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What is Probate

"What is probate?" is a question I hear on a regular basis. In a nutshell, probate is the legal process used when a person dies. A series of events occur to tie up loose ends and distribute inheritance assets to heirs or beneficiaries. Everything decedents own must be accounted for and outstanding bills and taxes paid before assets can be distributed.

Let's further probe the question of "what is probate?" Probating estates is required within all 50 states of the Union. Probate is governed by state law, but the process can be different within each county of the state. This non-uniform standard can create confusion; particularly, if the estate administrator resides in another state or county and is not familiar with probate laws.

Probate begins when a person dies unless their assets are protected through an established trust. A probate executor is designated within the decedent's Last Will and Testament and is responsible for handling matters associated with the estate. If a person dies intestate (without a Will), the court will appoint a probate executor to oversee administrative duties.

The probate executor has multiple responsibilities. They are compensated for their time based upon the fee schedule allowed in the jurisdiction where the decedent resided. Fees can be paid at an hourly rate, flat fee or percentage of the estate's value.

When probated estates are complex, estate administrator's can enlist the assistance of a probate attorney or professional estate planner. This is particularly helpful when family discord occurs. Oftentimes, family members are appointed to the position of estate administrator. If other family members feel the Administrator is withholding information, mismanaging the estate, or disgruntled heirs elect to contest the Will, a probate attorney can step in to mediate.

The Administrator must take inventory of all assets owned by the decedent. Valuable assets such as real estate, jewelry, automobiles, antiques or collectibles must be appraised to determine their date-of-death value.

Financial holdings such as checking, savings, retirement and investment accounts are frozen unless the decedent assigned beneficiaries to receive funds. If the decedent executed transfer-on-death or payable-on-death beneficiaries, the Administrator is responsible for obtaining date-of-death values from the financial institution where accounts are held.

These values are submitted on a form which is sent to the county Tax Assessor's office to determine if the decedent owed taxes. If so, the estate must pay taxes before the Assessor will sign-off on the form. Once taxes are paid in full, or if no taxes are owed, the tax form is returned to the financial institution and distribution to named beneficiaries can occur.

The probate executor must pay all outstanding debts and attorney fees, as well as their compensation for duties performed. Documentation is presented to a probate judge who reviews the case and validates the Will.

Once the judge signs a settlement statement, remaining assets can be distributed to heirs. The process typically lasts between six and nine months, but can extend for years if family disputes arise.

The only way to avoid probate is to establish a trust. Several types of trusts exist, so it is best to consult with an estate planner to determine the best course of action. Trusts are generally reserved for estates valued over $100,000. Individuals whose estates are valued below this amount will benefit from reading "Avoid Probate: Five Ways to Protect Your Assets".

If you are entitled to assets held in probate and desire a lump sum of cash in exchange, I encourage you to contact me. I buy probated estate assets and am particularly interested in estates with real estate holdings located in Orange County, California.

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Published on July 27, 2009 at 02:40 AM

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