"Probate" (literally meaning "to prove") is a court proceeding in which it is determined that the decedent left a valid, original will (or did not and therefore intestacy heirs are identified). The probate process for settling an estate involves a number of steps, most of which are the responsibility of the personal representative. Below are some of the steps involved in probating an estate in Idaho.
Step 1: Getting Appointed as Personal Representative
- Determine who has priority for appointment as personal representative. If the decedent had a will, review the will to see who is named as the personal representative. The person named in the will has priority under Idaho statutes, but if he or she declines to serve as personal representative, then the second named personal representative will have priority and so on. If the decedent didn’t have a will, then Idaho’s intestacy statutes will determine who has priority.
- Hire a probate attorney. The probate attorney should provide advice on whether probate is necessary, the type of probate that should be undertaken, how much it will cost, how long it may take, the fiduciary duties of the personal representative, issues involved in appointment of the personal representative if he or she does not have priority under applicable statutes, and other matters relevant to the probate. Once hired, the attorney will fill out & submit the required forms to the court to commence the probate process and seek approval of your appointment as personal representative.
- Receive Letters Testamentary or Letters of Administration. If the court approves the probate application, or following a hearing, if applicable, the judge will issue Letters Testamentary (if the decedent had a will) or Letters of Administration (if the decedent died intestate) (referred to herein as “Letters”). Upon issuance of the Letters, the personal representative will have authority to act on behalf of the decedent’s estate.
Step 2: Secure Property. The decedent’s property should be secured from potential vandalism and theft. For a house, this may involve changing the locks. Personal property should also be secured. The personal representative should ensure that insurance is in place to protect real property, vehicles and personal property.
Step 3: Open an Estate Bank Account. Once appointed, the personal representative should obtain a tax identification number for the estate from the IRS and take the Letters to a bank to open an estate bank account. When the account has been opened, all of the decedent’s cash and bank accounts (that are not titled to pass to an heir by virtue of a pay on death or transfer of death designation) should be transferred to the estate’s bank account. All money received by the estate or paid from the estate should be paid to or from the estate’s bank account. The personal representative should never commingle the decedent’s assets with the personal representatives.
Step 4: Ledger, Inventory and Accounting.
- Ledger. If the personal representative will be paid compensation for settling the estate, then he or she should use a ledger document all work performed. The ledger should include the date, the work performed, the amount of time spent and the rate that will be charged. Payments made to the personal representative should then be recorded in the Accounting.
- Inventory. An inventory should be developed that lists the assets and liabilities of the probate estate together with the estimated values of such assets or claimed amounts. Identifying assets and liabilities often requires going through the decedent’s bills, tax returns, investment records and bank and insurance statements. Some accounts may be on-line- which will require obtaining passwords. The complexity of estimating the value of the assets depends on the asset. For cars, Kelly’s Blue Book might be used. For real property that will transfer to an heir, rather than be sold, it may be advisable to obtain an appraisal. The reason is that the heir’s tax basis in the property will be the market value of the property at the date of the decedent’s death and that value will be relevant to the amount of taxes the heir will pay the IRS when the property is ultimately sold. The inventory should be given to your attorney (who may file it with the court) and should be updated throughout the probate.
- Accounting. An accounting should be developed and updated over the course the probate. The accounting should show the value of assets in the estate at the beginning of the probate, plus assets added to the estate and income earned over the term of the probate, minus payments, gains or losses from sale of assets and disbursements to heirs from the estate over the term of the probate. The accounting statement should provide enough detail that it provides a clear picture as to what the sources and uses of probate assets are.
Step 5: Contact Interested Parties. Your attorney should send notices of your appointment to the decedent’s heirs and publish notice to creditors. Unless the attorney has been requested to do so, the personal representative should notify various parties of the death of the decedent including Medicaid, Medicare, the social security administration, veterans affairs, life/annuity insurers, credit card companies, etc.
Step 6: Publish Notice to Creditors and Give Actual Notice to Known Creditors. The personal representative or his or her attorney should publish notice to creditors as required under applicable statute and give actual notice to known creditors. Following the giving of such notice, creditors will have a certain length of time to bring a claim against the estate. Failure of a creditor to make a claim during the applicable time period set forth in the statutes will result in the creditor being barred from making or collecting on a claim at a later date.
Step 7: Review the Distribution Provisions of the Will. The personal representative should consult with his or her attorney to be sure that he or she understands who the decedent’s property will transfer to and whether it will be transferred to such heirs outright or in trust.
