Probate is the legal process in which a court administers the estate of a deceased person. The probate court will inventory the dead person’s assets, pay off any debts and taxes, and then distribute the remaining assets to the beneficiaries listed in the will, or if the person dies without a will, the assets will be distributed according to state law.
Why Do I Want to Avoid Probate?
There are two main problems associated with probate in California: 1) It takes a long time, and 2) It can be very expensive.
- The probate process can take a very long time to complete. In most cases, it will take at least 8 moths to probate an entire estate and this can extend out to as long as several years if the estate is complicated or under contention. This means that your family members and other beneficiaries may need to wait 8 months or even longer before they receive anything under your will.
- In California, the probate process can become very expensive. California law contains a formula for the fees to be paid to the executor and the attorney who administers the estate:
- Four percent on the first one hundred thousand dollars ($100,000).
- Three percent on the next one hundred thousand dollars ($100,000).
- Two percent on the next eight hundred thousand dollars ($800,000).
- One percent on the next nine million dollars ($9,000,000).
- One-half of 1 percent on the next fifteen million dollars ($15,000,000).
- For all amounts above twenty-five million dollars ($25,000,000), a reasonable amount to be determined by the court.
Bear in mind that both the executor and attorney can each receive fees based on the above table. The value of the estate is calculated on the total value of all the assets of the dead person – debts are excluded. Thus, if your house is worth $500,000 and you still owe a $300,000 mortgage, the value of the house will still be $500,000 for the purposes of determining probate fees. Using a relatively modest $500,000 estate as an example, probate fees can reach as high as $26,000 using the statutory formula. This is $26,000 that your beneficiaries will not be getting.
Why Would Anyone Ever Want Probate?
The probate process may be desirable under two circumstances:
- If a person has a large amount debt (much more than just a mortgage and credit card debt), it may be advantageous for the estate to go through the probate process since the court will ensure that all creditors will be paid off so that the heirs to the estate can receive the remaining assets free of any creditor’s claims.
- If it is foreseeable that the estate will be under contention, the probate process could be beneficial since there will be a Superior Court Judge who oversees the administration of the estate and can serve as a “referee” to rule on any disagreements.
Other than these 2 very limited circumstances, a vast majority of California residents will benefit by avoiding probate.