Reading Room

Probate: What Does This Mean?

by Paul Schmidt
Boardman Law Firm

Many of us make charitable bequests in our wills. This is a practical and tax-effective way to benefit our favorite charities, even if we do not make lifetime gifts. There are many ways to make charitable bequests:  you can bequeath cash or other property in a will or living trust, for example. You can also name a charity as the beneficiary of proceeds of a life insurance policy or retirement plan.

If you make a bequest under your will, the designated cash or property is transferred to the charitable organization through the probate process. The probate process is a legal proceeding necessary to settle a deceased individual’s (“decedent’s”) estate. When an individual dies, if he or she has a will, the original will must be filed with the probate court for the county in which the individual lived. At the time that the will is filed with the probate court, the “personal representative” (also known as the “executor”) named in the will will normally apply to the court to be appointed as the decedent’s personal representative. 

Typically, after the appropriate parties have received notice of this application (e.g. heirs, individuals and organizations named in the will), the personal representative will be officially appointed. At this point, he or she has the authority to take the necessary steps to resolve the decedent’s estate, such as paying off outstanding bills, paying necessary taxes, and paying bequests under the will. When these actions, and all other necessary actions, have been taken to resolve the decedent’s estate, the personal representative will close the estate. This process usually takes 6-12 months.

The decedent’s will governs how “probate” assets are distributed. Probate assets are those assets which require some action by the personal representative to transfer ownership to a beneficiary. For example, if John dies as the sole owner of his home, his personal representative must transfer title to the beneficiary as named in John’s will.

Not all assets are subject to probate, however. For example, if John names a charity as the beneficiary of his or her life insurance policy or annuity, the insurance proceeds will be paid directly to the charity, regardless of what John’s will says. These proceeds will not be subject to probate, will not be available to pay expenses of John’s estate, and will not be governed by his will. Similarly, if John holds assets in joint tenancy, such as bank accounts, investment accounts and real estate, these assets pass directly to the surviving joint tenant, without probate.

Sometimes this creates a problem, if there are insufficient assets to satisfy bequests under the will. For example, if, at John’s death, his only assets are life insurance policies and retirement assets made payable to his children, but he wants to leave a charitable bequest to his church in his will, there may not be probate assets available to fund that bequest. One solution to this problem is for John to consider naming his church as the beneficiary of one or more of his policies. Another solution is for John to make sure there are sufficient “probate” assets to fund the bequest to his church.

You should not be intimidated by the probate process. Probate is designed to ensure that a decedent’s estate is administered in a timely and orderly manner, and the procedure provides significant protection against later claims by creditors. In Wisconsin, most probates are handled in an informal fashion, meaning that the personal representative is not required to go through formal court hearings in order to administer the estate. Typically, when an estate takes a long time to administer, it is due to factors unrelated to the probate process, such as a delay in selling estate assets, or the need to file estate tax or income tax returns. It is important to remember that if you make a bequest under your will, make sure you have sufficient assets to fund that bequest.

Paul M. Schmidt focuses his practice in the areas of estate planning, probate, will, trusts and elder law. Contact Paul at pschmidt@boardmanlawfirm.com.