People, including many attorneys, use the term “probate” to refer to the general process of administering an estate when there is Last Will and Testament.
Probate: Why Do People Hate it So Much? Probate is actually the first of three main steps in the process of administering an estate. Probate is more correctly described as the process of proving to the court that a Will is valid. Putting this nuance aside, when people say they hate probate, they are not just talking about the first step in the process. They hate the whole process.
In a case involving a small estate with assets that are easy to liquidate and beneficiaries that get along, probate can be an inconvenient process but relatively painless. When an estate plan is more complex, assets that are harder to liquidate and the beneficiaries are at each other's throats, probate can the legal and financial equivalent to root canal without anesthetic—only worse, since it can go on for years. If you're asking yourself, why is probate so painful? Well, let me provide a general overview of the process and you can decide for yourself if it's something you want your loved ones to go through after you leave this Earth. If you want to avoid probate, there many strategy that can be used to eliminate probate entirely or, at least, minimize the pain associated with probate.
A. Probating a Will
1. The Probate Petition
When you die and leave behind a Last Will and Testament, the estate administration process is divided into three main steps. Probate is the first of these three steps. In New York, there is a special court called the Surrogate's Court that is responsible administering estates. As part of the administration process, the Surrogate's Court is responsible for determining if a Will is valid and enforceable. The testator, who is the person that created and signed the will, names one or more people to serve as executor his or her estate. The executor serves as a fiduciary to the testator with the responsibility of probating the will and administering the estate in accordance with the testator's wishes.
To start a probate proceeding, the executor causes a probate petition to be filed with the Surrogate's Court along with the original Will and an original Death Certificate. In the probate petition, the executor will provide the Surrogate's Court with certain information, including the approximate value of the assets in the probate estate, the names and addresses of all beneficiaries named in the Will and the names and addresses of all heirs-at-law. Heirs-at-law are the people that would inherit if there was no will. (See New York Estate Powers & Trust Law (EPTL) §§ 4-1.1 and 4-1.2). Heirs-at-law include the decedent's surviving spouse, children, parents, grandchildren, siblings, aunts, uncles, nieces, nephews and cousins.
2. The Probate Citation
After the petition is submitted, the clerk for the Surrogate's Court will review the documents to confirm that they are complete. If the clerk finds the documents conform to the rules, the Court will issue a citation that is intended to put all interested parties on notice of the probate proceeding. The citation is the equivalent to a summons issued in a civil lawsuit. The citation will also include a return date for any interested party to object to the probate of the Will. Considering the number of people that may need to be personally served with the citation, there is a good chance that at least one address for an heir-at-law will be out-of-date or incorrect. If this occurs, the executor's attorney will have to ask the clerk to issue a supplemental citation with the correct information. Although this should be a quick process, I have seen it take four to eight weeks to get a supplemental citation issued.
3. Determining the Validity of a Will
If there are no objections to probate, and the Will does not have any obvious defects on its face, the Surrogate will likely admit the Will to probate. However, if an interested party objects to probate, a litigation begins to determine if the will is valid and enforceable. When this occurs, the opposing sides are entitled to discovery and a trial before the Surrogate's Court to determine if the will is valid. I'll put together another blog and video dedicated to discussing will contests and objections to probate.
B. The Estate Administration Process
For today's discussion, we can assume the will is valid and admitted to probate. So, what happens next? Once a will is admitted to probate, the Surrogate's Court will issue testamentary letters to the executor named in the Will. Testamentary letters are legal documents that give the executor the power and authority to administer the estate. To fulfill the executor's fiduciary obligation, the executor must locate and take possession of all estate assets, pay all taxes owed by the decedent, preserve the value of estate assets, liquidate the estate's assets, pay all creditors and, finally, make distributions in accordance with the terms of the will. The amount of work involved will vary considerable depending on the complexity of the estate and types of assets involved.
