Do you want to know when property is in probate? Probate is the legal process after someone passes away, which includes verifying the deceased’s will and distributing their property.
Probate refers to the legal process by which an individual’s property, such as real estate, is dealt with after their demise.
We understand that you probably have not fully grasped the concept.
In this article, we will seek to explain what probate is, why it is crucial, and what any property owner or beneficiary should know about it.
If this is what you would be interested in, ensure to hop on the ride.
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Now, let’s get started.
What Is Probate?
Let’s start this piece by explaining probate, its definition, and its purpose before we touch on other aspects of this article.
Definition And Purpose
Probate is the legal process that involves proving the validity of a will, if any, and distributing a deceased person’s property according to the will or by state law if there is no will.
Validating the Will: The first is to make sure that the will is legally valid and reflects the true intention of the deceased.
Identifying and Inventorying Assets: this involves taking inventory of the deceased’s belongings, such as homes, cars, stocks and bonds, jewelry, and cash.
Paying Debts and Taxes: Paying any unpaid bills, credits, and taxes of the estate.
We are distributing the remaining assets: All the remaining property will be distributed to the legal heirs.
When Does Property Go Into Probate?
In this section, we will be considering the unique circumstances that make a property go into probate.
Presence Of A Will
In this case, probate comprises establishing the validity of the will and the subsequent administration of the estate following the instructions outlined in the document.
They will usually provide for an executor who oversees estate administration through probate.
The property in a will is then divided as the deceased wanted it to be divided after all debts and taxes have been paid.
Absence Of A Will
When there is no will, the estate is said to be “intestate,” probate guarantees that assets are distributed based on the state’s law.
These laws define who inherits the property, often focusing on spouses, children, and other related individuals.
Here, the court will assign an administrator to oversee the affairs of the estate.
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Steps In The Probate Process
The next question that comes to mind is what the steps in the probate process are. In this section, we will cover all the steps involved in the process.
- 1. Filing The Petition
The first step in the probate process would be to file a petition in the probate court.
The party responsible for filing the petition would either be the execution named in the will or, if there is no will, an interested party would file the petition.
After that, the court then has to schedule a hearing to validate the will and then appoint the administrator or executioner.
- 2. Notifying Heirs And Creditors
After the court accepts the petition, the executor must inform other beneficiaries and creditors that the probate process is underway.
This is usually achieved through public notices and direct contact.
- 3. Inventorying The Estate
The executor also has the duty of ascertaining all properties in the estate, including real estate, furniture and fixtures, cash and bank deposits, investments, and other assets.
The inventory must be filed with the probate court.
- 4. Appraising And Managing Assets
Some balance sheet items, such as fixed assets, especially property, plant, and equipment, may require valuation to arrive at fair value.
The executor must oversee and maintain these assets throughout the probate process.
- 5. Paying Debts And Taxes
Before the estate can distribute assets to beneficiaries, all debts and taxes must be paid.
This consists of clearing any remaining debts, such as car loans and credit card bills, and preparing the deceased’s final income tax return.
- 6. Distributing The Remaining Assets
After paying off all expenses, such as debts and taxes, the executor divides the remaining property as per the will or the state inheritance laws.
The executor can only distribute assets after getting approval from the court to ensure compliance with the law on the matter.
Importance Of Probate
Legal Transfer Of Title
Probate ensures the legal transfer of the title deeds from the deceased to the rightful beneficiaries.
This process is very important and plays a major role in avoiding future court cases involving property ownership.
Debt Settlement
Probate ensures the deceased’s bills and taxes are paid before the property is distributed.
This shields the beneficiaries against inheriting liabilities and possibly legal cases.
Protection Of Beneficiaries
Probate also safeguards beneficiaries since it guarantees that the estate is managed and distributed as per the wishes of the deceased or the applicable law.
Such court supervision helps eliminate fraudulent claims and mismanagement of the estates.
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Avoiding Probate
There are ways that the probate process can be avoided. These circumstances are what we would consider here
Joint Ownership
The first way of preventing an asset from going through probate is by having more than one owner of a particular asset.
Titled property, as a rule, transfers to the survivor owner of the property without any involvement in the probate process.
Trusts
Setting up a trust can also prevent probate. Property in the trust belongs to a trustee and is transferred to the recipients stipulated by the trust agreement; the property does not go through probate.
Beneficiary Designations
Beneficiaries are designated in life insurance policies and retirement accounts, which means that assets go directly to them without passing through the probate process.
Challenges And Considerations
Probate Costs
Probate is expensive because it attracts charges such as court fees, attorney fees, and appraisal fees. Such costs are funded out of the estate, which may decrease the beneficiaries’ share.
Time-Consuming Process
Probate is a time-consuming procedure; depending on the estate size, it might take several months to several years to complete.
This delay can be tiresome, especially for the beneficiaries who are waiting for their shares to be inherited.
Privacy Concerns
These proceedings are legal records that imply that information on the deceased’s estates and distribution is available in the public domain.
This can be a concern for those who are highly conscious of their right to privacy.
Which Of The Following Items Will Pass Through Probate?
Probate is the process of overseeing the affairs and distribution of the assets of a deceased individual or their estate.
