Probate is the Court proceeding brought by the Executor of an estate in order to transfer a decedent’s assets pursuant to their Last Will and Testament. Probate affects only those assets that do not transfer automatically by operation of law - such as those with named beneficiaries on file with the financial institution.
Procedurally, probate works as follows:
- A probate petition, along with the Last Will and Testament (the Will) and other supporting documents are filed with the probate court and notice of the proceeding is given to the decedent’s next of kin;
- In order for the Executor to perform their duties smoothly and least costly to the Estate, the Executor should be informed in advance, of the following:
- The location of the Last Will and Testament;
- The assets owned by the decedent; and
- The next of kin, through a family tree affidavit.
- In filing the probate petition, the Executor is requesting that the Surrogate’s Court determine if the Last Will and Testament is valid such that it can be “admitted to probate” and to appoint the Executor(s) of the estate as nominated by the decedent in the Will;
- At the time of filing, a fee is due and payable to the Surrogate’s Court. Filing fees for Surrogate's Court vary according to the nature of the proceeding and size of the estate and are set forth at Section 2402 of the Surrogate's Court Procedure Act. The schedule based on the value of the gross probate estate, as the chart below indicated
Less than $10,000․․․․․․․․․․․
10,000 but under 20,000․․․․․
20,000 but under 50,000․․․․․
50,000 but under 100,000․․․․
100,000 but under 250,000․․․
250,000 but under 500,000․․
500,000 and over․․․․․․․․․․․․
- If no heirs of the decedent object to the admission of the Will into probate or to the appointment of the Executor, then almost invariably, the Will is admitted to probate and the Executor named in the Will is granted authority to administer the estate. The Court issues “Letters Testamentary” – certificates which prove the Executor’s status and authority - it is recognized and honored by financial institution.
- An EIN number is obtained. This is akin to a social security number for an individual. It identifies the Estate and allows interest earned to be attributed to the Estate, for tax purposes.
- An Estate checking account and other financial accounts as necessary are opened with estate assets once the Executor has both Letters Testamentary and the EIN number.
- The Executor is responsible for collecting and valuing the probate property and paying the legitimate debts of the estate - from estate funds.
- Any real estate and personal property of value must be appraised.
- A list of the property and its values must be filed with the probate court. This is known as an "Inventory of Assets"
- If the decedent owned property located in several states, then the Executor may need to institute other probate proceedings in different jurisdictions. These additional proceedings are called “Ancillary Probate”.
- Depending on the estate, some property may have to be sold to pay estate taxes if the estate isn’t sufficiently liquid.
- An estate tax return may be required if the estate’s assets exceed the filing thresholds.
- An Executor’s accounting is prepared - to provide information to the beneficiaries regarding receipts and expenditures during the estate administration.
- Then, the estate may be distributed according to the terms of the Last Will and Testament. Note that a “partial distribution” of assets might be appropriate during the course of the probate process instead of waiting until the end of the process to pay out the inheritances. However, no distributions should be made without first discussing it with the attorney representing the Executor, commonly referred to as the Estate Attorney.
- Finally, closing documents are filed with the Probate Court.
- THE EXECUTOR’S CONSIDERATIONS
Certain Executor duties must be performed during specific periods of time pursuant to careful deliberation; many are listed below. It is advisable to establish a time-table for accomplishing the tasks. Always consult with the attorney for specific instructions in fulfilling your obligations as Executor.
- Secure decedent’s home (including changing locks) and protect vulnerable assets, if any;
- Gather and inventory the decedent's assets and liabilities;
- Determine whether estate taxes will be due, and if so, the precise date;
- Determine whether an ancillary probate proceeding in another state is necessary due to real property located in another state;
- Determine whether any special tax elections are advisable in consultation with the Estate Attorney and/or the CPA;
- Open an estate bank account - although it is not always necessary to liquidate assets to fund the account. The Executor should maintain some cash in an interest-bearing account or short-term investment. Please consult the Estate Attorney before executing investment choices;
- Close credit card accounts after consulting with the Firm regarding handling any liabilities that may be outstanding;
- Maintain complete and accurate records of the estate’s assets, income and expenses;
- Prudently manage and invest the estate assets during the course of the Administration;
- Prevent waste of assets;
- Determine and pay legitimate estate creditors, including the state and federal income and estate taxes (if any); Consult the Firm before paying any of the decedent’s liabilities;
- Distribute the remaining assets in accordance with the Last Will and Testament. The Executor, in consultation with the Firm, determines the timing of distributions of estate property, and may be called upon to divide the assets among beneficiaries;
- As Executor you owe a high standard of loyalty, or a “fiduciary duty” to the beneficiaries and to handle the estate with the utmost integrity. Of course, all estate accounts and funds must never be commingled with your own. You may not apply estate assets to satisfy your own financial obligation. Self-dealing is prohibited.
- When signing checks and estate related documents in your capacity as Executor, you must clearly indicate that you are signing as such;
- Be advised that an Executor may be fined if he or she is negligent in handling the Administration. Examples of where fines have been assessed:
Failure to collect rents;
Late filing of estate tax return and interest;
Depositing Estate Funds into a non-interest bearing account.
An Executor is subject to removal if his/her actions are improper or dilatory.
An Executor is entitled to commissions for performing these services unless the Last Will and Testament provides otherwise. The commission schedule is as follows:
- For receiving and paying out all sums of money up to $100,000 at the rate of 5 percent.
- For receiving and paying out any additional sums, up to $200,000 at the rate of 4 percent.
- For receiving and paying out any additional sums up to $700,000 at the rate of 3 percent.
- For receiving and paying out any additional sums up to $4,000,000 at the rate of 2 1/2 percent.
(e) For receiving and paying out all sums above $5,000,000 at the rate of 2 percent.