What is probate?
Probate is the legal process of distributing your assets according to your wishes, which includes determining the validity of your will, gathering your assets, paying your debts and taxes and then distributing the remaining assets according to your last will. To get the process started Your Personal Representative, the Executor, will submit your will to probate court to have it validated. The main advantage of probate is that the probate court is supervising the entire proceedings, and the probate laws are being followed.
- Probate
What Steps are involved in the Probate Process?
Probate process can be a complicated, lengthy and confusing process, but here is the general process; the probate process involves two steps:
- Pays debts you owe, including taxes
- Transfers assets to your beneficiaries, as per your will
The probate court oversees the probate process to make sure everything goes according to the probate laws and your will. Because probate courts are not federal courts, the processes they follow will vary. Despite their differences, these courts all pretty much follow the same basic processes:
- Swearing in your Executor
- Notifying heirs, creditors, and the public that you are, indeed, dead
- Inventorying your property
- Distributing your estate
Cost of Probate
There can be substantial cost involved in probating an estate, so it makes sense to avoid or limit full probate where possible legally [we will discuss legal means to do this in the next article]. Although probate costs will vary from province to province and state to state, they average range is between 0.5% and 2% of your estate. But that is not all, there are more costs associated with distributing your assets, some other costs are executor and attorney fees, executor fees can range up to 4%. Then there are always taxes your estate will have to pay before transferring assets.
How Long Does Probate Take?
The length of probate will depend on the complexity and seize of your estate, the larger and complicated your estate is the longer it will take to settle. It also will also depend on if you have a valid legal will and whether it will be contested by others or not. On average probate process can takes between 1-2 years if there are no complications, however in some cases it goes on for decades. To speed up the process and avoid complications it is highly recommended to have an updated and valid will.
If you need more information regarding probate and estate planning, please consult a qualified estate lawyer and/estate planner.
In the next article we will discuss ways to reduce your probate costs and leave more for your beneficiaries (legally).
Probate: Understanding What Probate is-Steps in the Probate Process,Subscribe to Financial Highway
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{ 16 comments… read them below or add one }
So are ALL of your debts paid out of your estate prior to the distribution of your money? What happens if the value of your estate is less than what you owe to creditors? This may not be the place to ask those questions but I have often wondered where your debt goes when you die.
All debts go to heaven…ooops sorry that’s dogs. As far as debts, I believe if it is unsecured – i.e credit cards, school loans they disappear. Secured debt (i.e. mortgages, car loans) go with the asset to the person receiving that asset. But hey, I’m not a lawyer! =)
@ Kyle thats a good question! Jason pretty much answered it. Debts need to be paid off before asset can be transferred. Creditors file a claim on your assets and the court will oversee that they are paid. There are some assets that skip the probate process and creditors do not have a claim on such as Segregated funds and insurance policies since they have a named beneficiary. These will not be included in your estate and creditor’s can not file a claim on (even in bankruptcy)
Ray, just to clarify your last sentence…I believe that life insurance proceeds ARE included in your estate for tax purposes if you are the owner of the policy, but they skip the probate process if there is a named benny. A sizeable life policy can create an estate tax burden that some often overlook.
@ Jason, no life insurance proceeds (as well as Critical Illness insurance proceeds) are tax free and bypass the estate. Often life insurance is used to reduce the tax burden on family members when transferring assets.
Ray, that’s correct they are income tax free. I should clarify – I was referring to the Federal Estate Tax Exemption. The way I understand it is that the proceeds are included in your estate, which means that it will make your estate larger and could potentially push you over the $3.5m exemption for Federal Estate tax purposes (if you have a large policy and you are the owner).
If I leave my entire estate to my spouse, does the estate need to be probated?
If you have a will than your will most likely will have to be probated. unless all your assets are owned jointly your spouse may not always have access to them without a probated will.
Jason,
Ray is writing about the Canadian estate system which is much different than the US system. Canada does not have an estate tax, but rather when you die, you are deemed to have sold your worldwide assets at fair market value. You the pay capital gains (generally) on the net gain.
We also do not have a gift tax or gifting limits in Canada.
I know you are referring to the US estate tax, and if I remember correctly, life insurance proceeds in the US are included in the valuation of the estate for US estate purposes and, yes pushes the estate above the exemption.
I know it’s been over a year since this article was written but anyone reading the comments should be aware of this difference.
CTG – clarification noted, thanks for that.
If a spouse dies however their will states that the estate goes to the remaining spouse but the remaining spouse died weeks earlier what happens? IE: they were sick and did not have a chance to change the will. Is the executor of the will of the last spouse still valid? Is the will still valid and how can it be if the reciepient is deceased? Will the estate have to go thru probabe now to be distributed amoungst the remaining living relatives IE: biological children of the deceased? thank you.
@Marcia….this sounds like a complicated case and I am not a lawyer or estate planner. I would highly recommend you seek legal advice from a qualified lawyer.
Does my fathers estate need to go to probate if he had no debts or mortgage and his will left everything to my mother? Please advise
@Nancy,
It all depends on the size of the estate, type of assets etc. I a property was held in joint tenancy probate is not needed for it. For life insurance, RRSP/RRIF if there are named beneficiaries probate is not needed. It also depends on the size of the estate, often for smaller estates the financial institution will not need a probated will.
I have a really close friend that needs help. This is the situation, in 2004 his parents remortgaged their home, (after it was paid off), and gave the $$, sum of $75000.00 to one of five (5) children, to build a garage on their own property. There was a signed and dated promissory note between the parents and child, stating the she will pay the mortgage payments, and in case of death of the parents that amount will be paid off. Since 2004, there has been missed payments and NSP cheques from the child for repaying of mortgage, and the parents covered this. Doing this, put them in financial distress with everyday living, eg. food, medication, gas for the car and utilities. My friend tried to help when he can will extra $$, and food. Now in 2011, both parents have passed and there is still a $48000.00 mortgage on the property and the child is refusing to make anymore payments to the mortgage. This is putting a lot of stress on the rest of the siblings, because there was no will done. My friend lives in Ontario, Canada; and he doesn’t have the $$ to pay the lawyers, let alone the funeral cost. What can he do to make her responsible for this $$?
in canada
if ure life ins policy says to the estate there will be taxes pd on it, but money in account for debts first etc, if ure policy says a beneficiary, no taxes pd on it , and person gets money sooner,
u may want to have 2 one for debts and one for kin
im not expert but this i beleive big time.
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