Probate is the court-supervised process by which your Probate Assets are distributed to the beneficiaries in your Will according to the provisions in your Will. If you do not have a Will, the probate process allows for the distribution of your Probate Assets pursuant to the laws of Intestate Succession.

How Does Probate Work?

The probate process normally begins when the person you nominate as Executor in your Will files a petition for probate with the Court and schedules a Court hearing. In the petition the Executor asks the Court for a determination that the Will is valid. The Executor also asks the Court for the legal authority to handle your probate estate. If you do not have a Will some other interested party must come forward and ask the Court for the legal authority to handle your probate estate. This person is called an Administrator and is usually the decedent's surviving spouse or child.

Notice of the petition and hearing date is published in the newspaper and sent to interested parties such as the beneficiaries under your Will and your heirs. If no one objects to the Petition for Probate the Court will appoint the Executor and give him/her the legal authority to collect and distribute your assets. The written document by which the Court confers such authority on the Executor is called Letters Testamentary. The Executor can then collect your Probate Assets by taking his or her Letters Testamentary and presenting them at the institutions holding your Probate Assets, such as banks and brokerage firms.

Once the Executor has collected your Probate Assets he or she is required to file an inventory and appraisal of such assets with the Court. If the probate estate contains non-cash assets, such as a house or valuable antiques, the Court will appoint an independent party, called a probate referee, to appraise such assets.

In addition to collecting and appraising your assets, the Executor must give notice to your creditors of the probate proceedings. Creditors have an opportunity to file claims for payment. If the claim is valid the Executor will accept the claim and pay the creditor. If the claim is not valid the Executor may reject the claim. If the Executor rejects the claim the creditor may contest the Executor's decision by asking the Court to overrule the Executor and grant the claim.

The Executor's job also entails working with an accountant to make sure that all necessary tax returns are followed, such as the decedent's final income tax return, fiduciary tax returns, and, if necessary, an estate tax return (otherwise known as the "death" tax return.)

During the probate process the Executor is required to keep a formal record of his or her actions and prepare periodic written reports of such actions for the Court. These written reports are called accountings and must be filed with, and approved by, the Court. Once the Court finds that all your debts, taxes and expenses are paid, it will issue an Order For Distribution and authorize the Executor to distribute the remaining property to the beneficiaries in your Will.

What Is Intestate Succession?

If you die without a Will, California law determines your estate's beneficiaries according to a scheme called Intestate Succession. This distribution scheme depends on what relatives survive you. If you do not have a Will the State may give your property to relatives you dislike or to relatives who do not need your property. Worse yet, if you die without any relatives the State of California keeps your property for itself.

How Much Does Probate Cost?

Probate costs include court filing fees, appraiser fees, newspaper publishing fees, and various other costs. The largest probate costs however, are attorney and executor fees. California sets the maximum fees that attorneys and executors may charge. The maximum fee is determined as a percentage of the gross probate estate. The gross probate estate is based on the fair market value of your Probate Assets, even if mortgages and/or other debt encumber such property. This means that the gross value of your probate estate will likely be higher than the equity you owned in the property. Fees can be even higher than the statutory maximum in probates that are complicated by litigation or tax problems.

How Can I Avoid Probate?

In most cases probate is necessary when you die having more than $150,000 in Probate Assets. The trick to avoiding probate is to reduce your Probate Assets to less than $150,000.

What Are Probate Assets?

Probate Assets are those assets which are in your name alone at the date of your death, and which do not pass by some other means, such as by beneficiary designation, joint tenancy or pursuant to the terms of a Living Trust.

How Can I Shrink The Value Of My Probate Estate To Less Than $150,000?

If you hold assets in any of the following ways the assets will generally not be included in your probate estate.

  1. Transfer On Death ("TOD"), In Trust For ("ITF") or Pay On Death ("POD") Accounts.

    Institutions holding these types of assets must follow your instructions and transfer the assets to the persons you have directed. Examples of assets that may pass as such are brokerage accounts, bank accounts and United States Savings Bonds.

    1. Retirement Plans such as a 401(k) or an IRA.

      If you have given instructions to the plan administrator prior to your death as to who gets your assets upon your death, the plan administrator will not need an order from the probate court in order to transfer the assets to your designated beneficiaries.

    2. Life Insurance or Annuities

      If you have designated a beneficiary on these assets the insurance company may pay your designated beneficiary without a probate court order.

  2. Revocable Living Trusts

    Assets placed in your Revocable Living Trust will be distributed according to the terms of your trust and do not need to be probated.

  3. Joint Tenancy

    Assets held as a joint tenant pass to the surviving joint tenant and not pursuant to the terms of your Will.

Can I Avoid The Federal Estate Tax By Removing Assets From My Probate Estate?

No. Just because you have arranged for the disposition of such assets outside of a probate court proceeding does not mean that such assets will not be subject to the Estate Tax.

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