Will and Probate Explained – Why You Should be Prepared
by Robert A. Hull
Sound estate planning, the realm of the trust, will and probate generally keep property in the family, make sure debts are settled and don’t become burdens on your loved ones, and ensure your wishes for the distribution of your property – assuming such wishes are legal – are implemented according to your instructions.
Let’s start with wills.
If you pass away with a will, your property will be distributed according to its terms. Your will can leave your assets to a trust you created during your lifetime. In such a case, your will is called a “pour over” will because it “pours” assets not already in your trust, into your trust. Your will can also include a trust created in the will itself.
Your will also names an executor to administrate your “probate estate” (more on that in a minute). This executor organizes and distributes your assets per the terms you outlined in your will, and arranges payments of debts and taxes.
And, if you have minor children, your will should name a trusted guardian for them.
What is Probate?
Probate is the process by which the Court supervises and validates your executor’s management and distribution of assets, as well as payment of your debts. Probate generally takes a long time, sometimes several years.
If there are assets which are subject to the probate process, the executor must file papers to “open a probate” with the Court. The will and probate process is highly specialized and very time-sensitive (i.e., there are many hard and fast deadlines based on your date of death, the date certain documents were filed with the Court, etc.). Thus, we don’t recommend that your executor handle this process without the assistance of a knowledgeable trust and estate attorney.
Generally, state law sets the fees that an attorney assisting with a will and probate may charge (a certain percentage of the gross value of the assets probated). However, such fees, and the time and inconvenience of managing a probate, will inevitably be significantly greater than the fees necessary to draft a complete estate plan which can avoid the need for probate.
However, probate is necessary to lawfully settle your debts and assets only if you die with “probate assets”.
Your Assets – What Should be Covered in Your Will and Probate Planning?
Only certain assets do not require a probate process – they are called, logically, “non-probate assets”. Some examples include:
▪ Assets in Joint-Tenancy
▪ Assets held by Trusts
▪ IRAs
▪ Life Insurance Proceeds
▪ Other assets with named beneficiaries
The administration of these assets are not governed by your will, but rather by the terms of the specific instrument. So even if you wrote a will, the executor may not need to open a probate, provided all of your assets are “non-probate” assets (or if you have less than $100,000 in probate assets). That’s good news for you and your beneficiaries.
No Will – What Happens Then?
If you pass away without a valid will, you die “intestate”. That is, the Probate Court will dispose of your property according to the California intestate beneficiary succession laws in place at the time of your death. If you are married, there are different schemes for community property and separate property.
If you don’t have a will, you don’t have an executor, so the Court will appoint a person nominated according to the statutory scheme (probably someone from your family) to act as your estate administrator. There is no authority to make transfers of your probate assets without the transferor being appointed executor, and an executor, with exceptions, cannot act without court approval.
Without a will, you can only hope that the people that you would have as beneficiaries and the amounts they would receive are consistent with the distributions provided for under the intestate succession laws.
A simple will and probate plan is a good first step toward the efficient management of your assets following your death. However, there is a much more powerful tool which, when used in conjunction with a will, can also have numerous tax benefits and help your estate avoid probate entirely.
Robert A. Hull is a Los Angeles trust and estate planning attorney at the Firm, and his practice includes business and corporate law. Contact Mr. Hull at 818.990.2120, or by e-mail: rhull@lewitthackman.com