“Probate” is a legal term for the Court process of transferring assets out of a deceased person’s name and to that person’s heirs and/or beneficiaries. The difference between the term “heir” and the term “beneficiary” is that an heir is someone that would legally take if a person died without a Will. A person’s spouse, for example, or children (if they have either a split family or pass away without a spouse). A beneficiary is the term used for the person who is legally entitled to receive assets. An heir can be a beneficiary, but sometimes a beneficiary is not an heir. For example, I could sign a Will saying that all of my assets go to charity – the charity would be a beneficiary, but not an heir.
One common misconception is that signing a Will avoids probate. Probate is required (here in Wisconsin) if you pass away with assets of greater than $50,000 (gross) and those assets do not automatically transfer by “TOD” “POD” or “Beneficiary Designation.” Another way to transfer assets without probate is to have co-ownership and survivorship on accounts. It also works to transfer your assets to a Trust. Since the Trust does not die, a probate is not necessary. We will go into this in more detail in other blog posts; simply having a Will does not prevent probate.
With that brief background, the purpose of this blog post is to provide you with a general overview of the probate process. Without knowing what the process is, it is hard to know if it is something worthy of avoidance.
The first step in probate is to file the Will (if there is one) along with a petition. A “petition” is another legal term that is used to describe the document that is used to ask the Court to do something. In this case, admit the Will and appoint a Personal Representative to be in charge of the probate process. Sometimes a petition is denied (for various reasons) and sometimes there is a disagreement on who is the appropriate Personal Representative; however, for simplicity sake, let’s assume the Court approves the petition. After a Personal Representative is appointed they are then given a set of tasks: notify the creditors, publish in the newspaper, compile a list of the assets owned by the decedent as of the date of his or her death, and requirements to keep the beneficiaries updated – providing them with an inventory and an accounting of the process. Then the Personal Representative has to actually do the work: consolidate the assets, liquidate them, retitle them, pay the bills and Court costs, and at the end of the process, distribute what is left to the beneficiaries (in accordance with the terms of the Will, if there is one).
In a later blog post, we will discuss in more detail the pros and cons of probate.