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Probate Administration

Probate administration is a legal process that settles a person's legal and financial affairs after death. This process includes collecting property, paying off creditors, filing taxes, and distributing any remaining property to the deceased person's legal heirs or estate beneficiaries. 

Probate is needed when assets worth more than $166,250 are titled solely in the name of the deceased and do not have a joint tenant on title or a named beneficiary. Common examples include real property, retirement accounts/life insurance with no named beneficiary, and individual bank and investment accounts. In the context of a probate, the deceased is referred to as the "decedent."

When is Probate Administration Required? 

A probate is needed when an asset exceeds $166,250 in value and is titled solely in the name of the decedent. In some cases, a probate may also be needed when a decedent has unsettled legal claims.  

A formal probate administration gets started when a petition for probate is filed in the superior court in the county where the decedent resided. A petition for probate requests the court appoint a personal representative for the estate; if there was a will the representative is called the "executor," and an  "administrator" if there was no will. The personal representative of the estate must be either (a) an individual with legal priority or (b) a nominee of an individual with legal priority. 

These people may include: 
  • the named executor in the will;
  • a legal heir (surviving spouse, child, or other next of kin); or 
  • a creditor of the estate. 
Probate Administration Process

In the case of a simple probate, there are four (4) phases involved in a probate administration: 
  1. Initial appointment
  2. Property collection and valuation
  3. Settling of creditor's claims
  4. Final distribution 
The typical timeline for a simple probate administration is one year. This timeline can change if the court is busy or the estate is complex.  

1. Initial Appointment

No formal action can be taken to collect the decedent's property until the court appoints a personal representative. A petition for probate requests a hearing for the court to appoint a personal representative, grant the petition for probate, and issue "letters of administration" or "letters testamentary" (often referred to as "letters").  

Letters are the official court document that give the personal representative the authority to act on the decedent's behalf, i.e. collect bank accounts, sell property, and settle claims. Depending on the county, it can take anywhere between 30 to 120 days to get a hearing date and an order for probate granted.  

2. Property Collection and Valuation 

Once appointed, the next step is to start collecting and valuing property that belonged to the decedent. Valuation of non-cash property must be completed by a court-appointed "probate referee." The formal valuation is then filed with the court, which determines the overall value of the estate.   

During this phase, the personal representative may also sell property on condition that all required notices are sent to everyone entitled to property in the estate. On average, this phase can take 30 to 150 days and depends on (1) how many separate assets are in the decedent's estate, (2) how quickly real estate sells, and (3) how long it takes banks/financial institutions and other property custodians to authorize transfers to an estate.   

3. Settling of Creditor's Claims/Paying Taxes 

After an order for probate is granted and letters are issued, most creditors have four (4) months to make a claim to be paid from an estate. If a claim is filed after four (4) months, then the creditor loses the ability to make a claim.  

Creditors are required to follow a formal court process to make a claim. Generally, the personal representative is not obligated to pay a creditor unless this process is followed.    

The personal representative must also ensure a final tax return is filed for both the decedent as an individual and the for the decedent's estate, which are considered two separate entities. Most estates do not have much tax liability because assets in the estate receive a stepped-up basis (i.e. for tax purposes, the fair market value of an estate asset on the decedent's date of death is the cost basis for determining taxable gain when sold).  

4. Final Distribution  

Once all estate assets are collected and valued and all liabilities are paid, then the personal representative may request a court order to distribute all remaining assets to the beneficiaries of the estate.  

Once property is distributed, then receipts are filed with the court and the probate is closed. Depending on court schedules, a petition for final distribution usually takes 120+ days for the court to approve.  

Determining an Estate's Value

The date of death fair market value of all assets titled in the decedent's name is the value of the estate. When a probate is opened, the estate is formally valued by a court-appointed "probate referee."

Assets held in joint tenancy, with a named beneficiary, or a "pay on death" designation are not considered part of a probate estate. Assets titled in the name of a trust are also not considered part of an estate.   

Probate Administration Fees and Costs

Fees for a probate administration are set by statute and based on the overall value of the estate. Fees for probate are payable to both the personal representative of the estate and the attorney representing the personal representative. 

Fees for an estate worth around $1.5 million total around $28,000 payable to the attorney and $28,000 payable to the administrator. These fees are paid out of the estate at the end of the administration. Costs, which include filing fees, taxes, and appraisal fees, typically total $2,000.

So, an estate worth $1.5 million will total roughly $58,000 in legal fees and costs. Kugelman Law probate administration attorneys in California understand that probate is costly, which is why we will work with clients on a case-by-case basis to negotiate discounted rates.  

Those probate administration fees statutes are provided below:

California Prob Code section 10811: 

(a) Subject to the provisions of this part, for ordinary services the attorney for the personal representative shall receive compensation based on the value of the estate accounted for by the personal representative, as follows:
  1. Four percent on the first one hundred thousand dollars ($100,000).
  2. Three percent on the next one hundred thousand dollars ($100,000).
  3. Two percent on the next eight hundred thousand dollars ($800,000).
  4. One percent on the next nine million dollars ($9,000,000).
  5. One-half of 1 percent on the next fifteen million dollars ($15,000,000).

California Prob Code section 10800: 

(a) Subject to the provisions of this part, for ordinary services the personal representative shall receive compensation based on the value of the estate accounted for by the personal representative, as follows:
  1. Four percent on the first one hundred thousand dollars ($100,000).
  2. Three percent on the next one hundred thousand dollars ($100,000).
  3. Two percent on the next eight hundred thousand dollars ($800,000).
  4. One percent on the next nine million dollars ($9,000,000).
  5. One-half of one percent on the next fifteen million dollars ($15,000,000).(
  6. For all amounts above twenty-five million dollars ($25,000,000), a reasonable amount to be determined by the court.

How to Avoid Probate

Some examples of how property may avoid probate include the following:
  1. Real property and financial accounts are titled in the name of your living trust
  2. Insurance policies and retirement accounts have a named beneficiary
  3. Property is titled in joint tenancy with your spouse
  4. Accounts have a pay on death designation.  
The right way to title an asset to avoid probate is something you should ask an estate planning attorney because there are benefits and drawbacks to each. 

Probate Administration Tax Consequences 

With respect to real property, there are property tax penalties that could end up costing the estate - and ultimately the heirs/beneficiaries - if a probate administration is not started in a timely manner.  

Also, the California Franchise Tax Board (FTB) and IRS are given special treatment as estate creditors, so addressing any tax issues early on will ultimately benefit the estate heirs/beneficiaries.

That is why it’s advantageous to hire Kugelman Law tax and probate administration attorneys in California to help ensure both the tax and estate plan aspects of probate administration are handled properly and efficiently. 
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