FAQs Probate
What is Probate?
Why is Probate Necessary?
How Long Does Probate Take and How Much Does It Cost?
Who is the Client in Probate?
What is the Difference Between Probate Assets and Non-Probate Assets?
What Sort of Tax Issues Arise in Probate?
Where Do I Get a Death Certificate?
What if I Can’t Find the Will?
Where Can I Get More Information?
What is Probate?
Probate is the legal proceeding in which a court approves or determines how your estate will be divided (an “estate” is all of your liabilities and assets – whether real property or personal property – determined upon your death). The court will follow your will in distributing your property and your Personal Representative (aka Executor) will carry out the terms of the will, unless the will is contested by your heirs.
Some people think having a will avoids probate. This is not the case. A will is used in probate to determine who receives what property, who is appointed guardian to any minor children and who will be responsible for carrying out the wishes contained in the will.
If an estate includes real estate or minor children, a formal probate action in court is generally required. However, if the value of the estate does not exceed $50,000, probate is not mandatory in many states, including Minnesota.
Probate can be expensive if you do not plan correctly. For instance, if you do not have a will, the court will need to appoint an administrator to determine how the estate is divided. This can take a long time and cost a significant sum of money.
There are a variety of estate-planning devices that can be used to avoid probate or minimize its expense. Joint tenancies, payable-on-death accounts and living trusts are some of the most common estate planning methods.
Why is Probate Necessary?
A Probate administration is required to make sure any of the decedent's property owned in his own name alone is transferred according to his Will or according to Minnesota law if there was no Will. In the process, the last bills and expenses and Estate Taxes, if any, will be paid.
How Long Does Probate Take and How Much Does It Cost?
This is one of the most commonly asked questions – and one where the answer varies greatly depending on the individual situation. The time it takes to probate an estate depends on how complicated the estate is, including whether or not the decedent (the person who died) left things in order. If the decedent left piles of papers to be filed and a paper bag full of receipts, it may take time to sort out the initial things, like gathering assets, filing tax returns, and paying debts. Other situations can cause delays such as a complicated tax situation, many assets to be sold, debt disputes, lawsuits against the estate, or difficulty finding the people who will receive under a will or under state law (Beneficiaries). A lawsuit involving a challenge to a Will may cause long delays. Considering all of these factors, probate can take anywhere from about 6 months to several years.
It is worth noting that much ado is made about the length of time it takes to probate an estate. Perspective and patience are important as the process gets underway. Nobody is surprised that it takes 9 months to make a baby – because everyone is used to the idea. But somehow the probate process brings out the impatience in people. The process takes a many months – and it’s much easier when family members come to realize this and accept it rather than getting anxious about the process.
The cost of probate will differ depending on these same factors. When all the costs are added up—and these may include appraisal costs, Personal Representative fees, court costs, costs for a type of insurance policy known as a Surety Bond, plus legal and accounting fees—probate will most certainly run into the thousands of dollars. Some costs, such as filing fees and publication fees, cannot be avoided, but you may be able to help keep costs down by helping perform certain tasks along the way. J. F. Henderson Law will work with you to find an arrangement that makes you comfortable.
If there is a Will contest or other litigation involving an estate, there is no way to predict costs. Disputes have been known to consume all or most of an estate’s assets, which is why it’s in everyone’s interest to resolve difficulties as quickly and amicably as possible.
Who is the Client in Probate?
The Estate is the Client. J.F. Henderson Law will represent the Personal Representative (aka Executor) of the Estate, not any of the heirs or beneficiaries individually. This is important to remember if a dispute arises among the heirs.
What is the Difference Between Probate Assets and Non-Probate Assets?
The basic difference between Probate and non-Probate assets is that Probate assets are those assets which are titled in the decedent's name alone, and where there is no Beneficiary designation (except as may be specified in a Will). Non-Probate assets are those assets which have a Beneficiary designation, where ownership is held in joint tenancy, or where there is a POD (payable on death) or TOD (transfer on death) account. Then, title to that property goes to the surviving joint tenant or named Beneficiary. Other types of non-Probate assets are insurance policies naming a Beneficiary other than the insured's Estate, pension and profit-sharing plans naming a specific person as Beneficiary, bank accounts held by the decedent in Trust for someone else, and assets held by the decedent in a Trust. If the decedent held an interest in real estate as a tenant in common, his interest in that real estate is a Probate asset.
We must know what the decedent owned and how those assets are titled before we can determine whether or not it will be necessary to Probate the decedent's Estate. It is necessary to open a bank account in the name of the Estate and deposit all Estate receipts and pay all bills through this account (a new Tax ID is required from the IRS to open this account). This will give a paper trail in the event there are any questions by heirs, claimants, or taxing authorities. The Personal Representative (a.k.a. Executor) will have the authority to open this account after the court grants him or her authority.
What Sort of Tax Issues Arise in Probate?
This is another one of the most commonly asked questions – and one where the answer varies greatly depending on the individual situation. The information provided here is general information only and cannot be relied upon as legal advice. You should consult J. F. Henderson Law, another attorney or a tax professional for further information. With that said, here are general summaries of some of the biggest tax issues that arise:
- Decedent's Income Taxes: The Personal Representative is responsible for making sure the decedent's final Income Tax Returns are filed on time. If there is a surviving spouse, joint returns can be filed for the year of death. The Income Tax Returns would include the deceased's income up to the date of death and the spouse's income for the entire year. If you are expecting a refund, a special form must be filed.
