Probate FAQ

FAQ

Nothing on this website should be considered legal advice.
Always seek the advice of an attorney on legal matters.

Q. What is probate?
Q. How can we avoid conflicts with family members?
Q. Can we avoid probate altogether?
Q. Can we handle probate without an attorney?
Q. How do we avoid being taken advantage of?
Q: How long does probate usually take to complete?
Q. How do we avoid ‘probate quicksand’?
Q. How do we invest and grow our inheritance?
Q: Is it necessary for all of the decedent’s property to go through probate?
Q: How much does probate cost?
Q: What goes on in the probate of an uncontested will?
Q. Are personal representatives usually paid for their work?
Q. What if there is no Will?
Q. How are creditors against the estate notified?
Q. Must a Will actually be read out loud to the family?
Q. How can I avoid probate of my estate?

Q. What is probate?
A. Probate is a legal process by which an estate pays its bills and distributes its assets. Probates are either informal or formal. An informal probate is generally one in which the Will names the person who will act as the personal representative who can then act without limitation. A formal probate is more complex. Possibly the decedent died without a Will (intestate) or a conflict exists among family members or a family member is contesting the Will. In these situations, the probate court is likely to require a formal probate. In a formal probate, the personal representative has limited powers and may be unable to sell real estate for a year or more and the sale will require court confirmation. This delay can be very expensive to the family.

Q. How can we avoid conflicts with family members?
A. The will or trust outlines what should happen under the law, but often the will or trust does not address every issue. Avoiding disagreements with family is an important goal. The best way to avoid conflict is open communication. Every person needs to feel like they have a voice and they are being heard.

To avoid disagreements regarding the real estate, we encourage every interested family member be a part of the initial conversation with us. In this way, we can explain the different options available and learn from the family the goals and challenges. Together, we can map out a customized real estate strategy.

Disagreements can also arise over the distribution of personal property. Some personal property will have greater sentimental value to certain family members than to others. This should be taken into consideration but also handled carefully.

When estates are large and complex, it may be necessary to call in an appraiser to settle questions of value. One of our prized resources in our network is an art and jewelry appraiser who once worked for Sotheby’s in London.

Q. Can we avoid probate altogether?
A. Generally, no. However, with an attorney’s help, if the estate is very small – under $50,000 – then it may be possible to avoid probate altogether. If you represent a small estate, we can recommend an attorney who specializes in avoiding probate.

Q. Can we handle probate without an attorney?
A. People often wonder if they can handle a probate themselves without the help and expense of an attorney. We almost always advise hiring a good probate attorney because of this one important fact: You don’t know what you don’t know.

Here are some stories to show why it is smart to hire an estate planning and probate attorney who understand tax implications.

Beware Liens and Judgments
Five siblings inherited a residence. They took title to the property through a final decree and distribution and then put the property up for sale. That’s when they learned that not having an attorney can be expensive. One of the siblings had a child support lien and some judgments against him. The moment he took title to 20% of the real estate, those liens and judgments attached to the property. This means the property cannot be sold until the liens and judgments are paid (likely paid at the close of escrow). This became a problem for the other four siblings because the total of the liens and judgments of the one sibling were more than the value of his 20% interest in the property. A good attorney would have advised that the estate sell the property first and then distribute the proceeds to the heirs.

Consider the Tax Consequences
In another case, four siblings inherited several properties. The siblings decided to sell several properties and split the proceeds, but one sibling wanted to live in one of the houses. The residence was distributed via final decree and distribution to all four siblings. Three of them deeded over their share of the house to the fourth sibling. Little did they know the tax problem they created for the fourth sibling. According to the laws of the state (California), transfers of property from parent to child are not a change of ownership. However, a transfer between siblings is considered a change in ownership and is therefore a re-assessable event. The home had appreciated considerably from when his parents first bought the house. The annual tax bill went up by 300%.

Beware Unintended Consequences
In an effort to avoid having a property go through probate, parents decided to put their son on the deed of their home so he would the right of survivorship. The plan of saving money by avoiding probate backfired. The home was originally purchased for $50,000. When the parents died, the home was worth $600,000. The right of survivorship meant that the son inherited the $50,000 cost basis so that when he sold the home for $600,000, he had a taxable capital gain of $550,000. If he had inherited the property through a trust or through probate, he would have received it at the stepped up cost basis of $600,000 and owed no capital gains tax.
As you can see, the order in which you do things can be important. These stories are neither tax nor legal advice. Rather they are offered to inform and inspire you to seek good tax and legal advice. Remember, you don’t know what you don’t know.

Q. How do we avoid being taken advantage of?
A. Personal Representatives and their families are often concerned they are at a disadvantage. The probate world is new to them and they already live busy lives. They don’t want to feel coerced into doing anything, and rightfully so.
If you are concerned about being treated unfairly by contractors or real estate investors, the best advice is to get multiple quotes from vendors and multiple offers from buyers, whenever possible. If real estate will be repaired before it is sold, get multiple quotes for the work. If you are considering selling to a cash buyer, get multiple offers before you make a decision. Net proceeds on a home will almost always be much greater after repairs have been completed. Ronald and Meagan can help you arrange for both multiple quotes and multiple bids. Call us to schedule an appointment and we will be happy to explain our process.

Q: How long does probate usually take to complete?

A: Lots of variables come into play, but a general rule of thumb is approximately five or six months. It can and frequently does takes far longer.

