A simple explanation for probate, what it is, what to expect, how long it can take, and how much it might cost.
Maybe you lost a parent, a spouse, or a loved one, and you are wondering what to do about distributing his or her assets. In that case, I am deeply sorry for your loss. Maybe you are working on estate planning, and you are wondering what your beneficiaries will do with your assets when you die. In that case, good for you for getting prepared! Maybe you are just trying to do some research. In any event, you have heard the word “PROBATE”, and you are curious. What is probate? Will I have to do it? What should I expect?
Let’s start with the basics of defining what Probate actually is.
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WHAT IS PROBATE?
Probate or probate administration is simply the orderly administration of a person’s assets that he or she still owned at death. (Assets are everything that you own, your stuff.) Although some people use the word probate as though it only contains four letters, there is nothing inherently bad or wrong with probate.
Honestly, the vast majority of estates that come through my office have no fighting or hiccups in the process. Personal representatives who come to my office with a realistic idea of what to expect are very pleased with the probate process. And, their estates proceed in an orderly, efficient manner.
A probate estate refers to the assets being administered by a court through a personal representative/executor/administrator and subject to the laws of the state where the assets are located or where the decedent died.
Having a step by step process for distributing a decedent’s (someone who died) stuff is just good sense. Generally, the probate process entails the use of a court system. Most states and counties have a dedicated court to deal with probate issues such as administering an estate, granting petitions for sale or distribution, and supervising probate administrators/executors/personal representatives.
Read below for what to expect from the administration process.
DO I NEED PROBATE?
A probate estate is only necessary if the decedent died with assets titled in his or her name alone which value exceeds a certain state-specified amount.
Once you understand the basic idea of what probate actually is, then you should understand that it does not apply to every estate (the group of assets that person owned at his death). In most states, a person is only subject to court supervised probate administration where his or her assets exceed a specific amount. In 2023, the limit for Indiana is $100,000. Thus, anyone dying with a probate estate in Indiana must go through court probate if the person owned more than $100,000.00 at his or her death.
If a person owned less than $100,000 in assets at his or her death, then that person can usually pass probate and go directly to jail…I mean small estate administration. Small estate administration is usually a quick, inexpensive, and painless way to transfer the title of assets without involving the court. Of course, if any dispute as to transfer, value, or division arises, then you may still have to involve a court or mediator.
WHAT IF MY SPOUSE DIES
On a positive note, the good news for spouses is that if all of your assets are jointly titled, regardless of value, then the jointly titled assets will pass directly to the surviving owner without need for probate as a matter of law. (More to come for protecting your spouse and children.) Remember, a probate estate is referring only to assets owned individually. To determine whether assets in your specific situation are joint or separate please consult with a licensed attorney about your specific title.
Titles can be quite tricky to the untrained eye and simply telling your attorney that your parents owned something jointly, that your brother “put you on the account,” or that your sister “added you to everything” does not mean that you are automatically a joint owner. Deeds and titles should be read with care and caution and need careful attention.
WHAT IF MY PARENT HAD A BENEFICIARY ON THE ACCOUNT?
GOOD FOR YOU! That is my favorite form of estate planning. Some states are quite progressive in their beneficiary planning (including Indiana!). If your loved one included beneficiaries on his accounts, policies, business, or even the house, then you will not need to probate those assets. Those assets will transfer directly to the beneficiary without need for court intervention. Pass GO, Collect $200.
Probate administration deals only with the assets that a person owned at death. A beneficiary transfer is treated as though the person transferred the asset in the moments before he or she passed away. The law treats that asset as though it is already owned by the beneficiary.
If your loved one died with a beneficiary on the account, then you can simply submit a claim form, a death certificate, or an affidavit depending on the situation. Some companies prescribe a claims process while others merely require that you produce a death certificate and proof of identity.
If your loved one had a transfer on death provision on his or her real estate, then you simply need to present an affidavit to your county records department confirming your identity and the death of your loved one. This can be done at any time after a person dies, but, keep in mind, a death certificate usually takes several days or even weeks to prepare.
PROCEED WITH CAUTION
In the best of scenarios, a parent, spouse, or loved one will have added beneficiaries to every single account, asset, title or deed. In that case, you are free from probate, and the rest of this article isn’t for you. However, beware the loose ends.
Although the majority of a person’s assets might have been transferred by beneficiary designation, he or she might have failed to include some minor assets. These might include used vehicles, CDs (Certificates of Deposit, not music), or collections. Most of the time, these assets do not total more than the minimum probate limit ($100,000 in Indiana).
There is no limit to the value that a person can transfer by beneficiary designation. It can be $10,000,000 in farm property, $1,000,000 in life insurance, $150,000 in a house, or $10,000 in checking. If your state allows the asset to be transferred by beneficiary designation then regardless of the value, you do not have to take it through probate.
Note: Trusts can also prevent probate, but the type of trust and the type of administration will differ for each person. More about trusts another time.
