Probate Administration & Litigation
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Manner of Passing Assets at Death
Probate
Probate is a legal proceeding that is used to wind up a person's legal and financial affairs after death.
Assets owned solely in the decedent's name, as well as interest in property held as tenants in common, must be administered and disposed of under court supervision as governed by the decedent's Last Will and Testament or, where no Will is present, under State law. Not only does this create delays but may also cost as much as 4% of the value of the gross estate.
If a trust is in place, assets governed by the trust are administered and disposed in accordance with the trust agreement; therefore, they are not subject to probate.
In California probate proceedings are conducted in the Superior Court for the county in which the decedent lived, and can take at least six months and sometimes as long as several years.
The Probate Process.
The person who is nominated in the will as Personal Representative files a petition with the Superior Court asking that he or she be appointed as Personal Representative. If there is no will, the Probate Code provides a list of persons who have priority to petition to become Personal Representative. The will also is filed with the petition, and notices are sent to the heirs and/or relatives to let them know when the hearing will be held. If there are objections to the petition, or if the validity of the will is contested, the hearing will be used to resolve any problems that have arisen. In some cases this may mean that the validity of the will is not upheld, or that some other person than the original petitioner is chosen to administer the estate. In most cases, however, there is no objection and the petition is granted. The Personal Representative then makes an inventory of the estate's assets, locates creditors, pays bills, files tax returns, and manages the estate assets. When all of the duties of the Personal Representative are completed, another petition is filed with the court asking that the estate be distributed to the heirs. If this petition is granted, the estate administrated is completed by distributing the assets to the heirs and filing final tax returns.
Probate Costs.
With regards to statutory fees that can be charged by California probate attorneys, California Probate Code §10810 sets the maximum, although higher fees can be ordered by a court for more complicated cases. Probate is generally more expensive than setting up a California trust. The maximum fees that can be charged by probate lawyers, California Probate Code §10810 says, are 4% of the first $100,000 of the estate, 3% of the next $100,000, 2% of the next $800,000, 1% of the next $9,000,000, and one-half percent of the next $15,000,000. For estates larger than $25,000,000, the court will determine the fee for the amount that is greater than $25,000,000. Unlike a trust, a California will may be subject to probate.
The value of the estate is determined, in general, by the inventory for the estate. Debts are not included in determining attorney's fees. So to illustrate, if a house is appraised at $1,000,000 and it has a mortgage of $800,000, it is still considered a $1,000,000 asset for the purpose of calculating attorney's fees. In probates that are complicated by lawsuits or tax problems, the attorney and Personal Representative can ask the judge to approve fees that are higher than those set by state law.
The fee charged to file a probate petition is $320, but may be slightly higher in some counties due to surcharges. Filing fees were substantially higher until a state appellate court ruled in early 2008 that the fees were unconstitutional because they violated Proposition 6, passed in 1982 to eliminate the state inheritance tax. In addition to the statutory fees, there are costs for appraisal fees, publication costs, and miscellaneous fees charged by the county. A typical estate might incur $1,000 to $3,000 in court costs and other mandated fees.
Appraisal Of The Estate.
Estates are appraised by probate referees, who are appointed by the State Controller to determine the fair market value of the asset. The fair market value includes mortgages and other debts, which can result in an appraisal of the property that is higher than the equity that the deceased owned in the property. Probate referees receive a fee based on .1 percent of the assets that have been appraised.
Advantages Of Probate.
The proceedings are controlled by a judge, who can decide disputes between heirs or between the heirs and the Personal Representative. Creditors are required to submit their claims against the estate within a four-month period, provided they have been notified of the probate. The Personal Representative is required, in most cases, to prepare an accounting and report of the Personal Representative's activities.
Disadvantages Of Probate.
The cost is usually much higher than would be required for the administration of a living trust for an estate valued at the same amount. It usually takes longer to probate an estate than to administer a trust. Most estates don't need the supervision of the court unless disputes occur.
If you are domiciled in the State of California or own California real estate or you are an heir to an estate subject to administration in California, let us help you. We can also answer questions about handling tax problems that arise in probate.
Click here to complete our Probate Administration Questionnaire for an evaluation of the administration of an estate or call us toll-free at 866.494.6829.