Overview of Probate
Probate is a court proceeding utilized to supervise the transfer of your assets to your heirs and beneficiaries. It is also a process to determined who is entitled to receive distributions of your property either under your will or according to the laws of intestate succession (if you die without a will).
If you die with or without a will (and without a trust or other probate avoidance device), and the fair market value of your probatable assets are worth more than $150,000.00 at the time of your death, it will be necessary for a probate proceeding to be initiated to transfer your assets to your beneficiaries (if you have a will) or heirs (no will) as determined under the laws of intestate succession according to a statutory order of priority (generally spouse, children, parents and so on).
If the value of your estate is less than $150,000.00, a summary probate may be available. Automobiles do not count in the $150,000.00 limit and there are several other exclusions that make this a useful approach for many people.
The purpose of a probate is to legally transfer title and ownership of the assets of the decedent to the heirs under court supervision. For example, if you died and owned a home in your name alone, your beneficiary would need legal documentation indicating ownership in the event they wanted to sell, refinance or remodel the property. No one could legally sign your name to a deed that would convey the property to the new owners, sign financial documents to get a better mortgage rate or a contract for remodeling. Any bank accounts, stocks, bonds, etc., in the name of the decedent would also be unavailable to your heirs. Dividend checks or other monies owed to you may still arrive in the mail, but no one would be able to cash them as they would still be in your name.
Many of the costs and fees associated with probate proceedings are based on the fair market value of property you owned at your death regardless of any liabilities on the property such as mortgages and other debts. For example, let's assume the only asset in your estate was a home you own with a fair market value of $500,000, and that home has a $450,000 mortgage note on it when you die. The personal representative's commission, the attorney's compensation and depending on the type of assets you own at your death, the probate referee fees will all be based on the $500,000 amount. Then add in filing fees, publication fees and a premium for your bond, it is conceivable that much of the $50,000 equity in the home will be consumed by the fees and costs leaving little if anything for your beneficiaries.
Normally, whomever you nominated in your will as executor files a petition for probate asking the court that he or she be appointed. The original will is filed with the petition, and notice of the petition is sent to all the heirs and/or relatives to let them know that the petition has been filed and when and where the hearing will be held.
If you die without a will, the Probate Code provides a list of persons who have priority to petition the court to be appointed administrator. Any "interested person" may begin the probate process. "Interested person" generally means any heir, relative, or creditor of the decedent. If more than one person initiates the probate asking to be appointed, the court will decide who to appoint as administrator based on the statutory priority schedule. Whether the person named in your will is appointed executor or an administrator is appointed because you die with out a will, we use the term Personal Representative to refer to the person appointed to handle the duties of the probate administration.
The petitioner must arrange for the Notice of the Petition for Probate to be published in a newspaper of general circulation where the decedent was domiciled at the time of death.
Any objections to the appointment or issues regarding the validity of the will may be brought at the time of the hearing. An interested party may contest the probate, or the validity of the will at any time within 120 days after the will has been admitted to probate. If there are no extraneous matters and the executor's appointment is accepted, the judge will sign the Order for Probate and Letters will be issued to the personal representative.
Unless you died with a will and the will waived bond, your personal representative will be required to arrange to post a bond and pay premiums to the surety until the probate is complete.
The personal representative must locate creditors, pays bills, file tax returns, and manage the estate assets. He or she must complete an Inventory & Appraisal form which adequately describes each asset and file the form with the court. State law requires a change of ownership form be sent to the assessor's office in each county the decedent owned real property within 150 days from death or when an Inventory and Appraisal is filed.
The court appoints a probate referee, who appraises these estate assets (other than cash) and determines the fair market value as of the date of death. Probate referees also receive a fee based on a percentage of the assets that have been appraised.
Your personal representative must send a notice of the probate to all reasonably ascertainable creditors. Creditors are required to submit their claims against the estate within a four-month period, provided they have been properly notified of the probate. The personal representative will approve or reject in full or part or each claim filed with the court.
After all the duties of the personal representative have been completed, he or she is required, in most cases, to prepare and submit an accounting and report of the executor's activities for approval to the court. The petition will request permission to pay attorney and representative compensation and to distribute the remaining estate to the heirs. If this petition is granted, the estate administration is completed by distributing the assets to the heirs, paying closing costs and compensation. If the estate administration cannot be completed within one year, a status report including an up to date accounting must be filed with the court explaining why the estate cannot be closed. A status report is required annually until the probate is completed.
Advantages of Probate
Because the proceedings are controlled by a judge who can decide disputes, it may be desirous to go through probate.
Disadvantages of Probate
Probate is a court supervised process that takes a minimum of a year (but typically much longer) and up to several years before the process is complete. Because of the current financial crisis encompassing the State of California, and the closure of many courthouses through Los Angeles County, with the exeption of Van Nuys, all probates must be filed in the downtown Los Angeles court. This is regardless if you lived and died in Pomona, Long Beach, or Santa Monica, the probate must still be filed in the downtown Los Angeles court. As you can imagine, this is causing the process to take longer than what we have typically been accustom.
During this time, property owned by the decedent may be tied up and there may be restricted or no access to important funds and accounts. The sale of property may be complicated by the need for court approval of the terms of sale.
Probate is a matter of public record. Probate can be expensive considering attorney's fees, representative/administrator fees and filing, publishing and referee fees.
The Attorney and Personal Representative are entitled to receive the same fee, unless compensation has been otherwise provided for. The Executor may waive their fees. Fees are set out according to statute. The Attorney and Executor may also receive extraordinary fees for activities such as selling real estate or preparing tax returns. Additionally, if the probate is complicated by lawsuits or tax problems, the judge may be asked by the Attorney and Executor to approve fees that are higher than those set by state law.
The statutory fees are based on a percentage of the appraised value of the estate assets without regard to encumbrances. For ordinary services the attorney and personal representative shall receive compensation based on the value of the estate accounted for by the personal representative, as follows:
(1) Four percent on the first one hundred thousand dollars ($100,000).
(2) Three percent on the next one hundred thousand dollars ($100,000).
(3) Two percent on the next eight hundred thousand dollars ($800,000).
(4) One percent on the next nine million dollars ($9,000,000).
(5) One-half of one percent on the next fifteen million dollars ($15,000,000).
(6) For all amounts above twenty-five million dollars ($25,000,000), a reasonable amount to be determined by the court.
The following charts show examples of statutory fees based on the fair market vale of estate assets:
|ESTATE ASSETS||STATUTORY FEE|
If the attorney and the executor receive a fee, the amount paid will be double that shown above. It is not required that an attorney be retained, however, probate tends to be a highly structured and complicated proceeding and many find it helpful to have the assistance of an attorney to make their way through the requirements.
The Superior Court will also charge filing fees.
As of October 19, 2010 the fee to initiate a probate proceeding is $395.00 regardless of the size of the estate (http://www.lasuperiorcourt.org/feesnet/pdf/fee-schedule-2010.pdf ).