Thus, knowing what assets go through probate can assist people in making a proper plan for their estates and prevent undesired situations for the heirs.
Property That Goes Through the Probate Process
1. Solely Owned Property
Assets that were exclusively owned by the deceased at the time of their death usually go through probate.
These include real estate, cars, bank accounts, and other personal effects not held jointly or with named heirs.
2. Personal Possessions
Some probate assets include jewelry, furniture, art, and other personal effects that belong exclusively to the deceased. These assets are counted and valued for the estate.
3. Bank Accounts
Accounts just in the deceased’s name without a payable-on-death designation (POD) will go through the probate procedure.
These are savings accounts, checking accounts, and certificates of deposit.
4. Investments
Other assets that fall under the category of probate include stocks, bonds, mutual funds, and other securities that the deceased held individually without any named beneficiary.
5. Real Estate
Assets owned solely by the deceased or jointly with another person as tenants in common are subject to the probate process.
This encompasses principal residences, secondary homes, and rental or income properties.
Probate assets include sole and separate property, personal effects, bank accounts, stocks, bonds, and some kinds of real estate.
Some assets subjected to probate can be avoided through proper estate planning, like joint ownership, beneficiary designations, and trusts.
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What Assets Are Exempt From Probate In NC?
North Carolina, like many other states in the USA and beyond, allows some assets to avoid the probate process to make it easier to settle an estate and to transfer property to the rightful heirs.
It is important to know about them, as it is useful knowledge in estate planning.
Exempt Assets
1. Jointly Owned Property
Assets held with rights of survivorship become the property of the surviving owner without the need for probate.
This includes shared accounts, jointly owned houses, or any other property with tenancy in common ‘with right of survivorship.’
2. Beneficiary Designations
Some of the major examples of assets that do not go through probate include certain types of financial accounts and insurance policies with named beneficiaries. These include:
Life Insurance Policies: Payments are made to the intended recipients themselves.
Retirement Accounts: Traditional and Roth IRAs, 401(k) or other qualified pension plans, and any other accounts with a specific beneficiary.
Payable-on-Death (POD) and Transfer-on-Death (TOD) Accounts: These are bank accounts and securities that go directly to the named beneficiaries and are thus exempt from the probate process.
3. Trust Assets
Property that is placed in a living trust cannot go through probate. When done correctly, a trust will allow the trustee to deal with the property without going through the probate process.
4. Small Estate Affidavit
North Carolina laws state that the small estate affidavit can be used for estates worth less than $20,000 or $30,000 if the surviving spouse is the only beneficiary.
This means that the estate can be managed without going through probate.
In North Carolina, other categories of property do not go through the process of probate; they include property owned jointly, accounts with nominated beneficiaries, trust property, and small properties.
Legal methods such as joint ownership, designation of beneficiaries, and the creation of trusts can minimize the burden of transferring property and the overall time taken to go through the probate process to ease the process for the next of kin and heirs.
Why Do You Need Probate?
Probate is an essential legal procedure that must be followed to supervise the property and assets left by the deceased.
Recognizing probate’s importance adds meaning to its function in facilitating an organized and fair distribution of property.
Formalization Of The Will
It also aims to establish the validity of the deceased person’s will. The court then verifies the will to check its originality and correct it.
This validation is important to ensure the deceased’s wish is respected and avoid complications among the beneficiaries.
Estate Administration
Probate is beneficial for the estate because it lays down a framework for the management of the deceased’s property. This includes:
Inventorying Assets: this involves the process of identification and listing of all the assets of the deceased individual
Appraising Property: In this process, you identify the value of the deceased’s assets.
Paying Debts and Taxes: Paying off all the liabilities that are owed and the taxes from the estate.
Distributing Remaining Assets: Disposing of the remaining property as intended by the will or following the laws of the particular state in case there was no will.
Protection Of Beneficiaries And Creditors
Probate, on one hand, protects the interest of the beneficiaries while, on the other, protects the interest of the creditors.
To the beneficiaries, probate provides guarantees that the property is divided properly and as the will of the deceased stipulates or the state laws on the matter prescribe.
From the perspective of creditors, probate offers a legal channel through which it can present its claim on the estate to have it paid before the remaining property is divided among the beneficiaries.
Prevention Of Fraud
Probate protects against fraud and misuse of property by those who feel entitled to it.
It also ensures that the court plays a role in the administration of the estate, hence minimizing cases of fraudulent conduct by either the executors or the administrators.
Probate is required for the legal substantiation of wills, the precise organization of the estate, the defense of heirs and creditors, and combating fraud.
It also instills order, equity, and efficiency in administrating and distributing the deceased’s property, thus giving all concerned parties a sense of relief.
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Final Thought
It is crucial to understand what happens to property when one passes through the probate process and what risks and benefits it may bring to the beneficiaries.
Probate does guarantee the lawful and proper transfer of estate properties, but this often takes a lot of time and money.
Joint tenancy, trusts, and beneficiary designations are some of the ways through which the transfer of property is likely to be done without going through the probate process.
When choosing to go through probate or when trying to avoid it, it is always wise to seek a lawyer’s counsel and create clear estate plans and documents that will give you and your family the needed comfort and financial security.