Not too many people know what to do with a person’s estate when they die. What can make matters even worse is that filing paperwork, taking an inventory, and locating legal documents are going to be the last things you want to think about at such an emotional time.
Estate administration and Arizona probate can be a very intimidating process, but if you’ve got some level of understanding as to how such processes work, you’ll be better able to execute your duties correctly and with confidence.
Probate: What is It?
Probate is a legal process that takes place when a person dies. It is a way by which their will is authenticated, the person names in the will to administer the estate is approved, and the estate contents are distributed to heirs and beneficiaries named in the will.
The process is supervised by a probate court, and it usually takes around a year, depending on the size of the estate and how complex it is.
Estate Administration: What is It?
Estate administration is a term that’s used for the act of representing, inventorying, managing, and disbursing a person’s estate after they’ve died. Ultimately, this important responsibility falls to the executor or personal representative named in the decedent’s will.
If someone passes away without making a will (called intestacy), matters can be a little more complicated because it’s not clear who should handle the estate administration and probate processes.
How Does the Probate Process Work?
The rules and details of the probate process can differ slightly, depending on where the deceased lived, but the following steps are a general guideline of what happens during probate proceedings and estate administration.
File as an Executor. If you’re the person named in the will as the executor or personal representative, you have to file a petition at the probate court in the county where the decedent was living before they died. When there is no will, eligible heirs must petition to be the appointed “administrator” of the estate and the court decides who will take on the role. The approved administrator of the estate gets legal documentation (typically called “letters”) to certify their authority. If there is a will it must be filed with the court, along with a death certificate.
Notify Creditors, Beneficiaries, and Heirs of Probate. Each state has its own laws that govern how creditors, beneficiaries, and heirs of probate have to be notified and the length of time they have to file a claim against the estate. Notification options include publishing an obituary in the local newspaper or directly notifying interested parties by mail.
Collect, or Marshall the Assets. In this step, you have to find out everything the deceased owned, create an inventory, and file it with the court. This task is best started as soon as possible. In addition, it’s a good idea to consolidate all the estate funds as much as possible. It’s much simpler and more transparent if bills and bequests are paid from a single, separate checking account. If you’ve got an attorney, you can ask them to set this up for you, or establish one yourself.
Pay Bills. When someone passes away it doesn’t mean their debts are just forgotten. The bills will also keep rolling in and they have to be tackled. A good place to start is by making a list of all the liabilities as some have to be kept current throughout the probate process. Utility bills, mortgage payments, storage fees to secure belongings are considered administrative expenses. If you pay them using your own money, make sure you keep meticulous records as you may be able to get reimbursement from estate assets in some cases. Other liabilities, such as medical bills and taxes, can only be paid once probate has concluded, as they are considered final bills.
File Tax Returns. A final individual income tax return also has to be filed for the deceased person by tax day of the year following their death. Any income the estate earns, such as dividends or interest, during the administration process, has to have its own tax identification number so that you can keep track of the earnings and possible tax consequences. In general, most estates don’t need to file federal estate tax returns, but if it is required, it must be filed and paid within nine months of the date of death. If the deadline is missed, there could be severe penalties and interest may apply.
Distribute Property to Creditors, Heirs, and Legatees. Any payouts are not generally made until the period runs out for creditors to make claims. This can be up to a year after the date of death. However, once you’ve processed the estate and paid any debts and taxes, most of the assets can be distributed. Be sure to retain a reserve for unanticipated claims and the cost of closing out the estate.
File a Final Account. The final step is to file a detailed account with the probate court. In the account, you must list all tax filings and payments, payments made to creditors, and distributions of property and assets. The court has to approve this final account and once that is done, the remaining funds can be distributed and your work is finished.
Final Thoughts
Now that you know a little bit more about the probate process it will help you understand your responsibilities and what your choices are. Its also a good idea to talk to a lawyer to get specific answers about your situation. You can usually pay the lawyer’s fees from the estate.
Photo Credit: Ken Mayer
Thank you for this article. It does a good job of giving an overall view and timeline of how probate works. It also reminded me of things hubby and I can do NOW (list bank accts., investments, inventory personal property, etc.) to make things easier for OUR kids when the time comes!
The easiest, most efficient, fastest and cost effective way to pass on a lot of your stuff is to put the name of the person who should inherit on your accounts as “POD” (Payable upon death). The asset immediately becomes the property of the person upon your death. No probate, no greedy court getting its fingers in your pie, no waiting, no people coming out of the woodwork claiming to be long lost relatives due a share. With real estate you arrange to have “joint tenants in common” on the deed and the the property goes to the person who outlives the other . The change of ownership is the moment the other person dies. Fast, neat, almost free and faultless.
Yes, very good comment! We take advantage of the POD option whenever it is offered too, Karen.
Putting someone as joint tenant in common on your real estate can have adverse consequences if something goes wrong financially with the other person. Being that it is not their primary residence, you can face issues if they go bankrupt or are sued.
I was the executor of an estate in 1986. Always look through every single envelope, and what you think is scrap paper. You never know what you’ll find. I had to go through receipts dating back to the 1930’s to find important papers. I found cash stashed inside a sofa, and all kinds of things.
Good to know, Bill. As for being the executor of any estate, it is a very serious responsibility. Sometimes the role is fairly routine; but I know people like you who had to go the extra mile to ensure that the estates they were charged with distributing got to all of the rightful heirs.