Probate and Its Alternatives
By Sarah L. Ream

Maybe they learned it in law school, from conversations with colleagues, or from personal experience. But, regardless of where they learned, most attorneys have at least a casual familiarity with the terms associated with probate proceedings: executor, administrator, decedent, beneficiary, heir, etc. However, attorneys who do not practice in the probate area may lack an understanding of the basic probate procedures and the alternatives to probate that are often available. Knowledge of these basics is helpful to the non-probate practitioner who may receive questions from clients, friends, or relatives regarding the probate process following a death in the client's family.

The Where, What and How of Probate
Technically, a "probate court" does not exist. Rather, probate matters fall within the jurisdiction of the Superior Court. In Sacramento, Department 122, located at the William R. Ridgeway Family Relations Courthouse on Power Inn Road, hears all probate matters, including administrations of wills and estates, oversight of trust matters, conservatorships, and guardianships.

When a California domiciliary dies leaving property located in this state, a probate proceeding may be necessary if the decedent's property is subject to probate administration. It is easier to define property subject to probate by specifying what is not subject to probate. Among assets not subject to probate are property held in joint tenancy, property held in an inter vivos/living trust, life insurance proceeds (unless the beneficiary is the estate or the representative), and a surviving spouse's one-half of the community property. If the decedent left property that does not fall within an exception to the requirements of probate, a probate proceeding is likely required unless a statutory exception exists (see below).

If the decedent was testate, the first step is to locate the last will and lodge the original with the court. Next, the petitioner who will file the petition for probate must be determined. If there is a will, it will almost inevitably name an executor who will act as the petitioner, assuming the person named is able and willing to act. If no will exists, then an administrator must be determined and appointed. Probate Code sections 8402 and 8460 through 8469 set forth the priority and requirements of persons entitled to serve as administrator. First in line to act are surviving spouses/domestic partners, followed by the decedent's children, grandchildren, other issue, and other relatives. After determining who the executor or administrator will be, the probate procedures are largely the same, whether the decedent died testate or intestate.

A petition for probate must be filed in the county where the decedent lived. (Probate Code ß7051.) If the decedent was not a California domiciliary, the proper venue for the petition will depend on where the decedent died and where he/she left assets. (Probate Code ß 7052.) After filing the petition, notice of the petition must be published in a newspaper of general circulation in the city where decedent lived when he/she died or in the county where the decedent left property. At least 15 days before the hearing on the petition, notice must be personally served or mailed to each known or reasonably ascertainable heir and each devisee, executor, or alternate executor named in any will offered for probate (even if a later instrument also offered for probate purportedly revoked the devise). The petition itself does not have to be mailed with the notice.

Assuming there are no objections, at the hearing the executor/administrator (generically, the "representative") will be appointed, bond may be set (unless the will waives a bond) and letters testamentary issued.

Most petitioners request that the representative be granted power to act under the Independent Administration of Estates Act (Probate Code ßß10400-10592). These powers, commonly called "IAEA powers," allow the representative to perform certain aspects of the administration of the estate without first obtaining judicial approval. Included in the IAEA powers are the power to sell property, invest estate funds, and borrow money. The authority granted by the IAEA is not unlimited however. At least 15 days before many proposed actions, the representative must mail written notice to each devisee or heir whose interest in the estate will be affected, and to any person who has filed a request for special notice.

Following the issuance of letters testamentary, the representative must begin marshalling (i.e., collecting) the assets of the decedent and determining who the decedent's creditors are. Notice of administration of the estate must be mailed to all known or "reasonably ascertainable" creditors no later than four months after letters testamentary were issued or 30 days after the representative learns of the creditor. (Probate Code ß9051.) A creditor's claim will generally be barred if the creditor does not file a claim with the court and mail a copy of the claim to the representative within four months of the issuance of the letters testamentary or within 60 days of when the creditor was given notice of the estate administration, whichever is later. (Probate Code Sec. 9100, 9150(d).) However, some claims, including claims by the United States and California (typically for taxes) and secured claims are not barred if a creditor's claim is not submitted within the four months/60 days claim period. It is important to note that if the decedent was a Medi-Cal recipient, or was the surviving spouse of a Medi-Cal recipient, the representative must also mail notice to the Director of Health Services. (Probate Code Sec. 9202.)

