What is a Probate and Should I Be Afraid of It?

The purpose of this article is to summarize the process of probate and to introduce ideas that we will explain in greater detail in later posts.  In its simplest terms, probate is a process where a court gives a person the authority to act on behalf of an estate to administer the estate.  Administration of an estate consists of five primary duties. 1) locating the heirs and beneficiaries of the deceased, 2) identifying, securing, and inventorying the assets of the estate, 3) identifying and paying the creditors of the estate, 4) paying any taxes that the estate owes and 5) distributing assets to the heirs and beneficiaries of the estate.  The person given the responsibility to do these tasks is referred to as the Personal Representative, or “PR” of the estate.  Many people are familiar with the term “executor” which technically is a man who is acting as the personal representative of an estate where the deceased had a will.  (Just in case it is legal trivia night, a woman in the same role is an executrix and if there is no will, the person’s title is Administrator and Administratrix, respectively.)  Personal Representative and Executor can be used interchangeably when referring to the person responsible for administration of an estate.  A person does not become a PR until a probate is opened in court.  They will be issued “Letters Testamentary” or “Letters of Administration” which is the proof that a probate is open, and they have been appointed as the PR. 

Locating Heirs and Beneficiaries of the Estate

The first job of a person who will petition the court to be appointed as a PR is to locate the heirs and beneficiaries of the estate.  This includes all people identified in a will who will receive assets of the estate and any people who would inherit from the deceased if there was no will.  Often these people overlap or are exactly the same people.  The petitioner has a duty to make a reasonable effort to find mailing addresses for each person and include the names, relationships, addresses and age (minor or adult) in the petition to be appointed as the PR.  Usually, the PR is a family member, and all the heirs and beneficiaries are also family members so with a few phone calls and emails someone can easily find the necessary information.  Sometimes this task can be difficult, especially where heirs are not descendants of the deceased or when a person has not given adequate information to the person who will be acting as their PR.  The process of opening a probate is different if there is a will that names the petitioner as the PR or executor or if there was no will, but identifying this information is necessary in both situations.

Identifying, Securing and Inventorying Assets

Every PR must identify the assets of the estate and create an inventory with the values of the assets on the date of death.  Typically, these assets are bank accounts, investment accounts, real estate, vehicles, household goods and other personal property.  Some assets of a deceased person pass to another person, people, or charitable organizations without a probate.  These are called “non-probate assets.”  An example of a non-probate asset is a 401k that has a valid beneficiary designation completed by the deceased.  In most cases the financial institution will distribute that account without a probate and without regard to the inheritance structure in a will.  If there is a risk of an asset being stolen or misplaced, a PR has a duty to secure the assets so they can be properly inventoried and handled.  A written inventory is prepared by the PR within 90 days of opening a probate.  The inventory is not filed and is held only for creditors of the estate and heirs and beneficiaries of the estate.  The assets and values of assets are not made a public record in the probate. 

Identifying and Paying Creditors of the Estate

The third duty of a PR is to find and pay creditors.  This could be final medical expenses, costs of a funeral or burial, credit card debt, mortgages, car loans, Medicaid repayment or other debts.  Creditors are separated into two categories and dealt with differently.  First, known creditors are creditors that the PR knows about or finds out about during the administration of the estate.  This can also be known potential claims, such as someone who may have a pending lawsuit against the deceased or someone with a known potential, actionable claim against the deceased.  For known creditors, a PR mails a “Notice to Creditors.”  Once a person or company receives the notice, they have 30 days to file a creditor’s claim in the court where the probate is open.  A PR does not need to give notice to a secured creditor, such as a mortgage lender or the lender on a car loan, if the asset will be sold as part of the probate.  Secured creditors can still recover the debt from the asset that secures the loan.  For unknown creditors, a PR can publish the notice in the proper newspaper in the county where the deceased lived.  After the publication has been made, unknown creditors have four months to file a creditor’s claim.  The PR must approve, reject, or pay each creditor’s claim that is filed in in the court case.

Paying Taxes of the Estate

There are two types of tax that a PR must consider.  First is income tax.  If the deceased owes income tax, or is entitled to an income tax refund, the PR has the authority to file a tax return.  Second is estate tax.  Many estates are under the Washington State and IRS estate tax thresholds.  We will cover estate taxes in greater detail in later posts, because our Washington State estate tax and the federal estate tax have drastically different rules and different exempt amounts.  There can even be reasons to file an estate tax return even if no estate tax is due.  Because tax laws and exempt amounts can change from year to year, it is recommended to talk to a probate attorney or CPA to learn what the rules were in the year that a person died. 

Distributing Assets to the Heirs and Beneficiaries

A PR has the authority to distribute assets of the estate directly to the heirs and beneficiaries or to liquidate assets and distribute money.  Often real estate must be sold because it cannot easily be distributed to multiple people, but some assets, like jewelry, art, furniture, collections, and cars will be distributed directly to the heirs and beneficiaries.  A PR must act in the best interest of the people and organizations that will receive assets of the Estate, but it is their discretion on liquidating and distributing assets.   Often an estate will be divided between multiple people by percentage, i.e. “equally to my children.”  A prudent PR will keep track of the value of the personal property that each person takes to make sure they can divide the remaining assets to achieve the proper percentages.  Typically, the assets of the estate are distributed after the estate has dealt with all creditors and paid any taxes, but a PR may make preliminary distributions before they are ready to close the estate.  This is in the PR’s discretion and at the PR’s risk.  The PR must make sure they hold enough assets to pay all valid expenses of the estate, including paying themselves for the hours they have spent administering the estate.

Once a PR has completed all these steps, they are ready to close the estate.  If done correctly, a PR has no liability to the heirs, beneficiaries or creditors after the estate is closed. 

This article gives a 30,000-foot overview of the probate process.  Each component is made up of multiple steps, deadlines, and decisions to be made.  Each probate is different and issues that may be front and center in administering one estate may not be present at all in another.  In upcoming blog posts, we will describe the detailed duties of a PR, the process and timing of a probate, the process to deal with specific asset types, common pitfalls of administering an estate and other topics.

To learn more about What is a Probate and Should I Be Afraid of It?, please contact Beresford Booth at info@beresfordlaw.com or by phone at (425) 776-4100.

BERESFORD BOOTH has made this content available to the general public for informational purposes only. The information on this site is not intended to convey legal opinions or legal advice.