Good morning. My name is Rick Gans and I'm an ACETC Fellow and I'm here this morning with Phil Baumann from Tampa, Florida also an ACTEC Fellow and our topic today is What is Probate. So Phil, what is probate?
Well Rick, strictly speaking, probate is just the validation of the will of the decedent who has recently died. But more recently people have used that word to mean, or to refer to, the entire administration of a decedent's estate.
Well, you say, administration of a decedent's estate. What does that mean?
Well, Rick, that means that the court appoints somebody to gather the assets of the estate to determine what debts the decedent left behind including what taxes are owed and then takes those assets, pays the bills, and then distributes whatever is left to the beneficiaries who are entitled to his assets.
You say that the court appoints somebody. I mean what does that mean?
Well if you named somebody in your will to administer your estate that's only the first step. The court has to determine that they're eligible and then appoints that person who handles the estate and gives them a document that they can show to others to show that they have the authority to collect the assets of the decedent's estate.
Does the person who gets appointed have to go to court as a rule?
Almost never. We have to go to court if there's a dispute among the beneficiaries or among other people interested in the estate but most of the time we submit the paperwork to the court and we just proceed.
How long does it take to get started?
Oh, you know it depends on what jurisdiction you're in. Some cities, especially big cities, are busier than others and it takes a little longer, but maybe a week or two weeks at the most, usually, and in one case I had a personal representative appointed the very same day that I filed the paperwork.
Excellent, so does the personal representative have to pay the decedent's creditors?
Yes, there's a priority and once the personal representative has collected the assets the first thing he does is to determine what bills are to be paid, and they get paid first. The beneficiaries get paid after the bills and taxes are.
That sounds like it takes it takes a long time. How long does it normally take?
Usually, an estate can be administered in a matter of months. For example, in Florida we have a, we have a deadline. We have to close in the estate within a year after we've opened it unless we can show to the court there's good reason to keep it open longer.
I hear a lot of talk that probate is really expensive and the lawyers charge a whole lot of money is there any truth to that?
Well, Rick, it can be but usually, it only is if there's a dispute that arises among the beneficiaries or with the creditors or something like that. But in 99% of the cases there are no disputes that arise and so it's not nearly as expensive as people worry about. Probably the most, the highest expense is the cost of hiring a lawyer to give advice to the administrator of the estate on how to execute his or her duties. And just about anybody, whether it's a probate administration or a non-probate administration, needs that advice so they're gonna have that expense anyway.
You say, non-probate estate. How would that happen?
Well, if a person dies with assets that are not subject to probate you still have to collect the assets, you still have to pay the bills and distribute the assets to the beneficiaries. So regardless of which system you use, that, the administration is about the same.
Well, Phil, I go to the book store I see a lot of books on the shelves about avoiding probate and how do you avoid probate.
Well, assets that avoid probate are assets that have a beneficiary designation or are joint assets that are payable on death to someone, or a pay on death account at a securities firm or they could be assets in a in a trust that are payable to the beneficiaries. All of those are still distributed in pretty much the same way but you don't have what is called the probate process which involves the court proceeding.
So, a person could have assets that would be subject to probate and a person could have assets that were not subject to probate. Is that common kind of thing to encounter?
Yes, in fact, I would say most estates have assets that are both what we what you would call probate assets and assets there are non-probate assets.
Okay, well Phil thanks a lot for being we are with me today. It was very helpful.