What is probate?
Probate is a court process by which a judge validates a will and supervises the settlement of an estate, including the transfer of assets to beneficiaries. The court, as part of the probate, will appoint someone to handle the bills of the deceased as well as his or her assets. Depending on certain circumstances, that person is called the executor, administrator, or administrator with the will annexed. The person who is nominated in the will as executor or if no one is nominated, the administrator, files a petition with the Superior Court asking that he or she be appointed under the proper term. An executor is appointed if the person is named in the will. An administrator is appointed if there is no will. An administrator with will annexed is appointed if the will does not name an executor or if the person named is incapable of performing or unwilling to perform. If there is no will, the Probate Code provides a list of persons who have priority to petition to become administrator.
The will is filed with the petition, and notices are sent to the heirs and/or relatives to let them know when the hearing will be held. If there are objections to the petition, or if the validity of the will is contested, the hearing will be used to resolve any problems that have arisen. In some cases this may mean that the validity of the will is not upheld, or that some other person than the original petitioner is chosen to administer the estate. In most cases, however, there is no objection and the petition is granted.
Probate is also when creditors of the deceased can appear before the court and make their claims for payment. Under law, they have a fixed period of time to file a “creditor’s claim” and demand payment. The executor or administrator or the court may need to determine if the claim is valid and or if it should be paid or how much of the claim should be paid.
In addition to insuring the payments of those debts presented by creditors, the probate process is also used by the federal government to make sure taxes are paid. Income taxes for the deceased must be paid for his or her personal income tax return for the period up to the date of death. If the estate earns any income during the probate, a separate estate income tax return is required, and taxes must be paid on the income. If the estate of the person who died is over the maximum exemption – currently $5,450,000 – a federal estate tax return is due, and any taxes due must be paid within nine months of the date of death unless an extension is filed.
The executor or administrator is responsible for collection all of the assets owned by the person who died and then obtaining appraisals for the assets date of death value. The executor or administrator is also responsible for the sale of assets, potentially overseeing a business, paying property taxes and making sure other debts are paid before the executor or administrator distributes the remaining assets as provided for in the decedent’s will or, if there is no will, following the rules of intestate succession.
When all of the duties of the executor are completed, another petition is filed with the court usually providing an accounting and then asking that the estate be distributed to the heirs. If this petition is granted, the estate administration is completed by distributing the assets to the heirs and filing final tax returns, closing out the estate account and finalizing all of the details of transfer.
How do I avoid probate?
Only assets in your individual name will go through probate. Many folks use a (fully funded) revocable living trusts to avoid probate. In addition, contract assets such life insurance, retirement accounts, and annuities as well as assets owned by joint tenants with right of survivorship avoid probate as well. If you can place a “payable on death” or “transfer of death” designation on an account, this too may avoid probate. However, using these techniques may or may not be the best solution for your family. It is best to seek advice from a professional for the benefits and risks of each technique.
Why should I avoid probate?
Most people want to avoid probate because it can include high fees and costs, significant time delays and stress, and everything that goes through probate is public information. Anyone can go on the Internet and see a listing of your assets, debts, beneficiaries, and who got what. If you’re like most people, you want to keep your family affairs and finances private. Another reason, you may want to avoid probate is because you lose control of the process. A judge you have never met or who doesn’t know you or your family will be ultimately be making decisions as to who is in charge of your assets and how your assets would be distributed.
What is a Conservatorship?
A Conservatorship refers to the court process necessary if you don’t have a disability plan in place. In some states it is referred to as a “guardianship” but in California, it is called a “conservatorship.” It can be an expensive, painful, arduous, and time consuming process for your loved ones that is easily avoided with powers of attorney and living trust planning. We’ve found that most folks also want to keep their family and financial affairs private with a disability plan instead of subjecting their family and revealing their assets to a public court proceeding.