Step 8: Identify Which Property is Subject to Probate and Which is Not. Property that transfers by its title or by beneficiary designation will not be distributed through the probate process- though the personal representative may assist in effecting the transfer of such property to the appropriate recipient. The personal representative should determine the title of all the decedent’s property. For property, this will require looking at the recorded deed; for vehicles, by looking at the titles; for bank accounts, by looking the bank account statements (and potentially calling the bank to verify); and for insurance, by looking at the policies. Only property
Step 9: Collect Money Due to the Estate. If any persons or entities own money or property to the decedent, then the Personal Representative should take action to collect that money or property. It is a good idea to search on-line databases to determine if the decedent had a right to unclaimed property. Examples of search sources include: ACS Unclaimed Property Clearinghouse (www.missingmoney.com) and National Association of Unclaimed Property Administrators (www.unclaimed.org).
Step 10: Pay or Disallow Creditor Claims. The personal representative is responsible for determining whether claims made against the estate are valid and should therefore be paid or whether they should be denied. If the estate is insolvent (liabilities exceed assets), then the personal representative should not pay creditors claims without receiving advice from their attorney. Idaho’s statutes govern which creditors have priority in the event of an insolvent estate. The personal representative should also strictly follow the time frames set forth in the statutes for disallowing any claim that was properly filed against the estate as failure to abide by such time periods may result in the claim being deemed allowed.
Step 11. Sell or Transfer Real Property. If property will be sold, sales contracts need to be drafted and executed. If real property will be sold or transferred to heirs, then a personal representative’s deed needs to be recorded (evidencing the transfer) with the county where the property is located. Ask your attorney to draft this deed. If an heir is receiving property that will be their primary residence, tell the heir that he or she may want to file for a property tax exemption.
Step 12. Make Interim Distributions. Often heirs want distributions of part of their inheritance prior to the closing of the probate. If the personal representative is sure that the estate will be solvent, he or she may make interim distributions to heirs. To prevent future legal issues, the personal representative should require that any heir that receives an interim distribution sign a document evidencing that they received the distribution and their inheritance is reduced by the amount of the distribution.
Step 13. File Tax Returns. The personal representative should consult a tax accountant to make sure that tax returns are timely and accurately filed. Various tax returns that may need to be filed include:
- Federal and State Income Tax Returns. If the decedent earned income (above then applicable thresholds) in the last year of his or her life, final income tax returns need to be filed by April 15th of the year following the decedent’s death.
- Federal Income Tax Return for the Estate. If the estate earns income (above the then applicable threshold) from the date of death of the decedent until the probate is closed and all property is distributed by heirs, then a federal income tax return must be filed for the decedent’s estate.
- Federal Estate Tax. If taxable gifts by the decedent during his or her life plus assets in the decedent’s estate at his or her death exceed the Federal estate tax exemption amount (being $5.43 million in 2015), then a Federal Estate Tax Return will need to be filed within 9 months following the decedent’s death.
- Federal Portability Election. If the decedent directed the personal representative to, or it is advisable to, make a portability election in favor of a surviving spouse, then a Federal Estate Tax Return (being form 706 in 2015) needs to be filed within 9 months following the decedent’s death even if the personal representative is not obliged to file a Federal Estate Tax Return because the decedent’s estate is in excess of the Federal Estate Tax Exemption Amount.
Idaho does not currently have either a State estate tax or a State inheritance tax; however, if the decedent had property in other states, the personal representative needs to consult legal or tax counsel to determine whether additional tax returns should be filed in light of such ‘other state’s’ laws.
Note also, if the personal representative receives compensation from the estate for acting as personal representative or providing any other functions, then the personal representative will need to report such income on his or her income tax returns.
Step 14. Closing the Estate. After all money owed to the estate has been collected and all valid claims have been paid or disallowed, the personal representative will make distributions to heirs. Prior to making such distributions, the heirs should sign a receipt and release form that will acknowledge their receipt of assets from the estate and release the personal representative of liability. After receipt of all the receipt and release forms, the attorney will take appropriate actions to close the probate. Note that, under Idaho statutes, the earliest an informal probate can be closed is six months following the appointment of the personal representative.
How Can We Help?
Attorneys at Mathieu, Ranum & Allaire, PLLC can assist Executors in understanding their rights and responsibilities, identify actions that can expose the personal representative to liability, file documents with the court and provide advice and assistance as needed. We can assist beneficiaries in relation to issues they have with process, notices, elections and other matters relating to the probate process.
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