February 24, 2011

California Probate

Here are some common questions associated with probate. 

1. What is probate? 

In short, probate is a court-supervised procedure for collecting a deceased person's assets, paying debts and taxes to the appropriate parties, and distributing the remaining property to the person's beneficiaries.

The distribution of the beneficiaries’ property is accomplished through either the instructions the person set forth in their will or as determined by state law if the person died without a will, which is called “intestacy.” Conversely, if you die with a will, you die “testate.” 

2. When does probate occur?

Generally speaking, probate occurs when a person passes away and their estate is comprised of assets totaling more than $100,000 which are not subject to non-probate transfers or held in a revocable trust. Non-probate transfers would include life insurance contracts, assets held in joint tenancy, pay-on-death bank accounts, transfer-on-death stocks, etc.

3. If I write a will can I avoid probate?

No, all wills are probated. Thus, writing a will would not prevent your estate from being probated.

4. Why do people try to avoid probate?

The two main reasons why people would like to avoid probate is due to the time and cost involved. See Questions #5 and #6.

5. How long does probate last?

It is difficult to definitively state how long probate will last because the probate timeline is driven by the amount of court filings in each county’s superior court and the probate’s complexity. For instance, in a simple probate in a smaller county such as Modoc or Alpine, probate could be completed in as little as 6-8 months. Conversely, in a larger county such as Los Angeles or Santa Clara with a more complex probate, the process could easily take 12-14 months to complete.

6. How much is the attorney and personal representative compensated?

The amount of compensation is based off of the value of the person’s estate, which is basically everything they own. Prob C §§ 10800, 10810. The attorney and personal representative are, generally speaking, compensated in the same manner as provided for below:

Estate Value               Fee for Attorney and Personal Representative

$100,000                    $4,000

$200,000                    $7,000

$300,000                    $9,000

$400,000                    $11,000

$500,000                    $13,000

$600,000                    $15,000

$700,000                    $17,000

$800,000                    $19,000

$900,000                    $21,000

$1,000,000                 $23,000

Furthermore, the fees for both the attorney and personal representative may go higher for extraordinary services such as selling a house, defending a will contest, or litigating a matter. Prob C § 10811.

What is particularly important about the estate value calculation is that encumbrances, such as a mortgage, are not included in the probate calculation. Prob C § 10810(b). Thus, if the decedent had a house worth $500,000 on the date of death but had a mortgage of $300,000 on the property, the probate estate would be valued at $500,000 not $200,000. This is a significant difference because the fee for $500,000 is $13,000 while the fee for $200,000 is $7,000.

6. What happens if probate is not needed?

There are numerous procedures that are used in lieu of the formal probate process: small-estate affidavit, spousal property petition, non-probate transfers or trust administration.

7. How many steps are needed to complete the probate process?

The answer to this question varies because there are a few probate filings that are not mandatory. Thus, one probate might include the optional filed document whereas another probate will not. If you are really bored, you can call my office and I can pull out my probate checklist from my desk and rattle off the required probate steps to aid your boredom.

8. What is the first step in the probate process?

The first step in the probate process is to lodge the decedent’s will with the local probate court.

9. What is the last step in the probate process?

The last step in the probate process is to transfer the assets from the decedent’s estate to the beneficiaries. This can be done only after numerous steps have been completed however.

10. What is a personal representative?

A personal representative is the individual entrusted with executing the probate process from start to finish.

11. How is a personal representative chosen?

A personal representative is usually chosen through either designation in a will or if the decedent wrote no will, then through a next of kin formula found in Prob C § 8461. This next of kin formula basically says that the closest relative to the decedent has priority to become the personal representative.

12. Can the personal representative be removed?

Yes, just as a trustee of a revocable trust can be removed, so too can a personal representative. For example, per Prob C §8502, the personal representative may be removed in the following situations:
  1. The representative has wasted, embezzled, or mismanaged the estate property, or committed a fraud on the estate or is about to do so;
  2. The representative is incompetent to act;
  3. The representative has wrongfully neglected the estate;
  4. The representative has long neglected to perform any acts as representative;
  5. Removal is necessary for protection of the estate; or
  6. The representative is subject to removal for any other cause provided by statute  
13. Can you make an early distribution of a probate estate?

Yes, a personal representative may petition the probate court to allow an early distribution of the probate estate. Prob C §11620. Although, the aggregate amount of all property that can be distributed is limited to 50 percent of the net value of the estate. Prob C §11623(a)(2). Thus, in the case of a $1,000,000 probate, the personal representative could not distribute more than $500,000 to the beneficiaries.

Otherwise, the distribution of the estate can only occur after probate has been completed.

14. Are there advantages to probate?

Yes, there are advantages to probate. If an attorney ever tells you that there is nothing positive about probate, they are fibbing.

For example, since probate is a court-supervised process, the beneficiaries can be assured that the personal representative will faithfully execute their duties or else suffer monetary punishment. However, given the time and cost involved with probate, the disadvantages of probate outweigh its advantages typically.

15. What role does an attorney serve during probate?

The attorney’s role is to supervise the personal representative during the execution of his or her duties. Consequently, the attorney will make sure that the personal representative is filing the right documents at the appropriate time in the correct fashion.

There is no requirement that an attorney be hired to assist a personal representative in handling a probate. However, it is preferable because the practice of law is what lawyers are trained to do. Or at least that is what I was told in law school. In contrast, the personal representative often has little exposure to the legal realm other than what they have seen on television or in the movies, which is often times a gross exaggeration of reality. Sad but true.

16. How common is probate?

Probate used to be the dominant form of post-death administration for a decedent’s estate. 

However, due to prevalence of revocable trusts (“living trusts”) which are exempt from probate and non-probate transfers such as pay-on-death bank accounts, the frequency of probate is gradually decreasing.

17. When will probate typically occur?

The easiest way for a probate to be required is for an individual to own their home in their individual capacity and die with or without a will. For example, if John Smith was the sole owner of 2176 El Capitan Ave Santa Clara, CA 95050 and died, a formal probate would be required because the home’s value would exceed $100,000 and the home was not held in joint tenancy or transferred to a revocable trust. Thus, John’s personal representative would need to navigate the probate process in order to distribute the house to John’s beneficiaries.