Navigating the Complexities of Probate

Funeral arrangements are just the beginning of the journey when your dearly departed leave assets behind. From family heirlooms to the junk drawer, everything needs to be handled appropriately and legally, especially when those assets include a house.

 

That’s where the probate process comes in.

 

Simply put, probate is the legal, court-supervised process that ensures the proper people are granted the right to and responsibility for the decedent’s estate.

 

Unless the deceased took steps to avoid probate before death such as a living trust or a transfer-on-death deed in most cases, if the estate includes property it must go through probate.

 

The probate process can be lengthy, confusing, and overwhelming for a grieving family. Minimize distress during the proceedings by getting educated on what’s going to happen.

 

While probate law varies from state to state, the overall probate process remains the same.

 

Would you ever guess that cleaning your parents’ house might be illegal? Well, if your deceased parents’ estate is headed for probate, it is.

 

Sacramento-based probate attorney John Palley, who has been awarded Martindale-Hubbell’s prestigious “AV” peer review rating, says:

 

“Generally speaking, you have no legal authority until the court has named you as the personal representative. So in most cases you really can’t do anything. You can’t clean the house, you can’t discard stuff, you can’t have a garage sale, you can’t even list that house for sale until you’ve been named by the court.”

 

Also referred to as executor or administrator of the estate, the personal representative is the court-appointed person responsible for maintaining and distributing all of the decedent’s assets.

 

However, even if the decedent’s will names you as the executor, you have no legal authority to access, alter or administer the estate until permission is granted by the probate court. For that to happen, you need to file a petition.

 

In order to file a petition to open probate on the decedent’s estate you’ll need the death certificate, the will (if there is one) and a good probate attorney.

 

Hiring a lawyer who specializes in probate is a must. Only an experienced probate attorney will know the specific documentation and procedures that your state probate court requires.

 

Once you have all the proper paperwork, your attorney will file the probate petition and your court date will be set. Unfortunately, that date may be weeks or months in the future.

 

According to Palley, “That’s why I’m a big proponent of getting probates filed as quickly as possible. That starting point triggers many other things during the probate process, so the sooner you start, the sooner you’re in control, and then the sooner you finish.”

 

While you are waiting for that court date, you cannot legally take any action with the decedent’s estate like making repairs to the house or handing out heirlooms as directed by the will but you may take steps to safeguard the estate.

 

Actions that protect the estate’s assets like collecting the decedent’s mail so that it doesn’t pile up or wrapping water pipes in winter so that they don’t freeze are acceptable in most cases. However, when in doubt, check with your probate attorney.

 

If you intend to sell the decedent’s house as part of the probate proceedings, you’ll need a real estate agent with probate experience. While you cannot legally sign a listing agreement until you’ve been named as the personal representative, you may interview Real Estate Agents and show them the house to jumpstart the real estate sale.

 

When that first court date arrives, Palley says, “Assuming that everything has been filed correctly, the court will sign a court order that says that you are now the personal representative of the estate, and the court clerk will issue what is called Letters of Administration if there’s no will, or Letters Testamentary if there is a will.”

 

Those letters grant you the right to transact business for the estate. Your next step is to give notice to the appropriate parties.

 

All interested parties must be given notice that the estate is being dissolved via probate. For family members who are legal heirs to the estate and other beneficiaries named in the will, this is called Notice of Probate.

 

Every heir and beneficiary must be formally informed of probate via a written letter or a process server. If you don’t have their contact information, you must post a public Notice of Probate for a designated period.

 

This action is required to allow all interested parties the opportunity to make inheritance claims on the estate or, in rare cases, contest the will. In essence, a Notice of Probate creates a paper trail for the court as proof that the appropriate steps were taken to notify all interested parties of the probate proceedings.

 

Along with notifying heirs and beneficiaries, the personal representative must contact the financial organizations to which the estate owes a debt, such as credit card companies and mortgage banks. For this, a Notice to Creditors is required.

 

The Notice to Creditors must be done at the beginning of the process to allow ample time for the creditors to submit a claim for debts owed, which the executor will then pay out of the balance of the estate.

 

To pay these debts, the personal representative must first do an inventory of the estate. This includes real and personal property (real estate, jewelry, cars, heirlooms and other valuables), plus financial assets (cash, bank accounts, insurance policies, and stocks).

 

While you are compiling the inventory, you’ll also need to obtain the date of death value of all assets. This information plays an important role as you administer the estate.

 

Administering an estate so that it may be dissolved and closed is the most complex and often overwhelming part of the entire probate process.

 

You’ll need to close out retirement accounts, submit policy claims, sell off assets, settle debts, pay taxes, and sort through and distribute (or dispose of) every single possession owned by the decedent the list of responsibilities can feel overwhelming.

