What is Probate Anyway?
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What is Probate Anyway?

What is Probate Anyway?

The name itself conjures up images of decrepit judges wearing white wigs and stockings while presiding over dark, dank and dreary courtrooms. While probate is one of our oldest traditions in American law, it certainly isn’t the worst (I give the award to the rule of perpetuities).

Probate is mandatory if an individual dies without a will. But did you know that probate is also mandatory when a person dies with a will in most cases? That’s right. Let’s assume that Jane, a single California resident, dies with a gross estate worth $650,000. Of that gross estate, her house is worth $400,000, stock $100,000, and her life insurance naming her only child as the beneficiary pays $150,000. Jane has a will, which designates that all of her property goes to her only daughter, but she does not have a trust.

So is probate necessary? You bet. Jane has a gross estate of $500,000, which is subject to probate. Jane’s life insurance policy would not be subject to probate since the money passes by contractual beneficiary designation.

Jane’s executor, most likely her daughter, must retain an attorney who would be required to file a petition in probate court. The attorney would have to do the following: a) within thirty (30) days of Jane’s death, file a Petition for Probate and lodge the will and any codicils with the clerk of the court; b) within three months, send Notice of Administration to Creditors; c) within four months, file an inventory and appraisal; d) within one year, file a status report with the court; e) within nine months after date of death, file estate tax returns, if required; and f) file fiduciary income tax returns annually.

Sound complicated and long? The process usually takes a year. It gets worse and takes longer if Jane has multiple beneficiaries and there are challenges to the proceedings by disgruntled beneficiaries.

Sound expensive? Attorney’s fees alone (not to mention court costs), imposed by law, will cost Jane’s daughter $13,000 at a minimum. Alternatives? Form a Living Trust. Property that is in a Trust is not subject to probate. Always the safer way!