Probate is used by the courts to transfer property once a person has died.
This YouTube video by attorney Zev Brooks explains this in plain language so that you will understand how probate works in California.
Players in the California probate process
There are three:
♦ The first is the person who died. That person is called the decedent.
♦ Then there are the people who are inheriting property from the decedent. They are the beneficiaries.
♦ The third is the personal representative. This is the person administering the estate on behalf of the decedent for the beneficiaries.
Is probate necessary?
The first question one must ask after the death of a loved is, “Do I need to open a probate case?”
In California, not everything the decedent owns at death needs to go through the probate process to be transferred to beneficiaries. In fact, there are major categories of assets that can avoid probate entirely and still be distributed to beneficiaries.
Assets excluded from probate
One of these is jointly-held property. For instance, if the decedent had a bank account titled jointly with a beneficiary or the decedent had a joint piece of property upon death, the surviving joint tenant inherits that asset without any probate.
Another category of assets which avoid probate is pay-on-death property such as life insurance. A beneficiary of a life insurance policy will get those funds without the need for probate.
In addition, many assets accounts (such as stock accounts, savings accounts) allow for a beneficiary designation. The assets in such accounts will transfer to the named beneficiary without probate.
Another category of assets that avoid probate are assets in a living trust, that is a trust that the decedent created while he or she was alive. Property titled in a living trust avoids probate.
In addition, assets passing to a surviving spouse avoid the full-blown probate procedure, although in some cases, it might be necessary to do a summary procedure in the California courts.
Lastly, a full probate isn’t necessary if the decedent had a small estate which is defined as an estate worth less than $150,000, or the decedent owned real property worth $50,000 or less.
When is a probate actually necessary?
It is typically in cases where a decedent is a single person (either divorced, widowed, widower, or never married), and owns real estate in his or her name alone, or assets in his or her name alone that are worth over $150,000.
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Steps of the probate process
Appoint a personal representative: The first step in the probate process is filing a petition to have somebody appointed as a personal representative. After a petition is filed, a hearing will be set in court anywhere from six to eight weeks out, depending on the county where you file the petition.
Notice and publication: After the petition is filed, notice and publication must be done. Notice is just informing the people that are mentioned in the will and the decedent’s intestate heirs that a petition was filed. Publication is a legal notice published in a newspaper informing the public that a probate petition was filed and when the hearing is set.
Letters: On the date of the hearing on your petition, if all is in order, i.e. notice and publication were completed, then the petition will be granted and Letters will issue. Letters is the document the personal representative can use to show that he or she has authority over the estate. With Letters in hand, the personal representative can deal with third parties, sell real estate, open and close bank accounts.
Posting a bond: Sometimes before Letters are issued, the court might require a bond. A bond is like an insurance policy. If the personal representative mismanages the estate or runs away to Tahiti with the money, an insurance company will pay the beneficiaries their rightful inheritance and then go after the personal representative for reimbursement.
Often, a will waives the bond. Beneficiaries can also waive a bond and often do because a bond can be expensive and it takes money out of the estate that otherwise would go to the beneficiaries.
Inventory and appraisal: Once you have Letters, the next step in probate is obtaining and filing an inventory and appraisal.
After Letters are issued, the court will assign someone called a probate referee as the official appraiser of the estate. It is the probate referee’s job to give the estate a date of death value. All cash in the estate, that is money in bank accounts and cash, will be given a date of death value by the personal representative because it is easy to establish those values by simply referring to account statements.
But, every other type of asset, real estate, stocks and bonds, patents, trademarks, royalties, a car, any other asset that is not cash, is given a date of death value by the probate referee on the Inventory and Appraisal.
A date of death value is important because it establishes a starting point for a future accounting of the probate administration. The personal representative has to ultimately report how the estate went from the date of death value to the assets on hand. Also, the attorney fees and personal representative fees are based in large part on the date of death inventory and appraisal value.
Administering the probate: The next step of the probate process is the actual administration. During administration, the personal representative will sell real estate, dispose of vehicles and personal property, talk to the banks and other institutes holding the decedent’s money, open up an estate account, and deal with the IRS and creditors.
