Probate is the process completed when a decedent leaves assets to distribute, such as bank accounts, real estate, and financial investments. It’s the general administration of a deceased person’s will or the estate of a deceased person without a will.
The probate process includes the collection of the decedent’s assets, payment of claims, appraisal of assets, filing of tax returns, and the distribution of the remaining assets to the estate’s beneficiaries.
Not All Assets Pass Through Probate
Only assets held in the decedent’s individual name with no named beneficiary pass through probate.
Here are a few examples of assets that are not subject to probate:
Pay on death bank and brokerage accounts
Jointly held real estate
Joint bank accounts
Life insurance and retirement accounts with named beneficiaries
Assets held in a trust
The Advantages of Probate
During probate, the period for creditors to file claims is only four months from the date the executor is appointed. In the absence of a probate, the period is generally one year from the date of death. The shortened claim period can be beneficial when the decedent left behind unknown debts.
The Disadvantages of Probate
Probate is an expensive and lengthy process. In California, the typical probate takes around a year, but can last far longer in contested or mishandled cases. While the court filing fees aren’t too expensive, the fees paid to the personal representative and probate attorney are significant. While fees can vary, they generally average around 2-3% of the estate value.
Additionally while most trust administration matters remain private, probate is a public process. All of the court filings can be reviewed online or in person by the public.
Probate is Not Required in Cases of a Small Estate
The current threshold in California for a small estate is $184,500 (as of 2023). If all the assets that would pass through probate do not exceed this value, the assets can be collected by presenting an affidavit to the bank or other entity holding the property.
Setting Up a Trust as an Alternative to Probate
The majority of clients will set up a revocable trust as an alternative to probate when planning their estates. With a living trust, upon death, the assets will pass to the trust beneficiaries after the administration process is completed by the trustee.
While trust administration is not free, the costs are generally much lower than in a formal probate.