WHAT TO EXPECT FROM PROBATE.
If you have already determined that you need to open a probate estate as the personal representative, read on. Or if you are wondering whether planning to avoid a probate estate is necessary, then you likely want to know more about the process. What does the probate process actually look like? Let’s examine the process, the time, and the cost.
What is the process?:
In any estate, the first step is to involve a professional. Get an attorney. Don’t try to do it yourself. This process is complicated, has a lot of paperwork, and even involves taxes. Although you may be able to clean out the house, gather the account information, and get in contact with the family members, let an attorney determine what documents you need, whether they need to be verified, notarized, or proven, and how to treat income/estate/inheritance taxes.
Don’t worry about calling the attorney the moment that your loved one passes away; give it a few days or as much as a couple of weeks.
State law grants every loved one a sort of grieving moratorium. Consider it a time period during which you are not required nor expected to make any payments, transfers, or changes to the estate. Generally, no creditor will track you down at a funeral and require that you produce your father’s mortgage payment
No electric company can power down the heat without some notice. Usually a simple, “my father just died, and we are working it out” is more than satisfactory. Generally companies understand that this is a difficult time and aren’t looking to collect on a payment or debt until after the first few weeks after death.
When you meet with your attorney, he or she will give you some preliminary instructions. He or she is going to ask you to do a few things right off the bat.
Some of those will include changing the locks and securing any property that can be moved (RVs, vehicles, outside equipment). Then he or she will likely tell you to start creating an inventory list, and starting appraisals. Your specific circumstances will determine other starting points.
WHAT IF I HAVE MORE COMPLICATED ASSETS?
Situations that might require different treatment may include dealing with a small business, managing agricultural property, or owning property outside of your state of residence. Yet other situations that may dictate special treatment come up when titles and deeds were not handled appropriately during life. Did grandpa split off a piece of property to your aunt without getting a survey? Did grandma “give” the car to Jonny without ever signing over the deed?
Your attorney can handle as much or as little of this as you want her to. No, your attorney is not a locksmith or an auctioneer (at least not this one!), but attorneys have networks of professionals that they call on to complete these tasks. In my practice, I have multiple appraisers, accountants, and bank representatives that I call regularly and who I trust to be professional, timely, and efficient. I even have relationships with antique car appraisers, farm equipment auctioneers, and yard maintenance companies. If you do not know where to start, your attorney will.
After you determine everything that comprises the estate and its value (by appraisal, sale, or auction), then you have to decide what to do with it. Are you all going to split it by agreement? Are you all going to split the proceeds of an auction? Is someone going to buy another person out? You make the decision of what you want to do with it, and your attorney can make it happen. Don’t try to do it without telling your attorney.
FIGHTING IS NOT WORTH IT
One important exception to this is if the fighting starts. Unfortunately, time after time, I see siblings, children, parents, friends, nieces, nephews, and spouses completely torn apart by the probate process. I am here to tell you that YOUR STUFF IS NOT NEARLY AS IMPORTANT AS YOUR FAMILY. If I get a whiff of in-fighting, I pull the emergency brakes fast.
Then, we go to the mattresses…I mean, go to court. The great thing about probate is that a court decides what to do with the assets if you and your family can’t or won’t decide. If one of you wants to sell and the others want to buy, then the court decides. If one of you believes that the appraisal is low, while another believes that the appraisal is high, the court decides.
Beware, if you start fighting, the length of time for probate and the cost of probate will dramatically increase. In my experience, when the family starts fighting over cost or distribution, the cost of attorney fees and related expenses will often exceed the value of the disputed asset. Furthermore, if you start disagreeing, the length will graduate from a matter of months to a matter of years.
How long will it take?
Although I am not in the CIA, my job is often mischaracterized on TV too. A person dies, and at the funeral, a well-dressed attorney carries in keys, titles, and checks for the beneficiaries to take with them. Probate over. Or, a person dies on TV, and the family sits in a somber room while they watch their wealthy grandfather describe why each one of them gets nothing.
I am here to tell you that I have never delivered anything at a funeral (except flowers), and I have never held a “will-reading.” That’s not how it works…generally. Now, your loved one may have coordinated a will-reading for dramatic effect (because he saw it on tv!), but this is not a standard part of the probate process. I have written hundreds of wills and have administered dozens upon dozens of estates, and not one of them has included a video recording. Plus, in Indiana, any probate estate is required to be open for at least 3 months.
So, please remove the idea of a 1 day, 1 week, 1 hour administration from your mind. In my office, the amount of time for the average probate estate is roughly 6 months. Some are as few as 13 weeks while others exceed 4 years. The explanation for the difference in time generally falls to two criteria: 1. Estate planning and 2. Family dynamics.
WHAT COMPLICATES PROBATE?
