Your Legal Companion for Probate

1. An Overview

• What Is Probate?
• What Is Involved in Settling an Estate?
• How Long Does It Take to Settle an Estate?
• What This Book Covers
• Simple Estate Checklist
• Important Terms in Probate
• Insolvent Estates
• Estate Taxes
• Do You Need an Attorney?

2. First Steps in Settling an Estate

• Who Should Act as the Estate Representative?
• Responsibilities of the Estate Representative
• Preliminary Duties of the Estate Representative
• Preliminary Collection of Assets

3. Who Are the Heirs and Beneficiaries?

• Where to Start
• Reading the Will
• Compare Schedule of Assets With Property Left in Will
• When Public Policy Affects the Distribution of Property
• If There Is No Will
• Right of Representation and Gifts to Descendants

4. What Is the Decedent's Estate?

• Real Property
• Personal Property
• What Establishes Ownership of Property?
• How Was the Decedent's Property Owned?
• How to Determine Whether Property Is Community or Separate
• Actions That Change the Character of Property
• Property That Is a Mixture of Community and Separate Property
• Examples of Property Ownership
• Property Acquired by Couples Before They Moved to California

5. Preparing a Schedule of the Assets and Debts

• Describe Each Asset
• Value Each Asset (Column A)
• How to Determine Ownership of Property (Columns B and C)
• List the Value of the Decedent's Interest (Column D)
• Determine Whether Property Is a Probate or Nonprobate Asset (Column E)
• List All Debts
• Checklist of Property to List on Schedule of Assets
• Schedule of Assets for a Sample Estate

6. How to Identify the Best Transfer Procedure

• Nonprobate Assets
• Assets That May Be Subject to Formal Probate
• Examples of How Assets Are Transferred in Typical Estates
• Sample Estates

7. What About Taxes?

• Decedent's Final Income Tax Returns
• Fiduciary Income Tax Returns
• Other Income Tax Returns
• Stepped-Up Tax Basis Rules for Inherited Property
• Federal Estate Tax Return
• California Inheritance Tax
• Tax Returns for Estates

8. Transferring Title to Real Property

• Ways to Transfer Real Estate After Death
• Basic Information on Recording Documents
• Change in Ownership Statements
• How to Record Your Document Transferring Title
• Mortgages
• Reverse Mortgages

9. How to Transfer Securities

• Documents Required to Transfer Securities
• The Stock or Bond Power
• The Affidavit of Domicile
• The Transmittal Letter
• How to Sell Securities

10. Joint Tenancy Property

• Where to Start
• How to Clear Title to Real Property in Joint Tenancy
• How to Clear Title to Securities Held in Joint Tenancy
• How to Clear Title to Motor Vehicles and Boats Registered with the DMV and Held in Joint Tenancy
• How to Clear Title to Joint Tenancy Bank Accounts (and POD Accounts)
• How to Clear Title to Money Market Funds and Mutual Funds
• How to Clear Title to U.S. Savings Bonds in Co-Ownership

11. Transferring Small Estates Under $150,000

• Overview of Transfer Procedures for Small Estates
• How to Determine Whether You Can Use Small Estate Procedures
• How to Transfer the Property

12. How to Transfer Trust Property

• Notifying Heirs and Beneficiaries
• Trust Property
• Handling Debts and Expenses
• How to Transfer Property Held in Living Trusts

13. An Overview of the Probate Court Process

• Do You Really Need a Probate Court Proceeding?
• Probate Checklist
• Dealing With the Probate Court
• Beginning the Probate Process
• Taking Care of the Estate During Probate
• Closing the Estate

14. Conducting a Simple Probate Proceeding

• Step 1: Prepare the Petition for Probate
• Step 2: Prepare the Certificate of Assignment
• Step 3: Prepare the Notice of Petition to Administer Estate
• Step 4: File Your Petition for Probate
• Step 5: Complete the Proof of Subscribing Witness Form
• Step 6: Complete a Proof of Holographic Instrument
• Step 7: Notify Government Agencies
• Step 8: Prepare Your Order for Probate
• Step 9: Obtain and Respond to the Probate Calendar Notes and Hearing
• Step 10: Prepare the Letters
• Step 11: Prepare a Duties and Liabilities of Personal Representative
• Step 12: Prepare the Application Appointing Probate Referee
• Step 13: Prepare Notice of Proposed Action, If Necessary
• Step 14: Prepare the Inventory and Appraisal Form
• Step 15: Notify Creditors and Deal With Creditors' Claims and Other Debts
• Step 16: Prepare the Petition for Final Distribution
• Step 17: Prepare Notice of Hearing (Probate)
• Step 18: Prepare Order for Final Distribution
• Step 19: Transfer the Assets and Obtain Court Receipts
• Step 20: Request Discharge From Your Duties

