You may have been warned to avoid probate, but you might not fully understand what it is. Probate is a legal process used to handle the payment of debts and transfer of assets after a person has died. The process is supervised by the county Surrogate Court.
When probate isn’t necessary
Probating an estate is not always needed and New Jersey has a small estate probate process. If the estate does not exceed $20,000 and all assets will be given to a surviving spouse the estate qualifies for simple probate. The estate can also qualify if it totals to less than $10,000 and one heir can file an affidavit with the court to receive any assets from the estate. This is dependent on written consent from any other potential heirs. Assets such as retirement accounts and life insurance policies with designated beneficiaries do not need to go through probate.
The six steps of the probate process
Although probate has a reputation for being lengthy, complicated and costly, in most cases the process involves six simple steps.
- Validating the will: The court will establish the genuineness of the will. In cases without a will New Jersey has laws determining how the estate will be divided.
- Executor appointment: Even if the will named an executor, that person needs to be formally appointed by the court. Non state residents may be required to post a bond to protect the estate from theft and mismanagement. An executor is entitled to commission from the estate to compensate them for the work required to close the estate.
- Inventory: The executor must take a thorough inventory of the estate, accounting for all assets. Any property such as real estate or valuable collections should be appraised.
- Paying claims: Any liabilities discovered during the inventory process needed to be settled. The claims can either be settled and paid or rejected. After settling claims against the estate a final inventory needs to be submitted to the court.
- Taxes: Final taxes for the deceased and the estate need to be completed and submitted by the executor. Once the taxes are paid, the IRS will issue a letter stating that all taxes have been paid.
- Distribution: A final accounting is done to summarize the estate and all payouts to beneficiaries are itemized. The final accounting summary needs to be signed by all beneficiaries and then submitted to the court. Once the final accounting is approved the assets can be distributed to the beneficiaries.
The closing of an estate can be a lengthy process, given everything involved, but a comprehensive estate plan will aid the executor and facilitate the process.
