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Probate: What it is and What it Costs in California

“Probate” means the court procedure by which a will is proved to be valid or invalid. However, the term is used in common everyday conversation to refer to the legal process through which the estate of a deceased person is administered. Where the decedent has not left a will, the process is geared to carry out the directives of the state, as determined by the laws of “intestate succession”, the default laws for passing on property on death. The purpose is to ensure that property is not left unaccounted for upon the death of the original property owner.

 Probate generally involves collecting a decedent’s assets, liquidating liabilities, paying necessary taxes, and distributing property to heirs. These activities are carried out by the Personal Representative (executor) of the estate usually under the supervision of the probate court.

Some estates may require ongoing supervision by the probate court under certain circumstances.  Many other estates do not, and may even be transferred according to a “summary” probate process that is much more efficient in both time and money terms.  This is an option often available to very modest estates, and very rarely where there is real property involved.   Finally, some estates can be passed on with no court intervention at all, as in the case of uncontested trusts.

Cost, Privacy Concerns, and Delay in Distribution

Most of you are aware that there is a strong popular trend to avoid probate.  There are a number of good reasons for this, not the least being cost.

In California, probate attorney and executor fees are set forth in the Probate Code. Attorney fees and executor fees  that may be charged at the present time are as follows:

4% of the first $100,000.

3% of the next $100,000

2% of the next $800,000.

1% of the next $9,000,000.

½% of the next $15 million, and

a “reasonable amount” determined by the court for everything above $25 million.

Under the law as it presently stands, these are fees that both attorneys and executors may charge for their respective functions.  So double the figures above if you are going to have to name an executor that expects to be paid the statutory amount. As a practical matter, in many cases executor fees are not incurred since a relative of the deceased will likely be serving as executor.  But unless these fees are waived in a will, or the fees are specified in the will, the executor will have a right to the full statutory fees that attorneys also receive.

The Probate Code also provides that attorneys and executors may charge additional fees for “extraordinary services” that are approved by the court.  Furthermore, an executor’s expenses in employing accountants or other tax experts are additional fees that may be taken out of the estate. There are also court administrative fees to be paid to probate referees, to the court for filings, and to newspapers for publication of notices.

Generally speaking, fees are computed on the basis of the appraisal value of the property without deducting any encumbrances. Therefore, if you had a $700,000. house with a $500,000. mortgage outstanding, both attorney and executor fees would be assessed on the gross value of the property, $700,000.

As a practical matter, in many cases executor fees are not incurred since a relative of the deceased will likely be serving as executor.  But unless these fees are waived in a will, the executor will have a right to them.

Finally, if you have real property in another state and do not have your property in a trust, you will incur fees for a whole other probate process governed by the laws and attendant fees of the state where the property is located.  Court fees are also charged on top of the attorney and executor fees.

Concern for Privacy is another factor motivating people to avoid probate through a variety of strategies. Probate is a public proceeding.  With probate, a will is examined, filed, and can be inspected by anyone who goes to a courthouse and asks to see it.  Your family’s affairs, beneficiaries, amount of property--in short, all the details of your legacy to your loved ones-- becomes public knowledge that can even be used by con artists looking to gather information to perpetrate scams on vulnerable family members, most often, elders. Court fees can be as high as  1% of your estate on top of the above- mentioned fees.

Delay in Distribution is yet a third reason that many are intent on avoiding probate.  The average probate can take from 1-2 years in California.  In the meantime, costs continue to run on homes, insurance, and if you sell through the probate process, the property may have to be sold at a discount, with other court-ordained qualifications to the sale.  A judge, however, may allow the immediate family a “family allowance”, but it is ironic that a family would have to ask a court to use its own money!  This, of course, can be avoided through a number of estate planning strategies.

Fortunately, as I said at the beginning of the probate discussion, not all estates need go through an extensive probate process such as the one just described.  Property that passes outright to a spouse and property in small estates (a total gross value of $150,000 or under) can be transferred by “summary” procedures without a formal court proceeding.

A special note about property passing outright to a spouse:  this property will eventually have to go through probate at the death of the second spouse, when the burden will fall on the heir (most probably the children) of the couple.  That is one of the important reasons why married couples make provisions for avoiding probate altogether.  The possibility, however remote, of a couple with small children dying simultaneously makes this avoidance all the more urgent. 

Yet another caveat is that special rules apply to non-citizen spouses in all estate planning matters that should be considered before making any important decision about your estate.

Assets with beneficiary designations (other than to the estate) such as life insurance proceeds, death benefits, and property held in trust do not go through probate at all, and joint tenancy property goes through probate only at the death of the last joint tenant.

© Aida M. del Valle.  All Rights Reserved.