Probate

What is probate?

Probate is the court-supervised process created by California law to handle the distribution of a Decedent’s (the person who has died) estate. Probate is required whether the decedent died with or without a will. Probate can be bypassed with estate planning and using trusts. The word “probate”in latin means “proving”.

In short, probate is the process the state uses to determine who is the rightful person to receive the deceased person’s property when they died without leaving specific instructions, or to supervise that the property is distributed according to their will.

It is estimated about 70% of Americans die without either a will or an estate plan. That is high number! I can see why, people don’t like to talk or think about death. Unfortunately, if you leave it up to probate court, the disposition of your estate may take a year or more, you will incur fees for the cost of probate, and your estate may not be distributed the way you intended. For those reasons I recommend meeting with an estate planner and creating a trust.

 

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How does probate process start?


Probate begins with the filing of a petition for probate at the Superior Court in the county where the decedent lived. One of the first things you should do as a family member when a relative passes away is consult with a probate attorney. They will help you prepare the petition. The petition should be filed by the person who wants to take responsibility for the estate by becoming executor or administrator.

 

An ‘executor’ is the person named in the will to represent the estate.

 

An ‘administrator’ is a person appointed by the court when there is no will, when the will does not name an executor, or when the named executor is unable or unwilling to serve. state law provides that the decedent’s closest relatives have the highest priority to become administrator of the estate.

 

Being executor can be a very difficult job. Administration of the estate includes managing the assets to prevent losses, paying bills for the estate, filing tax returns, preparing an inventory of the assets, locating heirs, posting public notice of important events, settle the estates debts, keep financial records, and dozens of other duties. The goal is to wrap up all of the loose ends of the decedent’s financial affairs and distribute the estate to the beneficiaries. Administration can be very technical and time consuming. As a fiduciary, if you screw up- you might find yourself financially liable!

 

Fortunately, as executor you do receive something for taking on this large task – a small fee from the estate as compensation for the hard work. Compensation is fixed by law and is based on the value of the estate.

 

Table 1 Executor Compensation Schedule

 

Estate Value

Statutory Fee

$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

$1,500,000

$28,000

$2,000,000

$33,000

$3,000,000

$43,000

$4,000,000

$53,000

$5,000,000

$63,000

$6,000,000

$73,000

$7,000,000

$83,000

$8,000,000

$93,000

$9,000,000

$103,000

$10,000,000

$113,000

$15,000,000

$138,000

$20,000,000

$163,000

 

 

 

As executor, you will work very closely with the probate attorney. The probate attorney compensation is fixed by law and is the same rate as the executor from the table above.

 

To figure out the approximate cost for a probate – multiply the statutory fee of estate value in the table above by two (one fee for the executor and one fee for the probate attorney), add $5,000 for court filing fees and an additional 1/10 of a percent (0.1%) of the value of the estate for the probate referee. Probate is expensive! For a $1M estate probate will cost you $50,000 about 5% of the estates gross value (if that estate is an $800,000 property and $200,000 in bank accounts, and there is a mortgage on the property of $400,000 the estates net value is $600,000 but you will be charged on $1,000,000 making an effective cost for probate of ~10%). Probate costs usually ranges from 4%-10% the value of the estate.

 

The other thing to note about Probate is that it takes quite a long time to finish, 8-18 months.

 

The Probate Timeline

 

 

 

File Petition for Probate 1-2 months
Court hearing 2-3 months
Will VerifiedExecutor or Administrator AppointedProbate Case Opened 2-4 months(if not contested)
Give Notice to Creditors 4 months
Prepare Estate Inventory & Complete Real Estate Appraisal 4-8 months
Pay Debts & file tax return (due 9 months after death) Sell Property if necessary to raise funds 6-12 months
File Petition for Final Distribution and Accounting 8-16 months
Distribution of Assets to Heirs 9-17 months
Final Discharge Order (indicates close of probate case) 9-18 months
Final Distribution of Funds 9-18 months

 

When there is no will, probate determines the order of inheritance by intestate succession. The estate is divided into as many equal shares as there are living members in the ‘issue’. The issue order is:

 

Spouse

Children

Grand Children

Parents

Descendents Siblings (Uncles and Aunts)

Decedent’s Nephews and Neises

Grandparents

Escheat – estate reverts to the state if there no heirs can be found at all

 

 

Buying a Probate Property

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