When you are left the duty of administering a loved one’s estate through the probate process, it is important that you are represented by attorneys that have a local presence, who understand the probate court system, the court’s local rules, and the drafting preferences of the judge and the judge’s staff. Again, there is no substitute for experience. Our probate attorneys are present in court on a daily basis and have a reputation as among the best in Los Angeles County. We understand how the over-burdened court system works. We know how important it is to prepare the court pleadings correctly the first time, allowing us to shepherd your important papers through the court system with the least possible delay. We want to become part of the solution, and not the problems confronting the court, so we actively volunteer our time as members of the Los Angeles County Superior Court’s (LASC) probate volunteer panel, LASC’s pro per guardian panel, LASC’s probate mediation panel, and also on behalf of the Orange County Superior Court.
The probate court in California primarily handles four different types of cases. They are cases involving: (1) a decedent’s estate (often referred to as a probate estate), (2) a trust estate, (3) a guardianship of the person or estate, and (4) conservatorship of the person or estate. Our attorneys are experts in all four types of cases.
When a decedent’s Will does need to be probated, our attorneys lead the personal representative (i.e., executor, administrator, administrator with will annexed, and special administrator) through the process with the least possible disruption and delay. In many cases, the entire probate can be completed without the client ever needing to appear in court. Many of the horrors stories circulating about California probates have as much to do with mistakes of inexperienced counsel as they do with actual court delays. From start to finish, most small probates in California can be completed within 9 months of filing the petition for probate, provided the personal representative’s attorney is experienced and familiar with local court practices. This is roughly the same time period for most trust administrations.
While most properly-prepared estate plans avoid probate, this is not always the case. After executing the initial estate plan, an individual may incorrectly acquire a new asset in his or her name individually and not in the name of the trust as instructed. If the client dies before transferring the asset into the Trust, then the asset may need to be submitted to the probate process. Contrary to popular mythology, probating an asset does not mean that the government takes a larger portion of the asset in taxes or that part of the asset escheats to the State California. The most important reasons for avoiding probate in California are: (1) the 5 to 6-month delay in making initial distributions to heirs and beneficiaries; and (2) the fact that a probate is a public proceedings, with important asset and income information available for everyone to see.
Among the other California probate myths is the belief that the attorneys are generally overcompensated by the attorney’s fees statue. Under the California probate system, the attorney and the personal representative are generally compensated based on a percentage of the gross value of the assets subject to probate. The fees are set by statute – hence referred to as statutory fees, and they cover the typical services required in most probate administrations. The percentages set by statute do not vary based on the complexity of the estate or the actual time required to perform all of the tasks needed to complete the administration. In cases where the gross value of the assets in the estate are large, even though the work required to administer them is simply average, the statutory fee has the effect of overcompensating the attorney and the personal representative. By contrast, when the gross value of the estate is small relative to the time required to administer it, the statutory fee has the effect of under-compensating the attorney and personal representative. In hiring a probate attorney, it is important for the personal representative to know that the statutory fee is the maximum fee for ordinary services. Where appropriate, the attorney and personal representative may agree that the attorney should receive compensation based on the attorney’s normal hourly rate, provided the total is less than the statutory fee.
Besides the statutory fees for ordinary services, the attorney and personal representative may be entitled to additional fees (referred to as extraordinary fees) for extraordinary services. The typical services generating extraordinary fees are litigation between the beneficiaries and the personal representative, tax work such as preparation of the federal estate tax return and the sale of real property. It is the probate court, and not the attorney, who ultimately decides the value of the extraordinary services and the extra compensation that should be paid to the attorney, if any. The court takes into account a number of factors in determining whether extraordinary compensation is warranted, including the extra time that should have been required, the benefit conferred on the estate, the need for specialized skill, the expertise of the attorney, the attorney’s normal billing rate and whether the attorney was already overcompensated by the statutory fee for ordinary services.
