Demystifying the Probate Process
What is probate?
Many people have heard of probate and while they may not know exactly what probate is, they have heard they should avoid it like the plague.
“Probate” is the legal process for settling an estate when someone passes away, regardless of if the person has a will or not. When someone passes away, the government has a legal duty to ensure the assets of the deceased are transferred to the legally entitled heirs, unless the deceased has prepared a will informing the court of a specified plan for transferring assets.
Why avoid probate?
Contrary to popular belief, the probate courts do serve an important role in settling estates and preventing fraud. However, the probate courts will cause significant delays in transferring assets and will result in exorbitant fees that can be avoided with proper planning. Additionally, probate is a public process and individuals may prefer to keep transfers of property a private matter.
In the interest of time.
The probate court allows a period of time for creditors and other claimants of your estate to come forward and notify the court that they are owed assets out of your estate. This time period is a minimum of four months and generally lasts as long as six or nine months.
To fee or not to fee?
Some attorneys in California love the probate process. You are about to find out why. California sets attorney probate fees according to statute, meaning the legislature has established the following attorney fee schedule based on estate value in CA Probate Code 10810:
4% on the first $100,000
3% on the next $100,000
2% on the next $800,000
1% on the next $9,000,000
0.5% on the next $15,000,000
Beyond $25 million, the court determines a reasonable fee.
For example, if someone’s only estate asset is a residence valued at the median home price in California of $600,000 their estate risks paying attorney fees of $15,000.
The person responsible for settling the estate, known as the Executor is also entitled to a fee. However, when the Executor is a family member they often waive this fee. However, when a personal representative accepts a fee it is statutorily the same amount as the attorney fee! No one likes paying double fees!
How to avoid probate?
To avoid probate, you will first need to determine which assets are subject to probate and which assets are not subject to probate. With a little planning and paperwork, usually naming a beneficiary, your assets not subject to probate will transfer outside of the court system. Assets that are subject to probate must be planned for through the use of estate planning tools including the will, the trust, and often by re-titling the assets.
Continue: What is a Will?