When a decedent dies with a valid will, but without a Living Trust, their estate is subject to Probate. Probate translated literally means "to prove the will." The probate process, in it's origin, was designed to prove that the decedent actually had died, and that the will in question was the actual will belonging to the deceased.
Today, probate is best described as a court-supervised process by which a decedent's assets are gathered, valued, and distributed according to the decedent's last wishes, as stated in his or her will.
In addition, the probate process also requires a formal process by which all creditors (or potential creditors) of the deceased, known and unknown, are notified of the death, and given the opportunity to make a claim on the decedent's estate.
Due to the formal, court-supervised nature of the Probate process, the average length of a probate case can be anywhere from 6 months to a year and a half, depending on the complexity of the case and a variety of issues.
Some important issues when considering whether or not to avoid probate include:
Disadvantages of Probate
(1) Cost- The probate process as a whole can get quite expensive (see Probate Fees, below).
(2) Time - As indicated, the average length of time for a probate is anywhere from 6 to 18 months
(3) Lack of Privacy - Probate is a public procedure. Therefore, all of your financial and personal records become public documents. Anybody can walk into the Probate Clerk's office, pay a fee, and access all of your personal and financial information.
(4) Restricted Distribution of Assets - Because of the court-controlled process, getting money in the hands of your beneficiaries may be slower and more complicated than you would like. Family allowances are often granted, but only after petitioning the Court. Likewise, paying family members back for funeral and other costs can be slow, and subject to Court Approval.
Currently, California Probate Code 10800 sets the compensation for the Personal Representative - and for the Attorney for the Personal Representative - of an Estate that is subject to Probate as follows:
- Four percent on the first one hundred thousand dollars ($100,000).
- Three percent on the next one hundred thousand dollars ($100,000).
- Two percent on the next eight hundred thousand dollars ($800,000).
- One percent on the next nine million dollars ($9,000,000).
- One-half of one percent on the next fifteen million dollars ($15,000,000).
- Above twenty-five million dollars ($25,000,000), a reasonable amount to bedetermined by the Court.
According to this schedule, the Probate fee on an estate of $1,000,000 is equal to $23,000.
Please bear in mind, that this is the fee to be paid to both the attorney and the personal representative.
While many personal representatives forgo their share of the fee, not all will do so. Therefore, it is possible that the full probate fee on an estate of $1,000,000 is equal to $46,000! And that is not including court filing fees!
It's no small wonder why people are anxious to avoid the Probate process whenever possible.
Assets Not Ordinarily Subject to Probate
The primary way to avoid Probate is through the use of a properly funded Living Trust.
However, certain assets are not normally subject to Probate, and may pass outside of the Probate process.
Some of these assets include:
- Assets held in Joint Tenancy
- Designated Beneficiary Accounts
- Individual Retirement Accounts (IRA's)
- Corporate Pensions
- Life Insurance Policies
- Accounts Payable on Death (i.e. Totten trust bank accounts)
- Lifetime Gifts (subject to Annual Exclusion limits)
Through careful planning of your estate, which may include a properly-funded Living Trust, you may be able to spare your family members and loved ones from having to slog through the Probate process for months on end.
In every estate that we have worked on, the primary concern of the beneficiaries is that the whole estate administration process is wrapped up as quickly and efficiently as possible - while minimizing costs and taxes.
Proper Estate Planning can help you and your family achieve these objectives.
We welcome the opportunity to meet with you in person to discuss your Estate Planning needs.
Copyright (c) 2007 John Fraker
Artice Source: http://www.articlesphere.com
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