15. Handling Property That Passes Outright to the
Surviving Spouse or Domestic Partner

• An Overview of These Simplified Procedures
• Collecting Compensation Owed the Decedent
• Affidavit for Transferring Community Real Property
• Survivorship Community Property
• The Spousal or Domestic Partner Property Petition
• How to Transfer the Assets to the Surviving Spouse or Partner

16. If You Need Expert Help

• Deciding to Get Help
• What Kind of Expert Do You Need?
• Working With an Attorney

Appendixes 

A: California Probate Code §§ 13100–13106

• Affidavit Procedure for Collection or Transfer of Personal Property

B: Judicial Council Forms

• DE-111 Petition for Probate
• DE-120 Notice of Hearing
• DE-121 Notice of Petition to Administer Estate
• DE-121(MA) Attachment to Notice of Petition to Administer Estate
• DE-131 Proof of Subscribing Witness
• DE-135 Proof of Holographic Instrument
• DE-140 Order for Probate
• DE-142 Waiver of Bond by Heir or Beneficiary
• DE-147 Duties and Liabilities of Personal Representative
• DE-147S Confidential Supplement to Duties and Liabilities of Personal Representative
• DE-150 Letters
• DE-157 Notice of Administration to Creditors
• DE-160 Inventory and Appraisal
• DE-161 Inventory and Appraisal Attachment
• DE-165 Notice of Proposed Action
• DE-172 Creditor’s Claim
• DE-174 Allowance or Rejection of Creditor’s Claim
• DE-221 Spousal or Domestic Partner Property Petition
• DE-226 Spousal or Domestic Partner Property Order
• DE-270 Ex Parte Petition for Authority to Sell Securities and Order
• DE-295 Ex Parte Petition for Final Discharge and Order
• DE-305 Affidavit re Real Property of Small Value ($55,425 or Less)
• DE-310 Petition to Determine Succession to Real Property (Estates of $166,250 or Less)
• DE-315 Order Determining Succession to Real Property (Estates of $166,250 or Less)

C: Non–Judicial Council Forms

• Who Inherits Under the Will?
• Schedule of Assets
• Notification by Trustee
• Affidavit—Death of Transferor (TOD Deed)
• Affidavit—Death of Joint Tenant
• Affidavit for Collection of Personal Property Under California Probate Code §§ 13100–13106
• Affidavit—Death of Trustee
• Declaration for Collection of Compensation Owed to Deceased Spouse or Domestic Partner
• Affidavit—Death of Spouse or Domestic Partner—Survivorship Community Property

Index

Chapter 1: An Overview

What Is Probate?

To many people, the term “probate” refers only to a long, drawn out, and costly legal formality that takes place after a person dies. Technically, probate means “proving the will” through a probate court proceeding. In the past, virtually every estate had to be reviewed by a judge before property could pass to those who would inherit it. Today, however, some ways to transfer property after death don’t require formal court proceedings. And the term “probate” now generally describes the entire process of settling the legal and financial affairs of someone who has died.

For example, a surviving spouse or domestic partner may receive property outright without any court proceeding at all. Joint tenancy property also escapes the need for formal probate, as does property left in a trust and property in a pay on death bank account. If an estate meets the standard for a small estate, currently defined as consisting of property worth less than $166,250, it, too, can be transferred outside of formal probate. Fortunately, the paperwork necessary to actually transfer property to its new owners in the foregoing situations is generally neither time-consuming nor complicated. We discuss all of these procedures, as well as how to do a formal probate court proceeding.

