It is important to understand the probate procedure after a person dies and why probate should be avoided. Here is a brief summary of the steps that occur if a deceased person’s assets must go through the probate procedure:
1 – An attorney hired by the deceased’s estate executor (named in the deceased’s will) files a petition in local Probate Court to distribute the deceased’s assets. If no will was found, the deceased’s relatives hire an attorney to petition the Probate Court for distribution of the deceased’s assets to the heirs according to the state’s law of intestate succession. However, if the deceased left no will, and no heirs can be located, the state will get all the assets by escheat!
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Probate attorneys love this easy and very profitable work. Although their fees are usually set by state law, often as a percentage of the estate’s gross assets, they will usually negotiate their fees downward because they know they can easily be replaced by a probate attorney who will negotiate fees, so don’t hesitate to negotiate up front.
2 – The probate judge then appoints the executor named in the deceased’s will (if no will was found, the court appoints an estate administrator) to collect and distribute the estate assets, after paying any creditors who submit claims. Executors and administrators should question all claims submitted because some people submit bogus claims, knowing the heirs often have no way of verifying if the claim is valid.
3 – Unless waived in the will, or by the heirs, a financial bond must be posted by the executor or administrator, thus adding to the estate’s expenses.
4 – Notice of death must be published in a “Notice to Creditors” legal ad in a local newspaper, giving the creditors usually four to six months to file their claims. If the deceased left many debts, it can be an advantage to have a probate court proceeding because it cuts off creditor’s claims after the time to file expires. But most decedents don’t have substantial unpaid creditor problems. If there is not enough cash in the estate, then estate assets must be sold to pay the creditor claims approved by the Probate Court.
5 – The Probate Court can be petitioned for an immediate widow’s or family allowance, pending final probate distribution of the deceased’s assets (which often takes six to 24 months, sometimes even longer).
6 – The estate executor or administrator must inventory the deceased’s assets and might be required to have them appraised for their fair market value. Costs of hiring appraisers are extra expenses to be paid by the estate.
7 – The Probate Court judge or referee will approve payment of creditor claims and hear any arguments by the executor or administrator against paying disputed claims. However, any federal estate taxes and income taxes due for the decedent’s last income tax return must be paid first.
My uncle was a probate referee for many years. He used to regale our family at dinners with stories of what went on at his probate proceedings–little did I realize at the time (I was a teenager) how expensive and unnecessary most of those probate proceedings were and how they can be completely avoided by use of a living trust.
8 – When assets must be sold either to pay estate or income taxes, creditor claims, or because the heirs want cash rather than the specific assets that were willed to them, the Probate Court can order which assets shall be sold. When real estate is sold at probate sales, it often sells for much less than if it was exposed to the market in the normal sales procedure.
Real estate to be sold in probate sales can usually be listed for sale with a professional real estate agent to help obtain the highest sales price. Some realty agents specialize in probate listings and become experts in selling this type of property. Often they know more about such sales than do the probate attorneys.
But there are often probate sale complications, such as required approval of the heirs, or confirmation of the high bid by the probate judge. Many potential buyers won’t even consider buying probate properties if these probate disadvantages occur. More details are in my special report, “How to Profit from Probate and Bankruptcy Properties.”
9 – State and federal income tax returns for the deceased’s last tax year, plus any federal estate and state inheritance tax returns (unless the net estate is below the exempt amounts), must be filed by the estate executor or administrator (often, the probate attorney handles the tax returns, for an additional fee, of course).
10 – After all the creditors and any estate and inheritance taxes have been paid, the Probate Court judge will order the remaining assets or cash distributed to the heirs (or to the state if no heirs were located).
(For more information on Bob Bruss publications, visit his
Real Estate Center).
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