Who needs probate? Part 2: The Estate
We previously discussed general guidelines regarding how to determine whether or not your family needs probate. In this article we will discuss this determination in more detail.
Before considering anything else, we need to first determine whether or not your loved one left any assets or property after passing away. If your loved one left no real property, and very few other assets, then probate may not even be necessary.
Because most individuals do indeed leave property after passing away, which property becomes part of the deceased’s estate, it is necessary to more closely examine that estate. As part of such an examination, your attorney will review several important factors. Learn about some (but not all) of the primary factors below.
FACTORS OF AN ESTATE EXAMINATION
After passing away, your loved one’s property automatically becomes part of his or her “estate,” and the probate process safely and securely transfers your loved one’s asserts from the estate to your family. As a result, to determine whether probate is necessary, we must examine your loved one’s estate in more detail.
Estate Plan Review
The initial step of this examination involves reviewing whether or not your loved one prepared any estate plan documents while he or she was living. (Estate plan documents include Wills, Trusts, and other peripheral documents.) As discussed, probate is typically necessary if a loved one owned real property and passed away with only a valid Will, without a valid Will, with only an invalid Trust, or with an incompletely-funded Trust. If, however, your loved one passed away with a valid Trust that he or she created while living, and into which your loved one transferred all of his or her property while living, probate is typically unnecessary. (For more information about this scenario, please refer to our “exceptions to probate” discussion in another article.)
Property and Asset Review
The second step of this examination involves reviewing what kinds of assets your loved one left behind (i.e., real property, insurance policies, investment accounts). While reviewing those assets, we determine whether they must transfer via probate or by other legal means. We discuss this more deeply in another article, but, generally, most estates contain both “probate assets” like real property as well as “non-probate assets” like certain financial accounts. Thus, unless otherwise held in a valid Trust, all “probate assets” like real property must transfer from your loved one’s estate to your family via probate.
Another step of the examination, which may or may not be necessary, involves determining whether or not your loved one left any debts. If debts do exist, then creditors will essentially make a claim against the estate, and the estate must satisfy those debts with any remaining assets during the probate process. Please note one important exception: If the debts include only liens on real estate (such as mortgages), such liens need not be immediately satisfied from the estate’s remaining assets. In such a “lien on real estate only” scenario, the real property must transfer via probate, and the estate’s heirs may then decide to sell the house and keep the principle, or to keep the house and continue to make necessary mortgage and property tax payments (among other options).
Another step of the examination, which is usually necessary when no estate plan documents exist, is to determine who are the heirs of your loved one’s estate. When someone passes away without estate plan documents, and hence without legally demonstrable certainty re the identities of that estate’s heirs, the law requires a legally satisfactory identification of that estate’s heirs. This legal identification often occurs during “Determination of Heirship” proceedings, which are very similar to probate proceedings, and even handled in the probate courts. After determining heirship, the identified heirs are there positioned to inherit from the estate. (As discussed in other articles here, there are alternative methods by which heirship may be determined as well.)
Other steps may be necessary for different estates, but the above process offers some general guidelines regarding how to examine an estate for purposes of determining the necessity of probate.
Please note that many other steps may be necessary as part of this “Estate Examination” process because each estate is different and may present unique legal issues. Consequently, make sure to disclose as much information as possible to your attorney so you can both make informed decisions about the estate’s needs.