When an individual dies, his or her estate must be properly administered. The administering of an estate includes paying any debts and taxes that are owed and locating and distributing the assets of the deceased individual (the “Decedent”). If an individual dies "intestate," meaning without a Last Will and Testament (a “Will”), the process is known as “Administration” and if there is aWill, the process is called "Probate."
If a Decedent dies intestate, his or her estate will be distributed based on the intestacy laws of the state where the Decedent resided at the time of his or her death. The Court (in New York it is the Surrogate’s Court but it may also be known as the Probate Court in other jurisdictions) will appoint a fiduciary for the estate. Without a Will, the Court will also determine with whom minor children will live if there is no surviving parent. By leaving the decision as to who will be the fiduciary in the hands of the Court, an estate may be managed by individuals that the Decedent would not have wished to have been appointed. Additionally, by leaving the distribution of the assets to the intestacy laws, the Decedent's estate may not end up where the Decedent intended (for example, the Decedent's estate may pass to a family member from whom the Decedent was estranged). It is also possible that the Decedent's estate tax exemption may not be fully utilized or that an heir who has judgment creditors loses the inheritance to the creditors.
If you do not want state law to dictate who gets your property and who will manage your affairs when you die, if you care who is appointed as guardian of your minor children at your death, and if you would like your estate to pass in a tax efficient manner, you must have a Will. The Will should be updated as necessary over the course of time to deal with changes in circumstances. After your death, that Will is taken to the Court and “Admitted to Probate.”
Probate is the process of judicial verification of the Will, the appointment of the Decedent’s chosen fiduciary (known as the Executor) and the administration of the estate in accordance with the Will's terms. There are a number of advantages to Probate:
- Probate ensures that the estate is managed by an Executor of the Decedent’s choice and distributed in accordance with the Decedent's wishes.
- Once Probate has begun, creditors have a limited time to file a claim against the Decedent's estate (which, in New York, is seven months from the date of the Executor's appointment). Once the “claims period” has expired, and debts and taxes have been properly paid, the Executor may begin distributing the estate’s assets. Although a creditor may still bring a claim against the estate after the expiration of the “claims period”, if the Executor has already distributed the estate’s assets, that Executor is protected from suits brought by the creditor.
- If an Executor is nominated in a Will, the requirement that the fiduciary post a bond is normally waived by the Court. In contrast, an Administrator in intestacy is often required to post a bond. Probate therefore saves the cost of “bonding” the fiduciary and paying significant bond premiums during the Probate process.
- If there are minor children involved, a Will is the only legal document in which the Decedent can nominate physical and financial Guardians for those children. With Probate, the Decedent chooses who will raise, and monitor the assets for, minor children. In Administration that decision is left entirely in the hands of the Court.
- As long as the Court's instructions are followed and no breach of fiduciary duty occurs, Probate shields the Executor from personal liability.
- Preparing and Probating a Will allows the Decedent to take advantage of tax planning opportunities that simply are not available if one dies intestate.
The laws surrounding the administering of an estate can be complex and overwhelming to a grieving friend or family member of the Decedent, especially if the Decedent does not have a Will. By working with our estate planning attorneys, you can give clear instructions on the distribution of your assets, appoint Executors and Guardians, minimize the potential for disputes among your beneficiaries and heirs, and save estate taxes. We can help make this process easier. Please do not hesitate to contact a member of our Trusts and Estates Practice Group with any questions.