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California Probate: What It Is, What You Should Know, And How It Works

Probate Litigation

California Probate: What It Is, What You Should Know, And How It Works

Chapter 1: What is probate? Why would I need it?

Probate is the court supervised process of gathering, managing, and distributing the assets of a deceased person to the people who are supposed to inherit it. Probate is necessary when property cannot be transferred from the deceased person to a living person because the title is held in the name of the deceased person. You might think of it this way, if the deceased person would need to sign a document in order to transfer ownership of an item then probate will be necessary.

 

What amount of assets require probate?

In order to require probate in California the total, the gross value of the assets in a deceased person’s estate must be $166,250 or more. If there is no real estate that needs to be passed and the total value of the assets is below $166,250, then you can use an informal proceeding called a small estate affidavit. A small estate affidavit does not require filing anything with the probate court.

If the deceased person’s estate contains real estate worth less than $166,250, then you can use a petition to determine succession to real property. This does require filing pleadings with the probate court. However, this is not full-blown probate. This is a shorter, less expensive proceeding in the probate court that will result in transferring real estate without probate.

 

If the deceased person was married when they died, then their spouse may be able to avoid probate for the assets that are community property. The surviving spouse can file a Spousal Property Petition with the probate court.  If the petition is granted then all assets identified in the petition will not go through probate.

After applying all these exceptions, if the gross value of all the assets owned by the deceased person is over $166,250, then you must do probate.

 

What assets are subject to probate?

In determining whether you need probate, you must first evaluate which of the deceased person’s assets are actually subject to probate. As you might imagine, not everything owned by a deceased person will be subject to probate.

If the deceased person had a trust, and they actually transferred title of their property to the trust, then everything in the trust is not subject to probate. But, having a trust alone is not enough to avoid probate. The deceased person must have actually transferred title to their property while they were alive.

Any property the decedent owned in which the deceased person’s interest terminates at death is not subject to probate. Common examples might include:

  • Property held in joint tenancy – for instance
  • A life estate
  • Property passing to a spouse or registered domestic partner through the use of a spousal property petition.

Also excluded from probate are multi-party accounts, Pay On Death accounts and Totten Trust accounts.

Similarly, assets that have designated beneficiaries are excluded from probate, such as:

  • Life insurance
  • Bank accounts
  • Mutual funds
  • Employee retirement plans
  • Employee death benefits.

 

The lesson to take from all of this is after your loved one has died, check to see how title was held to the property you believe may have to go through probate. If title was changed in such a way that probate can be avoided, then you don’t have to open probate. If you don’t have title information and the financial institution that has the financial information won’t give it to you, then probate is likely necessary.

 

Chapter 2: How to open probate in California (a step-by-step guide)

Step 1: Initial document filing

To open probate you, or your attorney, must file the following documents with the probate court:

 

These documents are the bare minimum that must be filed with the probate court. In many counties, additional local forms must be filed as well. Some counties have local rules that require you to provide additional information but don’t provide a form or specify exactly how that information must be presented.  Each county will have the local rules, and local forms, on their court’s website.

 

Step 2: Your initial hearing date is set

After your pleadings are filed, the clerk of the court will set an initial hearing date on your petition for probate. After you have that date you will need to file the following documents with the probate court:

Step 3: Immediately read and review any probate notes

Most, but not all, probate courts publish probate notes on their website before your hearing date. The probate notes are written by attorneys or paralegals who assist the probate court judge. The probate notes typically summarize what has been done, the relief being requested, and any deficiencies or defects in the pleadings that have been filed. The probate notes will also point out any pleadings that have not been filed but are required.

Simply stated, probate notes will help you identify anything that might hold your case up and give you a good idea of how to proceed. If there are any problems with your pleadings then a supplement can be filed with the probate court in order to address the noted deficiencies or defects.

You may get probate notes 2-3 weeks before your first hearing. In other cases, you may only get probate notes a couple of days before your initial hearing. Regardless of when you receive probate notes, it’s imperative that you take immediate action to resolve any deficiencies or defects. If you have any unaddressed concerns from the probate notes, your case may not be able to move forward.

