How are assets and expenses handled during probate?

| Feb 8, 2020 | Firm News

The executor of an estate has many duties to complete during the probate process. One is making sure that the estate’s bills are paid properly. To do this, you have to know what assets are handled in the probate case and which bypass probate. You also need to understand what bills are the estate’s responsibility.

Before anything is done with the estate’s bills, the executor must locate the assets and determine how the decedent intended them to be handled. Some of these assets are exempt from creditors, so they can be distributed prior to the ones that must be kept until the probate case is closed out. Typically, the probate process can take one to two years to complete.

What assets bypass probate?

There are a few types of assets that bypass the probate process, including:

  • Property with a payable on death designation
  • Jointly held property for which the other party is still living
  • Assets held in a trust

Property that’s held only in the decedent’s name and that isn’t covered by one of those situations is included in the probate process. A person who had a complex estate plan might not have many assets that have to go through probate, but some might have many. Additionally, some estates that don’t meet specific value requirements might be able to bypass probate entirely.

What expenses must be paid?

There are six classes of expenses that are handled in probate. These have varying priority levels, so the executor must handle them in the proper order.

Funeral expenses are at the top of the priority list and are usually the first expense paid by the estate. The cost of the funeral must be reasonable when you consider the value of the estate. A person who has a very small estate may only have enough to cover the funeral.

The cost of the estate administration is another priority expense. This includes the attorney fees for the probate process and any fees paid to the executor.

Taxes are third on the list of priority expenses. The taxes due to the federal government must be handled before state taxes. Inheritance, estate and income taxes are all covered under this category.

Medical bills from before the decedent’s death are next on the list. These are followed by anything that’s provided a priority status by state laws. Last on the list is any creditor who remains after all other bills are paid.

As you can see, this is a complex undertaking for some estates. It may behoove some individuals to seek assistance from someone who’s familiar with these matters.