Probate is a judicial proceeding through which a decedent's will is validated, the decedent's creditors are paid, and the decedent's assets are distributed to those specified in the decedent's will or by the laws of the State of California, if the decedent died without a will.
Some types of assets are subject to probate, e.g., cars or personal property, while others are not. Below is a non-exhaustive list of assets that are not subject to probate:
• Real property held in joint tenancy with right of survivorship
• Real property held in community property with right of survivorship
• Life insurance with a designated beneficiary
• Bank accounts held in joint tenancy with right of survivorship
• Bank accounts held in community property with right of survivorship
• Individual Retirement Accounts ("IRAs") and 401ks with a designated beneficiary
Cost: This is the number one reason to avoid a probate. In California, attorneys and executors are paid a statutory fee that is a percentage of the gross estate as follows:
4% of the first $100,000
3% of the next $100,000
2% of the next $800,000
1% of the next $9,000,000
½% on the next $15,000,000
These fees are calculated on the gross estate, meaning that if a decedent died with an estate consisting of only a house worth $1 million that had debt of $800,000 on it, and nothing else, attorneys’ fees would be based on a $1 million estate (or $23,000 total) and not based on the $200,000 net value of the estate.
Privacy: Everything done through a probate is public record (asset values, beneficiaries, copy of your will, etc.). Anyone willing to put in the time down at the courthouse could look through the probate file. This is not true of a trust administration.
Timing: Typically the probate process, from start to finish, will take a minimum of six months, but typically takes much longer, while a trust administration generally takes much less time.
There are various strategies by which a person can structure his/her estate to avoid probate, including holding property in a revocable “living” trust, holding property in joint tenancy, naming designated beneficiaries on accounts, using beneficiary deeds, etc.
If a decedent has not left behind any legal documents, a probate will still be needed. The property will pass to the decedent’s beneficiaries through the laws of intestate succession. Who the ultimate beneficiaries of the estate depend on many factors, including the following:
• Was the decedent married?
• How many children did the decedent have?
• What relatives survived the decedent?
California provides a procedure by which estates valued at less than $166,250 can be collected without a probate. This will likely still require the advice of an attorney, but the process is much simpler, cheaper, and faster than a full blown probate.