The person who settles an estate usually doesn’t have much choice as to which property transfer method to use. That is, whether you are required to use a formal probate or a simpler method to transfer property at death depends on how much (or little) planning the decedent (deceased person) did before death to avoid probate and how the decedent held title to the assets. This is discussed in detail as we go along.

Both formal probate and some of the other nonprobate procedures involve filing papers at a court clerk’s office, usually in the county where the decedent resided at the time of death. Most probate matters don’t actually require that you appear in court before a judge during the process. In fact, settling an estate through papers submitted to the court by mail or electronic filing is now the norm.

What Is Involved in Settling an  Estate?

Generally, settling an estate is a continuing process that:

• determines what property is owned by the decedent
• pays the decedent’s debts and taxes, if any, and
• distributes all remaining property to the appropriate beneficiaries.

When a person dies, she may own several categories of assets. Among these might be household belongings, bank accounts, vehicles, mutual funds, stocks, business interests, and insurance policies, as well as real property. All property owned by the decedent at the time of his or her death, no matter the kind or the value, is called his or her “estate.”

To get this property out of the name of the decedent and into the names of the people who inherit it requires a legal bridge. There are several types of legal procedures or bridges to move different kinds of property to the new owners. Some of these are the equivalent of large suspension bridges to carry a lot of property while others are of much less use and might be more analogous to a footbridge. Lawyers often call this process “administering an estate.” In this book, we refer to these procedures collectively as “settling an estate.”

The estate settlement bridges may lead the property to the beneficiaries named in the deceased person’s will. Or, where there is no will, state law determines the heirs, usually close relatives. And, of course, the rights of creditors are considered in the process. No matter how property is held when a person dies, it must cross an estate settlement bridge before those entitled to inherit may legally take possession. The formal court probate process is but one of these bridges. Some of the other bridges involve community property transfers, clearing title to joint tenancy property, transfer to a beneficiary designated by contract, winding up living trusts, and settling very small estates that are exempt from probate.

How Long Does It Take to Settle an Estate?

If a formal probate court procedure is required, it usually takes nine to 12 months to complete all the necessary steps. More complicated estates can take longer. On the other hand, if the decedent planned his or her estate to avoid probate, or the estate is small, or everything goes to a surviving spouse or domestic partner, then the estate may be settled in a matter of weeks by using some easier nonprobate procedures. See the checklist for formal probate in Chapter 13 for details about the typical length of a formal probate administration.

CAUTION
The procedures in this book are only for California estates. Real property and personal property (see Chapter 4 for definitions) located outside of California are not part of a California estate and cannot be transferred following the instructions in this book. To transfer property located outside of ­California, you will either have to familiarize yourself with that state’s rules (these will be similar, but by no means identical to those in effect in California) or hire a lawyer in the state where the property is located.

What This Book Covers

Not all estates can be settled entirely by using a self-help manual. Although many California estates can be settled with the procedures described in the following chapters, some estates will require at least some formal legal assistance. Therefore, it’s important to know if the estate you are dealing with has complexities beyond the scope of this book.

First, an estate that can be settled using this book (a “simple estate,” for lack of a better term) is one that consists of the common types of assets, such as houses, land, a mobile home, bank accounts, household goods, automobiles, collectibles, stocks, money market funds, promissory notes, etc. More complicated assets may be more complicated to administer after death. This can include complex investments, business or partnership interests, out-of-state property, or royalties from copyrights or patents. For these assets, it may not be as easy to determine the extent of the decedent’s interest in the property, relevant tax or accounting issues, or how to transfer that interest to the new owner. However, a simple estate may include unusual assets if the person settling the estate has experience in such matters or has help from an accountant or attorney along the way. When questions arise as to ownership of an asset, or when third parties make claims against the estate (as would be the case if someone threatened to sue over a disputed claim), you have a complicated situation that will require help beyond this book.

Second, for an estate to be “simple” there should be no disagreements among the beneficiaries, especially as to the distribution of the property. Certainly, dividing up a decedent’s property can sometimes bring out the worst in human nature. If you face a situation with angry family members or threats of lawsuits, it is not a simple estate. To settle an estate without unnecessary delays or complications, you need the cooperation of everyone involved. If you don’t have it (for example, a disappointed beneficiary or family member plans to contest the will or otherwise engage in obstructionist behavior), you will need professional help. (See Chapter 16.)