Step 4: Attend the hearing on your petition for probate

Assuming you’ve cleared all the probate notes and no one objects to your petition for probate then you can expect it will be granted at the first hearing. Once your petition has been granted, then the probate court judge will sign your order for probate and your letters testamentary or letters of administration.

Different courts have different processing times for the orders and letters. They may be available as soon and the day after the hearing or it may take weeks. Once the order and letters have been signed by the probate court judge then you have successfully open probate.

 

Chapter 3: First steps once the probate estate is open

Once your petition for probate has been granted, the court will sign the Order For Probate and your Letters Testamentary or Letters of Administration.  You need both before you can move forward administering the probate estate.

  • The Order For Probate tells the world either a will has been admitted to probate or that there is no will.
  • The Letters Testamentary or Letters of Administration are the legal documents you use to show third parties, like financial institutions, that you are the legal representative of the estate. In other words, you have the legal authority to act on behalf of the estate.

 

Can you open an estate account before probate?

 

The short answer is no.  No bank will allow you to open an estate account until you give them a certified copy of your letters and the employer identification number (EIN) for the estate.

 

You can apply for an EIN at any time after death by completing and submitting IRS Form SS-4.  However, it makes no sense to do this on your own before the estate is open.  Instead, this is a good time to hire an accountant to get the EIN for you and to begin a working relationship. We’ve seen clients get sued, failed filing, and paying more for amended errors after the fact when taking the DIY route.

 

Once the estate is open, two simultaneous processes are going to take place.  The executor or administrator will gather the estate’s assets and address known and potential creditors.  Gathering assets is addressed immediately below.  Creditor claims are addressed in Chapter 4.

Gathering estate assets

It is critically important the executor or administrator get possession, control, and/or title to estate assets after the order and letters are filed by the court.  Common assets going through probate include:

 

  • Bank accounts
  • Safe Deposit Box Contents
  • Mutual Funds/Securities
  • Life Insurance
  • Tangible items
  • Automobiles
  • Real Estate

Each of these types of assets can present unique challenges. We’ll dive into each of the assets below, their challenges, and how to solve these issues.

Bank accounts

The one challenge presented by bank accounts is locating them all.  If the deceased person was secretive or just didn’t communicate well with the person who became executor or administrator, then the executor or administrator may not know about all the accounts.

So how can you get around this? By reviewing past income tax returns and collecting mail.

The income tax returns should show you the source of all interest income.  In other words, it will show you the bank’s name.  From there, you can go to any bank branch with a certified copy of your letters to collect the account.

You’ll also want to keep collecting the deceased person’s mail because you may receive bank statements.  Once a year, at minimum, you will receive tax reporting documents from the bank.

Both tax returns and bank statements will tell you to highlight all the accounts where you can go and collect money.

Safe deposit boxes

If you believe there is a safe deposit box, then examine past bank statements or cancelled checks.  One of these should show you payment for the safe deposit box.  You will then know which bank to contact.

To get into the box you will need the key.  If you don’t have it, then you will have to make arrangements with the bank to have the locked drilled.  Once that is done, you can collect the contents of the safe deposit box.

Mutual funds/securities

Similar to bank accounts, review past income tax returns and collect the deceased person’s mail.  If you have access to their email, check that as well.  One of these methods will turn up a statement that identifies what is owned, an account number, and who has possession of it.

For individual stocks, transfer agents can be a good source of information. BNY Mellon  and Computershare are two of the largest.

Once you have that information, you will need to contact the institution.  Be prepared to provide a copy of the death certificate, a certified copy of your letters, and to fill out their paperwork to transfer the mutual funds and/or securities.

Life insurance

Hopefully your deceased loved one kept their life insurance policy in their records.  If not, then look for cancelled checks or electronic payments for the policy.  Most insurance companies are quite helpful even without a policy number once you present them with your letters and a death certificate.

If you can’t find any identifying information for the life insurance policy but are convinced it exists, there are some services that can help you search for the policy.  Be warned, these services don’t have complete information. That means even if the policy exists, they may not find it.  If the life insurance policy has a face value below $50,000 then it very likely won’t be found by these services.

