If a person knew all the facts and costs involved in Probating an estate, very few, if any, would voluntarily decide to have their estates probated. The problem is that most people do not know what Probate is or entails, nor the costs involved to Probate an estate.
Probate is the legal process that must be conducted when an individual dies with assets titled in his own name solely (with no beneficiaries) and those assets have an aggregate value of $100,000 or more. Probate will determine the rightful heirs of the decedent. The Probate Court oversees the distribution of the decedent’s assets to the decedent’s heirs and/or legatees named in a decedent’s Will. A decedent may die with a Will (Testate) or without a Will (Intestate). Probate encompasses both Testate and Intestate matters. If a decedent dies with a Will (Testate), his named executor files the Will with the Clerk of the Court and then that named executor petitions the Probate Court to Admit the Will and Issue Letters Testamentary.
If a decedent dies without a Will (Intestate), a person who has preference under the Probate Act can petition the Probate Court for Letters of Administration. The Probate Court will determine if the petitioner has standing and if no one objects will appoint the petitioner as Administrator of the estate and issue to him/her Letters of Office as the representative the Estate. In order for the representative to have the legal authority to gain control or sell the decedent’s assets to pay bills such as medical, funeral, mortgage, charge cards, etc. and distribute the remaining assets to the decedent’s heirs and legatees, he/she must be issued Letters of Office by the Probate Court.
In addition, with a Intestate Estate, the Administrator has to obtain a surety bond usually for one and half times the total value of the personal assets of the estate. Upon the sale of any real estate in a Intestate matter , the Administrator must also obtain an additional surety bond for the sale proceeds. This requirement of a surety bond is usually waived in a Will and therefore an Executor does not have to obtain a surety bond in a testate matter.
A common misconception is that if a person has a Will, there is no need for a Probate proceeding. That is entirely INCORRECT. A named Executor in a Will has no power to administrate the estate unless he/she is issued Letters of Office from the Probate Court. Without Letters of Office, the named Executor has no authority over the decedent’s assets owned in the decedent’s sole name upon the decedent’ death. Probate can be time consuming and thus expensive- that is the very reason people set up Revocable Trusts and “fund” those trusts with their assets- to avoid the costs and delays in Probate.
Once a representative is issued Letters of Office from the Probate Court, the representative now has a fiduciary obligation to the estate and the beneficiaries of that estate. The representative upon appointment must first gather (marshall) all of the decedent’s assets by selling, liquidating and transferring those assets into the name of the estate. He will set up bank accounts, brokerage accounts, etc in the name of the estate and will obtain a Federal Employer Identification Number (FEIN) from the Internal Revenue Service so all interest, dividends, capital gains/losses on those assets after the decedent’s date of death are taxed to the estate. The FEIN is needed because upon a person’s death, the decedent ceases to be a tax paying entity and his estate becomes the new tax paying entity.
We counsel and advise the estate representative on what he/she needs to do and how to effectively administrate the estate in the most time efficient and least costly manner without incurring any liability for his/her actions.