If there’s any contention over the will or personal matters, things can get messy and more time-consuming fairly quickly.
The upside of the probate process is that it makes the decedent’s financial estate a matter of public record, including the person’s assets, debts, and who’s entitled to what. This can make the process more transparent and hopefully quell family contentions or lingering doubts about how the estate was divided.