Probate – What is it?

In California, the probate court serves several functions. The most common is administration of the estates of persons who die, called a probate proceeding. However, the probate court also handles guardianships and conservatorships. Thus, the same court may decide to appoint a conservator for an incapacitated person, and then may administer that person’s estate several years later, after death.

What Is Probate?

In a probate proceeding, the court oversees the process of identifying the deceased person’s property, paying any debts, identifying the proper heirs, and distributing the property to them. Most of the actual work is done by an executor (usually a relative or friend of the deceased person), with the assistance of an attorney and often an accountant.

Not all of a deceased person’s property is subject to the probate process. Life insurance, retirement accounts, and “joint tenancy” property all pass directly to the appropriate beneficiary automatically, without any court confirmation. If the person created a “living trust,” any property held in the trust is not subject to probate. A bank account or motor vehicle title may also specify a death beneficiary.

Benefits of Probate

Probate does provide some important benefits. Most important, it provides some court supervision to make sure a deceased person’s property is accounted for and distributed as intended.

Once the probate “creditor’s claim period” expires (generally four months after the executor is appointed) it is very difficult for creditors or others to claim any interest in the estate. For a professional (such as a doctor, accountant, or attorney), probate may bar later lawsuits that would otherwise be difficult to defend without the help of the deceased person.

Drawbacks of Probate

But probate has several drawbacks, which lead many people to seek to avoid probate.

Probate Delay: Formal probate takes at least six months to a year. Sometimes, probate can drag on for several years, or in extraordinarily rare situations, for decades.

Often, these delays are not important. The surviving family members usually have immediate access to joint bank accounts, and rapid access to life insurance proceeds. If special needs exist, the probate court will usually allow preliminary distributions or payment of an allowance to family members.

However, in certain situations, probate delays can create problems. For example, a small business or professional practice must often be sold quickly after death to avoid losing clients. If a deceased person owned stock options related to employment, those options may lapse if not exercised quickly.

Probate Fees: Second, probate can be expensive, because of fees paid to the attorney and to the executor. The actual fees paid to the probate court are minimal, typically about $400 for filing fees. For property other than cash or its equivalent, a probate referee must appraise the property, for a fee equal to one-tenth of 1 percent (0.1%) of the value of the property. (Even if probate is avoided, the IRS may require an appraisal. )

The executor’s fee and attorney’s fee are much larger. The probate code provides that the executor and attorney may each charge a fee that ranges on a sliding scale, but works out usually to be about 6% of the gross value of the estate. These probate fees are computed only on property which is subject to probate (and thus usually won’t include life insurance, retirement accounts, or joint tenancy property).

However, if the executor is also the sole beneficiary of the estate, he or she will usually waive the executor’s fee, since it is subject to income tax. In addition, the attorney’s fee is negotiable; many attorneys charge hourly rates, with the statutory fee set as a maximum fee for ordinary probate legal services.

Finally, even if probate is avoided, the fees might not. An attorney and/or accountant usually must be hired to help administer a deceased person’s trust or non-probate estate. In addition, the trustee of a “living trust” is usually entitled to claim a reasonable fee for managing the trust, although many family members do not actually request fees.