Most people have heard of the term “probate,” but many do not understand what it really entails. Technically, probate means the “official proving of a will,” which happens when someone submits the will to a special court called the probate court. Once the will is determined to be valid (if a will exists), the probate judge oversees the process of transferring the decedent’s estate to the heirs or beneficiaries.
Not too long ago, most estates went through the formal probate process. Today, there are many different ways of transferring property at death, some of which do not require a formal court proceeding. Even though the law allows for several ways of settling an estate, the person taking on this responsibility usually does not have much choice when it comes to which method is used. The availability of the different transfer methods is largely determined by the types of assets involved, the size of the estate, and how much planning the decedent did before death.
The Personal Representative.
When someone dies, it is necessary for someone to step in and coordinate the task of transferring the decedent's property to the appropriate beneficiaries. This individual is generally referred to as the "personal representative" of the estate. Determining who will serve as the personal representative depends on several factors, such as whether the decedent left a will nominating someone and whether that individual is willing and able to serve. Normally, the personal representative must be formally appointed by the court before he or she has the legal authority to act on behalf of the estate.
Necessity of Probate.
Not all estates require a formal probate proceedings with court involvement. Many estates are able to avoid probate because the decedent engaged in various estate planning strategies during his or her life, such as placing property into a revocable living trust or designating beneficiaries on certain assets. If a formal probate is not needed, then there most likely will not be a court-appointed personal representative.
Responsibilities of the Personal Representative.
On its most basic level, probate involves gathering information, using that information to prepare various forms and documents, and then providing the forms and documents to the proper companies or individuals. Throughout this process, three main tasks are completed: (1) It is determined what assets the decedent owned at death; (2) The decedent’s debts and taxes are paid; and (3) All the remaining property is distributed to the appropriate beneficiaries.
Serving as the personal representative can be time-consuming and tedious, but it does not require any special knowledge or skills. A personal representative, though, must be organized, responsible, and trustworthy. The main duty of the personal representative is to protect the estate from injury or loss and to ensure that it is transferred to the beneficiaries. In carrying out this duty, the estate representative serves as a "fiduciary."
A fiduciary, or someone with a fiduciary duty, must act with the utmost good faith and candor. A fiduciary must invest the estate's assets prudently, which includes keeping all excess cash not needed to administer the estate in interest-bearing accounts or investments (which may need to be approved by the court). Also, a fiduciary may not advance his or her own interests at the expense of the estate. A breach of this fiduciary duty can lead to the personal representative being cited to appear before the court, held personally financially responsible, and even charged criminally.