WHAT IS A PROBATE?

Probate is when the court supervises the processes that transfer legal title of property from the estate of the person who has died (the “decedent”) to his or her beneficiaries.

Usually, you have to fill out court forms and appear in court to:

• Prove to the Court that the Will is valid (this is usually routine).
• Appoint a legal representative with authority to act on behalf of the decedent.
• Identify and inventory the decedent’s property, and have that property appraised.
• Pay debts and taxes.
• Distribute the remaining property according to the terms of the Will or to the decedent’s heirs.

WHAT IS A PROBATE SALE?

When the Will is subject to probate, there may be property that must be disposed of pursuant to a sale. This sale is also known as a probate sale. Sometimes a probate sale is necessary in order for the estate to get money to pay off debts of the decedent, while in other instances; the sale may be done simply to liquidate the assets of the estate. The process involves having a personal representative appointed (such as an executor, trustee, administrator, or conservator, to name a few), settling the claims of creditors, inventorying the estate, paying any taxes due, administering the estate during probate, and then distributing the estate to the appropriate heirs or beneficiaries. For all the details, please inquire and we will send you a Probate & Trust Advisory that lists all the facts.

IS PROBATE NECESSARY?

If the person who died did not have any property to transfer, probate is usually not necessary. The deceased person’s survivors may decide to open a probate if there are debts owed or if there is a need to set a deadline for creditors to file claims. When there is property to transfer, the probate process also provides for the distribution of the estate’s property to the decedent’s heirs.

DOES ALL PROPERTY GO THROUGH PROBATE WHEN A PERSON DIES?

No. The term “probate estate” refers to any property subject to the authority of the probate court. Assets distributed outside the probate process are part of a person’s “non-probate estate.” California has “simplified procedures” for transferring property for estates worth under a certain amount (from $20,000 to $100,000 depending on the circumstances and the kind of property). There is also an easy way to transfer property to a surviving spouse, property held in Joint Tenancy or Community Property with Right of Survivorship, and life insurance and retirement benefits.

SHOULD I CHOOSE THE SIMPLIFIED PROCEDURES?

Not necessarily. Talk to a probate lawyer. There may be debts or tax claims that make probate a better option for you. If there are a lot of issues to handle, going through probate allows you to pay the person who deals with the creditors and taxing authorities.

HOW MUCH DOES PROBATE COST?

The cost of probate is set by state law. When all the costs are added up – these may include appraisal costs, executor’s fees, court filing fees and certified copies, costs for a type of insurance policy known as a “surety bond,” plus legal and accounting fees–probate can cost from 4% to 7% of the total estate value, sometimes more. If someone contests the Will, there could be thousands of dollars of litigation costs.

DO LIVING TRUSTS GO THROUGH PROBATE?

No. When a living trust holds title to some of the decedent’s property, that property also passes to the beneficiaries without probate.

DO LIFE INSURANCE OR RETIREMENT BENEFITS NEED TO GO THROUGH PROBATE?

No. The benefits can be paid directly to a named beneficiary. Money from IRAs, Keoghs, and 401(k) accounts transfer automatically as long as the persons are named as beneficiaries. Bank accounts that are set up as pay-on-death accounts (PODs) or “in trust for” accounts (a “Totten Trust”) with a named beneficiary also pass to the beneficiary without probate.

WHERE WILL THE PROBATE HEARING BE?

In California, probate hearings are in the Probate Department of the Superior Court in the county where the decedent lived at the time of his or her death. The Probate Department is located at the Central Justice Center in Santa Ana, California.

If you have to file a probate petition in another state because there is real property in that state, the courts in that state may use a different name. In New York, for example, the probate court is known as the Surrogate Court.

WHO CAN BE THE PERSONAL REPRESENTATIVE?

The personal representative does not have to be a legal or financial expert. But, s/he must have reasonable prudence and judgment and be very careful, honest, loyal, impartial and diligent. This is called a “fiduciary duty” — the duty to act with good faith and honesty on behalf of someone else.

The personal representative should have good organizational skills and be able to keep track of details. It is preferable if he or she lives nearby and is familiar with the decedent’s finances. This makes it easier to do tasks and find important records.

WHO IS NOT ALLOWED TO BE THE PERSONAL REPRESENTATIVE?

The following people cannot be the personal representative:

• A minor.
• A person subject to a conservatorship or otherwise incapable of performing the duties of personal representative.
• A surviving business partner of the decedent, if an interested person objects (unless the Will names the partner as executor).
• A non-resident of the U.S. (unless the Will names the non-resident as executor).

