The main players in a probate case are the person who has died and the beneficiaries of their estate—first and foremost the spouse. If there is no spouse, then the assets may go to the children or to whomever they named as a beneficiary. For example, someone could name a church as the primary beneficiary of their estate.
While it’s not required that someone obtain a lawyer, a lawyer is normally involved in the probate process; going through it without one would be much like trying to plumb a house and not knowing what a wrench is. In other words, it would be dangerous, but people try it anyway. Many people have come to me after attempting to navigate the process without an attorney, at which point it is much more difficult for me to straighten out.
Summary administrations can be completed in as few as 30 days, assuming all of the information has already been gathered. However, it is important to remember that a creditor could make a claim within the six months following the completion of the process. Relief administrations can be completed in fewer than two months.
Full administrations are most common. If there is no will, then the next of kin will need to be appointed as administrator; if the next of kin does not want to act as administrator, then someone else would assume that role. That person would then provide an estimate of the size of the estate, which means estimating what each item in the estate might be worth. That information would be included in the application to open the estate.
The law requires that all next of kin members be notified of the probate, even if they are not a beneficiary. In most cases, the next of kin is the spouse or the children. If there is no spouse or children, then it may be the parents or siblings. In rare cases, nieces and nephews will be considered next of kin. If the next of kin cannot be located, then a notification will need to be published publicly in order to give them an opportunity to know that the estate is being probated.
Next, an inventory is done in order to determine the value of the assets in the estate and ensure that nothing has been missed. If the value of an asset is not readily ascertainable, such as that of a coin collection, then it will need to be appraised. Once the assets have been appraised, they are either distributed to the beneficiaries or sold for cash in order to pay off court expenses, administration expenses, attorney’s fees, and bills.
There’s a pecking order for paying bills; the courts always get their money first, administration costs (such as attorney’s fees and administrator’s fees) come second, funeral bills come third, and then the other debts are addressed. If there is a mortgage on real estate, then that mortgage will take priority. For example, if there is a piece of real estate worth $80,000 and the mortgage is $40,000, then the mortgage will have to be taken care of by the person who takes over the property. Alternatively, the property could be sold in order for the mortgage to be paid off.
Oftentimes there will be an insolvent estate. Years ago, real estate was a big asset because it was usually worth more than what someone owed on it. However, since the real estate debacle starting in 2006, a lot of real estate that was worth $120,000 was suddenly worth only $70,000 or $80,000. As a result, many people found themselves in the hole for $10,000 or $15,000. The situation is the same with vehicles. For example, if someone pays $30,000 for a car today and tries to sell it tomorrow, they would be lucky to get $25,000 for it due to the fact that vehicles depreciate in value very rapidly. Unless someone has very nearly paid off the entirety of their vehicle, it will be a liability because they will owe more on it than it is worth; it is under these circumstances that an individual will find themselves with an insolvent estate.
If someone needs to sell a piece of real estate in order to resolve an insolvent estate, then they will first need to notify the treasurer, the mortgage company, and the next of kin. This is a long and expensive process. If the piece of property sells for $70,000, the mortgage company will get the amount that remains after the costs and expenses. This means that the mortgage company may only get $62,000, but there’s no way that any money will go toward the estate since the estate was insolvent to begin with.
Insolvent estates are important to understand because they are becoming increasingly common. I used to handle about one every two years, and now I handle anywhere from 10 to 15 per year. Oftentimes, this happens when people spend a lot of money without there being any probate-able assets. As a result, there aren’t enough assets for the probate to pan. For instance, if there is $15,000 in assets but $35,000 in credit card debts, a funeral bill, and medical bills, then someone may find themselves with $40,000 in debts.
Under such circumstances, a person can do something that is similar to bankruptcy—I call it “probate bankruptcy.” In essence, the individual would send a letter informing them that there is no money in the estate to pay the debts in each category. So, if there is $20,000 owed in a particular category and there is only $2,000 in the estate, then one category might receive ten cents on the dollar, and the next category might receive nothing. Any time anyone passes away, the people left to deal with the estate and debts really need to contact a probate lawyer.
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