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Probate

What is Probate?

In the abstract, probate is not difficult to understand.  At your death, your assets need to be distributed to your heirs, your debts need to be paid, and any loose ends need to be addressed.  You, obviously, can’t sign the deeds, write the checks, or handle your business affairs.  Therefore, the probate court takes over all of those duties.  The probate process is a detailed, lengthy, complicated, and bureaucratic nightmare for most families.

What Are The Basic Steps To Probating An Estate?

Step 1: Filing Petition and Gathering Material

A formal written petition to the court along with a filing fee must be submitted to the court to start the probate process. The first thing the court will do is approve or appoint someone to handle the affairs of the estate.  This person is called the executor, administrator or personal representative depending upon the rules of the state and whether the decedent died with or without a will.  Generally, the first thing the personal representative does is hire an experienced probate attorney to help guide them through the complex and daunting probate process.

Step 2: Publishing Notice to Creditors

The second major job of the probate court is to order that the decedent’s creditors be notified so that they can present their claims to the court for payment.  This requires the time consuming task of gathering all of the decedent’s liabilities.  The creditors are notified either by notice in the local newspaper or directly by mail.  The law sets a time that the probate proceeding must be left open to allow the creditors the chance to present their claims.  This is typically several months in most states.

Step 3: Inventory and Appraisal

During probate, all of the assets in the decedent’s estate are frozen so that an accurate inventory and appraisal can be made.  This means that during this period of time, none of the assets can be distributed or sold without written permission from the court.  The court will usually require formal written appraisals for many items, such as real estate, antiques, collectibles, automobiles, furniture and other valuable assets.  Appraisal fees can be expensive and take some time to complete, and like all expenses in probate, are paid for out of the estate.

Step 4: Payment of Debts, Claims and Taxes

Once all debts and claims have been submitted and approved, they’re presented to the court for approval to pay them from estate assets.  Some estates may also owe federal estate tax and the probate must stay open until those taxes are paid. During the entire probate process, disgruntled heirs or those who disagree with the provisions in the will can bring a lawsuit in the probate court.  These suits are called will contests.  They can delay the distribution of the estate and cause additional unnecessary stress on the personal representative trying to settle the estate.

Step 5: Final Distribution and Closing the Estate

Finally, after the court is satisfied that all legal requirements have been met, it will order all debts, claims, taxes, attorney’s fees, the personal representative’s compensation, and any other miscellaneous expenses to be paid from the estate.  If there is not enough cash in the estate to satisfy these substantial claims, the judge can order that assets be sold at public auctions or estate sales.  Only after all the bills are paid will the probate court distribute the remainder of the estate to the beneficiaries named in the will; or if there is no will, to the identified heirs at law.  The court then closes the file.  This process can take anywhere from 12 months to 24 months depending on the size and complexity of the estate.

I’ve Heard Probate Is Expensive. How Are Probate Fees Calculated?

State law sets the probate fees that attorneys and personal representatives can charge. Many states allow attorneys to charge any fee that the court deems reasonable, without any limitations. Other states limit attorney’s fees to a fixed percentage of the estate. Under either method, the fees can be very expensive.

In states that limit fees to a percentage of the estate, probate fees are calculated on your estate’s gross value without deductions for liens or encumbrances. For example, let’s say that a married couple, Chandler and Monica, own a home worth $1,000,000 and they die without having a revocable living trust and now their estate is going through probate. They have a mortgage on their home worth $400,000. You might assume that when calculating the value of their estate, the home would only be worth $600,000, which represents their equity in the home at the time of their death. However, the probate fees will be calculated on the fair market value of the home ($1,000,000), without any consideration for the significant mortgage liability still on the home.

The following are some of the fixed probate fees in California:

GROSS ESTATE SIZE PROBATE FEES

(ATTORNEY’S FEES + PERSONAL REPRESENTATIVE FEES)

$150,000 $11,000
$500,000 $26,000
$1,000,000 $46,000
$2,000,000 $66,000
$5,000,000 $126,000

How long does probate take?

Probate typically takes at least a year and a half to complete, many estates take several years. This slow process can be very frustrating for your family. Most people assume their estates are simple and will glide through the system. However, regardless of how simple an estate appears, it is very difficult to close a full probate in less than a year.

Are the details of the estate kept private in Probate court?

No. All probate proceedings are open to the public. Anyone who has an interest can pull your probate file and examine every detail of your financial life. This file reveals that nature and value of every asset you own and the name of all your creditors and amount owed to each.

What happens to the real estate owned located in another state?

A probate must be instituted not only in the state where you lived, but in every state where you owned real property. This is called ancillary probate.

Does Joint Tenancy avoid Probate?

Yes and no. In the case of Monica and Chandler who own their assets in joint tenancy, there’s no probate when Chandler dies because title passes automatically to Monica. However, when Monica dies, there is no joint tenant to pass the interest to and there will be a complete probate on the entire estate.

Does a Will avoid Probate?

No.  In fact, a will guarantees probate.  All property that is controlled by your will must go through the probate court.

Does a Revocable Living Trust avoid Probate?

Yes.  All assets transferred to your living trust during your lifetime completely avoid the probate process. Transferring your assets to your trust really just means changing the title of your assets into the name of your living trust. For real property, it means you will sign a new deed. For other assets, you sign special transfer documents changing ownership to the name of your trust. Once the process is complete, all your assets will be owned by the trust. Although your living trust has title to the assets, don’t worry, you, or you and your spouse/significant other, have complete control of the trust while you’re alive. You can amend the trust or even revoke it if you’d like. When you die, there are no assets in your name so there’s no need to go through probate.

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