No, the difference is not the value of the estate, the types of assets included, the amount of beneficiaries, or even the amount of taxes owed. Instead the explanation is simply one of preparation and family dynamics.
For example, if dad never had a will and died intestate (meaning no will), then your attorney will have to determine who the heirs at law are and who will be the personal representative. This takes extra time. If dad had a will and even a trust but never funded that trust, then transferring titles, businesses, vehicles, and other assets might take quite a bit of time through probate. This takes extra time and money. This is why meeting with a trustworthy estate planner is so important. An estate planner will not only prepare your will but will examine holistically what you own, how you own it, and who you want to receive it. She can make the necessary transfers and preparations to ensure that your assets are ready for probate or avoid probate altogether.
SOMETIMES PROBATE IS RIGHT FOR YOU
Further, an estate planner can determine the best plan that not only fits your assets but fits your beneficiaries. If your children disagree over even the most mundane of issues, then your estate planner can prepare for that. If you have a large uncomplicated business, then your estate planner will know how to transfer that asset at your death without impairing the function of the business.
However, even if your family member has a beautifully crafted estate plan, the law provides that a variety of persons are still eligible to object to the proceedings. Spouses, children, business associates, creditors, and government entities are all eligible to disrupt all the preparation that you or your loved one did.
No state allows a spouse to be completely disinherited, no state allows you to completely cut off creditors or the IRS. And, some children just don’t trust that their brother or sister is doing the right thing.
All of these entities and people have standing (the ability to show up in court on a specific matter) to challenge the estate and its proceedings.
All of the preparation and hard work can go out the door in an instant if someone objects. That is why I always say that the most important step in implementing your estate plan is discussing it with your family members.
IMPORTANT CONVERSATIONS TO HAVE WITH YOUR FAMILY
If your children know in advance that you have done planning, who will be coordinating the plan, and where the money goes, then there is much less opportunity for fighting. I have heard mother after mother tell me that there will be no fighting among her children, and that I can just trust her.
I don’t.
But, if your children are in the room when you craft your plan or you have had a family meeting about what to do in the event of your death, then I am far more confident that your probate estate will go much more smoothly.
Funnily enough, I have had clients specifically request that their children be required to go through probate. They might know that their children will always disagree, that their assets will not be well-divided, and that a court will be the only way to get it done!
GET AN ATTORNEY TO DO YOUR ESTATE PLAN so you can tailor your plan to your specific need! The planning and the family dynamics will be the most important determining factor for the length of time in probate.
WHAT DOES IT COST?
You might have skipped everything above just to get to the price tag. Well, sorry to disappoint, but I have no idea how much your probate estate will cost you.
I can tell you that, on average, a simple probate estate in my office might range from $3,000 to $6,000 depending on all of the factors I outlined above. However, some estates exceed $20,000, $30,000, and even $40,000 once you include costs of appraisal, hearings for disputes, creditor payments, and tax returns.
What I can also tell you is that despite the price tag on an estate plan, it will, more often than not, be less than the amount of probate administration. Even if your attorney quotes you a few thousand dollars for a trust and trust preparation, it’s still probably cheaper! Probate will probably cost you and your loved ones more than your estate plan.
HOW MIGHT YOUR LACK OF PLANNING COMPLICATE YOUR CHILDREN’S LIVES:
Maybe you don’t care about that because you won’t be around to deal with it. But estate planning is about more than just you. It is also about making your beneficiaries’ lives easier.
Do you really want your children paying for your electric bills for months on end because they can’t find a buyer? Do you really want them to have to sell the classic Camaro to pay for probate costs? It happens.
A good and thorough estate plan can mitigate the cost and the time involved.
At any rate, if you already know that you will need to go through probate, know, in advance, that this will cost money.
That money does not come from the personal representative. Instead it is paid directly from the estate. Many times, you do not pay a probate attorney until the estate closes or the court so orders.
Your attorney might require an upfront retainer, but he or she is probably not eligible to take his or her fee until the court allows.
Knowing that your attorney doesn’t get paid until the beneficiaries are also paid may give you a lot of peace of mind. As an estate administrating attorney, I am highly motivated to get you to the most efficient end of probate. Not to cut corners but not to drag out the process simply for my own amusement or continued payment. I am not a subscription service!
WHAT DO I DO NOW?
Now you have a general overview of the probate process: what it might cost you and how long it takes. You might feel more confident about making your estate plan or proceeding to an attorney.
Probate is not in and of itself a bad process, but it does take time and some money. You have the most control. You choose whether you will go through the process, how long it will take, and how much it will cost by making sure that you do planning during your life.
And, if you are already a personal representative, then communicate with your attorney. The best thing you can do to be more efficient and less stressful is to seek professional advice.
Just because your neighbor did it one way does not mean that the same rules apply in your circumstances.
If you have any questions regarding probate and what type of planning or administration is right for you, contact your attorney! Also check out my other posts here regarding estate planning, protecting your family, and protecting your money.