The distribution of assets after a person’s death is never the way it is portrayed in the movies, with family huddled around an attorney, learning about their family member’s last wishes, with the wealth immediately distributed. Instead, whether a person has a last will and testament or not, many estates fall within the purview of the probate court, which is the ruling power that handles and administers estate matters.
Avoiding the probate process can ensure a quicker distribution of assets and large savings to the estate. Newer laws in California have allowed certain estates to avoid the probate process with proper planning. Unless there is significant family strife or adversarial conflict, the goal is to avoid probate in almost all circumstances.
What is Probate?
Probate is the process that occurs when someone dies with a gross estate worth over $150,000 (either with or without a last will and testament) in California and in some cases, with a living trust which is not properly funded.
When a decedent passes away, the court determines a probate period, thus halting any distribution of assets until legal title to those assets has been determined and cleared. During this period of time, the probate court attempts to reach any potential creditors of the decedent to ensure that anyone owed money can come forward and collect what is owed to them from the estate. The remaining amount, after creditors have received what they are owed, will be distributed to the beneficiaries of the estate.
The probate process can take years and cost a hefty amount of fees. The beneficiaries of the estate typically must pay the attorney and also the executor (also known as the personal representative), along with court fees and costs, publication costs, and filing fees.
In fact, the State of California, Probate Code Section 10810 has established a fee schedule that indicates that beneficiaries should expect to pay 4% of the first $100,000, 3% of the next $100,000, 2% of the next $100,000 and so on.
In January 2012, the California Probate Code was amended and changed the definition of a “small estate” from those estates holding real and personal property totaling $100,000 to $150,000. Additionally, this new law is applied retroactively to any person who passed away as long as the estate was filed after January 1, 2012. This law effectively allowed anyone with an estate valued at less than $150,000 to avoid the probate process entirely. It also simplified the administration of any estate with real and personal property having a gross value of less than $50,000 by allowing them to transfer the property through an affidavit procedure. Also, the amendment allows a surviving spouse to receive any unpaid salary or compensation of the decedent up to $15,000.
If the gross value of all the real estate and personal property of a decedent is less than $150,000, the inheritors may go through an affidavit procedure to receive the estate instead of going through a lengthy and costly probate process.
The affidavit process may be used to both collect money due to the decedent and in some cases, transfer real property. If a decedent was owed money from bank accounts, certificates of deposit, etc., these monies may be collected through the affidavit procedure. If the gross value of the real estate property is less than $50,000, the transfer of that property to an inheritor may be done through the affidavit procedure.
If all the assets, including real estate property, in your estate are valued at less than $150,000, then a Small Estate Affidavit can be filed in the state of California and probate can be avoided. All an inheritor needs to do is prepare this short document, stating that they are entitled to this asset under oath. This document is called an affidavit and when the person or institution holding the property or asset receives this affidavit and a copy of a death certificate, they will release the asset to the inheritor.
Petition to Determine Succession
If the estate has real estate property exceeding $50,000, an inheritor or beneficiary may petition the court for an order to distribute the real estate to the person to which it is entitled without having to go through a full and formal probate proceeding. Filing for a Petition to Determine Succession may take a few months to complete, and a hearing will be set, however, this process is still simpler and less expensive than a full probate process.
Understanding What Constitutes Real Estate
With property values of homes in California rising at astronomical rates, you may believe that these laws and provisions do not apply to you, given that your home value likely exceeds the $150,000 limit. However, it is important to note that not all property will be considered to be part of your estate. The following property types are not considered part of an estate at a person’s death:
- Real estate property and other property held in joint tenancy or as community property
- Assets held in a revocable living trust
- Accounts determined to be “multi-party” accounts, payable to a third party upon the death of the decedent
- Vehicles and boats
- Manufactured homes, mobile homes, commercial coaches, floating homes, or truck campers. (However, if a decedent owns the land or property to which these items are affixed, then this may be part of the estate.)
Determination of Real Estate Value
If you have real estate as an asset you want to include in your estate planning, the value of the real property often needs to be determined by an independent third party. This independent third party is the probate referee and they will determine if the real property is eligible for small estate administration in the State of California. This determination of eligibility will be done through a qualified appraisal which is then submitted to the probate court.
Contact an Experienced Estates and Trusts Attorney
Our goal is to ensure that every person has an estate plan that saves them both time and money under the law. The law surrounding small estate administration in the State of California can be legally complex, and the value of property challenging to determine. Contact an experienced attorney to help you understand your rights at The Law Office of Christopher P. Walker at (714)639-1990 or online today.