DOES THE COURT SUPERVISE THE PERSONAL REPRESENTATIVE?

Not usually. But, in some situations the Court requires the personal representative to ask the Court’s permission to sell real estate or business interests owned by the estate.

The personal representative cannot do any of the following things without the Court’s permission:

• Pay fees to himself or herself.
• Pay fees to his or her attorney.
• Make a preliminary distribution of property to beneficiaries (with a few exceptions).
• Close the estate.

WHAT DOES THE PERSONAL REPRESENTATIVE DO?

The Personal Representative must:    

• Decide if there are any probate assets.
• Locate the decedent’s assets and manage them during the probate process. This could take up to a year or longer and may involve deciding whether to sell real estate or securities owned by the decedent.
• Receive payments due to the estate, including interest, dividends, and other income (e.g., unpaid salary, vacation pay, and other company benefits).
• Set up an estate checking account to hold money that is owed to the decedent — for example, paychecks or stock dividends.
• Figure out who is going to get what and how much under the will. If there is no will, the administrator will have to look at state law (probate code sections 6400 – 6414 , called “intestate succession” statutes) to find out who the decedent’s heirs are and determine each heir’s share of the estate.
• Value or appraise the estate’s assets.
• Give official legal notice to creditors and potential creditors of the probate proceeding and  the deadlines for creditors to file claims, according to state law.
• Investigate the validity of all claims against the estate.
• Pay funeral bills, outstanding debts, and valid claims.
• Use estate funds to pay continuing expenses — for example, mortgage payments, utility bills and homeowner’s insurance premiums.
• Handle day-to-day details, such as disconnecting utilities, ending leases and credit cards, and notifying banks and government agencies — such as social security, the post office.
• File tax returns and pay income and estate taxes – including a final state and federal income tax return covering the period from the beginning of the tax year to the date of death.
• After getting the court’s permission, distribute the decedent’s property to the people or organizations named in the will, or to the decedent’s heirs if there is no will.
• File receipts for distribution and wrap up any closing details for the estate.

WHO IS IN CHARGE OF THE PROBATE PROCESS?

If there is a Will, the person named as executor will usually be appointed as the personal representative – this means s/he is responsible for managing the estate and following probate rules and procedures. The executor has no authority to act as personal representative until s/he is appointed by the court and formal “Letters Testamentary” are issued by the Court Clerk.

If there is no Will, or if the Will doesn’t name an executor, or the person named as executor in the Will is unable to be executor or does not want to be executor, the probate court appoints someone called an administrator to handle the process. The Court usually chooses the closest living relative, or a person who will inherit some portion of the decedent’s assets.

IF I AM NAMED AS EXECUTOR IN A WILL, DO I HAVE TO SERVE?

No. If you choose not to serve, the Court will probably appoint the alternate executor to be the personal representative. If there is no alternate executor, or if that person doesn’t want to serve, the Court will appoint someone to serve. The Court usually appoints a capable family member or an independent professional fiduciary.

If you decide to be the personal representative, you can resign at any time. But, you may have to give an “accounting” to the Court for the time you served.

IF I SERVE AS EXECUTOR, WILL I GET PAID?

Yes. In addition to your out-of-pocket expenses to manage and settle the estate, personal representatives usually earn a statutory fee of 2% – 4%of the probate estate. The percentage decreases as the size of the estate increases. The Court must approve all fees and expenses. And, in extraordinary circumstances, the Court may allow other fees. (See “How Are Fees Determined for the Personal Representative and Attorney” in the Closing and Distributing the Probate Estate * section of this website.)

WHAT IF THE DECEDENT OWNED LAND IN MORE THAN ONE STATE?

The probate laws of the state in which the decedent was a permanent resident determine who will get the decedent’s personal property (wherever it was located) and the decedent’s real property located within the state. This is why probate is almost always filed in the decedent’s home state.

If the decedent owned real property in another state, that state’s laws determine how the real property will be distributed. There will be probate in each state where there is real property, in addition to the home state. Each state has its own method for distributing the decedent’s real property. Even if there is a Will, the Will is first admitted to probate in the home state, then it must be submitted to probate in each state in which the decedent owned real property.

The extra probate procedure is called “ancillary probate.” Some states insist upon the appointment of a personal representative who is a local resident to administer the property in that state.

HOW DO CREDITORS GET PAID?

Part of the probate process is to notify creditors of the death. Notice requirements vary. In some cases, you must provide direct notice. In others, you must publish a notice in a newspaper in the city where the decedent lived.