The personal representative during administration also has to give certain notices. For instance, if the decedent received Medi-Cal benefits or the decedent’s deceased spouse received medical benefits, then notice must be given to the California Department of Health Care Services. If there is a beneficiary in prison, notice needs to be given to the California Department of Corrections.
Notice also needs to be given to the California Franchise Tax Board to see if the decedent owes any taxes to the State of California.
Creditors: The next step in the probate process is dealing with creditors. The court is interested in making sure not only that the beneficiaries get what they are entitled to, but that the decedent’s creditors get paid as well. Creditors are defined as debts the decedent had prior to death, like credit card debt, hospital or medical bills, utility bills, anything the decedent owed prior to death.
The personal representative needs to give notice of the administration to the creditors. The creditors then have to file a creditors claim. They have to file this claim within 120 days after Letters were issued or within 60 days after they receive notice from the personal representative, whichever is later.
If a creditor doesn’t file a timely claim, the creditor waives its right to get paid. Of course, this is a good thing for the beneficiaries because that means they will have more money in the estate.
If a creditor does file a timely claim, the personal representative must either pay the claim or reject the claim. If the claim is rejected, then the creditor has to bring a lawsuit against the estate within 90 days. If the creditor does not file a timely lawsuit, the creditor waives its rights as well.
Statute of limitations for creditors
Also, there’s a hard and fast one-year statute of limitations for debts of the decedent. So, no creditors of a decedent can legally collect against the estate if the creditor took no legal action to secure the debt and one year has passed after the decedent’s death.
Dealing with creditors is a complicated part of the probate procedure. But it is a very important part of the probate administration because the court is going to make sure that creditors were properly dealt with before the probate case closes.
Four-month minimum administration period
Another thing to understand is that there is a minimum administration period of four months. That means once Letters are issued, a personal representative cannot bring a request to the court for an order authorizing distribution of the assets on hand to the beneficiaries until at least four months have gone by after the Letters were issued.
This is the case even in the most simple probate estate. For example, if an estate had only one beneficiary and the entire estate was only one bank account consisting of $180,000 cash and there are no creditors, the personal representative would still need to wait that minimum four-month period before he or she could ask the court to distribute the estate.
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Closing out the probate: The next step in a probate is closing out the probate. As long as four months have elapsed after Letters have issued, the personal representative can bring to the court a final accounting, request for distribution, and a request for fees.
The final accounting is for the benefit of the beneficiaries and those interested in the estate. However, an accounting can be waived by the beneficiaries.
The accounting is filed and a hearing date will be set. This hearing date can be anywhere from three to even five months after the accounting is filed, depending on the county.
The purpose of the accounting is to explain to the court and to the beneficiaries how the estate went from the date of death value established by the probate referee to the assets on hand available to distribute. The accounting also deals with the payment of attorney’s fees and the fees for the personal representative. These fees aren’t paid until the beneficiaries receive their distributions and the court has to approve those fees.
Usually at the same time an accounting or waiver of accounting is filed, the personal representative will ask the court to authorize distribution of the estate to the beneficiaries, and approve attorney’s fees and the fees for the personal representative.
Distribution of the estate: The last step of the probate process is distribution.
Once the court approves the accounting and gives the authority to distribute the estate, now the personal representative literally does just that. He or she distributes money to the beneficiaries or retitles property in kind.
Then the personal representative obtains receipts from all the beneficiaries. Those receipts are then filed with the court with a simple petition called an Ex-parte Petition for Discharge. Once that is filed, the case is over and the personal representative is discharged.
So just like the case began with filing the petition to get the personal representative appointed, the case ends when the personal representative demonstrates that he or she did his or her job by filing the receipts for distribution.
Also at this time, if there was a bond, the bond company will exonerate the bond so there is no more liability.
In the real world, of course, the process is much more complicated and there are issues I did not discuss that might arise in any particular case. Typically, if the probate process goes smoothly, it will last nine to twelve months.