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Estate Planning, Probate, Trust Administration.

What is probate?

What is probate?

Probate is the process of administering and ultimately distributing a deceased person’s estate. The process is overseen by the court and often lasts 9 to 18 months. In general, probate can be divided into three phases: petitioning for appointment as administrator, marshaling assets and noticing creditors, and obtaining a final order.

The first phase of probate is petitioning the court for the appointment of an administrator. A potential administrator initiates this process by submitting an application, or petition, to the court. The court then sets a hearing date, often within 30 days of submitting the petition, and reviews the paperwork. On the date of the hearing, the court decides whether to appoint an administrator or whether to seek more information and continue the matter until a later date.

Once an administrator is appointed, he or she must marshal the decedent’s assets. This involves taking control of and managing the decedent’s property. The administrator must also send notice to estate creditors. During this period, the estate must remain open for at least 4 months in order to give creditors adequate time to submit a claim.

The last phase of probate is obtaining an order for final distribution. Much like the appointment phase, the administrator must submit a petition to the court requesting that the assets be distributed and the estate be closed. The court sets a hearing date upon receiving the petition. At the hearing, the court may grant an order to close the estate or request more information and continue the matter.

Will my estate need to be probated?

Whether your estate will need to be probated depends on the value of your assets and how they are titled at your death. Not all assets owned at death are includable in a person’s probate estate. For example, assets controlled by beneficiary designations, pay on death accounts, and certain joint tenancies pass outside of probate. On the other hand, bank and investment accounts held solely in your name and real property titled in your name can be subject to probate. If your estate has over $150,000 in probate assets, your heirs will have to go to court.

How much will probate cost?

In California, fees for estate administrators and attorneys are set by statute. Fees are based on the gross value of an estate, which is the total value of property subject to probate. Note that debt does not decrease the gross value of an estate. Estate administrators and attorneys are presumably entitled to 4% of the first $100,000 of the gross estate, 3% of the next $100,000, 2% of the next $800,000, 1% of the next $9M, and 0.5% of the next $15M.

For example, say your estate has a $250,000 bank account and a house worth $1.75M, both titled in your name.  The house is subject to a $1M mortgage. The gross value of your estate is $2M, regardless of the mortgage. Probate fees would be charged as follows:

ATTORNEY FEES FOR A GROSS ESTATE OF $2M

4% of the first $100,000          $4,000

3% of the next $100,000         $3,000

2% of the next $800,000         $16,000

1% of the next $9M                  $10,000

          TOTAL ATTORNEY FEES:        $33,000

ADMINISTRATOR FEES FOR A GROSS ESTATE OF $2M

4% of the first $100,000          $4,000

3% of the next $100,000         $3,000

2% of the next $800,000         $16,000

1% of the next $9M                  $10,000

     TOTAL ADMINISTRATOR FEES:   $33,000

Estate administrators are not required to take fees. And attorneys who are appointed administrator of an estate cannot take double fees. However, compensation may be awarded to attorneys for extraordinary services. These fees can be charged for non-routine probate matters, such as litigation, certain real property transactions, or specialized tax issues.

Additionally, there are other fees associated with probating an estate. A probate referee is often appointed to appraise estate property, and he or she charges 1/10th of 1% of the value of the property appraised. Court filing fees, realtor fees, and charges for other services also are costs associated with probate.

Is it possible to avoid probate?

Yes, probate can often be avoided with a little advance planning. Keep in mind, however, the cost of probate may be worth the peace of mind provided by a court confirmed process. 

Karly Peterson