Simone Lawson
When a person passes away, their estate includes all the assets and liabilities that were in their name during their lifetime. The probate process involves distributing the deceased person's assets according to their will or the laws of the state. The probate court oversees the process to ensure that the deceased person's wishes are carried out and their assets are distributed fairly. The executor or administrator of the estate is responsible for managing the estate and carrying out the probate process, which includes collecting the deceased person's assets, paying their debts, and distributing their property to their beneficiaries.
| Characteristics | Values |
|---|---|
| Definition of "estate" | All of the property owned by a person at the time of their death |
| Who handles the estate? | The executor or administrator of the estate, often a family member |
| What is included in the estate? | Assets, such as bank accounts, investment accounts, real property, personal property, vehicles, computers, and investments |
| What else is included? | Debts and unpaid bills, including taxes |
| What is probate? | The legal process of distributing a deceased person's assets according to their will or the laws of the state |
| What is a probate asset? | Property titled only in the deceased person's name, such as real estate with no rights of survivorship and bank accounts that are not jointly held |
| What is a non-probate asset? | Joint bank accounts, real estate in survivorship, assets held in revocable or living trusts |
| What happens if there is no will? | Intestate succession laws determine who inherits the property |
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Probate assets
When a person passes away, their "estate" includes all the assets and liabilities that were in their name during their lifetime. The probate process involves distributing their assets according to their will or the laws of the state. Probate assets refer to property owned solely by the deceased person that must go through the probate process.
Some assets are considered probate property or assets that will be distributed to heirs based on the terms of a will or according to state law if there isn't a will. A probate asset might include personal items, real estate, vehicles, a bank account, and tenants-in-common assets.
The executor or administrator of the estate is responsible for managing the estate and carrying out the probate process. This includes collecting the deceased person's assets, paying their debts, and distributing their property to their beneficiaries.
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Non-probate assets
When a person dies, their estate includes all the assets and liabilities that were in their name during their lifetime. The probate process involves distributing their assets according to their will or the laws of the state. However, not all assets are subject to probate; some assets bypass the probate process entirely as they are transferred directly to beneficiaries or surviving owners. These are known as non-probate assets.
There are several types of non-probate assets. One common example is a jointly owned property with a right of survivorship. In this case, the property automatically passes to the surviving owner outside of probate. Another example is a bank account with a payable-on-death or transfer-on-death policy, which allows the asset to pass directly to a named beneficiary. Retirement benefits and savings accounts that require a beneficiary designation, such as employer-sponsored pension plans, IRAs, 401(k)s, and life insurance policies, are also considered non-probate assets.
It is important to note that while non-probate assets do not pass through the probate court, they are still considered part of the overall estate for tax purposes. This includes all life insurance proceeds, property, and investment proceeds. Proper legal designations, such as beneficiary designations, joint ownership, or placing assets in a trust, must be applied for assets to officially bypass probate.
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Joint ownership
When a person dies, their estate, including their assets and liabilities, must go through the probate process, which involves distributing their assets according to their will or the laws of the state. The probate court oversees the process to ensure that the deceased person's wishes are carried out and their assets are distributed fairly.
In the case of joint ownership, the property will automatically pass to the surviving owner when the other person dies. This is known as the right of survivorship, and it applies to various types of assets, including real estate, bank accounts, securities (stocks and bonds), and more. For example, if a person owns a house jointly with another person, the surviving owner will need to put a document on file in the local public land records, showing that they are now the sole owner of the property. This can be done by filing a certified copy of the deceased co-owner's death certificate, and in some cases, the surviving owner may also need to sign and file a statement.
For jointly held bank accounts, the surviving joint tenant should take a certified copy of the death certificate to the bank, along with the checkbook or savings account passbook, to change the ownership records. If the deceased person owned a brokerage account or mutual fund account in joint tenancy, the surviving joint tenant will need to fill out a form and send it to the brokerage company, along with a certified copy of the death certificate.
It's important to note that joint ownership can also apply to assets such as retirement accounts and life insurance policies, which typically have designated beneficiaries. In these cases, the asset will generally pass directly to the designated beneficiary, who will need to prepare and submit the necessary paperwork provided by the financial institution.