Surprising to many, the cost in terms of legal fees to correctly administer a large trust estate may be roughly equivalent to or only slightly higher than the costs of administering a probate estate of the same size. Large trust estates, like large probate estates, usually require considerable fact gathering and forensic work, the preparation and filing of federal estate tax returns, the careful allocation of assets to continuing trusts, full appraisals and full accountings. The additional filing fees charged by the probate court in a probate administration are often inconsequential relative to the normal costs of any large administration. The appraisal costs charged by the court-approved appraiser (known as the “probate referee”) are generally no more than the costs of an appraisal from any certified real estate appraiser. Real appraisals are required in both trust and probate administrations. The cases where the probate appraisal costs far exceed the trust appraisal costs relate to marketable securities, which generally require no certified appraisal in trust proceeds but requires a certified appraisal in the probate proceedings.
Beneficiaries of trusts have the right to petition the probate court to challenge the actions of the trustee in the same respect that beneficiaries of a will or heirs of an intestate estate have the right to petition the probate court to challenge the actions of the personal representative. Although the administration of a trust may commence without judicial involvement, any beneficiary may invoke the jurisdiction of the probate court by filing a petition requesting some type of relief relating to the trust. If the probate court believes that the trustee is not properly administering the trust estate, the probate court can require that the trust administration remain subject to court supervision in virtually the same respect as a probate estate.
Probates in California have important time guidelines to ensure their expeditious administration. The hearing to appoint the personal representative may be done on 15 days notice (although it generally takes 45 to 60 days to receive the hearing date). Once the personal representative is appointed and notice of the administration is published in the local newspaper, the 4-month creditor’s claim period commences. During this time, the personal representative is required to notify any known creditors of the decedent that an estate has been opened and that they must file their creditor’s claims within the 4-month period. Typically, if the creditor was given notice but fails to file the claim within the 4-month period, the creditor is barred from recovery. Once the creditor’s claim period has expired, the probate estate may be in a position to be closed, if the estate is not large enough to require the filing of a federal estate tax return. By law, the personal representative ordinarily has 12 months from appointment to close the probate estate. If, after 12 months, the estate is not in a position to be closed, then the personal representative must file a status report with the court explaining the reason for the delay. Where the estate is large enough to require the filing of a federal estate tax return, the personal representative is given 18 months from appointment to close the probate estate or file a status report with the court explaining the reason for the delay.
The biggest difference between the probate administration and trust administration is the length of the delay before initial distributions can commence. In the probate process, in the best case scenario, it will generally be a minimum of 7 months from the date of death before the court will be in a position to authorize a preliminary distribution to the heirs or beneficiaries. In a probate, no distributions can be made without advance court approval. By contrast, in a trust administration, the initial preliminary distributions can literally commence within days of receiving the first death certificate.
The processes for closing a probate administration and trust administration are roughly the same, with the exception of the need for court approval. Both require that the fiduciary (i.e., personal representative or trustee) prepare a detailed accounting compliant with the probate code or receive written waivers of accounting from all interested parties. Where an accounting is produced and disseminated to the beneficiaries in probate, they generally have a limited period of time in which to object. Barring no objections, the fiduciary can then distribute the estate. The judicial approval of the accounting in probate provides an added benefit. Once the probate court approves the personal representative’s accounting, the court order approving the accounting acts as a bar against later challenges to the accounting. By contrast, if the trustee simply delivers an accounting privately to the beneficiaries, the beneficiaries may have as much time as three years in which to challenge the accounting. This may force the trustee of the trust to retain a large reserve to cover any future litigation expenses, where by contrast the personal representative in a probate may be free to distribute the entire estate without fear of reprisal. To give our trustee/clients the same type of immediate judicial protection, we often advise our trustee/clients to voluntarily file their final accounting with the probate court for approval, releasing them from all possible liability.
Simplistically, probate is required when there is no other mechanism for transferring title to a decedent’s assets from the decedent’s name into the name(s) of decedent’s intended beneficiaries. The probate process can be thought of as simply the last option for transferring title from the decedent to the intended beneficiaries, when no other options work.