 

The best way forward is to tackle one thing at a time, starting with the biggest.

 

“We usually want to deal with the biggest and most important things first, which typically is going to be the house,” says Palley. “Dealing with real estate is at the forefront because it’s incurring costs while it sits there. We’re paying a mortgage, utility bills, taxes, and insurance. We’re doing all of these things that are costing money.”

 

Not only is the home an ongoing expense, but disposing of this asset is going to take the longest amount of time.

 

For starters, even in the hottest housing markets, it’ll take an average of three weeks to receive and accept an offer for the home. Then you’ve got an average 47-day escrow period during which any number of complications may arise that might extend the timetable.

 

Source: Ellie Mae 2018 Origination Insight Report

 

While a probate home sale is similar to a traditional sale in most ways, there are a few subtle differences that may extend the transaction timeline.

 

The similarity between a traditional sale and one that involves a probate home is dependent upon whether the court has granted independent or dependent administration. If the court has granted independent administration, then there are only a few subtle differences.

 

However, in the event of a dependent administration, the difference can be immense. That’s why it’s important to have a real estate agent with probate experience on your side.

 

One major difference is that both federal and state law require an appraisal of the probate property. Often done by an estate tax appraiser, this appraisal determines the date of death value of the property for both estate tax purposes and to establish the cash value of the estate for the probate court.

 

It will take time to schedule and complete this appraisal which must be done before listing the home for sale.

 

If you’ve been granted the right of independent administration by the probate court, once you’ve had the appraisal done, you can proceed with the home sale immediately. Why? Because you’ve been permitted to transact business for the estate without first seeking court approval.

 

Laws governing independent or unsupervised administration vary from state to state as do the requirements to be granted this authority. However, this is by far the best option if you want to get through the probate process quickly.

 

Luckily, most states have taken steps to make it easier to obtain independent administration status. For example, California enacted the Independent Administration of Estates Act (IAEA) in 1987.

 

Other states have adopted the American Bar Association-approved Uniform Probate Code. Drafted by the National Conference of Commissioners on Uniform State Laws, the code is designed to simplify most aspects of probate law, including the granting of independent administration.

 

Source: Uniform Law Commission

 

Unless you are the sole beneficiary of the estate, you will need to obtain a waiver of process and consent to probate form from every beneficiary to include with your petition for independent administration.

 

If you cannot obtain consent, or if state law requires court oversight, the probate court will rule that the decedent’s estate must have dependent administration.

 

Under dependent administration, the court becomes involved in all of the transactions of the estate including the home sale, which will require court confirmation.

 

In a court confirmation situation, the home is listed, an offer is accepted, and then the sale heads to court. This court date will likely be scheduled for several weeks or months after the filing.

 

At the hearing, the court will initiate the overbid process which functions much like an auction. The buyer’s offer is presented, and then the court will start the bidding at an amount above that offer by a percentage that varies by state.

 

Overbidders must come with a Real Estate Agent, a cashier’s check to cover the deposit, and a probate purchase agreement contract ready to be signed that cannot contain any contingencies. The sale will then be confirmed at this hearing, whether your original buyer or another offer from an overbid buyer is accepted by the court.

 

When the home is sold and the check has cleared, the personal representative will use these funds to pay the decedent’s remaining bills, the estate taxes, and any other debts against the estate.

 

Once all of the assets are ready to be distributed, the probate process proceeds to the final step.

 

After the home is sold, the debts are paid and the financial assets are ready to be distributed, it’s time for your probate attorney to file the final petition.

 

“The final petition is going to lay out everything that happened during the probate period in a fifteen or twenty-page document,” says Palley. “It’s going to list the assets at the beginning of the estate, include a copy of the final closing statement from the real estate sale, list the taxes paid, the attorney’s fees and court costs all of that is laid out. Then it says here’s what’s left and who the money should be given to.”

 

While you may want to wrap things up as quickly as possible, it’s important to not rush into closing the probate process. As the personal representative, you can be held personally liable if a debt claim is made against the estate and you’ve distributed funds to the beneficiaries too early.

 

However, if you’ve made a good-faith effort to identify all potential creditors and allowed a sufficient amount of time for creditors to make a claim, you’re safe to proceed with the final petition which will dissolve the estate and close probate.

 

According to Palley, “Assuming that all has gone according to plan, the judge will sign off, the petitioner or the personal representative will write the checks and that’s pretty much it. We close the case.”

 

Dealing with a deceased family member’s estate is never easy and the complexities of the probate process often deepen the grief. But with the help of a top-notch probate attorney and an experienced probate real estate agent, you can say goodbye to your loved one with peaceful dignity.