Creditors must file a claim with the court for the amounts due within a fixed period of time. If the executor approves the claim, the bill is paid out of the estate. If the executor rejects the claim, the creditor must sue for payment. If there is not enough money to pay all debts, state law determines who gets paid first.

The personal representative most likely will sell property to pay approved creditor claims. Remaining claims are paid on a pro-rata basis

IF I AM A BENEFICIARY AND THE ESTATE DOES NOT HAVE ENOUGH MONEY, DO I HAVE TO PAY CREDITORS OUT OF MY OWN POCKET?

Generally, no. The law says you cannot be made responsible for others’ general debts without your consent. Unless the decedent gave away his or her assets to someone shortly before dying, or otherwise acted in concert with them to defraud the creditors, the beneficiaries should not have to pay the creditors just because they are beneficiaries.

There may be nothing left in the estate for the beneficiaries after paying the creditors. But, the beneficiaries will not owe the creditors money. Still, if the children or beneficiaries took property or benefits from the decedent or the estate, or assumed liability for care given the decedent, or guaranteed payment, they can be liable for some or all of the decedent’s debts separately.

HOW ARE TAXES HANDLED IN PROBATE?

For federal and state tax purposes, death means two things:

• It marks the date of the close of the decedent’s last tax year for filing an income tax return, and
• It establishes a new, separate entity for tax purposes, the “estate.”
• For federal taxes, you may have to fill out and file one or more of the following forms. (It depends on the decedent’s income, the size of the estate, and the income of the estate):
• Final Form 1040 Federal Income Tax return (the decedent’s personal income tax return).
• Form 1041 Federal Fiduciary Income Tax returns for the estate.
• Form 709 Federal Gift Tax return(s).
• Form 706 Federal Estate Tax return.

For California taxes, the executor must file any needed state income tax return, state fiduciary income tax returns during the probate period, estate tax and gift tax returns. There may be other taxes, too, like local real estate and personal property taxes, business taxes, and any special state taxes.

The executor must also check for taxes owed for years prior to the decedent’s death.

AM I RESPONSIBLE FOR PAYING THE REST OF MY DECEASED SPOUSE’S BILL?

Maybe. If you and your spouse shared the same bank account and credit cards, checks, etc., then you may have to pay the bill. If the credit cards or accounts were opened with only your spouse’s information as reference, then you may not be liable. Creditors usually collect their debts from the estate before the remainder is divided among the heirs.

Each case depends on the circumstances. Talk to an experienced probate lawyer.

AS AN HEIR, HOW DO I STAY INFORMED OF WHAT IS HAPPENING IN THE PROBATE CASE?

You will receive mailed notice of certain petitions filed, including the petition for appointment of the personal representative and the final petition when it is time for the estate to be closed and distributed. If the personal representative wants to sell real property, you should also get a Notice of Proposed Action.

If you want to get copies of everything filed in the probate court concerning the estate, file a Request for Special Notice. There is a fee to file this document.

WHAT HAPPENS IF THE PERSONAL REPRESENTATIVE FAILS TO PERFORM HIS OR HER DUTY?

The court may lower or deny compensation and can replace the personal representative with someone else. The personal representative may even have to pay for any damages he or she caused.

A personal representative may be held liable for:

• Improperly managing the assets of the estate.
• Failing to collect claims and money due the estate.
• Overpaying creditors.
• Selling an asset without the authority to do so, or at an inappropriate price.
• Not filing tax returns on time.
• Distributing property to the wrong beneficiaries.
• Distributing property to beneficiaries before all creditors have been paid, etc.

DO I HAVE TO USE A LAWYER FOR THE PROBATE PROCESS?

No. But, it may be a good idea if the estate is complex. A lawyer can help you meet all deadlines and avoid mistakes and delays. A lawyer can sometimes help avoid disagreements among family members over minor or major issues. But the lawyer represents the interests of the personal representative, not the beneficiaries.

You may not need a lawyer if:

• You are the sole beneficiary.
• The decedent’s property consists of common assets (like house, bank accounts. insurance, etc.).
• The Will is simple and straightforward.
• You have access to good Self Service materials.

In most cases, the personal representative may never see the inside of a courtroom. But, s/he will have to go to the Court Clerk’s office.

Disclaimer: The intent of the information given here is to provide the layperson with a general understanding of Trust/Probate law procedures. The information within this website is not comprehensive and is not intended to serve as a substitute for independent research of the law or an attorney. Most of the information found here can be found directly on CA court websites. RobertGraf.com is not intended to take the place of an attorney or other professional counsel.

Additional Questions contact Robert Graf directly @ 818.399.9455  no cost or obligation.