Frequently Asked Questions

What is Probate?

Probate is a legal process in which a probate court settles the estate of a deceased individual (the “decedent”). The process of probating a decedent’s estate involves gathering and accounting for the assets of the decedent, payment of debts, taxes, claims and costs of administration of the decedent and distribution of probate assets to the beneficiaries.

Typically, assets that are subject to the probate process consist of real estate, financial assets and personal property titled solely in the decedent’s name at death, which do not pass automatically (by operation of law, etc.) to a third party upon the decedent’s death. A simple method in which to determine the probate estate of a decedent is to take all known assets of the decedent, then exclude (1) all joint tenancy property, (2) all assets with a beneficiary designation (other than to the decedent’s estate), such as life insurance, IRA, pension/profit sharing, and payable-on-death accounts, (3) any assets in trust and (4) other property passing by contract or operation of law. The remaining assets, if any, are the probate assets of the decedent.

Probate generally involves paperwork and court appearances. Any fees and court costs are paid from estate property, reducing the amount which would otherwise go to the decedent’s beneficiaries. Formal court-supervised probate can be a costly, time-consuming process. In many cases, the less formal and simple “Independent Administration” can be used to streamline this process. The cost of probate is either set by state law or by practice and custom in your community.

Intestate Estate

If a decedent dies without a Will, he or she is said to have died “intestate”. The probate assets of the decedent pass to the heirs (after the payment of any debts, taxes, claims and costs of administration) pursuant to a distributive scheme created under the laws of the jurisdiction in which the decedent was legally domiciled. This process is overseen by a probate court. In Illinois, if a decedent dies intestate, then the probate assets are distributed as follows:

Decedent is survived by Intestate share
Spouse only Entire estate to spouse.
Spouse and Descendants One-half to spouse and one-half to descendants.
Descendants Entire estate to descendants.
Parents and/or Siblings Decedent's parents, brothers, and sisters in equal parts. If one parent predeceases the decedent, the surviving parent gets a double portion. If a brother or sister predeceases the decedent, his or her descendants take the predeceased sibling's share.
Grandparents and/or their Descendants Half of the estate passes to the decedent's paternal grandparents equally if both survive, or to the surviving paternal grandparent, or to the descendants of the decedent's paternal grandparents, or either of them if both are deceased. The other half passes to the decedent's maternal relatives in the same manner. If there is no surviving grandparent or descendant of a grandparent on either the paternal or the maternal side, however, the entire estate passes to the decedent's relatives on the other side in the same manner as the half.
Great Grandparents and/or their Descendants Half of the estate passes to the decedent's paternal great-grandparents equally if both survive, or to the surviving paternal great-grandparent, or to the descendants of the decedent's paternal great-grandparents, or either of them if both are deceased. The other half passes to the decedent's maternal relatives in the same manner. If there is no surviving great-grandparent or descendant of a great-grandparent on either the paternal or the maternal side, however, the entire estate passes to the decedent's relatives on the other side in the same manner as the half.
Remaining Family Members Decedent's nearest kin in equal degree.
State of Illinois If there is no taker under any of the above provisions, the intestate estate reverts (escheats) to the state of Illinois. Real estate in the estate generally goes to the county where the real estate is located. Personal property in the estate generally goes to the county where the decedent was a resident.

For most families, the above distribution scheme is not the best choice. Many families would like to see their assets be distributed to or held in trust for the surviving spouse, and then, upon that spouse’s death, to their children (or trusts for their benefit). If the decedent dies intestate survived by minor children (and no spouse), a guardian will be appointed by the court to represent the children’s interests with respect to the probate estate. If there is no Will naming a guardian(s) of the minor children, the court may choose a guardian from its roster. If the decedent is also survived by a spouse, then the courts will typically appoint the spouse as the guardian, but is not required to do so if it is against the best interests of the minor child.

Testate Estate

One common misconception in estate planning is that a Will avoids probate. This is not the determining factor. If a decedent dies with a valid Will, he or she is said to have died “testate”. The executor(s) named in the Will presents the Will to the probate court which determins if the Will is valid, hears any objections to the Will and supervises the process to assure that property remaining (after the payment of any debts, taxes, claims and costs of administration) is distributed to the beneficiaries in accordance with the terms and conditions of the Will.

Advantages and Disadvantages of Probate

There are both advantages and disadvantages to probate.

Advantages

The primary advantages of probate include the following:

Will Validation
The probate process provides judicial verification of the Will, if one exists.

Supervision of Personal Representative
The actions of the personal representative (i.e. executor in an testate estate or administrator in a intestate estate) are overseen by the probate court which ensures that debts are properly paid, claims are resolved and property is distributed in accordance with the Will or by the law of intestacy.

