If someone dies after having established a living trust, the trust assets won't go through probate. Assets, including any money that you've inherited, can be immediately distributed by the trustee under the terms of the trust deed. On the other hand, when someone dies and you inherit money under a will, you probably won't get the money immediately. The will must first go through probate, a process that determines whether the will is valid and allows interested parties to contest it.
Anyone can initiate the probate process by submitting the deceased's will and a certified copy of his death certificate to the clerk of a probate court sitting in the county where the deceased lived. The court will then schedule an initial probate hearing. At the initial hearing, the probate judge will appoint an executor to administer the deceased's property, including all cash and the contents of the deceased's bank account. The court will then present the executor with documents that establish his authority to third parties. With these documents the executor can access the deceased's bank account, for example, or sell the decedent's property to raise funds.
The executor must create an inventory of all estate assets including cash, real property, personal property and corporate stock. He must also secure payment of all debts owed to the deceased, such as a last paycheck. The executor must pay estate creditors before he may distributes anything to heirs. If necessary, he must sell estate assets to raise the money to pay creditors. If the value of the estate exceeds the federal estate tax exemption, he must also pay estate taxes. If the estate earns at least $600 during the probate process -- interest on bank account funds, for example, or rent from tenants living in real property owned by the estate -- the executor may be required to file a federal tax return on estate income and pay any taxes due. All such payments reduce the amount of money remaining in the estate for you to inherit.
Additional hearings may be scheduled to allow someone to contest the validity or interpretation of the will, or to make a claim against estate property. A company, for example, may argue that the deceased owes money that should be paid out of estate assets, or a relative of the deceased who was not named in the will may argue that he is entitled to inherit money from the estate. Any such payments to creditors or other heirs will come out of estate funds.
Distribution to Heirs
The final stage of the probate process is distribution of estate assets to heirs under the terms of the will. If, after paying creditors, the estate doesn't contain sufficient funds to pay your full inheritance, the court may authorize the executor to liquidate estate assets -- by selling a house, for example -- to raise the money. If the deceased's will states that you are to inherit a specific amount of money and liquidation of assets is insufficient to raise this amount, you will receive less than the amount specified in the will. If the estate is insolvent after paying creditors, you will receive nothing.
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