When a person dies, his or her entire financial life must be wound up and taken care of. That process is called estate administration. Part of administering a decedent’s estate usually involves probate. Probate is part of estate administration. It may help to understand probate by putting it in context of the bigger picture of estate administration. The main purposes of estate administration are to make sure that the decedent’s assets are appropriately used to pay his creditors and that the remainder of decedent’s assets are distributed to the right beneficiaries.
All of your assets may not go through probate. There are four different paths that your assets may pass after death, which depends on the type of asset involved. If you own an asset jointly with right of survivorship, such as a joint bank account or entireties property owned by husband and wife, it passes directly to the surviving owner without regard to your Will. If you have an asset for which you can name a beneficiary, such as life insurance, an IRA, or a “pay on death” account, it passes directly to the designated beneficiary, again without regard to your Will. Or, if you have created a living trust and transferred assets to it during your lifetime, those assets pass according to the provisions in your trust. All three of those types of assets are non-probate assets and pass outside your Will. All of your other assets pass under your Will and therefore go through the probate process. In other words, your probate assets are those assets that you own in your sole name (or joint without right of survivorship), don’t have a beneficiary, and have not been transferred to a living trust during your lifetime.
Probate is that part of estate administration that is supervised by the courts. This is done so that your probate assets can be properly administered and distributed. Probate means proving your Will through the courts. The first thing we must do to begin the process is to probate or prove your Will. So we use the term “probate” as shorthand for the whole court-supervised estate administration process. If you die intestate (without a Will), you will likely have assets that need to be administered and distributed through the courts. Even though there is no Will, we may still refer to the process as “probate,” simply for convenience
The court supervises the probate process by: (i) appointing the personal representative of your estate (if you have a Will, the personal representative is called the “executor” and is usually the person you named as executor in your Will); (ii) requiring your personal representative to file with the court various affidavits, inventory, accountings, and other documents to verify that he or she is properly administering the estate; and (iii) ruling on various issues or disputes that may arise in the course of the probate process.
Your personal representative has three main functions: (1) to gather and protect your assets; (2) to pay your debts and expenses, including any taxes; and (3) to distribute your remaining probate assets to your beneficiaries as provided in your Will, or if you don’t have a Will, then to your heirs at law according to the North Carolina Intestate Succession laws. Probate is finished when your personal representative files the Final Account and it is accepted by the court.
For those asset that do not pass under the Will (i.e., the non-probate assets described above), your personal representative for the most part does not have control over them, nor the responsibility to administer them. Those persons who are the surviving joint owners, beneficiaries of beneficiary type assets, or the trustees under a living trust, are responsible for dealing with those assets. Having said that, certain types of assets, such a joint accounts with right of survivorship and pay on death or transfer on death accounts, may need to be brought into the probate estate by your personal representative if there are insufficient probate assets to pay the debts and administrative expenses of your estate.