“You can’t take it with you,” goes the old saying.
So how does your property pass to your heirs when you die? One way is through the probate process. I find that many people have heard the term “probate” but not everyone has a clear understanding of what the term means.
This post will explain what probate is and how it works in Pennsylvania, where I practice law.
Various ways to pass ownership
The first thing to understand is that probate is only one of several way that ownership passes to someone else when you die.
If you own an asset titled jointly (with rights of survivorship), then that asset will pass to any surviving owner automatically upon your death. Some assets, particularly retirement accounts and life insurance, pass to others because you have designated them as beneficiaries. Financial institutions such as banks often allow depositors to title accounts “payable on death to,” “transfer on death to,” or “in trust for” a named beneficiary; accounts titled this way will be paid to the beneficiary after you’re gone.
Some people own property that is titled in the name of a trust that spells out how assets will be distributed and re-titled after death.
Pennsylvania law also provides procedures to obtain certain assets without opening a probate estate. These procedures apply to amounts on deposit at a bank or patient’s care account of $10,000 or less; wages, salary, or employee benefits of $5,000 or less; and life insurance payable to an estate of $11,000 or less. The procedures are described here.
But if you die owning property in your own name alone, that cannot pass to others by any of these methods, someone will probably have to open a probate estate to pass ownership to anyone else.
Probate is the process by which those individually owned assets get re-titled. In most cases it also involves settling debts and paying taxes.
If the deceased left a valid will, the executor named in that document will appear at the local Register of Wills office to initiate the probate process with the filing of certain documents and the payment of any required fees. This is called opening a probate estate. (There are other names for an executor, including executrix (female) and personal representative. For simplicity, I will simply refer to the person in this role as the executor.)
The appointed executor will receive “short certificates.” A short certificate is a one-page document showing official proof that the person named as executor may act on behalf of the estate.
The executor then collects the assets of the estate, pays bills, pays taxes, and takes whatever other actions are necessary to make sure the estate is handled properly under state law. Once this process is complete (usually in about six to 18 months), the executor accounts for the estate’s assets, income, and expenses and petitions the county’s Orphans’ Court to approve the account and authorize distribution to beneficiaries. (The estate can also be closed after an informal accounting and a written settlement agreement among the beneficiaries.)
When there is no will, the Register of Wills can appoint a family member, beneficiary, or other appropriate party to be the “administrator” of the estate. To read about who is eligible to be named administrator, click here. An administrator acts in the same manner described above to settle the estate; but instead of distributing to beneficiaries named by the deceased, the administrator must distribute assets as prescribed by Pennsylvania’s “intestacy” statute.
Once distribution has been made to beneficiaries, the executor or administrator files papers to close the estate.
That, in a nutshell, is the probate process. It can sometimes be a simple process, such as when the estate contains only a few bank accounts. In other cases, probate can be a lengthy, drawn-out process lasting years if real estate must be sold, a business sold or wound down, environmental issues addressed, or family disputes (a will contest, for example) resolved.
The executor or administrator is held responsible for knowing the requirements of state law, meeting deadlines, and administering the estate according to the law. For that reason, most hire legal counsel to assist and guide them through probate.