If a creditor files a timely claim, the representative either allows or rejects the claim in full or in part. If the claim is allowed, the creditor should be paid the amount owed from the estate. If the claim is rejected in whole or part, the creditor has three months after service of the rejection to bring suit against the estate. (Probate Code Sec. 9351.)

In addition to ascertaining and noticing creditors, the representative must also prepare an inventory of the property in the estate, submit the inventory to the probate referee, who is appointed by the court to appraise the assets, and file the inventory with the appraised values. The inventory and appraisal must be filed with the court no more than four months after the representative is appointed, unless the representative is given an extension. Extensions are frequently granted when the estate is large, assets are difficult to locate, or there are other problems with locating and appraising the property.

Finally, after the inventory and appraisal has been filed and the time for filing creditors' claims has run, the representative must file an accounting (unless an accounting is waived by all interested beneficiaries or heirs) and a petition for final distribution. The accounting sets forth how the representative has handled the assets in the estate. The petition must include, among many other things, the persons entitled to distribution from the estate, what they are entitled to, and whether any preliminary distributions have been made.

The petition for final distribution also sets forth the amount of compensation the representative and the representative's attorney are entitled to. The amount of compensation for each is a percentage prescribed by statute of the gross value of the estate. If the attorney rendered "extraordinary" services, the court can also award compensation for these services in an amount that is "just and reasonable." (Probate Code Sec.10811.)

After the final accounting is approved and the petition for final distribution is granted by the court, the representative makes final distributions of the assets of the estate, takes his/her statutory compensation and pays the attorney his/her fees.

The procedures described above include only a very brief overview of the steps required to probate an estate. Many estates raise issues beyond the scope of this article. However, probating even the simplest estate takes at least six months and requires at least three court filings - the initial petition, the inventory and appraisal, and the final petition and accounting. And, even modest estates will likely incur several thousand dollars in attorney's fees. (Remember, attorney's fees are calculated on the gross, rather than the net, estate).

Alternatives to Probate Administration
Thankfully, there are ways to avoid probate. Among the most common is the use of a revocable inter vivos trust. Of course, this requires that the decedent have done some estate planning during his/her life, which many people fail to do. If the decedent died intestate, or with a will but without a trust, probate may still be avoided in some circumstances. If the gross fair market value of the decedent's real and personal property in California (excluding property held in a revocable inter vivos trust or in joint tenancy) does not exceed $100,000.00, the statutorily provided affidavit procedure may be used to collect and transfer personal property of the decedent without the necessity of court intervention. (See Probate Code Sec. 13100-13116.) Similarly, if the decedent's real and personal property does not exceed a net value of $20,000.00, the court upon petition may summarily set aside the estate to the decedent's minor children or to the surviving spouse. (See Probate Code Sec. 6600-6615.) Finally, one of the most common alternatives to a full probate proceeding is the use of the spousal property petition procedure described in Probate Code section 13500 et seq. Under this relatively simple procedure, all of the community property and the statutorily prescribed share of the intestate spouse's separate property passes to the surviving spouse. This procedure may also be used to pass the property left to the surviving spouse in the decedent's will.

Probate administration can be costly, requires extensive court involvement, and may delay distribution of the decedent's assets to the beneficiaries and heirs. Careful pre-death planning clearly provides the best way to avoid unnecessary probate expenses. However, even an intestate decedent's estate in some circumstances can be administered without probate. Exploring these options with the survivors can save them money and unnecessary trips to the courthouse.
The Probate and Estate Planning attorneys at Wilke, Fleury, Hoffelt Gould & Birney, LLP include Richard H. Hoffelt, Ernest James Krtil, Gene E. Pendergast, Jr., and Sarah L. Ream. These attorneys may be contacted by telephone at (916) 441-2430 or on the web at www.wilkefleury.com.