Donald L. Field, Jr.
Attorney at Law
601 Montgomery Street, Suite 1088
San Francisco, California 94111
Offering planning, implementation, advice and representation of taxpayers before federal and California courts and Agencies regarding income, franchise, sales, real property, estate and gift taxes since 1979
Probate consists of court proceedings that conclude all your legal and financial matters after your death. In the case of a valid will (the deceased person's will is proved in court), the probate court distributes your estate according to your wishes. It acts as a neutral forum in which to settle any disputes that may arise over your estate, including determination of valid claims of any creditors who have claims against your assets at your death. If you did not leave a valid will, then your assets that are subject to probate will be distributed by the court in accordance with the laws of intestacy of the state in which you were domiciled or in which your assets were situated.
Some assets are not subject to probate because of the manner in which the property is held or because they are subject to a contract which provides for beneficiaries at death. This includes property held in trust or in joint tenancy, and life insurance and retirement plan benefits (unless the beneficiary is specified as your estate).
In many states if the assets in your name alone at your death do not include an interest in real estate and/or have a total gross value of less than a specified amount, then generally the beneficiaries under your will may follow a statutory procedure to effect the transfer of those assets pursuant to your will, subject to your debts and expenses, without a formal court-supervised probate administration. For example, in California this is possible in the case of a probate estate not exceeding $150,000. If there is real property, probate may still be necessary although there is a simplified procedure where the gross value of the real property is $50,000 or less. California also no longer requires a formal probate for assets held as community property.
At the beginning of a probate administration, a petition is filed with the court, usually by the person or institution named in your will as executor. After notice is given, and a hearing is held, your will is admitted to probate and an executor is appointed. If you die "intestate" (that is, without a will), your estate is still subject to probate court administration and the person appointed by the court to handle your estate is known as the "administrator." A bond may be required of your administrator by the court (even if your will waives any bond).
The main functions of the administrator are:
- Collection of assets: To protect the interests of those who may have a claim against the estate by providing for systematic collection by the representative of the decedent's real and personal property, as well as debts due him or her.
- Appraisal of assets: The assets are valued by appraisal where necessary, usually by independent referees or others designated by the court who receive a fees for their services.
- Payment of debts and taxes: To require creditors to present their claims within a prescribed period, so that liabilities of the estate are promptly determined with relative certainty. Creditors may assert their rights, and claims may be rejected by the representative or the court. Probate likewise provides a method of determining state and federal taxes due because of death.
- Distribution of the estate: To provide a means of determining the persons entitled to receive the decedent's property. In most states title to the decedent's property vests in his or her heirs or legatees at the time of death, subject to possession by the representative and control by the court for purposes of administration. The judgment of distribution provides record evidence of title to the property.
A probate has advantages and disadvantages. The probate court is accustomed to resolving disputes about the distribution of your assets in accordance with defined rules. In addition, you are assured that the actions and accountings of your executor will be reviewed and approved by the probate court. Although there is usually legal recourse against a trustee who has violated fiduciary duties or dissipated trust assets improperly, it may be difficult to recover assets or collect damages from a trustee against whom a judgment has been obtained.
Disadvantages of a probate include its public nature; your estate plan and the value of your assets become a public record. Also, because lawyer's fees and executor's commissions are based upon a statutory fee schedule, the expenses may be greater than the expenses incurred by a comparable estate managed and distributed under a living trust. Time can also be a significant factor; often distributions can be made pursuant to a living trust more quickly than in a probate proceeding. Probate proceedings in most states will take 6 months or more and can continue for years in a complex estate or where the proceedings become adversarial in nature.
The preferred method of avoiding probate (and fixed statutory lawyer's fees executor's fees) used by most estate planning attorneys is a revocable trust or "living trust" to hold the probate assets of individuals or families. Many simplified methods, such as holding property in joint tenancy, can yield unexpected results which may disadvantage estate beneficiaries. Estate taxes can be minimized either through the use of a properly drafted will or revocable trust. In large estates, however, this is a complex analysis and requires the assistance of an estate planning professional.