If you or someone you know is going through probate to settle the estate of a loved one, you will likely be exposed to some terms that you may have never seen before or don't understand. Probate can be a confusing process, but understanding what some of these terms mean may make the process easier for y ou:
Probate, also referred to as estate administration or estate settlement, is the process of settling a deceased person's estate, whether the decedent died with or without a will.
This process generally involves:
- Appointing someone to manage the estate.
- Taking inventory of all debts and assets of the decedent.
- Paying any valid debts the decedent had.
- Ensuring all remaining assets are distributed to the designated beneficiaries or appropriate heirs.
If there are no disputes within this process, then it is referred to as uncontested probate.
Probate settles the decedent's estate. The term Estate refers to the real and personal property, both tangible and intangible, that was owned by the decedent at the time of his or her death.
There are many people who are involved in probate; every person has a different role to play and, depending on what that is, there is a different term for each person.
A Decedent is a person who has died, whether with or without a valid Will.
If the Decedent died with a will (also referred to as testate) then an Executor will be named by the will and can then file to be appointed and sworn in by the probate court to carry out the terms of the will. Alternatively, if the Decedent died without a will (also referred to as intestate), then the probate court will appoint an administrator to administer the estate. Both an executor and administrator are responsible for:
- Notifying creditors and debtors of the death.
- Taking inventory of the estate.
- Paying off outstanding debts.
- Distributing assets to heirs or beneficiaries.
- Maintaining records of the estate settlement, and filing certain forms, receipts, and then closing the estate.
There are two terms to refer to people who might inherit from the decedent:
- Heir (also known as Heir at Law) - A person who, under the laws of a given state, is entitled to a share of a decedent's estate where the decedent died intestate. This is generally a spouse and children if the decedent was married; if unmarried it is children, if any; if no spouse or children, it may include parents, siblings, and more remote relatives.
- Beneficiary - A person designated on a beneficiary designation form to receive property upon a decedent's death; or in probate proceedings, a person to whom property has been bequeathed under a Will. A beneficiary may or may not also be considered an Heir of the decedent.
Now let's talk about assets. You will hear this term brought up frequently and this is simply any property owned by the decedent that holds value and is part of their estate. There are two distinctions about assets made during probate:
- Probate assets: Property governed by and distributed through the probate process. This usually includes bank accounts, stocks/bonds, real estate, or vehicles, except as noted below.
- Non-probate assets: Property which passes outside of probate automatically. These are usually jointly owned assets which are immediately transferred to the surviving owner. This can be joint owned accounts or real estate with rights of survivorship. In addition, assets that list beneficiaries such as a 401k plans, IRAs, life insurance, and assets that list a pay on death (POD) beneficiary or a transfer on death (TOD) beneficiary, are also non-probate assets.
This then brings us to our next term, Joint Owners With Right of Survivorship. This is an arrangement where two or more people have equal ownership over an asset, and upon the death of one person, ownership is automatically passed outright to the surviving owner(s) with or without the presence of a valid will. Assets owned as Joint Owners With Right of Survivorship are non-probate assets and therefore are not involved in the process of probate.
Alternatively, you may hear the term Tenants in Common, and this is when an asset is split in ownership between two or more people and such people can transfer their percentage of the asset to their designated heirs and/or beneficiaries. They do not, however, have the right to pass down the entire asset as they do not own 100% of it in a Tenants in Common arrangement. Assets under a Tenants in Common arrangement are considered probate assets and will be distributed through the probate process.
If the estate is insolvent and there are not sufficient assets to satisfy all debts the decedent had and also provide for the surviving spouse and minor children, the term year's support may come up. A year's support petition can be made to seek a priority amount to be awarded to a surviving spouse and/or minor children as part of the estate settlement, regardless of whether there was a will.
We hope that by defining some of these terms, and explaining where they fit in the process, that we have provided some clarity on the topic. At Peach State Wills and Trusts, we provide guidance in helping families and loved ones settle uncontested estates. If you need help with this call us at (678) 344-5342 or contact us here.