By Steve For several years, we have been guiding our clients in creating Revocable Living Trusts to avoid Probate and minimize estate taxes. But over the past several months, we’ve had increasing demand to provide Probate services in real estate transactions. In this Blog, I’ll help you understand the Probate process and let you know when you need it and when you don’t.
What is “Probate”?
Probate is the legal process through which a Court determines who should manage a deceased person’s estate and who is entitled to receive the estate assets. If, before dying, the person made a Will, then that document would instruct the Court on who should manage and who should get the assets. If no Will exists, then California law will determine these matters.
When is Probate required?
Anytime a person dies leaving gross assets of $150,000 or more (that means asset value without discounting for debt) a Probate procedure is required. If the estate is $150,000 or less and is needed to confirm who owns real estate, then a simplified process is available. But if the estate is greater than $150,000, then a formal Probate proceding is required which includes notifying and paying all creditors (including the State) as well as all possible heirs. Needless to say, this latter process is expensive and time-consuming and generally cannot be done without the assistance of a Probate attorney.
Why is this increasing now?
Over the past decade or more, people began to use Living Trusts as a way to avoid the high costs and time delays of Probate. I’ll discuss this more below. When the economy began crashing in 2006, many people saw their assets disappear and with it estate planning became less important. For a person who died with over-encumbered property, there was no reason to spend the money Probating when there was no estate to distribute. Many chose to simply let the real estate go in foreclosure. However, as our economy has gradually improved, those who held on are now finding that there is value in the estates and Probate is being used to enable the legal heirs to sell or possibly modify or refinance the real estate.
What is the formal Process?
Formal Probate (estates over $150,000 in gross value) has basically three parts:
– this involves some interested party – typically a spouse or other family member – asking the Court to appoint them as the legal manager of the decedent’s estate. …read more