Let us guide you through the maze of administering your loved one's estate.
What is Probate?
Probate is the process of “probating” (from the Latin for “prove”) the will of someone who has died. It’s a fairly involved process. The will is filed with the court, and notice is sent to the beneficiaries listed in the will, as well as heirs at law (spouses, children, and sometimes parents or siblings). If anyone thinks they have a more current will, they can object and file the will that’s in their possession. The court must then decide between the wills.
If no one objects to the will, the court proceeds. An executor is appointed, usually the one named in the will. That executor must be sure all the steps in probate are carried out. He may hire accountants, tax professionals, real estate professionals, and anyone else reasonably necessary to the administration. All these costs are paid out of the estate.
How does the court decide what an estate is worth?
An inventory must be filed listing all of the decedent’s property. A “probate referee” appointed by the court supplies values of all the items in the estate. There is a fee for the probate referee. If there are any unusual items, such as antiques, art, or collectibles, specialists must be hired (and paid) to value the items.
Death and Taxes
The executor must be sure that all tax returns have been filed and all taxes have been paid. If the decedent had employees, the executor must be sure all payroll taxes have been paid. If the estate has enough money to pay taxes, and the executor does not pay the taxes, the executor is PERSONALLY responsible for paying those taxes.
Do a person's debts go away when they die?
Notice must be sent to all known creditors of the decedent, and a notice posted in the newspaper so that unknown creditors have an opportunity to file their claims. The creditors must be given time to respond. In California, creditors have four months to respond. If they have not filed by four months after notice was filed, or within one year of the death (whichever is later), their claim is time-barred and does not have to be paid. Indeed, the executor should not pay the claim if it is filed late, because that deprives the beneficiaries of that money.
Cost of Probate
In California, there are statutory fees based on the size of the estate. The fee is 4% of the first $100,000 in the estate, then 3% of the second $100,000, then 2% on the next $800,000, and 1% on the next $9 million. The attorney advising on the estate administration is due an identical fee. It is worth noting that these fees are based on the gross value of everything that passes through the probate court. So it does not include life insurance or retirement accounts which pass by beneficiary designation. But it includes the value of real estate, with no subtraction for mortgages outstanding.
If the executor is also a beneficiary of the estate, she may choose to waive her fee, since it reduces the estate and is taxable to her. She should discuss that with her attorney and her financial and tax advisers.
In addition to these fees, there are court fees and costs to publish the notices to creditors. Probate of a modest estate can easily cost in the tens of thousands of dollars.
Spousal property petition
California does provide two mechanisms to avoid much of the cost of probate for a simple estate. One is the spousal property petition. If there is a spouse, and all property passes to that spouse in the will, that spouse (or registered domestic partner) may file a spousal property petition to request that all property be passed to them. An attorney is typically hired to assist with this process, but that is not required. Notice to other heirs is still required, but many of the other steps can be omitted.
Note that there may be reasons why the spouse would prefer a full probate. For example, by filing notice to creditors, a widow can be sure that all valid debts are paid and she can go forward without fearing future claims from her husband’s creditors.
Small Estate affadavit
If the decedent’s entire estate (including any real estate) is less than $150,000, an heir can use what is known as the small estate affidavit, or officially “Affidavit for Transfer of Personal Property Worth $150,000 or Less.” Real property (that is, houses or land) cannot be transferred by this method.
The heir(s) fill out a form swearing that no probate has been started, that the value of the estate is appropriate for the process, what specific property they are trying to collect (typically a bank account or personal property such as home furnishings) and file it with the court. Some large banks refuse to honor these orders, and demand that the person show letters of appointment as a personal representative. Persistence and a polite demand to speak with their legal department can be effective in these situations. If necessary, the heir can hire an attorney to force the bank to turn over the money. If an heir has a valid order for a personal property transfer, and his attorney has to go to court, the bank will be liable for the costs.
What is community property?
California is a community property state. The presumption is that assets acquired during marriage belong equally to both spouses. The exceptions (separate property) are assets owned before marriage, or received as gifts or inheritances. If assets owned before marriage increase in value during marriage, there are complicated formulas for calculating how much is community property and how much is separate property.
These formulas are the focus of many disputes in divorce court and probate court. Spouses can agree to change how they classify property as separate vs. community in a pre-nuptial or post-nuptial agreement. California has very detailed rules on how these agreements must be done. Anyone considering having one should consult with an attorney.
What if there is no will or trust?
If the decedent did not have any estate documents, or if none can be found, the assets will pass by intestate succession. In California, if there is a spouse or registered domestic partner, he or she will receive all of the community property and one-third to one-half of the separate property (depending on how many children there are). An only child will receive half of the separate property. Multiple children will divide 2/3 of the separate property. If there is no spouse, the children will divide all the property. If there is no spouse and no children, the property will go to the decedent’s parents, siblings, and more distant relatives depending on who is still alive at the time.
Intestate succession requires a full probate proceeding, but can have the added complication that multiple parties may attempt to be named personal representative of the estate.
If you are handling a decedent's will,
let us guide you through the process.
Call us at (530) 662-2226 or submit the form below for an appointment to discuss your Probate needs.
© 2015 Barbara Sonin
DISCLAIMER: In publishing these materials, the author is not engaged in rendering legal, accounting or other professional service. If legal advice is required, the service of a competent professional should be sought. No attorney-client relationship is created by the provision of this information.