When someone passes away, the procedure necessary to settle the estate depends upon the nature of the planning accomplished prior to death. If the “decedent” had developed a proper estate plan prior to death, the procedures are generally much easier, less costly, and less time-consuming. If, on the other hand, the decedent failed to properly plan, then a probate may be necessary. Following, is an overview of the probate process, as well as the process of administering the estate of someone who had developed a revocable living trust.
WHAT IS PROBATE?
If you die without a living trust-based estate plan in Orange County, and/or if you have probatable assets in excess of $150,000, your estate will be subject to the probate procedure. Probate is a legal proceeding that is used to complete a persons legal and financial affairs after death. In California, probate proceedings are conducted in the Superior Court for the county where the decedent lived, and can take at least six months and sometimes as long as several years to finish.
WHAT HAPPENS DURING A PROBATE?
The person who is nominated in the will as executor files a petition asking that he or she be appointed as executor of the estate. If there is no will, the Probate Code provides a list of persons who have priority to petition to become executor.
The will is also filed with the petition, and notices are sent to the heirs and/or relatives of the deceased to let them know when the hearing will be held. If there are objections to the petition, or if the validity of the will is contested, the hearing will be used to resolve any issues that have arisen. In some cases, this may mean that the validity of the will is not upheld, or that some other person than the original petitioner is chosen to administer the estate. If there are no objections, the petition is granted. The executor then makes an inventory of the estates assets, locates creditors, pays bills, files tax returns, and manages the estate assets. When all of the duties of the executor are completed, another petition is filed with the court asking that the estate be distributed to the heirs. If this petition is granted, the estate administration is completed by distributing the assets to the heirs and filing final tax returns.
HOW MUCH DOES PROBATE COST?
California Probate Code section 10810 sets the maximum statutory fees that Orange County probate attorneys can charge. Higher fees can be ordered by a court for more complicated cases. The fees are 4% of the first $100,000 of the estate, 3% of the next $100,000, 2% of the next $800,000, 1% of the next $9,000,000, and 0.5% of the next $15,000,000. The court will determine fees for estates in the amount greater than $25,000,000.
In addition to the fees listed above, compensation may also be awarded to attorneys and executors in probate cases. Superior Court will also receive a fee depending on the size of the estate.
APPRAISAL OF THE ESTATE
Estates are appraised by probate referees, who determine the fair market value of the assets. The fair market value includes mortgages and other debts, which can result in an appraisal of the property that is higher than the equity that the deceased owned in the property. Probate referees are appointed by the state controllers office and they receive a fee based on .1% of the assets that have been appraised.
FEES CAN GO HIGHER
In probates that are complicated by lawsuits or tax problems, the Orange County probate attorney and executor can ask the judge to approve fees that are higher than those set by state law.
In addition to the statutory fees, there are costs for appraisal fees, publication costs, and miscellaneous fees charged by the county. A typical estate might incur $1,000 to $2,000 in court costs and other mandated fees.
ADVANTAGES OF PROBATE
The proceedings are controlled by a judge, who can decide disputes between heirs or between the heirs and the executor. Creditors are required to submit their claims against the estate within a four-month period, provided they have been notified of the probate. The executor is required, in most cases, to prepare an accounting and report all their activities.
DISADVANTAGES OF PROBATE
The cost is usually MUCH higher than would be required for the administration of a living trust for an estate valued at the same amount. It usually takes months, or even years, longer to probate an estate than to administer a trust. Most estates don’t need the supervision of the court unless disputes occur.
For most families and individuals, the best way to avoid probate is to establish a comprehensive and funded living trust in Orange County with supporting documents.