What is the probate court?
The probate court oversees the administration of a person’s estate. When a person dies, and after creditors and taxes have been paid, the deceased person’s property must be passed on to heirs. If the person had a properly drafted will, determining where the property goes is fairly straightforward: it will be described in the will. The probate court has the legal authority to see that wills are properly executed, and to see that wills are properly carried out. For example, the probate court may order the payment of debts and taxes. Similarly, the probate court may issue deeds of real estate to heirs, or may transfer other personal property. If a person does not have a will, the probate court will distribute the deceased person’s belongings according to Ohio’s laws of intestacy. While the chief function of the Probate Court is to administer decedents’ estates, other matters within its jurisdiction are: issuance of marriage licenses, adoptions, guardianship proceedings, and the involuntary commitment of the mentally ill.
Do I want to “avoid probate”?
Generally, yes, though not always. The most popular reasons to avoid probate concern the costs and time requirements of the process. Another good reason to avoid probate involves keeping sensitive financial information away from public court records. Additionally, navigating the probate court system upon the loss of a loved one often is the last thing grieving parties want to do.
On the other hand, sometimes a person may want the probate court to supervise the transfer of assets. This may be a good idea for quarreling families. Additionally, when young children are to end up as beneficiaries of a trust—being too young to inherit until they are older and wiser—it may be a good idea to have the Probate Court supervise ongoing trust administration.
How do I avoid probate?
Clients can avoid probate by using alternative mechanisms to transfer assets at death. Ohio makes it simple to transfer automobiles, real estate, financial accounts and securities by using “transfer on death” or “payable on death” arrangements.
When a minor child is the beneficiary, the assets may still end up under the supervision of the probate court (through a guardianship) until the child reaches the age of 18.
Are “transfer on death” and “payable on death” arrangements good for everyone?
Not always, no. These types of arrangements, though effective in probate avoidance, can be rather blunt instruments. For example: assume that Client sets up a bank account as
“payable on death” to three children, all of whom have children of their own. If one of Client’s children, X, dies before Client does, X’s children would not inherit X’s share of Client’s bank account: Client’s two surviving children would take everything. This may not be what Client wanted.
As a result many people have come to use living trusts for Probate avoidance and to carry out other estate planning goals, including tax planning. These are described in the estate planning article.
If I don’t avoid probate, what can I expect?
Expect a lot of paperwork, a lot of accounting, and a good bit of waiting. Starting a probate estate requires that an attorney present the court with: the deceased person’s Last Will and Testament, an estimated schedule of the individual’s assets, and a listing of “statutory heirs” (those persons who would inherit if the decedent had passed away without a will). Next, the court will put someone in charge of the estate: an Executor if the individual had a will, or an Administrator if the individual did not have a will.
Who is in charge of the estate? Who interacts with the probate court?
A person’s will typically nominates someone to be in charge of the estate. If a person dies without a will, the surviving spouse is given the right to oversee the estate. If there is no surviving spouse, typically a child becomes the estate administrator. Where a decedent dies with no will and no immediate family, the probate court will look to more distant relations. However, where nobody comes forward to begin administration, a creditor can petition the court to act as administrator.
What responsibilities do Executors/Administrators have?
Executors and Administrators have the following responsibilities:
- Identify the decedent’s assets;
- See that assets are properly valued;
- Preserve assets during estate administration;
- Deal with creditors;
- Pay taxes;
- Interface with beneficiaries;
- Distribute assets after debts and expenses are paid and;
- Account to the Court.
Will a smaller estate go through the same procedures as a large one?
Certain smaller estates are treated differently under Ohio law:
If 1) the total value of all property in a decedent’s name is $35,000 or less;
or 2) estate assets are $100,000 or less and the surviving spouse is the sole heir
then the estate can be relieved from administration. This means a less expensive, streamlined procedure can be used to process the estate.
How long does it take to finish an estate?
As discussed above, smaller estates “relieved from administration” typically takes 2-4 months to process. For other estates, the length of time involved can vary greatly, depending upon the complexity of the assets owned. If real estate and business interests are involved, this will likely stretch out the administration process. Also, creditors are given 6 months after a decedent’s passing to assert claims. Thus, the court and an executor/administrator will be extremely reluctant to pass out estate assets until that time period as expired—otherwise the fiduciary could end up personally liable for estate debts.
How much does probate cost?
There are many expenses involved in handling an estate. Among them are: probate court fees, executor/administrator fees, appraisal fees, and of course attorney’s fees. Court costs are based on a fee schedule established by statute for each type of document filed in the Probate Court. Executor/administrator fees are also established by the state legislature and are based on percentages of the assets in the estate. These range from 1% to 4%, depending upon the nature and value of the assets. Where the value of an estate asset is not readily ascertainable, an appraiser must be appointed. Appraisers are often appointed to value real estate and are paid an appraiser fee—generally not more than one or two hundred dollars. Attorney fees are not set by statute, but are determined according to the rules of each county Probate Court. Most Courts tie attorney fees to the amount of time the attorney spends in dealing with estate matters.
What taxes must an estate pay?
All taxes due on or after the death of the decedent must be paid from the estate assets by the executor or administrator of the estate. These taxes are: real estate taxes, personal property taxes, local, state, and federal income taxes, and Ohio and federal estate taxes.
Will I have to pay estate taxes to the state of Ohio?
Effective in 2013, the Ohio estate tax is entirely repealed.
Will I have to pay estate taxes to the federal government?
For a detailed discussion of estate planning concepts and federal estate taxes, see our Basic Estate Planning Principles page. In a nutshell, if you are leaving everything to your spouse, there are no federal estate taxes. Beginning in 2013, a decedent can leave $5 million to heirs without paying the 40% federal estate tax. The $5 million is adjusted for inflation each year.
How can I find out what is happening in a particular estate?
Like other court proceeding, an estate is a public matter and any documents which have been filed in an estate may be reviewed. If you stand to inherit from an estate, you can examine the filings of the executor/administrator. For example, the executor must file an inventory of estate assets – what the decedent owned at the time of death. The executor will also need to file a final accounting which shows what monies were paid out of the estate and to whom they were paid. If the decedent had a will, it is on file with the court and can be reviewed.