The Ins and Outs of Probate

By Jim Gianelli

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Probate is a court process set up to assure that upon one’s death, assets get distributed to the people in one’s will (or in absence of a will, to one’s legal heirs), creditors get paid, and disputes are settled.

Probate requires the estate to pay set statutory attorney and executor fees based upon the estate’s gross value. It takes at least six months and, more likely, a year or more, and involves court costs, inventories, appraisals, and court-approved accountings.

For those who don’t plan ahead, probate is required, and the laws of the State of California – rather than you – will determine where your assets go and who is in charge of your estate. However, it is possible to avoid the inherent delays, costs and difficulties of probate.

Here’s the process: By submitting an estate to probate, one is asking the court to appoint someone to act as executor and issue “letters of administration” allowing banks, title companies, and stock advisors to deal with the executor.

The executor must take inventory and appraise all assets in the estate, protect the estate’s assets, notify creditors of the death, publish a death notice in a newspaper (to give unknown creditors a chance to step forward), address creditor claims, pay taxes, and keep beneficiaries informed.

After all this is completed, the executor files a “petition for final distribution” which reports on all of the executor’s activities, and finally, transfers the assets to the beneficiaries.

Why is probate often a bad thing? In a community like ours, most estates are small to medium in size. Most are under $1 million, and most are fairly simple, comprised of a house, money in the bank, and an investment account.

Probate is usually not necessary upon the death of a person with a simple estate, no surviving spouse, and no major family disputes – provided they’ve planned properly. By contrast, the estate of a person who leaves a will only (or did no estate planning) and has assets in excess of $100,000 must go through probate. However, a person who enters into a carefully crafted revocable living trust can easily avoid probate and allow for an informal (albeit attorney-guided) distribution of assets.

 

For a simple estate, in cases where it’s easy to reach agreement on structure and attorney participation and fees, this can mean big savings to your loved ones in terms of time and money.

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