When There is Only a Will There’s No Way You’re Avoiding Probate

A common misconception is that when you die with a Will, your heirs avoid probate. In California when you die with a Will and the total assets owned in your sole name exceed $166,250, your estate goes through probate (a court proceeding) before the assets can be transferred to your beneficiaries.

The Executor, the person named to administer your Will, is responsible for filing the court documents required to open the probate case, collect the assets, advise creditors of your death, manage the estate, and distribute the assets according to your wishes. This process can be difficult, lengthy and expensive. This article provides you with a brief overview of probate and what is expected of your Executor.

Executor’s Duties

The Executor usually works with an attorney to determine whether or not a probate is required, represents the estate through the court proceeding, collects your assets, pays your debts, and manages the estate assets and issues during the probate process. An Executor’s duties range from finding assets/accounts and liabilities to handling day-to-day details such as cleaning out your home and holding an estate sale.

The Executor works with a court-appointed appraiser to value real estate, stocks, artwork, cars and other assets, cancel credit cards and subscriptions, notify the Franchise Tax Board and Internal Revenue Service of your death, file your final income tax returns, and investigate claims against the estate.

The Executor sets up an estate checking account to hold assets and pay debts. Before the estate can be distributed to the beneficiaries, the Executor must file an inventory of all the estate assets with the court, ensure that all valid claims against the estate are paid, and then report to the court when the estate is ready to be distributed.

Timeline

In Los Angeles, the probate process can be completed in as little as nine months, but generally takes 12 to 18 months.

The process begins when the Executor files a Probate Petition with the court and lodges your Will with the Court Clerk. The Executor publishes formal legal notice of the hearing date in a local newspaper and mails legal notice of the hearing to all of your legal heirs and the beneficiaries under your Will. The initial hearing date is set approximately four to six weeks after the petition is filed with the Court.

At the hearing, the Executor is appointed to serve and will be issued Letters Testamentary. The appointment and Letters Testamentary allow the Executor to gather your assets, ascertain your liabilities, prepare an inventory and appraisal to file with the court, provide legal notice to potential creditors, pay off any debts, and, if needed, sell real and personal property. Once all of your liabilities are paid, the Executor petitions the court for the authority to distribute the remaining assets to the beneficiaries as directed in the Will and reports to the Court how the estate was administered. This report and Petition for Distribution cannot occur until at least 120 days after the creditors are sent notice, and often is not filed until 8 or 9 months after the petition was initially filed.

Cost of Probate

The court filing fees, publication fees, appraisal fees, and other miscellaneous expenses are generally less than $5,000. Executor fees and the Executor’s Attorney Fees alone, without disputes or unusual circumstances, will each be approximately two to four percent of the total estate value. For example, if the only asset subject to probate in your estate is a house appraised at $1,000,000, the Executor’s commission will be $23,000 and the Executor’s attorney fees will be $23,000, regardless of any mortgages on the property. Thus, with just a Will and a house valued at $1,000,000, your probate costs are approximately $51,000,00.

How To Avoid Probate

Good News

The inconvenience, time, and expense of probate can easily be avoided with a combination of strategies such as having a Trust, designating payable on death beneficiaries, and owning in joint tenancy. If you are concerned that your loved ones will have to go through the probate process to administer your estate, you should consult an estate planning attorney to help ensure that your assets will not be subject to probate at the time of your death.

Small Estate

If your estate has no real estate and is valued at less than $166,250 at the time of your death, probate may not be necessary. Instead, a small estate affidavit can be used to collect your accounts/assets and thereafter distribute them to the beneficiaries according to your Will.

Account Types

Some accounts are not subject to probate or your Will, including but not limited to assets with Payable on Death beneficiary designations (e.g. life insurance, retirement accounts, annuities, bank accounts, brokerage accounts), real property titled with a Revocable Transfer on Death Deed, and assets held in joint tenancy or as community property.

A Will can be an effective estate plan for small estates or estates where Payable on Death accounts make up the majority of the estate.

Speaking to an estate planning attorney can help you avoid probate and get your financial and medical affairs in order with a Powers of Attorney for Health Care and Asset Management Powers of Attorney in the event you are incapacitated.

Kira S. Masteller and Lani Fu are trust and estate planning attorneys.