When a person dies, he or she leaves behind an estate that is made up of all assets owned by the decedent at the time of death. Ownership of those assets must eventually be transferred to the beneficiaries and/or heirs of the estate. To ensure that happens in a timely manner, most estates are required to go through the legal process known as probate. Probate also serves to:
- Identify, locate, and value all estate assets
- Notify creditors and allow them the opportunity to file claims
- Make sure all taxes are paid
- Authenticate the decedent’s Will and litigate any challenges to that Will
Most estates are required to go through some type of probate. Modest estates with uncomplicated assets may qualify to use an alternative to formal probate which is offered in most states, including New Hampshire. Estates that do not qualify for a small estate alternative must go through the formal probate process.
If the decedent executed a Will prior to death, the person named as the Executor in the Will is the person who will oversee the probate of the estate. If the decedent died intestate, any competent adult may volunteer to act as the Administrator of the estate and oversee its administration. In the event no one volunteers, the court must appoint someone.
Some assets bypass probate altogether. This is a huge advantage for several reasons which is why probate avoidance is a common estate planning goal. Examples of non-probate assets that can be distributed to the beneficiary immediately include:
- Assets held in a trust
- Certain types of jointly held property
- Life insurance proceeds
- Funds held in an account designated as “payable on death(POD)” or “transfer on death (TOD)”
- Certain funds held in retirement or pension accounts
If the decedent left behind a Last Will and Testament, the estate is referred to as a “testate” estate. In a testate estate, the terms of the Will, along with any other related estate planning documents, determine how the estate assets are distributed. If the decedent failed to execute a Will prior to his/her death, the estate is referred to as an “intestate” estate. In an intestate estate administration, the New Hampshire intestate succession laws (or the laws of the decedent’s state of residency at the time of death) determine what happens to the decedent’s assets. Typically, only a spouse and/or close relatives will inherit from an intestate estate.
Every estate is unique, making the probate process unique for every estate as well. Nevertheless, there are some fairly common steps in the probate process, such as:
- Identifying, securing, and valuing estate assets
- Opening probate by submitting the original Last Will and Testament (if applicable) and a petition to open probate in the county where the decedent was a resident at the time of death.
- Identifying and locating heirs if the decedent died intestate.
- Notifying creditors that probate is underway.
- Reviewing creditor claims and approving or denying each claim.
- Litigating any claims
- Calculating and paying any state and/or federal tax due.
- Transferring the remaining assets to the intended beneficiaries/heirs of the estate.
In most states, any “interested” person (usually beneficiaries, heirs, or even creditors) may contest the validity of the Will submitted for probate. If a Will contest is filed, the contest must be litigated before probate can resume because the outcome determines whether a Will or the state intestate succession laws will govern the distribution of the estate assets.
Probate can be a lengthy, and costly, process. In New Hampshire, it takes at least six months to probate an estate because creditors have that long to file claims. Assets cannot be released to beneficiaries until the probate process has reached a conclusion. In addition, everyone involved in the probate of an estate is entitled to a fee for their services, including the Executor, attorney, accountants, and appraisers. As a general rule, the longer it takes to probate the estate, the more it costs to do so. The more it costs to probate the estate, the less assets that are left to pass down to loved ones, ultimately making probate avoidance an attractive goal.