What Is Probate and Should You Avoid It?
One of the most misunderstood concepts of law to the layman is the probate process. Many persons are named as personal representatives in their parent’s, other family member’s or friend’s wills without knowing what the job entails. As a result the probate process is often feared and some will go to great lengths to avoid it. This article will attempt to explain what probate is and why it is necessary for so many people.
Simply defined, probate is the steps necessary to establish the validity of a will. The process of collecting a decedent’s assets, paying his bills and taxes, and distributing what is left to his heirs or beneficiaries is actually called "administration" of the estate although it has become common to refer to this entire process as probate. There are two types of probate administration under Florida law: formal administration and summary administration. Summary administration is an abbreviated proceeding for smaller estates. Summary administration is available if the gross value of the probate estate is not greater than $75,000 or the decedent has been dead for at least two years
Estates can be either testate, where the decedent has left a valid will, or intestate, where there is no will. In an administration of an intestate estate the laws of the state of Florida will determine how the assets are distributed. In a testate estate, the will acts as a set of instructions to the court, naming a personal representative and directing the disposition of the assets.
Estates subject to probate administration consist of assets owned solely by the decedent with no provision for automatic succession of ownership at death. Examples of automatic succession include beneficiary designations on life insurance policies and annuity contracts, bank accounts held "in trust for" a beneficiary and property owned as joint tenants with a right of survivorship. These assets would not be included in a probate estate and will generally go automatically to the named beneficiary or surviving joint tenant.
Formal administration is started by filing a petition for administration which identifies the decedent, states the approximate nature and value of the estate assets, names the beneficiaries, requests appointment of a personal representative, and, in a testate estate, identifies the will and requests that it be admitted to probate. All interested persons (as defined by Florida law) must then be served with formal notice of the petition. If the court finds the petition to be in order and there are no objections to the petition, then the will is admitted to probate, the personal representative is appointed and issued letters of administration. The letters of administration give the personal representative authority granted by the court to act on behalf of the estate.
The personal representative then publishes a notice of administration once a week for 2 consecutive weeks in a newspaper of general circulation in the county where the estate is administered. The notice of administration is intended to notify creditors of the decedent of the administration of the estate so that they may file claims to have any outstanding debts of the decedent paid. The personal representative is also required to serve a copy of the notice on those creditors of which he is aware. As a general rule, the creditors must file a claim with the court within 3 months of the date of the first publication or they will lose all rights to collect their debt.
The personal representative then goes through the process of identifying and collecting the estate assets, objecting to or paying claims, filing tax returns, distributing assets to the proper beneficiaries, paying administration expenses, reporting all of these activities to the court and closing the probate administration. Depending upon the complexity of the estate, this process can take from a few months to a few years to complete.
The personal representative, attorney for the estate and other professionals involved in the administration are entitled by law to compensation. Florida law states that the personal representative may receive a commission payable from the estate assets based upon the value of the estate. For estates less than one million dollars the commission would be three percent of the estate’s value. Attorneys for the Personal Representative would also receive a fee (generally 3% of the value of the estate's value).
As you can see, we've identified three reasons to avoid the probate process:
1. It's time consuming. A typical formal administration proceeding in Florida takes 8 months to a year to complete.
2. It's public. The probate administration is a court proceeding. Many of the documents and information about the decedent and his or her estate are a matter of public record. That creepy old lady who is always looking through her blinds at your house can go down to the courthouse and look through your probate file. She may be able to find out what you owned at death, who you owed money to and who will receive an inheritance from you.
3. It's expensive. Probate usually costs from 4% to 8% of the value of your estate. If you owned a house worth $200,000 and stocks and bonds worth another $200,000, the costs of probate would range from $16,000 to $32,000 ! That's money that goes to attorneys, court costs, accountants, etc. Most importantly, that's money that is not going to your loved ones.