What Is Probate?
Probate is the court process of appointing a personal representative and caring for someone’s affairs. There are two types of Probate cases: Death-Related Probate and Disability-Related Probate
Death-related Probate Process:
- death of the individual:
- family consultation with an attorney;
- collection of important papers;
- preliminary action to promptly take possession of real and personal property and its conservation and protection (for example, review of casualty and liability insurance);
- filing of the will, if any, with probate court;
- estimating nature and value of probate and nonprobate assets;
- preparation and court filing of Probate Petition
- court appearance for the prove-up of the will, if any; declaration of heirs; and appointment of a personal representative (called either the “executor” or the “administrator”);
- acquisition of a surety bond for the personal representative, if applicable;
- notification of the heirs, legatees, and known creditors;
- publishing of the claims notice of estate for the benefit of creditors;
- inventory of assets; conserving assets; and valuation of assets;
- payment of expenses, liabilities, and taxes;
- accountings and status reports with the court and beneficiaries; possible periodic special petitions to the court regarding estate expenditures, investments, and distributions;
- distribution of assets to appropriate heirs and legatees;
- closing of the estate;
- filing of final income tax returns.
What Property Goes Through Death-Related Probate?
The probate estate is calculated negatively. It is property that does not pass automatically and is then left over. The probate estate calculation can be made as follows:
Start with: all known assets; remove joint tenancy property; remove property with beneficiary designation (other than to the estate), such as life insurance, IRA, pension or profit-sharing, trusts, payable-on-death designated accounts; remove other property passing by operation of law, such as certain spousal rights (such as created by the Retirement Equity Act (REA) pension)
Remaining balance is the probate estate.
Generally, only probate property is governed by one’s will.
How Long Does Death-Related Probate Take?
Probate will generally take no less than six months, which is the “claims period” in many states. The “claims period” is the period of time in which creditors may assert their claims against the estate. An average probate may take eighteen months. Probate is a process as well as an activity.
What Is the Cost of Probate?
Depending on the size and complexity of the estate, estate settlement costs average anywhere from three to ten percent of the estate.
Reasons To Avoid Probate:
- To avoid the time delays associated with probate.
- To avoid the costs associated with probate.
- To avoid the administrative process and hassles associated with probate.
- To avoid the public examination of affairs associated with probate.
- To ease the transition on my loved ones.
How To Avoid Probate?
Adopt the proper tools of probate avoidance and coordinating the titles of assets and beneficiary designations to complement the proper tools. The proper tools of probate avoidance include
- a living trust;
- a durable power of attorney for property; and
- a durable power of attorney for healthcare.
For “guaranteed” probate avoidance, the living trust must be fully-funded and the power of attorney for property should be specifically coordinated with the living trust to permit the agent to transfer assets to the trust.
Remember, joint tenancy only postpones probate — it does not ultimately avoid it.
The Advantages of Going Through Probate
There are reasons for intelligently and consciously deciding to force probate even though it can be avoided. Some of these reasons include the following:
- The claims period (six months in Illinois) bars unknown creditors from later asserting claims. A trust, on the other hand, is generally subject to claims until the statute of limitations runs out (two years in Illinois).
- Also, having a will merely admitted to probate (even though there is no probate administration) along with the creditors’ publication notice can start the shorter claims period, which cuts off the claims of creditors (as contrasted to relying on the statute of limitations of two years in Illinois).
- The period to contest estate documents is short (six months in Illinois). A trust, on the other hand, is subject to challenge until the statute of limitations runs out (generally five years in Illinois).
- The identification of estate takers is established by judicial decree.
- The testamentary dispositive document (the will) is officially recognized by the court.
- A body of well-established law and procedure makes the probate process relatively predictable.
- A referee (the judge) exists in the case of a dispute.
- Formalized, detailed accounting and other safeguards are required.
- Will substitutes or the avoidance of probate sometimes present too many complexities and inequities.
- Certain family circumstances may dictate the need for the objectivity and the authority of court supervision of the collection, accounting, and distribution of assets.
- The cost of a living trust is perceived as too expensive.
- The family has additional rights: spousal renunciation and living expense awards.
Probate is not as onerous as it used to be. In Illinois, independent administration has simplified the process.
Disability-related Probate Process:
- disabling event or recognition of disability of the individual;
- family consultation with an attorney;
- consultation with a physician;
- coordination of the attorney’s and physician’s responsibilities;
- as circumstances warrant, attempt to collect important papers and move to control real and personal property for purposes of conservation and protection;
- guesstimate of nature and value of assets;
- preparation of medical affidavits (physician’s report);
- preparation and court filing of petition for declaration as a “disabled” individual (also generally referred to as an “incompetent”);
- service of summons and petition for appointment of guardian on the disabled individual;
- court appearance, if possible with the disabled individual, for court evaluation and declaration of disability (At this time, the court may appoint the guardian of the disabled individual (also sometimes called the “conservator”). The court probably will extend proceedings and appoint a “guardian ad litem” to represent the disabled individual during the proceedings for the eventual appointment of a permanent guardian. The guardian ad litem provides the court with an independent evaluation and recommendation regarding the appointment of a permanent guardian.);
- acquisition of a surety bond for the guardian;
- inventory of the disabled individual’s assets and filing with the court;
- preparation of petition and order for expenditures;
- annual accountings with the court with respect to the finances and report of health and circumstances of the disabled individual;
- payment of expenses on behalf of the disabled individual and management of assets and income of the disabled individual;
- court approval of fees of guardian and attorney;
- periodic special petitions to the court for various kinds of authorizations with respect to healthcare and expending the disabled individual’s money or investments; and
- eventual closing of the disabled individual’s estate upon either the individual’s regaining competence or death (if death, however, then the death-related probate must be commenced).
THIS MEMORANDUM IS AN EXCERPT FROM THE BOOK ESTATE PLANNING PRIMER: WHAT EVERYONE NEEDS TO KNOW ABOUTESTATE PLANNING, BY TIMOTHY S. MIDURA, C.P.A., J.D., LL.M., PUBLISHED BY THE ILLINOIS INSTITUTE FORCONTINUING LEGAL EDUCATION, COPYRIGHT © 1990-2008 – USED WITH PERMISSION.