Some of the matters that can delay the close of probate can include:

  • Problems in locating the heirs and beneficiaries
  • A contest of the will (disputing the validity of the document) by the heirs or beneficiaries
  • Claims or liens against the estate that remain unsettled
  • Real estate or other property that cannot be sold for some reason
  • Failure to properly notify creditors during the claim period
  • Dissatisfaction regarding the actions of the personal representative by the heirs or beneficiaries
  • Not knowing what to do to make progress – called “probate quicksand”

Q. How do we avoid ‘probate quicksand’?
A. Communication with your attorney is important, but you must realize that they are focused on the legal aspects of the case. They are not focused on the practical aspects dealing with personal property, maintaining real estate or preparing for it to be sold. Personal Representatives will often not know what they can do and when they can do it. As a result, the probate can needlessly drag on and on for several months more than necessary.
To help keep you out of probate quicksand, we provide you with a Probate Checklist. The checklist is pretty inclusive. Some of them will not apply to the estate you are probating, but many will.

Q. How do we invest and grow our inheritance?
A. Generational wealth is an important responsibility. We advise you to get advice! Registered investment advisors and certified financial planners are good people to seek out. But we strongly believe that investing in real estate should also be considered, including direct investment in rental property and commercial property. We have some outstanding investment advisors and financial planners in our network. And, of course, if you are interested in real estate we would love to talk to you about the opportunities we see in our local real estate market.

Q: Is it necessary for all of the decedent’s property to go through probate?
A: No, however some legal method must be employed to transfer the legal title and ownership of the deceased’s property into the name of the heirs. Retirement accounts which name heirs of beneficiaries can transfer without probate as can real estate when title is held in specific ways.

A living trust is another way to hold title to a property that also passes directly to the heirs or beneficiaries without probate. Such a trust is a legal entity which survives after the death of the person who created it. An estate planning attorney can explain these options. Call us for a referral.

Q: How much does probate cost?
A: It varies greatly. Some costs can be avoided and some cannot. Costs may include appraisal costs, personal representative’s fees, court costs, costs for insurance known as a “surety bond”, plus legal and accounting fees. Probate can easily cost from 3% to 7% of the total estate value. If someone contests the will, the costs can go much higher.

Q: What goes on in the probate of an uncontested will?
A: Typically, the person named as the deceased’s Personal Representative goes to an attorney experienced in probate matters, who then prepares a Petition for the court and takes it, along with the Will, and files it with the probate court.

The lawyer for the person seeking to have the Will admitted to probate typically must notify all those who would have legally been entitled to receive property from the deceased if the deceased died without a Will, plus all those named in the will, and give them an opportunity to file a formal objection to admitting the will to probate.

A hearing on the probate petition is typically scheduled several weeks to months after the matter is filed. Depending on the state, and sometimes who the named beneficiaries are, how long before the death the Will was signed, whether the Will was prepared by an attorney, who supervised the “execution” of the Will, and/or whether the Will was executed with certain affidavits, it may be necessary to bring in the persons who witnessed the deceased’s signature on the Will.

If no objections are received, and everything seems in order, the court approves the petition, appoints the Personal representative, orders that taxes and creditors be paid, and requires the Personal Representative to file reports with the court to assure all the deceased’s property is accounted for and distributed in accordance with the terms and conditions of the Will.

Q: Are personal representatives usually paid for their work?
A: Yes, but it is not a requirement. Certainly, all personal expenses they incur in the management and process of settling the estate must be paid for.

All funds paid to the personal representative are subject to approval by the probate court. Additional fees may be allowed by the court in cases of unusual difficulty or extraordinary circumstances. On the other hand, if a personal representative does not perform their duties in an orderly or timely manner, the court may reduce or deny compensation and the Personal Representative may be held responsible for any damages caused.

If a person is both the sole beneficiary of the estate, and the estate is not subject to Federal Estate Tax, it usually does not make sense to take any fees as all fee income is subject to income tax. (The money a beneficiary receives from the estate is income tax-free.)

Q: What if there is no will?
A: If a person dies without a Will (known as dying “intestate”), the probate court appoints a Personal Representative frequently called an Administrator to receive all claims against the estate, pay creditors, and then distribute all remaining property in accordance with the laws of the state.

The major difference between dying testate and dying intestate is that without a valid Will an intestate estate is distributed to beneficiaries in accordance with the distribution plan established by state law; a testate estate is distributed in accordance with the instructions provided in the Will.

Q: How are creditors against the estate notified?
A: Creditors are notified of the death as part of the probate process. In Arizona, this is through a blanket notice to all creditors published in the local newspaper. Once this notification has occurred, creditors have a fixed period of time to file any claims against the estate either by notifying the personal representative or, in some states, notifying the probate court. If the claim is approved by the personal representative, the bill is usually paid out of the estate. However, if the personal representative rejects a claim, the creditor must sue the estate for payment.

If the estate does not have sufficient funds to pay the lawful debts to the creditors, the determination of who receives payment and in what order is usually a matter of law. Also, the personal representative may be required to sell some or all of the decedent’s property to satisfy the claims of the creditors.

Q: Must a will actually be read out loud to the family?
A: Arizona does not have such a requirement. Usually copies of the will are emailed to interested parties by the personal representative.

Q: How can I avoid probate of my estate?
A: One approach to reduce or eliminate the need for probate is through the use of a Living Trust that holds legal title to some or all of your property at the time of your death. The Trust is a legal entity which survives you after your death. If interested, we can recommend a qualified estate planning attorney.