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Probate

DEFINITION

Court administered legal action that distributes the real property of a decedent’s. Distribution of property is dependent on whether the decedent had a will or died intestate (without a will).

EXPLANATION

Probate refers to the legal process of proving to a court that a testator’s will is valid and enforceable.

An executor is the party responsible for overseeing the proper distribution of assets named in the will. The executor is chosen at the discretion of the testator. The property will usually be transferred from the descendant to a family member. Probate refers to the court administered process whereby a deceased party’s assets are distributed to heirs, beneficiaries and, if necessary, to pay off debts. The probate process occurs in probate court. If the deceased party held a preexisting will that included property, then it is subject to probate. The executor will represent the estate in court.

The executor or administrator is responsible for the following:

Verifying validity of will

Identifying real and personal property

Paying creditors

Paying property taxes

Appraising value of property

Creating report to give to probate court, which indicates descendants assets and liabilities

Distributing assets to proper beneficiaries

If a will has been established, the executor of the testator will carry out the will to the probate court, which will entail the will’s specific provisions. If the descendant does not choose an executor, the court will choose a representative. Both the actions of the executor and administrator must be approved by the court.

Estate property is split between heirs and devisees. Representatives, attorneys, and others involved in the probate court process are entitled to reasonable fees that must be approved by the court. After paying off the government, creditors, and completing the process of selling and or transferring assets, the remaining money becomes the property of the heirs and beneficiaries.

When Probate is Necessary

The probate court administers the process of dividing assets to the proper beneficiaries. While assets are typically divided between parties that are to receive the assets, probate courts determine who is entitled to the deceased party’s property when there are disputes.

The need for probate does not apply to all personal and real property of a testator. Assets below $100,000 are not subject to probate; however, any amount greater than $150,000 is subject to the probate court’s discretion.

One situation in which probate could be necessary is simultaneous death. This occurs when multiple parties who are entitled to the other’s estate die at the same time (or very close to the same time). This situation typically arises in the case of unnatural deaths, such as as those caused by accidents or homicides. If there is evidence that one deceased party outlasted the other deceased party (even if by moments), the estates of both parties would be distributed in that order and to subsequent heirs/beneficiaries

Probate can be a long and arduous process, and a testator is advised to take the necessary steps to avoid the property going into probate. Trusts and joint ownership are the simplest ways to transfer title to a testator’s person of choice.

Probate Process

A will may designate a representative to distribute a testator’s assets to its proper heirs/beneficiaries upon the testator’s death. This representative is known as an executor. In the event that no will exists, or an executor is not designated, the court will appoint an administrator.

An executor or administrator must prove to a probate court that the testator was legally and mentally capable of creating a will. He or she is also responsible for finding the testator’s heirs/beneficiaries.

The probate court is located in the state that the real property exists.

If the will is found to be valid and enforceable, the probate court will execute the terms of the will, including:

Distributing a testator’s personal and real property amongst the intended beneficiaries

Determining the value of personal and real property

Managing debts and paying off creditors

Balancing financial sheets

If the property does not have heirs or beneficiaries entitled to the property, the state gains control of the assets

Probate Length

The probate process generally takes anywhere from a few months to one or two years. The length of time is determined by the specifics of the probate, the amount and complexity of a testator’s designated assets and debts, the number of beneficiaries, and whether disputes arise amongst beneficiaries.

Selling Assets

A testator’s executor/administrator may determine the need to sell or liquidate the testator’s assets in order to pay off debts or liens. Such a sale must be approved by the court. In the event that the sale of a testator’s real or personal property is not to the financial benefit of the beneficiaries, the court may not grant approval.

If the court does approve the sale, however, a sale can occur.

Assets in a probate court sale can typically be bought at huge discounts. Buyers can place bids. All bids are subject to a court determining an approval. Back up bids and late bids can also occur.

Similar to a standard real property sale, property from wills and probate courts can be represented by real estate agents. The fees and commission to which an agent is entitled to receive is dependent on court approval.

The further allocation of a testator’s assets to heirs/beneficiaries will be determined after the net proceeds of a sale are calculated. A property title is not insurable until after the probate is determined. This is because the executor/administrator distributes the assets and no one knows exactly how assets will be transferred until the probate process is finished.

Heir/Beneficiary Discrepancies

If necessary to prove heirship, a potential heir may file a petition in the Superior Court of the county where the testator’s property is located (Probate Code Section 248). The court is tasked with determining the validity of the party’s claim. It may ask the potential heir’s child or children to provide genetic material to determine connection to the testator.

Minors as Beneficiaries

A beneficiary who is under the age of eighteen is known as a ward. If a testator wishes to transfer real property to a ward, he or she may nominate a temporary guardian, or conservator, for the property until the ward reaches legal age (Probate Code Section 1501).

The nominated guardian is responsible for managing the property, including paying property taxes, maintaining the property, and performing other duties associated with property ownership. As the manager of the ward’s estate, he or she has the legal authority to purchase property on the ward’s behalf if it is in the benefit of the ward (Section 2571). However, the purchase of any property must be approved by the court.

A guardianship naturally terminates once the ward reaches legal age (Section 1600). However, a guardianship can be terminated prior to this time if the guardian fails to meet his or her duties (Section 2650). Grounds for a guardian’s termination include: failure to use due care and diligence in the management of a ward’s estate; failure to provide financial documents requested by the court; and mental incapacity or an inability to make reasonable decisions.

Case Review: Estate of Lopez (1992)

The case Estate of Lopez (1992) 8 Cal. 317., involved a real estate broker bidding on a real property in a probate sale without a proper license.

A real estate broker (Tong) made a successful bid in a probate sale in order to purchase real property on behalf of his client. At the time of the bidding, Tong’s license was expired; however, he had renewed his license by the time the sale was completed.

The probate court ruled that Tong was not entitled to a commission because he had made a bid without a license. The Court of Appeals reversed the lower court’s ruling on the grounds that Tong had a valid license on the day of the sale’s close. The court cited Business & Professions Code Section 10136, which requires the party claiming commission be licensed at the time of the sale’s execution. The court also noted that according to Probate Code Section 10160, an estate is liable for commission at the time the actual sale is made. Therefore, Tong was entitled to a commission.

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