Third, and contrary to what you might think, a simple estate does not have to be small. Larger estates tend to have more complexities, may require more elaborate management of assets, and may have more at stake for potential disputes. Even so, in some circumstances even a larger estate can be simple to administer. An additional concern with a large estate is federal estate taxes, which affect estates valued over approximately $11.7 million (in 2021). Estate income tax returns may also be required. You can hire an accountant familiar with estate taxes to give advice on tax issues and prepare the necessary tax returns. We provide an overview of estate taxation in Chapter 7.

Even if you plan to get legal assistance to administer the estate—either because the estate is not simple or because you prefer to have an experienced person guiding the process—you may find this book helpful. Understanding the process will help you serve as the personal representative with confidence. Also, if you are a beneficiary, you may want to learn about the process so that you can have realistic expectations about what must be done before you get your inheritance.

TIP
This book does not cover the details of trust administration. Many people in California create a living trust to avoid a court probate procedure at their death. If the decedent set up a trust, the person named in the trust as trustee will need to follow the terms of the trust to distribute the assets of the trust. Administering a trust has its own legal requirements, which are not discussed in detail in this book.

Simple Estate Checklist

The checklist below shows basic parts in settling a simple estate in California. Each part is explained later in the book.

This list may appear a bit intimidating at first. Not every situation requires all of these parts. And some are quite straightforward. As with so many other things in life, probating a simple estate involves putting one foot in front of the other. If you understand the big picture, take it step-by-step, pay close attention to the instructions, and get professional assistance when needed, you can have a smooth and successful administration.

Important Terms in Probate

As you read through this material, you will be ­introduced to a number of technical words and phrases used by lawyers and court personnel. We define these as we go along, with occasional ­reminders. If you become momentarily confused, refer to the glossary, which follows Chapter 16.

The Gross Estate and the Net Estate

You will encounter the terms “gross estate” and “net estate” while settling an estate. The decedent’s gross estate is generally the fair market value at date of death of all property that he owned or controlled. It includes everything in which the decedent had any financial interest—houses, insurance, personal effects, automobiles, bank accounts, stocks, land, businesses, and so on. It includes only the decedent’s portion of the asset. How the decedent owned the property (for example, in a living trust, in joint tenancy, or as community property) may determine the decedent’s portion for the purposes of the gross estate. The net estate, on the other hand, is the value of what is left after subtracting from the gross estate the total amount of any mortgages, liens, or other debts owed by the decedent at the time of death.

EXAMPLE 1: Suppose Harry died, leaving a home, a car, stocks, and some cash in the bank. To arrive at his gross estate, you would add the value of all his property without looking to see if Harry owed any money on any of it. Let’s assume that Harry’s gross estate was $500,000. Now, assume he had a mortgage of $150,000 against the house. This means his net estate (the value of all of his property less what he owed on it) would be worth $350,000.

EXAMPLE 2: If Diego and Louisa, husband and wife, together own as community property a house, car, and savings account having a total gross value of $800,000, and owe $100,000 in debts, the net value of their community property would be $700,000. However, if Louisa died, only one-half of their property would be included in her estate because under California community property rules, discussed in detail in Chapter 4, the other half is Diego’s. Thus, Louisa’s gross estate would be $400,000 and her net estate $350,000.

The Probate Estate

The “probate estate,” quite simply, is all of the decedent’s property that must go through probate. This is very likely to be less than the total amount of property the decedent owned, because if an asset already has a named beneficiary, or if title is held in a way that avoids probate, then it isn’t part of the probate estate. To return to the bridge analogy discussed earlier, this means that property held in one of these ways can be transferred to the proper beneficiary using one of the alternate (nonprobate) bridges.

As a general rule, the following types of property need not be included in a probate administration:

• joint tenancy property
• life insurance with a named beneficiary other than the decedent’s estate
• pension plan distributions
• property in trusts
• money in a bank account that has a named beneficiary who is to be paid on death
• individual retirement accounts (IRAs) or other retirement plans or annuities that have named beneficiaries
• community property or separate property that passes outright to a surviving spouse or domestic partner (this sometimes requires an abbreviated court ­procedure), and
• real estate held by a transfer on death (TOD) deed.

