February 28, 2018

Probate Referee - Appraising Assets

One of the many steps during the probate process is to inventory and appraise the decedent's estate. Every person will pass away with something to their name, whether millions of dollars in assets or the clothes on their back. Probate only applies though when the decedent's "probate" assets exceed $150,000. Probate is a quoted term in the following sentence because not every asset a person has when they pass away is subject to the $150,000 threshold. For example, assets held in joint tenancy, held in trust or have a beneficiary designation do not count towards that $150,000 figure.  

Many clients initially believe that inventorying and appraising the estate is a simple endeavor. They assume they can ask the bank for a date of death balance, look up stock prices on Google Finance, appraise a car using Kelly Blue Book and appraise residential real estate using Zillow. If life were only that easy................

Generally speaking, the only assets that the client can appraise are cash assets. For example, this would include a bank account, a certificate of deposit and money paid to a decedent's estate for a life insurance policy.

The probate referee will appraise all other items in the estate. This would include real estate, stocks, bonds, cars, etc. 

The appraisal will need to reflect the asset's value on the date of the decedent's death. For example, assume Danny Decedent purchased a Campbell, CA home on October 8, 1980 for $20,000. Danny passes away without a will on February 1, 2018. The probate referee will appraise the house as of its value on February 1, 2018. Assume the probate referee appraises the house for $1,500,000. Danny's heirs decide to sell the home during probate. Danny's heirs will use the cost basis of $1,500,000 when determining  capital gains tax. The cost basis of $20,000 would not be used.

A probate referee is not always necessarily needed. One case I had involved simply a bank account with no beneficiary. In that case, a probate referee was not needed as the client could appraise the asset. However, the vast majority of probate cases require a probate referee. In Santa Clara County the process to obtain a probate referee is quite easy. The attorney just needs to ask the clerk to appoint one. There are currently 6 probate referees in Santa Clara County and appointment to a probate case is sequential. That is, probate referee 1 is appointed to a case, then 2, then 3, etc. Thus the probate referee is selected for you in Santa Clara County.