CA Estate Planning Blog

Tuesday, October 8, 2013

Common Questions on Probate

Common Questions: What is Probate and What Goes Through Probate?

When a loved one passes away in California, his or her estate often goes through a court-managed process called probate or estate administration where the assets of the deceased are managed and distributed.  California probate is not particularly onerous, and many families can avoid probate altogether if their estate is small enough, but it does have one huge drawback: it’s extremely expensive.

The length of time and cost needed to complete the probate of an estate depends on the size and complexity of the estate and the local rules and schedule of the probate court. 

Every probate estate is unique, but most involve the following steps:

  • Filing of a petition with the proper probate court.
  • Notice to heirs under the Will or to statutory heirs (if no Will exists).
  • Petition to appoint Executor (in the case of a Will) or Administrator for the estate.
  • Inventory and appraisal of estate assets by Executor/Administrator.
  • Payment of estate debt to rightful creditors.
  • Sale of estate assets. 
  • Payment of estate taxes, if applicable.
  • Final distribution of assets to heirs.

 If your loved-one owned his or her assets through a well drafted and properly funded living trust, it is likely that no court-managed administration is necessary, though the successor trustee needs to administer the distribution of the deceased's assets. 

Does probate administer all property of the deceased?

One of the most common questions about probate is what property is exempt from probate, and what property must go through probate.  Probate is primarily a process through which title is transferred from the name of the deceased to the names of the beneficiaries. 

There are certain types of assets are what is called “non-probate assets” do NOT go through probate.  These include:

  • Property in which you own title as “joint tenants with right of survivorship”.  Such property passes to the co-owners by operation of law and do not go through probate.
  • Retirement accounts such as IRA and 401(k) accounts where there are designated beneficiaries.
  • Life insurance policies.
  • Bank accounts with “pay on death” (POD) designations or “in trust for” designations.
  • Property owned by a living trust.  Legal title to such property passes to successor trustees without having to go through probate.

  

How much does probate cost?  How long does it take?

Common expenses of an estate include executor fees, attorney fees, accounting fees, court fees, appraisal costs, and surety bonds.  These typically add up to 2% to 7% of the total estate value. Most estates are settled though probate in about 9 to 18 months, assuming there is no litigation involved. California is one of the few states that allow lawyers to charge a statutory fee, which is an amount that is a percentage of the value of assets that go through probate.  The current rates for California Statutory Probate fees are:

  • 4% of the first $100,000 of the gross value of the probate estate
  • 3% of the next $100,000
  • 2% of the next $800,000
  • 1% of the next $9 million
  • .5% of the next $15 million

In addition,  the cost and duration of probate can vary substantially depending on a number of factors such as the value and complexity of the estate, the existence of a Will and the location of real property owned by the estate.  Will contests or disputes with alleged creditors over the debts of the estate can also add significant cost and delay. 

Bear in mind that simply having a will does not necessarily circumvent the probate in California.  While a will is helpful in determining how your estate is to be distributed, it is still a mandated court process in which the courts will determine its validity and pay any outstanding debts from the estate before any of the remaining assets can be distributed to the beneficiaries. Contact your California estate planning attorney if you have more questions on how to avoid probate. 


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