Automobiles

The most common problem with cars is locating the title (i.e. pink slip.)  If you can’t find the title then you can apply for a replacement at the DMV.  The form is available online.

Real estate

Real estate truly has its own unique challenges.  A lost deed isn’t one of them.  Deeds can be purchased from the county recorder’s office.  Let’s go through the real challenges with real estate that executors will face.

  • Determining Occupancy – no matter what type of real estate is owned by the estate, you have to first find out if it is occupied. If it is occupied, then you need to locate the rental agreement and collect rent as it comes due.  If a squatter is on the property, then you will need to go through an eviction process.
  • Survey the Property for Problems – if there is any type of structure on the land, then the executor need to walk through it and around the outside looking for problems. You don’t need any sort of expert to do this.  Simply use your common sense.  Things like holes in the wall will need to be repaired.  Signs of water damage may mean you need a plumber to fix a problem and check for mold.  A badly frayed carpet needs to be replaced.
  • Maintenance – you need to come up with a maintenance plan that is appropriate for the property. For example, a single family home needs the lawn mowed and the pool skimmed.  An apartment building may require a much more extensive plan.
  • Insurance – every type of building must be insured. It may be required as a condition to a mortgage.  Even if the property is owned outright, real estate is always a potential liability magnet.  People are entering and exiting the building all the time.  If anyone is injured then they are going to turn to the estate to be compensated.  Having the right insurance in place provides for a legal defense and a source of money if the estate is truly responsible for someone’s injury.
  • Environmental problems – these are very rare but should be examined if the estate owns an industrial site or gas station. If there is an environmental problem, then there is a good chance you must deal with the federal government. You may find yourself being held personally liable if the issue isn’t handled correctly.

Probate estate inventory and appraisal

The purpose for gathering all the assets is twofold.  First, to secure those assets for use during probate and distribution at the end of probate.  Second, because the executor or administrator must provide a list of all estate assets and their values on the day your loved one died.  This list is called an inventory and appraisal.

 

The executor or administrator has four months from issuance of letters to file a completed inventory and appraisal with the probate court.

 

The Inventory and Appraisal (I&A) effectively comes in two parts: Attachment 1 and Attachment 2.

Attachment 1 are the assets appraised by the executor or administrator.  They can only be cash and cash equivalents.  Cash equivalents include undeposited checks and money market funds. Cash equivalents do not include rare, collectible, or foreign currency.

Attachment 2 contains assets appraised by the probate referee.  The probate referee is a neutral third party appointed by the probate court to provide date of death values for all noncash assets in the probate estate.

Common items on Attachment 2 include:

  1. Real property
  2. Promissory notes
  3. Securities (i.e. stocks, bonds, mutual funds, ETFs, etc.)
  4. Tangible personal property
  5. Business interests

 

Additional inventories may be needed later. An inventory and appraisal – reappraisal for sale will be necessary if real estate is sold one year or more after the deceased’s date of death. A supplemental inventory will be needed if assets belonging to the deceased come into the probate estate after the date of death.

 

Chapter 4: Properly dealing with creditors of the probate estate

The executor or administrator must deliver notice of administration of estate within 4 months of the letters being issued to all known and reasonably ascertainable creditors. What this means is that if there is a known or suspected creditor (i.e. some person or entity that is owed money by the deceased), they must be sent a form called Notice of Administration to Creditors.

A Notice of Administration to Creditors is more commonly called a creditor’s claim. The time for a creditor to file a claim is either 4 months after the first issuance of letters or 60 days after notice is served to the creditor, whichever comes later.

This deadline assumes the executor or administrator acted in good faith.  If they fail to give notice to a known creditor, then the creditor can seek and receive an extension of time to pursue their claim.

 

If a creditor is discovered more than four months after letters are issued, then a creditor’s claim must be sent within 30 days of learning that information.  The creditor in turn must file their claim within 60 days of notice being mailed.

 

In addition to known or suspected creditors, California law requires notice be sent to three state agencies: Victim Compensation & Government Claims Board, Department of Health Care Services, and Franchise Tax Board.  It is critically important these government agencies are given proper notice.  If they are not given notice, then the probate court judge will not approve your petition to distribute the estate.

