If you’re wondering what the impact of probate on an estate is, it’s likely you know of an estate in probate now, or have been appointed an estate executor. Let’s define probate and talk about what it does and doesn’t do.
How Do We Define Probate?
Probate is the process that transfers legal rights to property from the estate to the beneficiaries. Any assets that don’t legally pass to beneficiaries automatically are subject to a court proceeding to take these assets out of the deceased person’s name and transfer them into the names of his rightful heirs and beneficiaries.
Examples of items that pass without probate are life insurance proceeds, bank accounts with payable-on-death designations, some retirement accounts, and some forms of real estate ownership pass directly to named beneficiaries by operation of law. This is because there’s already a legal framework to handle transfer of these things to named beneficiaries.
Items that require probate proceedings to transfer ownership to a living beneficiary are referred to as probate assets. This can include cars, personal belongs, antiques, art, or other other assets.
It’ important to note that opening probate is not automatic when filing a will with the courts. These are two separate actions, though often done together.
Creditors Are Affected by Probate
It’s unlikely that a person dies with zero unpaid bills. Opening probate shortens the amount of time a creditor has to file a claim against the estate. Without probate, creditors have one year to file for payment from the estate. Once there is an official executor or personal representative as part of the probate process, creditors have only four months to file a claim. After that any request for payment can be rejected.
Some Cases Don’t Require Probate
Probate is sometimes legally important, but not always. People frequently don’t bother to open probate when there’s nothing of value to transfer or when all items of value are in a trust, or a joint account. These types of accounts can often avoid probate.
Even when probate is not necessary, the filing of the will remains required by law.