Forum for Dispute Resolution
All estate issues are resolved by and overseen by the probate court, including guardianship of minors, conservatorship of incapacitated parties, disputed claims by creditors and Will contests.

Time Limitation for Creditor Claims
Creditors, given proper notice, have a limited time to file a claim against the decedent’s estate. In Illinois, a known creditor generally has six months from receipt of notice (or from the date of publication for an unknown creditor) that a probate estate has been initiated to file a claim. After the six month period, all such claims are barred. A trust, on the other hand, is generally subject to claims until the statute of limitations runs out. In Illinois, a creditor generally has two years to file such a claim. The shortened claims period provided in a probate proceeding may be particularly beneficial to the estate of a deceased professional who may be exposed to professional liability.

Disadvantages

The primary disadvantages of probate include the following:

Public Record
There is a lack of privacy in that the decedent’s Will, beneficiary information, asset information and the claims of creditors are all matters of public record.

Time Delays
Property distribution may be time-consuming, depending on the complexity of the estate, Will disputes and the jurisdiction. In Illinois, the probate process typically takes 12 to 18 months, but even the simplest probate process will take no fewer than 7 to 8 months (due to the 6 month creditor claims period).

Inflexible Court Process
The probate process must adhere to state statutes and strict court rules.

Assets Frozen
Typically, assets are frozen and unavailable to beneficiaries (including the surviving spouse) for a certain period (usually the expiration of the creditors’ claims period) without prior court approval. In Illinois, court approval is required for the first six months of probate and an individual requesting an early distribution may be required to post bond by the court.

Cost and Fees
The costs of administering a probate estate can be expensive, especially with attorneys’ fees, executors fees, accounting fees, filing fees, bond premiums, appraisal and business valuation fees and other miscellaneous fees. The cost will increase if there is a Will contest involving litigation.

Ancillary Probate
Ancillary probate is a proceeding conducted in a different state from the one in which decedent resided at the time of death. Such proceedings are required because the decedent owned real estate in another state and/or the decedent owned personal property, such as cars, boats or airplanes, that are registered and titled outside of the decedent’s home state.

Avoiding Probate

For the reasons discussed above, it may be prudent to avoid the probate process in one or more states. There are several methods of avoiding probate, some of which do so with ease but have disadvantages that require additional scrutiny.

Joint Tenancy with Rights of Survivorship

With the exception of retirement plans, IRA and life insurance, joint tenancy ownership can be used on most property. Property owned in joint tenancy with rights of survivorship avoids probate because his or her interest in the property automatically passes to the surviving joint owners(s) by operation of law at the first joint owner’s death. Unlike probate assets, jointly owned assets are not frozen, and are generally made available to the surviving joint owner(s) immediately. By owning property in this manner, probate is avoided; however, there are a number of disadvantages, such as achieving only a partial step-up of income tax basis, possible gift tax consequences, loss of ownership and control over the asset, and increased creditor exposure.

Beneficiary Designations

Beneficiary designations under life insurance plans, retirement plans and IRAs avoid probate because they follow strict contractual guidelines specifying the person to whom the proceeds should be paid. There is no need for a probate court to oversee the distribution of these types of assets, unless the named beneficiary is the estate or the beneficiaries do not survive the decedent.

Transfer on Death Accounts

Transfer on death (TOD) accounts (also known as payable on death accounts or Totten trusts) provides an alternative to jointly owned assets for bank accounts. During lifetime, the beneficiary of the TOD account has no rights to the account. The beneficiary of the TOD account can be changed at any time by the account owner, the funds spent or the account closed. At death, the asset is transferred to the beneficiary without going through the probate process. Although one method of avoiding probate, it is limited to bank and brokerage accounts and not used for tangible personal property or real estate. A TOD account requires the survival of the named beneficiary, otherwise it will be subject to the probate process of the owner.

Trusts

The final probate avoidance device is a properly prepared trust. A trust is a legal entity created by one party for the benefit of himself/herself or other parties. It can hold title to virtually any type of property. As such, it avoids probate by having title in the name of the trustee of the revocable trust and not the decedent and providing a plan of disposition for its assets at the date of death. With a Revocable Trust, which is a very popular will substitute in estate planning, the named trustee (or successor trustee) generally is given authority to pay the decedent's bills and has a fiduciary responsibility to distribute the trust property to beneficiaries (including other trusts) as provided in the provisions of the trust agreement. A revocable trust does not depend upon survival of specific persons to avoid probate.

Conclusion

Probate can be a cumbersome and expensive process which can be avoided with proper estate planning. You and the attorney should look to your particular needs to determine which type of estate plan is best suited for your needs. We welcome the opportunity to discuss the probate process, wills, trusts and other ownership vehicles to avoid probate and any other questions you may have with respect to estate planning. Please contact any of our estate planning attorneys for assistance.