The Probate Process
Probate is the legal process by which a person’s property is distributed after their death. While probate is something that many people will encounter upon the death of a family member, few people understand how it works or what it means for the estate of their loved one and the beneficiaries to the estate. Below are common questions that clients ask regarding the probate process, along with answers that will help to equip the reader with information about what the process entails.
What is probate?
As mentioned above, it is the legal process through which a court oversees the distribution of a person’s estate (property) that is left to their heirs via a will after their death. It begins when the person charged with serving as executor of the deceased’s estate petitions the court to probate the will of the deceased and officially appoint the petitioner as executor of the estate. (This appointment by the court is necessary for the executor to be able to act on behalf of the estate with third parties, such as opening a bank account for the estate, signing deeds or bills of sale when selling estate property, etc.) Once appointed, the executor must notify the deceased’s creditors that probate has been opened to give the creditors an opportunity to make a claim against the estate for any amounts owed to them by the deceased. The estate property cannot be distributed to the will beneficiaries until the creditors have had an opportunity to make their claims.
How much time must an executor give creditors to make their claims against the deceased’s estate?
Provided creditors are given adequate notice that probate has been opened for the deceased’s estate, Arkansas law provides that creditors have 6 months to make a claim against the estate for any debts owed to them.
What happens after the 6-month period comes to an end?
The executor will evaluate the validity of the claims made by the creditors, rank the priority of the claims according to the categories laid out in the Arkansas probate code, and inform the court of which claims should be paid. If the executor disagrees with a claim made by a creditor, a hearing must be held before the judge presiding over the probate in order that he or she can determine whether the debt in question should be paid. Once all debts are paid or it is determined that some need not be paid, the court will authorize the property of the estate to be distributed to the beneficiaries laid out in the will.
Does every person’s estate have to go through probate when they die?
No, with proper planning prior to a person’s death, their estate can avoid probate. When a person dies, their estate must go through probate 1) if they have property in their individual name, 2) that exceeds a certain dollar value ($100,000 in Arkansas), and 3) of the total property that is in their name, assets totalling $100,000 or more are set to pass to their heirs through a means other than non-probate transfers.
What are “non-probate transfers”?
Non-probate transfers are transfers of property upon someone’s death that occur automatically (without the need for court supervision) due to the fact that the property had individual ownership documents and a beneficiary had been designated on those documents. Examples of assets that can be transferred through a non-probate transfer are 1) bank accounts, 2) retirement accounts, 3) life insurance policies, and 4) vehicles. For all of these examples, as long as the owner of the assets had filled out the necessary paperwork with the account manager or DMV (in the case of vehicles) designating a beneficiary of the asset upon the owner’s death, then the ownership of the respective asset will pass to the named beneficiary automatically and the asset will not have to go through probate.
Real estate that is owned by two people as joint tenants with right of survivorship will also pass as a non-probate transfer upon the death of one of the joint owners. However, if both or all of the joint owners were to die simultaneously (such as spouse’s dying in the same incident), the property would not pass as a non-probate transfer to the owners’ heirs, and the property would instead have to go through probate (unless the owners had filed a beneficiary’s deed naming a third party beneficiary, which is a whole different topic!)
How can I ensure my estate avoids probate?
- Form a Revocable Trust
One of the most common ways that people ensure their estates will avoid probate is to establish and place their property in a revocable trust. As mentioned above, a deceased’s estate has to go through probate if he or she had property valued at $100,000 or more that was in their name at the time of their death. When a person creates a trust during their life and places their property in the trust, that property is no longer in their name–it is then in the name of the trust–and so it is not subject to probate.
- Ensure that your property is set to pass to your heirs via non-probate transfers
If the bulk of your estate is investment accounts, retirement accounts, or other assets subject to individual ownership documents that allow for the designation of beneficiaries, you may be able to avoid probate. As long as the portion of your estate that is set to pass under your will (and not via non-probate transfers) is less than $100,000, your estate will not have to go through a full probate. (It may still have to go through small estate probate, however, which is a simpler and faster process).
Are there any other drawbacks to the probate process besides the time beneficiaries must wait to receive property left to them under the deceased’s will?
Yes. Two additional drawbacks of the probate process are 1) cost and 2) lack of privacy. Because the probate process requires knowledge of several laws that make up the Arkansas Probate Code, as well as interaction with the probate court, it is necessary for the executor of a deceased’s estate to hire a probate attorney to guide them through the probate process. Because of the time involved in handling a probate matter, the attorney’s fees can add up quickly, and are often calculated as a percentage of the deceased’s estate. Fees can be as much as 15 to 20% of the value of an estate. Regarding lack of privacy, when the executor of an estate petitions the court to open probate, he or she must simultaneously file the will of the decedent. Once the will is filed, it becomes a public record that anyone can access and view. For some families, this lack of confidentiality makes the probate process an unattractive option.
Is it accurate to say that Legacy Law Firm, PLLC’s recommendation is for everyone to do what is necessary to avoid the probate process in every instance?
Not necessarily. There can be reasons why an individual or couple may want to pass their property to their beneficiaries via a will rather than a trust, even though the property that passes via the will would have to go through probate. This is why it is critical that a person speaks with an estate planning attorney prior to creating an estate plan. A conversation with an experienced estate planning attorney can help a person to ensure that they are using the correct tools to set up a plan that is right for them and their heirs.
