“Probate” is the process of identifying and gathering a decedent’s assets, paying taxes, claims and expenses, distributing assets to beneficiaries and the wrapping up of a decedent’s affairs in a court supervised setting. Probate provides a means for those interested to make any claims, valid or invalid, in a fair structured process. Properly followed, it adds finality to beneficiaries and creditors alike.
The date of death sets everything in motion. It establishes filing deadlines and the transfer of property rights. The Personal Representative (the “PR”) named in the Will, requests of the probate court permission for the administration of the decedent’s estate. The court then appoints then the PR and grants letters of administration (Letters Testamentary), which gives the PR the authority to manage the decedent’s estate.
The PR must locate and gather all the assets owned by the decedent on the date of death that did not pass to another person (the probate assets). Generally, assets held by a trust, for at least a three-year time period and most jointly held property are of no concern to the PR (non probate assets). The executor’s task requires the examination of the decedent’s financial records, safe deposit box, cancelled checks and checkbooks, old income and gift tax returns, insurance policies and incoming mail.
The most important aspect of the probate process is the settlement of claims against the decedent’s estate. The PR must contact known and reasonably ascertainable creditors to inform them of the decedent’s death. If a notified creditor does not enter a claim with the probate court within six months (the “claim period”), the creditor will be barred from making a claim against the estate.
Within nine months of the decedent’s death, if the value of the decedent’s assets (probate and non-probate) is more than the Federal Estate Tax Exemption Amount (presently $5,450,000), the PR must file a Federal Estate Tax Return with the IRS and pay any taxation due. The PR must also file a New Jersey Estate Tax Return if the estate is greater than $675,000 as well as file a New Jersey Inheritance Return.
In addition to the estate tax return, the PR must prepare and file the decedent’s final Federal Individual Income Tax Returns, as well as resolve any outstanding income or gift tax audits, if any, and pays any taxes due. After all claims have been settles, the PR must prepare a Final Accounting of Receipts and Disbursements, and determine how the remaining assets are to be distributed to the beneficiaries.
The probate procedure is a process that requires careful attention every step of the way, but the result will be the orderly transition of the decedent’s estate, and in accordance with the wishes of the decedent.