What is Probate? Probate is the legal process in which a decedent’s estate is administered and overseen by the Probate Court. This process is to make sure that the the assets are properly accounted for, that all valid creditors get paid for any outstanding debts, and that the balance of the estate is distributed to the beneficiaries.
I don’t have many assets. Does my estate have to be probated? In California, estates valued more than $150,000 generally have to be probated. This is for probate assets only (ie. Property outside of a living trust or do not have designated beneficiaries). Non-probate assets include the following listed below and usually do not have to be probated:
Small estates under $150,000
Property passing to a surviving spouse
Property held in a Living Trust
Joint Tenancy property
Accounts with Pay-On-Death beneficiaries (POD) such as bank accounts, Individual Retirement Accounts (IRA)/Life Insurance, Pension Funds and Brokerage Accounts
If the estate is worth under a certain amount (ie. From $20,000 to $100,000 depending on the circumstances the the kind of property), CA has simplified procedures for transferring property.
I have life insurance and retirement benefits. Are they considered part of my probate estate? No. The benefits can be paid directly to a named beneficiary. Monies from IRAs, Keoghs, and 401(k) accounts transfer automatically to the named beneficiaries. Bank accounts that are set up as pay-on-death accounts (PODs) or “in trust for” accounts (“Totten Trust”) also pass to the named beneficiary without going through probate.
What is an executor? The executor, also called an administrator or personal representative, is the person responsible for management of the probate. This includes preparing an inventory of the assets, paying bills, filing taxes and distributing the estate after the court makes the order. The executor is the person named in the will. If there is no will, a relative may petition the court to name him or her as the administrator.
What are the executor’s duties? The executor is responsible for administrating the estate, which includes the managing of the assets to prevent loss, paying bills, filing tax returns, preparing an inventory of the assets, locating heirs, etc. The executor is essentially in charge of wrapping up all of the loose ends of the decedent’s financial affairs and distribute the estate to the beneficiaries.
How long does probate take? If the probate case have no unusual problems, it can take about 8-12 months. During that time, a 4-month creditor’s claims period takes place. The time period also depends on the court’s calendar – hearings are usually scheduled several weeks after the petition is filed. Creditors, taxes, objections or will contests may cause delays in probate. In those cases, some probate cases can take years to resolve.
How much does probate cost? The cost to probate an estate include the following:
Court filing fee
Newspaper publication cost
Probate Referee’s fee to appraise the estate
These costs usually range from $1,000-$3,000
A typical estate may incur $1,000 to $3,000 in court costs alone and other mandated fees. After adding all the fees and costs, probate can cost anywhere from 3% to 8% of your assets that could have been included in your distribution to your beneficiaries.
The estate has to also pay for the attorney’s fees and estate representative, and their fees are set by state law and based on the value of the estate. In California, the statutory fees for the attorneys and personal representative are broken down as follows:
4% on the first $100,000 in assets
3% on the next $100,000 in assets
2% on the next $800,000 in assets
1% on the next $9,000,000 in assets
0.5% on the next $15,000,000 in assets
A reasonable fee thereafter
For example, if your only asset in your estate is a $500,000 house, the statutory fee would be $13,000 based on the full $500,000:
4% of the first $100,000 = $4,000
3% of the next $100,000 = $3,000
2% of the remaining $300,000 = $6,000
This total amount doubles to $26,000 if the estate has to pay both the attorney and the personal representative.
These fees must be approved by the Court and then are paid from the estate at the conclusion of the probate process. The estate representative can choose to waive his or her fee.
If I’m the executor, will I get paid? Yes, in addition to your out-of-pocket expenses to manage and settle the estate, personal representatives usually earn a statutory fee of 2%-4% of the probate estate. The fees and expenses must be approved by the Court. The Court also may allow other fees in extraordinary circumstances.
What if there is no Will? If a person dies without a Will, it is known as dying “intestate,” and the Court will appoint a personal representative called an administrator. The decedent’s property will pass to the decedent’s closest relatives in the following order: