What is a Probate Beneficiary?
A probate beneficiary is a person who is named in a will, and who stands to collect when the will is read. In other words, a probate beneficiary inherits wealth or property from a deceased person who has made a will. The beneficiary may have to pay taxes or other fees on the inheritance depending upon state law, and the size of the inheritance.
When a person makes a will, that person must divide up his assets and property. The person making the will can name one or more beneficiaries who will collect upon his death. The beneficiaries can be family members, charities, endowments, or any other entity that the person writing the will wishes to give his money to.
The person who is writing the will names an executor of the estate. The executor may be a beneficiary or an independent third party, such as an attorney. The executor is in charge of distributing the assets to the individual beneficiaries and overseeing the dictates of the will.
Upon the death of a person who has a will, the will enters the probate process. This is a formal legal process in which the executor of a state distributes assets. A court of law may have to oversee the distribution of assets, depending upon the size of the estate, whether the will is contested, or a number of other factors.
The reading of the will, which normally occurs immediately upon death, is generally the first action the executor of the estate takes. The reading of the will is usually done with each probate beneficiary present. The executor will announce who is receiving which assets.
If the will is uncontested, a probate beneficiary will generally receive the distribution of assets- property, funds or otherwise- from the will relatively quickly, upon the court signing off on the probate process. The probate beneficiary then becomes the owner of the assets, and can do anything he wishes with them. The beneficiary will have to pay taxes on the inheritance in generally every situation, unless special inheritance and estate planning provisions such as trusts are in place.
If a person does not make a will, his assets are not distributed through the probate process. Instead, intestacy laws determine who will receive which portion of the decedent's estate. A person who inherits under intestacy laws is not a probate beneficiary, since the will did not go through the probate process, and the inheritance taxes are usually higher.
I know of a family that used a revocable living trust to avoid the process. If the estate is small enough, a lot of states now have shortcuts to get through the probate process quicker and cheaper. Although it can be complicated, the probate executor doesn't have to be a lawyer to take an estate and will through probate.
The probate process tends to be time consuming and expensive. Depending on the state and size of the estate, attorney fees and court fees can take up a significant portion of the estate and tie up the estate for months, if not years, even if there is no contest. A lot of people try to avoid it.
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