Put another way, the probate estate (property that must cross the formal probate bridge) consists of all property except the property that falls into the above categories. Where there has been predeath planning to avoid probate, little or no property may have to be transferred over the probate court bridge. 

The Taxable Estate

Although this book is primarily about settling an estate, we include some mention of taxes because estates over a certain value are required to file a federal estate tax return. Therefore, you should know how to compute the value of the decedent’s estate for tax purposes, which—not surprisingly—is called the “taxable ­estate.” Keep in mind that the property that must go through probate (probate estate) is not necessarily the same as the taxable estate. Not all assets are subject to probate, but they are all counted when determining whether estate taxes must be paid. In other words, the taxable estate includes all assets in the decedent’s control just prior to death. The taxable estate may include assets subject to formal probate, plus joint tenancy property, life insurance proceeds (if the decedent was the owner of the policy), death benefits, property in a living trust, and property in any other probate-avoidance device. However, if any of the assets are ­community property (discussed in Chapter 4), only the decedent’s one-half interest is included in his or her taxable estate.

If the estate is large enough to require a federal estate tax return, any tax is computed on the net value of the decedent’s property (net estate). That is, the tax is determined by the value of all property, less any debts owed by the decedent and certain other allowable deductions.

Debts and Insolvent Estates

Probate administration provides a systematic way to determine debts and the order in which to pay them. Creditors are divided into classes according to their respective priorities. (Prob. Code § 11420.) First priority is given to debts owed to the United States or to the State of California, such as various taxes. Next in priority come the required expenses to administer the probate estate (personal representative and attorneys’ fees, court costs, etc.) and, after that, mortgages or other secured loans. Then funeral expenses, last illness expenses, judgment claims, and general creditors have priority, in that order. When there may not be enough money in the estate to satisfy all debts, each class is paid in full before going to the next class. For this reason, it is important to follow the correct timing for paying debts and expenses. For example, a personal representative may pay funeral expenses as soon as funds are available, but only after holding aside enough money to pay the expenses of administration.

If using small estate procedures (Chapter 11), the successors are responsible for paying the decedent’s unsecured debts out of the property they receive.

An “insolvent estate” is one that does not have enough assets to pay creditors in full. Insolvent estates are subject to special rules. If the estate cannot pay a class in full, the payments are prorated.

EXAMPLE: In the class of general debts, if Creditor One is owed $5,000 and Creditor Two is owed $10,000 and only $1,000 is left, Creditor One gets one-third of the $1,000 and Creditor Two gets two-thirds.

You must present an accounting for insolvent estates in a formal probate court proceeding. Consult an attorney if the estate is insolvent or has a complicated debt situation.

Estate Taxes

Most estates will not owe estate taxes. A person who dies in 2021 may own assets worth up to approximately $11.7 million without owing any federal estate taxes. This exclusion amount will rise with inflation. Estates having a gross value over the exclusion amount must file a federal estate tax return. The tax is computed on the net estate after certain allowable deductions have been taken.

If the net estate is under the exclusion amount, a return must still be filed if the estate has a gross value over the exclusion amount, although no tax may be owed. For example, if someone who dies in 2020 has a gross estate of $12 million and debts of $500,000, a federal estate tax return must be filed, even if the debts reduce the net value of the estate to less than the exclusion amount. Also, if the decedent was married, you may choose to file a federal estate tax return for an estate less than this amount to claim “portability” of the decedent’s unused exclusion amount for the surviving spouse’s estate. We discuss federal estate tax in more detail in Chapter 7.

California does not impose its own inheritance tax or estate tax. If the decedent owned property in other states, or if the recipients of property reside in other states, state estate or inheritance taxes may apply.

CAUTION
Pay taxes first. Although most estates don’t have to worry about federal estate taxes, if yours is a large estate that will owe federal estate taxes, those taxes should be paid before transferring property to the people who inherit it. Many wills set aside money for the payment of taxes.

Federal and state income tax returns for the dece­dent’s last year and sometimes for the estate (if there is a formal probate) must also be filed. (See Chapter 7.)

Do You Need an Attorney?