In attempting to fulfill these obligations, executors face many potential pitfalls. They need to be particularly careful when making decisions concerning the management of estate assets. If executors make a mistake, even an innocent one, executors can be held personally liable. For example, if the estate owns real property and the executor fails to pay the mortgage and real estate taxes on the property, penalties and interest will accrue that will diminish the value of the asset. In this situation, it is highly likely the Surrogate's Court will hold the executor personally liable for the loss he or she caused the estate. If this happens, the Surrogate's Court can surcharge the executor for the damages caused to the estate, plus interest and possibly attorney's fees, including the fees incurred by the estate in defending the executor.
After the executor liquidates all estate assets, he or she must first pay any taxed owed by the decedent and the estate, pay off all the estate's creditors and all administrative expenses associated with the estate's administration, including fees owed to attorneys and other professionals. Only after those expenses are paid, can distributions be made to the beneficiaries under the Will. At the time distributions are made, the executor will generally request a release from beneficiaries from liability associated with the administration of the estate. However, beneficiaries are not required to provide a release to the Executor—although some executors can make it seem as if a release is required before a distribution is made.
So, let's assume all assets are liquidated and distributions are made. The executor should hold back a reserve to cover potential liabilities and expenses that may come while closing out the estate. For example, the estate may have some tax liability for income earned during the administration. There may also be fees associated with an accounting and other expenses that are likely to be incurred while closing out the estate.
C. Closing the Estate
Speaking of closing out the estate, this can be a relatively simple matter of the executor preparing an informal accounting and getting releases from all beneficiaries. If the executor is not released by all parties, the executor will need to file a formal accounting with the Court and petition the court to accept the voluntary accounting and enter a decree releasing the executor from liability. The clerk will issue a citation that will have to be served on all beneficiaries of the estate giving them notice of the accounting and deadline to object or request discovery. If none of the beneficiaries object or request discovery, it will be a straightforward process. If there are objections or requests for discovery, it could be a long litigious and expensive process to close the estate.
D. How Long does it take to Administer an Estate with a Will?
Let's talk briefly about the time it takes to completely administer an estate. If the estate is relatively small, with assets that are easy to liquidate and beneficiaries that get along well and file no objections, the process will typically take anywhere from 12 to 36 months to complete. Even in uncontested proceedings, more complicated estates that have assets that are not easily liquidated, the administration process can take considerably longer. If the administration involves objections to probate, motions to remove the executor and a contested accounting, the estate can take years to fully administer.
Currently, many Surrogate's Courts are still working through their dockets that were put on hold during the Covid-19 lockdowns. Oh and that's another thing, even in the best of times, Surrogate's Court can sit on citations, motions and other critical decisions and take no action to the detriment of beneficiaries. For example, one Surrogate in Kings County refused to issue citations between March 2020 and December 2021 (see In Brooklyn's Surrogate's Court, Cases Before One Judge Are Stuck Before They Go Anywhere). There are only two Surrogates in King's County so you can imagine how many probate petitions were delayed by that decision. Imagine if your family had to cover the mortgage and real estate taxes on your home out of their own pockets for this two year delay, plus the usual 5-12 months it takes for a Will to be admitted to probate. Could your family afford this cost?
Estate planning based on a traditional Last Will and Testament may still have a place for smaller estates and younger singles and families. In many cases where people own a home and have more than $200,000 in assets, a Living Trust may offer a superior option to a Will as the cornerstone of a comprehensive estate plan. Even with a living trust, there may still be some assets that may need to go through probate. However, if the Living Trust is properly funded and the overall plan is thoughtful and comprehensive, the process should not be litigious and it should not tie up a substantial portion of the decedent's assets. Living trusts do have some downsides. When a person signs a Will and leaves their attorney's office, there's nothing left for them to do. All the administration takes place after that person dies. With a Living Trust, you need to go through the process of funding the Trust, which requires more work on your part and on the part of your attorney. Estate plans based on Living Trusts are also more expensive—which makes sense because there is more work involved. However, the short term expense and inconvenience of a Living Trust is more than offset by the long term saving and convenience it will provide to your family.