Probate is by no means the only mechanism for transferring title on a decedent’s death. The other mechanisms can be summarized as:
- By operation of law, including the Multi-Party Account Laws and by right of survivorship;
- By contract including beneficiary designation;
- By trust; and
- By summary probate procedure.
By operation of law: The California Probate Code contains the Multi-Party Account Laws. These rules generally determine who owns the funds within a bank account, although the contract establishing the account (usually the signature card) can vary the rules. These Multi-Party Account Rules provide generally that, upon the death of one of the individuals listed on the account, the funds in the account are owned by the remaining individuals. The decedent’s share of the funds passes by the terms of the contract (i.e., signature card) and if unspecified by contract, then by operation of law (the Multi-Party Account Laws) to the surviving individuals. The transfer of title is accomplished by providing a death certificate to the financial institution holding the account which in turn generally opens a new account in the name of the surviving individual. The decedent’s will does not control the distribution of the funds, and no probate is required.
By right of survivorship: The California Civil Code allows real property owners to designate who will succeed to their property on death through the manner in which title to the asset is taken. Specifically, two individuals can hold title to an asset in “joint tenancy,” which be definition includes the term “right of survivorship.” On the death of one joint tenant, the asset is owned entirely by the surviving joint tenant. The transfer of title is accomplished generally through the filing or recording of a death certificate and affidavit concerning the death. The right of survivorship characteristic under the Civil Code applies to both real property and personal property, but not to bank accounts, which are governed under the Probate Code’s Multi-Party Account Laws. The decedent’s will does not control the distribution of the asset and no probate is required
By beneficiary designation: The California Probate Code contains the Nonprobate Transfer Rules, which provide a broad endorsement to transfers on death by way of beneficiary designation. This encompasses most typically the standard life insurance beneficiary designation and retirement account beneficiary designations. On the death of the insured or the employee (i.e., the owner), the funds in the account pass to the individual that the owner designated on a beneficiary designation form filed with the financial institution (i.e., insurance company or employer). The Nonprobate Transfer Rules also endorse the transfer of death of securities through specific registration as “TOD” (transfer on death) or “POD” (pay on death). On the death of the owner of the security, the security passes to the beneficiary named on the instrument on beneficiary designation form. This is accomplished by providing a death certificate (and other documentation) to the transfer agent for the security. The decedent’s will does not control the distribution, and no probate is required.
By trust agreement: Assets held in trust generally escaped the probate process. Initially, trusts required three parties, a settlor who established the trust, a trustee who manages the trust, and a beneficiary who receives the benefit of the trust. Under this arrangement, legal title is held by the trustee, as opposed to the settlor or beneficiary. The death of the settlor or beneficiary does not affect the ability of the trustee to hold or transfer legal title, and thus no probate is required. Over time, the requirements for a third party trustee have largely vanished, with the settlor often acting as the initial trustee. Nonetheless, the probate avoidance feature has continued to be recognized and appears throughout the Probate Code under the Trust Laws and in the Nonprobate Transfer Rules.
By summary probate procedure: The California Probate Code contains certain summary probate procedures, which effectuate the transfer of the asset by the decedent’s will without the need for a full probate. Transfer by summary probate procedure is generally quicker and less costly than a conventional probate, even when Court action is required. The estates, which may be transferred pursuant to one of the summary probate procedures, include those:
- With personal property not exceeding $150,000 in aggregate value. This includes typically cash, accounts, securities and tangible personal property. (i.e., cash, securities and tangible personal property) of less than $150,000. Transfer occurs way of an affidavit, signed by the beneficiary under the decedent’s will and presented to the financial institution. No court filing is required.
- With real estate of less than $50,000. Transfer occurs by appraisal and filing of an affidavit with the court. No court hearing is required.
- With real estate of less than $150,000. Transfer occurs by appraisal and filing a separate petition with the court. A court hearing is required.
- Where the asset (regardless of type) passes under the will or by intestate succession to the surviving spouse. The transfer occurs by way of a separate petition presented to the court. A court hearing is required.