 

The creditors claim process is an incredibly powerful tool for the probate estate.  A creditor who fails to properly and timely file their claim is barred from ever collecting on it.  That means the creditor can’t take any type of action outside the probate court to collect on their debt.

When a creditor properly submits their claim, the executor or administrator must evaluate the claim.  This is usually pretty straightforward.  If the executor or administrator wants more information in order to evaluate the claim, they can contact the creditor to ask for more information.

 

Each claim must be approved, denied, or approved in part and denied in part.  If the claim is approved, then the estate issues payment and the creditor should sign an acknowledgment and satisfaction.  This is the creditors way of saying they have been paid in full.

 

If the claim is denied, the creditor has 90 days to file a lawsuit against the estate in civil court.  From there, the lawsuit will proceed in the same way as any other lawsuit.  If the creditor waits longer than 90 days to file, then the estate can seek dismissal based on the creditors failure to timely file their lawsuit.

 

If a claim is partly approved and partly denied, the creditor has the same options as when a claim is wholly denied.  Most often, a claim is partly approved and partly denied because a compromise was reached with the creditor.  If so, then the creditor isn’t going to file a separate lawsuit.  In fewer situations this is done because the executor or administrator recognizes some part of the claim (usually the large majority) is valid but some portion isn’t.  While the creditor can still sue, it’s very unusual because there is so little money left at issue.

 

 

 

Chapter 5: Distributing the Probate Estate

In order to distribute the remaining assets in the probate estate, a petition has to be filed with the probate court and approved by the court.  That petition can either be a final account or a waiver of account. Either type of petition, when granted, will result in distribution of the estate. We’ll dive into the two different petition types next and show you when to use both.

 

Final accounting for probate court

In most probate estates, the final account is the first and final account.  The account must report the assets on hand at the time the deceased person died, all income and property received by the estate after the date of death, all money that has been disbursed since the date of death, and all property left on hand at the end of the account period.

The account shows all the beneficiaries or heirs what has happened with the estate’s finances during the course of probate.  If any beneficiary or heir doubts what has been reported or is troubled by what is reported then they can file an objection to the account.

 

The petition to approve the first and final account shows the fees being sought by the executor or administrator and their attorney and how those fees were calculated.  The petition will state how the remaining property should be distributed.  In other words, who will receive what property from the estate.

 

Waiver of account for probate court

If the beneficiaries or heirs trust the executor or beneficiary, then they may agree to waive an account. Waiving an account simply means a person is giving up the formal financial reporting required by a court compliant accounting. It doesn’t mean that a beneficiary or heir is giving up their right to receive their inheritance.

Different courts have different requirements about what they want disclosed to the beneficiaries or heirs in order to accept a waiver.  In general, courts want something in writing in which the beneficiary or heir acknowledges they have been informed they have a right to an account, they understand they cannot be made to give up that right and knowing this they are choosing to waive an account.

 

One-way executors or administrators can facilitate a waiver is by providing the estate’s financial records to the beneficiaries or heirs. With this information in hand, they are in a position to decide if they really need a formal account.  If they already have the information, then providing the account will delay filing to distribute the estate.

 

On the other hand, an executor or administrator who won’t share this information should not be surprised when an account is required.

 

Do you need probate to close a bank account?

After the first and final account or waiver of account is granted by the probate court and an order is entered, the executor or administrator has the authority to distribute the property in the estate.  Real estate is distributed by recording the order or recording a deed.  Cash can be distributed by check or wire transfer.  When the estate owned bank account is fully distributed, it can then be closed.

 

Chapter 6: How much does probate cost in California?

In order to know what your case will cost you have to calculate:

  1. Probate Lawyer Attorney fees
  2. Executor or Administrator fees
  3. Filing Fees
  4. Probate Referee’s Fees
  5. Assorted out of pocket costs

To show you how to calculate these costs for your case we are going to use a simplified example.  In our example, the assets going through probate are a $500,000 house and $200,000 in bank accounts.

How much does a probate lawyer cost?

