California Estate Planning Practice Blog

California Courts Are Severely Impacted

Yesterday I attended a presentation by the Trusts and Estates section of the Orange County Bar Association. As customary for beginning of the year presentations, it was an overview of the new rules, laws and other items of note to begin the new year.

One of the presenters was the presiding judge that oversees the entire Orange County court system. His presentation was very dire and alarming about the state of the courts in California.

The sad thing is that most parties are in probate court because people fail to plan.

That's typically why probate gets opened. That's typically why conservatorships are sought. That's also why people seek guardianship of the estate to manage funds for minor children.

Many of these court proceedings could be avoided if people plan properly. First you have to plan properly.

Second to ensure that your proper planning will work, it is often advised to plan early! Most of the challenges to an otherwise proper plan is that the planning was done so close to when someone dies or becomes incapacitated that the objecting person thinks that you were under the undue influence or coercion of another especially where the plan confers an undue benefit to another person. Planning early while you are in good health can go a long way.

The presenter noted that the courts are under severe delays in setting matters to be heard, in processing orders and otherwise giving the parties speedy justice for the relief they seek. This may sound like hyperbole, but as an attorney that routinely practices before the probate courts, the delays are causing frustration to clients and families alike. When people pass away or become incapacitated -- the emotional turmoil during these times is already through the roof -- add in having to seek court orders, it becomes a very trying time in people's lives. If you care enough about what's best for you and your loved ones, get the proper plan in place.  At least for most people, with proper planning in place, making decisions concerning your affairs while you are alive (but not well) or have passed becomes more routine and can be conducted without seeking court orders.

California Probate Is A Mess.

For most individuals, opening probate in California is not a delightful or even pleasant experience. It's time consuming. It's confusing. And it's very expensive on the back end for statutory fees.

Many other states, however, have more streamlined probate procedures. Meaning probate is easier, less time consuming and less costly. Yay.

Also, other states offer beneficiary deeds for real property. A beneficiary deed allows you to slap on a payable on death beneficiary for your real estate holdings.

California does not have neither a streamlined probate process for real estate valued more than $20,000 (which is nearly any home in this state) nor beneficiary deeds. This is why in California it is very important to have your real estate holdings placed into a Living Trust if you wish to avoid probate.

For many, the goal of estate planning is probate avoidance. This makes it easy for your loved ones. It also tells them who should get what. Nice.

For Most, The Name Of The Game Is Probate Avoidance.

One of the goals for estate planning for most people is to avoid probate. Probate is the court involved process to transfer title of a loved one who has died to his or her beneficiaries or heirs. Probate is costly and time consuming. It can costs thousands of dollars and take many months.

There are a few ways to avoid probate.

The first way is to ensure that all of your contract based accounts like bank accounts, life insurance policies, retirement accounts have beneficiaries named. Call your financial institutions and ask if you have beneficiaries for your accounts. Review the beneficiaries and update them if needed. Upon your death, the financial institutions will transfer the assets directly to your beneficiaries so long as your beneficiaries follow their processing requirements.

The second way is to ensure that all of your assets that do not have a beneficiary named are in a trust. A trust is a legal fiction created for the private management of your assets in accordance to your wishes. Most people just need a Living Trust. If the Living Trust is properly created and funded, it will avoid probate as the successor trustee is able to privately manage your assets in the event of your passing.

The third way involves any assets in the aggregate worth less than $100,000 excluding real estate. Let's say you have beneficiaries named for most of your bank accounts and life insurance policy. Let's also say you have a Living Trust for your home. Then let's say that you forgot about that credit union savings account with your former employer that has $4,000 in it. Since all of your other assets are avoiding probate and what's left is less than $100,000, you can avail yourself to California's small estate affidavit procedure. This is a non-court procedure that allows you to request the financial institution to transfer the asset by providing a certified copy of the death certificate along with an affidavit following the requirements of California Probate Code Section 13100 (and et. seq.).

The small estate affidavit procedure is easier than it appears at first glance. Most probate and estate planning attorneys can help you with the requirements, write the letter for you and help you open a bank account with the funds as the check may be payable to the "estate of" instead of you directly as a beneficiary.

If you are not sure about what to do, seek counsel with a few probate attorneys in your area. Many offer a initial consultation at no charge.

If You Waited 10 Years, What's Another 60 Days?

Probate is a lengthy process. It's not all that cut and dried to gather all the information necessary to open an estate with the court. Sometimes there's paperwork to find, information to collect and court hurdles to clear before Letters Testamentary or Letters of Administration are issued by the court.

Letters Testamentary or Letters of Administration are essentially the court's way of letting everyone know that the estate has been opened and a personal representative has been appointed to manage the estate.

Once Letters have been issued, the personal representative may be in a position to sell real estate or manage other affairs on behalf of the estate.

It takes about 60 days on average to get the court to issued these Letters. Sometimes the court is busy, sometimes there is an issue that needs to be cleared or something else comes up that can delay this initial process.

There is a procedure for obtaining emergency Letters (to use a simplified term). But there truly needs to be an emergency or a good reason to petition the court to bypass the normal procedure.

Just because you are in a hurry to sell a house is a not a good enough reason especially when you've waited 10 years to even open probate following the death of your sibling. The court's response is going to be what's another 60 days when you've waited 10 years to deal with this?

What Is Probate?

Probate is the process by which legal title of property is transferred from the Decedent’s estate to his or her beneficiaries.

 If a person dies with a will, which is called testate, the probate court determines if the will is valid, hears any objections to the will, orders that creditors be notified and paid and supervises the process to assure that property remaining is distributed in accordance with the terms and conditions of the will. If the will nominates an executor, the court will appoint that person to act as executor of the estate barring any objections.