The laws and procedures regarding joint ownership and the transfer of assets after the death of a joint owner can vary by state and the type of asset involved. Seeking legal advice from a lawyer or consulting relevant state-specific resources is recommended to ensure compliance with the applicable laws and a smooth transfer of assets.
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Executor's role
The executor of a deceased person's estate is responsible for managing their financial assets, including bank accounts, investment accounts, and other assets, as well as carrying out the wishes detailed in the will. The executor must be over 18 without any prior felony convictions and can be a friend, family member, or a professional such as a lawyer or accountant.
The role of the executor is to ensure that the deceased person's wishes are carried out and their assets are distributed fairly and according to their will or the laws of the state. This includes collecting the deceased person's assets, paying any debts or taxes owed, and distributing the remaining assets to the beneficiaries. The executor must also ensure that all the assets are accounted for and that the estate is managed correctly. The probate process can be complex, and the executor may need to seek legal advice or the advice of other experts to ensure that the estate is managed properly.
One of the key responsibilities of an executor is to estimate the value of the estate. This involves looking into the deceased's finances for the previous 7 years and getting a professional valuation of their assets. This is important for paying any inheritance tax owed, which the executor is personally responsible for. Inheritance tax must be paid no later than 6 months from the end of the month in which the deceased died. Executors must also explain to heirs that they cannot receive their inheritances until all claims against the estate are settled.
Executors are also responsible for notifying various agencies and organisations of the death. This includes registering the death with the local register office, notifying the government, and contacting agencies like the Social Security Administration and the IRS to stop benefits and handle income tax and death tax matters. Executors may also need to notify the Department of Health in the deceased's state of residence.
In situations where there is no will, the court will appoint an executor, usually a close relative. In some cases, there may be multiple executors, but this can add to the amount of paperwork and potentially spark disputes.
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Paying debts
Paying off a deceased person's debts is a crucial aspect of estate management. The executor or administrator of the estate is responsible for managing the deceased person's financial assets, including their debts. The executor is usually named in the will and is often a family member. However, it is recommended to appoint someone familiar with inheritances and probate, such as a probate lawyer or accountant.
The executor must ensure that the deceased person's debts are paid before distributing the remaining assets to the beneficiaries. This includes collecting all the assets, paying any debts or taxes owed, and distributing the estate according to the will or state laws. The probate process can be complex, and the executor may need to seek legal advice to ensure the estate is managed correctly.
The estate's assets are used to pay off the debts, including money and property. If there is insufficient cash, assets may need to be sold to cover the debts. In some cases, if there is more debt than the value of the estate, the excess debt may go unpaid. It is important to note that family members are generally not responsible for paying off the debts of the deceased with their own money, unless they shared legal responsibility as a co-signer or joint account holder.
Certain types of debts, such as loans or bills with a co-signer, may have specific clauses outlining what happens in the event of the primary borrower's death. In such cases, the co-signer may become responsible for the debt if the estate cannot pay. Additionally, some states have "filial responsibility laws" that require children to cover their deceased parents' hospital bills or nursing home costs.
It is important to be cautious when dealing with debt collectors. Under the Fair Debt Collection Practices Act (FDCPA), debt collectors are prohibited from using abusive or deceptive practices. They can only discuss debts with the executor, administrator, or personal representative of the estate. Debt collectors are required to provide validation information about the debt within the first communication or within five days.
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Frequently asked questions
The 'estate' of a deceased person includes all the assets and liabilities that were in their name during their lifetime.
Examples include bank accounts, investments, retirement savings, real estate, artwork, jewellery, business interests, vehicles, and any debts owed to the deceased.
The probate process involves distributing the deceased person's assets according to their will or the laws of the state. The probate court oversees the process, ensuring the deceased person's wishes are carried out and assets are distributed fairly.
The executor, often a family member, is responsible for initiating the probate process. They manage the estate, collect the deceased person's assets, pay their debts, and distribute their property to beneficiaries.
Probate assets refer to property owned solely by the deceased and must go through the probate court. Non-probate assets, such as joint bank accounts or life insurance policies, automatically transfer to beneficiaries without the need for probate.
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