In order to know how much a probate lawyer costs, you have to know that lawyer’s fees. California doesn’t let probate attorneys set their own fees.  Attorneys must charge based on California’s statutory fee schedule. A fee schedule is the percent that an attorney makes that’s based on the total amount of assets going through probate. That fee schedule is:

Fee Schedule Percentage Gross Value of Estate
4% $1- $100,000
3% $100,001-$200,000
2% $200,001-$1,000,000
1% $1,000,001-$10,000,000
0.5% $10,000,000-$25,000,000

 

In our example the total probate estate is worth $700,000.  Notice we didn’t even consider whether there is a mortgage.  That’s because in calculating fees, the estate’s debts are not considered.  Probate attorney’s fees are based on the gross value of the property in the estate.

The statutory fee schedule is a tiered rate for attorney’s fees. The tiers build one on top of another. You start in the lowest valued tier and keep adding portions of the estate until you have exhausted the total value of the estate.

So, that $700,000 estate is subject to 4% of the first $100,000 or $4,000.  3% of the next $100,000 or $3,000.  And 2% of the next $500,000 which is $10,000.  Total executor’s fees attorney’s fees will be $17,000.

Executor or Administrator Fees

The fees for the executor or administrator are calculated in exactly the same way as the attorney’s fees.  That means in our example, $17,000 is paid to the executor and $17,000 to the executor’s attorney.

Filing Fees

Every probate case requires the filing of a probate petition at the beginning of the case and a petition to distribute the estate at the end of the case.  Filing fees for the petition for probate are $435 throughout California.  However, Riverside, San Bernardino, and San Francisco counties add a $15 first appearance fee.  Court reporter fees are $30.

Many, but not all counties, charge the court reporter fee.  The San Diego probate court, for example, does not charge a court reporter fee because they don’t provide court reporters. When you file to distribute the estate, you will pay another filing fee and probably a court reporter fee.

Most probate cases don’t require filing any other petitions.  But notice the word most.  If something unusual happens in your case, then there may be other petitions to file that require a filing fee.  For purposes of our example, let’s assume things went smoothly so only two petitions were filed during the probate.

Probate Referee Fees

The Probate Referee is a neutral third party appointed by the probate court to value the noncash assets in the estate.  Probate referees are paid 1/10 of 1% of the value of the property they appraise. They are also entitled to out of pocket costs they incur to do the appraisal. In our example, they will only value the house.  The bank accounts are cash.  Because the bank accounts are cash, the executor or administrator reports their value.

1/10 of 1% of a $500,000 house is $500.  The probate referee is likely to incur about $75 in out of pocket costs as well.

Assorted costs

You must publish notice of your petition for probate in an “adjudicated newspaper” in the area where the decedent resided.  Each court has a list of those newspapers.  Publication fees vary widely depending on location.  Most times publication will cost between $200 and $500.

You will definitely need a certified copy of your letters testamentary or letters of administration.  Most likely you will need multiple copies during your case.  They will cost $40.50 each.  You may need certified copies of the death certificate especially if you are trying to close accounts with a financial institution or collect a life insurance policy.

As you can see, the out of pocket costs will vary from one case to another.  For our example, let’s say publication was $400, three certified copies of letters testamentary were needed, and no death certificates were needed.  That would be $521.50 in out of pocket costs.

Calculating The Total Cost of Probate

Let’s add it all up to what this entire probate cost.

Executor Fees $17,000
Probate Attorney Fees $17,000
Filing Fees $945
Probate Referee Fees $575
Assorted Costs $521.50
Total Costs $36,041.50

 

Is probate the right step for you?

Probate is necessary when property cannot be transferred from the deceased person to a living person because the title is held in the name of the deceased person. If you don’t have another way of getting ownership of your deceased loved one’s property then probate is very likely necessary. Remember, nothing will happen on its own.  You have to start the process.

If your case is in the state of California and you’d like an honest evaluation of your case, then give us a call or fill out our contact form. Because we know that time is of the essence, you can expect to hear from us the next business day to begin discussing your case.

Scott Grossman

Scott Grossman

Certified Probate Specialist and Trust Litigation Attorney

Attorney Scott Grossman represents clients in cases throughout California.

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