Probate
What is probate?
Probate is the legal proceeding that takes place when someone dies. The court supervises the processes that transfer legal title of property from the estate of the person who has died (the “decedent”) to his or her beneficiaries.
The probate process usually includes:
- Proving to the Court that the Will is valid (this is usually routine);
- Appointing a legal representative with authority to act on behalf of the decedent;
- Identifying, inventorying and appraising the decedent’s property;
- Paying any debts and taxes;
- Distribute the remaining property according to the terms of the Will or to the decedent’s heirs, which are defined under state law.
How long does probate take?
Under California law, probate must be completed by the personal representative within one year from the date of appointment, unless s/he files a federal estate tax return. If federal estate tax return is filed, the personal representative has up to 18 months to complete probate.
Some situations can increase the time of probate, such as situations where the beneficiaries are difficult to locate, where there is a Will contest, or the estate is very large and complex. In these types of cases, probate cases take years to resolve.
How much does probate cost?
The cost of probate is set by state law. In general, the costs of probate range from 4% to 7% of the total estate value, but can go higher depending on the amount of work that needs to be done by the personal representative and the size of the estate. The costs of probate usually include appraisal costs, executor’s fees, court filing fees, a “surety bond,” plus legal and accounting fees. If someone contests the Will, there could be thousands of dollars of litigation costs.
California law allows both a Personal Representative and the attorney for the Personal Representative to take a fee (referred to as a statutory fee) for ordinary services, calculated as a percentage of the appraised value of the estate property. The formula for calculating the fee is as follows, from Probate Code Section 10810:
4% of the first one hundred thousand dollars ($100,000), plus
3% of the next one hundred thousand dollars ($100,000), plus
2% of the next eight hundred thousand dollars ($800,000), plus
1% of the next nine million dollars ($9,000,000), plus
½ of 1% of the next fifteen million dollars ($15,000,000).For all amounts above twenty-five million dollars ($25,000,000), a reasonable amount to be determined by the court.
Additional compensation, known as an extraordinary fee, may also be paid to the Personal Representative and/or the attorney for the Personal Representative for extraordinary services in an amount that the court determines is just and reasonable.
Should I plan to avoid probate?
Probate is rarely beneficial for your beneficiaries. As discussed above, probate can lock your assets in court for a year before it is distributed to your beneficiaries. In addition, the costs and fees associated with probate are taken from your estate, and ultimately from your beneficiaries.
However, the decision to spend time to plan your estate to avoid probate depends on your individual situation. Not everyone needs to avoid probate.
Speak with an attorney to see if you should consider probate avoidance techniques, such as a living trust.