Being the estate representative, in itself, is an important job that can provide satisfaction of handling the decedent’s estate with care. You will have responsibility for assembling assets, paying bills, managing the assets of the estate, and ultimately making distributions. The law does not require you to hire an attorney to assist you to settle an estate.

All of that said, probate is a legal process with unique rules. Hiring a lawyer who has the training and experience to maneuver through the relevant laws and procedures can make the process more smooth. Having a professional as a guide can allow you to focus on your own responsibilities with less stress.

If the estate is simple, if you have the time and desire to devote to learning the required procedures and following through, and particularly if you are the only beneficiary, you might choose to proceed without a lawyer. This book provides guidance and information on the process to help you recognize situations that may require legal assistance.

Complications that require special knowledge or handling may crop up even in an otherwise simple estate. Some examples are:

• claims against the estate by people who were left out or think they were given too little
• insolvent estates (more debts than assets)
• assets that require special handling, such as properties that will be sold, multiple owners, or business interests
• the decedent’s unfinished contracts. (For example, a sale of real property begun but not completed prior to death)
• ambiguities in the will. (For example: “I give $50,000 to the poor children in the County Hospital.” This would raise several problems. Does “poor” mean low income or just unfortunate enough to be in the hospital? And what did the decedent intend when it came to dividing the money? Is it to be divided among all the children in the hospital, or did the decedent intend to set up a central fund to be used to make life a little easier for all kids in the hospital?)
• substantial property given to a minor, unless legal provisions to handle this are made in the will, or
• contested claims about what property is in the estate (for example, a surviving spouse or domestic partner who claims a community property interest in property left by will to someone else).

In a probate court proceeding, standard attorneys’ fees have been set by law and are based on a percentage of the gross estate (the gross value of the assets that are subjected to probate). These statutory fees set the maximum the attorney may charge. You may be able to negotiate for a lower fee. However, for a particularly complicated estate needing out-of-the ordinary legal services, the lawyer can seek court approval for additional compensation.

The formula for computing ordinary attorneys’ fees in a formal probate court proceeding is found in California’s Probate Code Section 10810. The fee is calculated as follows:

• 4% of the first $100,000 of the gross value of the probate estate
• 3% of the next $100,000
• 2% of the next $800,000
• 1% of the next $9,000,000
• 0.5% of the next $15,000,000, and
• a “reasonable amount” (determined by the court) for everything above $25,000,000.

For example, in a probate estate with a gross value of $150,000, the fee set by statute is $5,500; in an estate with a gross value of $200,000, the attorney fee is $7,000; in an estate with a gross value of $500,000, the attorney fee is $13,000; and so on. Some circumstances may allow you to negotiate a lower fee with an attorney. For example, if a probate estate contains only one piece of real property, perhaps a home worth $1,000,000, the statutory attorney fee would be $23,000, even if the home might have a substantial mortgage that reduces the decedent’s equity to only $150,000. An attorney may be willing to accept a lesser fee, particularly if the estate has no complicating factors.

Attorneys’ fees in a formal court proceeding are paid out of the estate after being approved by the court, usually towards the end of the probate process. Chapter 16 provides information about working with an attorney.

If an estate doesn’t require formal probate because it can be settled in another way, such as a community property transfer to a surviving spouse or domestic partner, or a joint tenancy termination, a statutory fee does not apply. In these situations, an attorney will bill for his or her time at an hourly rate, which commonly varies from $250 to $450 an hour.

EXAMPLE: Returning to Harry’s estate for a moment (discussed above), let’s assume that Harry’s will left all of his property to his daughter, Millicent, and son, Michael, and one or both of them serve as executor. If they hire a lawyer to represent and guide them as executor, the attorney’s fee would be up to $13,000, computed on a gross estate of $500,000. If they, instead, proceed as executor without an attorney and also waived the executor’s fee, the job could be accomplished for the cost of administration expenses only, which would amount to about $2,500 (including filing, publication, certification, and appraisal fees).

When a friend or loved one dies, the natural grief process can make administrative tasks particularly challenging. Participating in the process of settling an estate, however, sometimes becomes a tangible way to approach the grief. Whether or not you choose to get legal assistance from the start, learning about the process, organizing relevant information, and proceeding in a responsible, diligent way can honor the deceased and care for beneficiaries or heirs. This book can help with that process.

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