- Income Taxes on Inheritances: There is no Income Tax on the value of an inheritance. However, some inherited assets could include taxable income which will have to be reported on a beneficiary’s personal Income Tax Return. Examples of these assets are pension and profit-sharing benefits, IRA plans, U.S. Savings Bonds, and some Annuities.
- Tax Basis of Inherited Property: Each Estate Asset is valued on the date of death or the "six-month alternate valuation" date. This valuation becomes the "tax basis" for the Beneficiary's Income Tax purposes and will be used to calculate capital gain or loss when the Beneficiary sells the asset. There are special rules for the tax basis of joint tenancy property and we can discuss them if applicable.
- Death Taxes and Tax-Sheltered Amounts: If the Estate Assets exceed certain amounts, Federal and/or Minnesota Estate Tax Returns must be filed. Estate Taxes must be paid if the Estate Assets (less certain deductions) exceed the Tax-Sheltered amounts. Under current law, the Tax-Sheltered amounts are . . .
| For Deaths Occurring in: |
 Federal Estate Tax Returns Must be filed if the Gross Estate exceeds the Tax-Sheltered Amount of... |
Minnesota Estate Tax Returns Must be filed if the Gross Estate exceeds the Tax-Sheltered Amount of... |
| 2008 |
$ 2,000,000 |
$ 1,000,000 |
| 2009 |
$ 3,500,000 |
$ 1,000,000 |
| 2010 |
 Federal Estate Tax is Repealed |
$ 1,000,000 |
| 2011 |
$ 1,000,000 |
$ 1,000,000 |
- An Estate Tax may be due depending on the amount of the assets and deductions and whether there is a surviving spouse. The Federal Estate Tax rate is 45% on the amount the Estate Assets (less deductions) exceed the Tax-Sheltered Amount. The Minnesota Estate Tax rates range from .8% to 16% on the excess over the Tax-Sheltered Amount. Generally, all property passing to a Surviving Spouse is exempt from Estate Taxes - and that is one of the deductions. The Estate Tax Returns must be filed and any Estate Taxes paid within nine months after decedent's death. Even when no Estate Taxes are due, the IRS and Minnesota Tax Department require the filing of Estate Tax Returns if the gross Estate exceeds the “Tax-Sheltered” amount. If necessary, an extension to file the Estate Tax return can be obtained.
- Estate/Trust is a New Taxpayer: After a person dies, his Estate becomes a new taxpayer. If he has a Trust, that Trust becomes a new taxpayer. Therefore, you must keep detailed records of income and expenses for the period after the date of death to the date the Estate is closed. Income earned before death must be reported on the decedent's last Income Tax Return. Income earned after death will be reported on the Income Tax Return for the Estate or Trust, or by the Beneficiary.
- Income Generated by Estate Assets: All income earned on the Estate Assets during the period of administration is potentially subject to Income Tax. Depending on when Estate Assets are distributed and other factors, either the Estate and/or the heirs are liable for any tax due on the income earned during the Estate administration.
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If an Estate has gross income of $600 or more, or there is a Beneficiary who is a non-resident alien, then the Estate must file a Fiduciary Income Tax Return.
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If a Trust has any taxable income (gross income less deductions and exemptions) or gross income of $600 or more, or there is a Beneficiary who is a non-resident alien, then the Trust must file a Fiduciary Income Tax Return.
Where Do I Get a Death Certificate?
Usually, the Funeral Director will order Death Certificates for you. It is a good idea to order at least a few copies. Oftentimes it takes several weeks to receive certified copies of the Death Certificate.
What if I Can’t Find the Will?
If a Will cannot be found, and you believe there was a Will that may be in a safe deposit box, you can make arrangements with the bank to look in the box for the Will. With the assistance of a form that I can draft for you, a bank representative will open the box, and if a Will is found, the bank will send it directly to the Probate Court.
If you are a co-owner of the safe deposit box, you can enter the box as usual at any time. If you are not a co-owner, you may utilize the form referenced above or you can wait until the Probate Court issues Letters of Administration appointing the Personal Representative of the Estate. If you choose to pursue the latter route, you (or the Personal Representative if it is someone other than yourself) must take a certified copy of these Letters along with a certified copy of the Death Certificate to the Safe Deposit Department of the bank, and then you will then be given access to the box. You may remove the entire contents of the box. It is best to bring all items to our office so we can inspect them and prepare a list of the important papers. If you are not a co-owner of the box, it is possible for the Bank to enter the box, make an inventory of its contents, and then send the Will, if any, and the Safe Deposit Box Inventory to the Probate Court. If this is the case, please ask the Bank for photocopies of the Will and the Safe Deposit Box Inventory.
Where Can I Get More Information?
There are countless sources of additional information pertaining to estate planning and probate matters. A suggested place to start reviewing unbiased information is the Minnesota Attorney General’s website at: http://www.ag.state.mn.us/consumer/seniors/probate/. And again, J. F. Henderson Law offers a free initial appointment to all new clients. This meeting is free and no obligation. You will not be charged for it whether you choose to use the services of J. F. Henderson Law or not. Email jfh@jfhendersonlaw.com or call 651-699-2600 to arrange an appointment.