 If a person dies without a will, which is called intestate, the probate court appoints a person called an administrator to receive all claims against the estate, pay creditors and then distribute all remaining property in accordance with the laws of the state.

 The major difference between dying testate and dying intestate is that an intestate estate is distributed to beneficiaries in accordance with the distribution plan established by state law; a testate estate (after payment of debts, taxes and costs of administration) is distributed in accordance with the instructions provided by the decedent in his or her will.

In California, the typical cost to probate an estate based on the following formula determined by the value of the gross estate.  Both compensation for serving as personal representative and attorney’s compensation for serving as probate counsel will be set by the court toward the end of the administration of the estate. The California Probate Code sets forth a statutory compensation schedule for the computation of compensation payable to estate representatives and to attorneys in connection with “ordinary services” rendered during estate administration. That compensation schedule, based on the size of the estate probated, is as follows:

4%  on the first  $100,000
3%  on the next  $100,000
2%  on the next  $800,000
1%  on the next  $9,000,000
1/2%  on the next  $15,000,000
“reasonable” compensation on the excess over $25,000,000

 Additionally, probate can tie up the property and other estate assets for months and sometimes even more than a year.

If You Own Real Estate, Your Will Must Go Through Probate.

If you own real estate in California and think that having a Will will avoid probating your estate when you pass away, you are likely to be mistaken and misinformed.

Generally, if you (as an unmarried person) own your home or rental property in your name alone (not held in joint tenancy with anyone) or as tenants in common with others, your interest in the home or rental property will go through probate.

A Will or no Will -- Probate Still Happens.

Unless you have less than $100,000 in assets requiring probate you can use a Small Estate Affidavit procedure thereby avoiding probate. See California Probate Code Section 13100 et. seq.  This does not work for real property in most instances.

I bring this up because a potential client told me yesterday that his bankruptcy attorney told him that if he had a Will his house would go to his parents without probate. I am not kidding! When in doubt, do your homework on the internet or ask an estate planning attorney. I answer questions about estate planning all day long without charging anyone. A quick email or a quick mention in person will always elicit an answer from me.

Of course, there may be a exception. An exception could be owning property in joint tenancy with right of survivorship or being married. Seek the advice of an estate planning attorney if probate avoidance is your goal.

Own Property Out of State? If So, Probate Becomes a Mess.

Many folks own property out of state. It could be a second home, a vacation home, a timeshare or just a piece of land. If you have not placed your out of state property into your Living Trust, then probate will have to be opened in the state where the property was located.

If you are a California resident when you pass away and own property in Las Vegas. Probate may or may not have to be opened in California, but it will certainly have to be opened in Nevada.

Probate is a process of changing title to the proper heirs upon the death of an individual who dies with or without a Will.

So, think of it this way: the basic probate rule is that a court in one state cannot affect title to real property in another state. Thus, if the decedent owned a piece of real estate in another state in which they lived in, then some sort of probate proceeding is likely necessary in the state the real property is located in.

Each state also has different rules regarding probate.

The easiest way to avoid this? Set up a Living Trust in the state you live in and transfer title to all of your property into your Living Trust. You knew I was going to say that, I hope.

Don't-do-it-yourself Probate...

On March 18, I linked to a blog that talked about handling probate matters yourself.

Over the past month, I have been working with a client who was handling a probate matter on his own. Papers had been filed, a court appearance was made and things turned into a mess.

I almost hate to say it, but California probate is not easy.

The first order of business is completing the Petition for Probate form. On this form, you must indicate to the court who the decedent's heirs are. First, you indicate if there is a surviving spouse. If no spouse, then are there surviving children? If no children, then are parents of the decedent still alive? And so on it goes... it's hard to know how to answer the boxes if you don't know which facts about the decedent are important.

Yes, it is important that the decedent had no spouse, no kids, no surviving parents, but had a half-sister who died and left children. I do not want to offer any more detail to protect my client's privacy.

But if you decide to go at it "in pro per" ... be sure to consult with an attorney first to get the lay of the land. Either that or crack open the Probate Code book.

How to Avoid Probate When You Own Your Home...

If you own a home, you may be wondering how to avoid probate.

Probate is a court procedure to determine who your heirs are at the time you pass away and transfer title of your assets to these heirs. It takes usually a year, if not more to probate your assets.

If you have a Will, your estate will still get probated.  This is because a Will must be "proved." Proving a Will in plain English means to verify that it was indeed your last Will and that you had capacity when it was prepared.  Suffice to say, the laws indicate that forgery of Wills is more commonplace than we think.

There are two major ways to prevent probate of your home:

1. Holding title of your home in your Living Trust, or
2. Holding title of your home in Joint Tenancy with Right of Survivorship with your heir

If you own your home in Joint Tenancy, then you are giving up control of your home. The person who is on title with you actually owns your home with you. You will need that person's consent to sell or refinance your home. And when you sell, the person is entitled to half of the proceeds of the sale. Further, the person can force you to sell your home through a court process called a partition lawsuit. And, moreover, your home may be subject to this person's creditors.

Sound scary?

I agree.

A Living Trust is a terrific way to maintain control of your home and still decide who should get your home when you pass away.  See your attorney for more information about Living Trusts.

Do-it-yourself Probate?

Joel Schoenmeyer, Esq., who practices in the Chicago-area, has started a thought-provoking thread about handling probate cases on your own. In other words, handling probate in pro per and should you attempt to handle a probate matter without attorney representation?

When I found myself probating my father's estate in my last year of law school, I hired an attorney to navigate the courts for me. Certainly I was in a better position to handle his estate in pro per, but for emotional reasons it would have been too much. It also would not have been fair to my brother as well. The role of attorney has its place in probate and it is a good one.