Probate is a court supervised proceeding wherein a court supervises the distribution of the assets of a deceased person. If the decedent left a a valid will, the assets are distributed in accordance with the terms of the will. If no will exists, the saying "the state has written one for you" applies. The state's will for California can be found in California Probate Code secs. 6401 and 6402. For this reason, you should have a written will or trust to ensure that your estate is distributed in accordance with your wishes and not the state's. For more information see Estate Planning. In addition to supervising the distribution of a decedent's assets, the probate court supervises the payment of the decedent's creditors. Under California law, creditors are allowed 4 months to file their claims for payment of expenses.

The court supervised probate procedure only arises when a decedent has died leaving property in his or her name alone (not held as joint tenants with a right of survivorship, or held as community property). It is for this reason that many people establish the popular "living trust" or hold their property as joint tenants with someone whom they wish to inherit the property.

The court proceeding commences with the filing of a document known as a petition. The person filing the petition must be willing to accept the role of executor or administrator of the decedent's estate. (An executor distributes property in accordance with the terms of a will; an administrator distributes property in accordance with the state statutory scheme of distribution established for a decedent who dies without a will.) Anyone who has an interest in the court proceeding (relatives, beneficiaries under a will, etc.) are informed of the petition and who the petitioner is. After everyone who has a legal interest in the proceeding has been given notice, the court will grant "letters" of administration (intestacy) or testamentary (will), unless an interested person objects to the award of letters to the petitioner. If a legitimate objection is made, the court may conduct a hearing to determine the issues raised by the objections. Typical objections are the qualifications of the person petitioning for letters, and whether the decedent's will is legally proper for the distribution of assets (i.e., whether it should be "admitted to probate"). If there are sufficient grounds to disallow the will, the court may decide the will, or a portion of it, should not be admitted to probate, and order the decedent's assets distributed in accordance with the intestacy statutes.

After an administrator or executor is appointed (also known as the "personal representative), that person must gather and appraise all the decedent's assets and prepare a special court document known as an "Inventory and Appraisal." This document must be filed with the court within 120 days of the appointment of the administrator or executor. The personal representative appraises such things as bank accounts, and other items of easily determinable value including relatively small value common household items. There is no need to individually appraise every last item, but the items may be grouped together for ease of administration. A special, court appointed "probate referee" appraises other items such as real estate, stock, and other items requiring special evaluation. The probate referee has 60 days to complete his task, but typically will have an appraisal within 10-14 days. The original purpose of the "Inventory and Appraisal" (formerly known as an "Inventory and Appraisment") was for the state to be able to assess its estate taxes. California no longer has an estate tax for estates which are not subject to the federal tax (estates in excess of $675,000.00 in value may be subjected to federal estate tax). Therefore the "Inventory and Appraisal" is used today primarily as a means for the court to supervise the distribution of assets.

Followin the filing of the iventory and apraisal, the personal representative may apply to the court for permission to distribute the assets. An accounting may be filed with the court with the request to distribute the assets, and anyone who has an interest in the estate may object to the accounting. Typically the accounting repeats much of the information originally found in the Inventory and Appraisal, but also includes expenses incurred by the personal representative in handling the estate (including attorneys fees, filing fees, and appraisers' fees), as well as income earned by the estate assets (i.e., bank interest, stock dividends, etc.). If the accounting is approved, the court will order the assets distributed, and unpaid expenses of administration paid. Attorneys fees are paid from the estate assets solely in accordance with the state's statutory scheme of payment (a sliding scale percentage based upon the value of the estate)

One can see why many individuals seek to "avoid probate" through the use of jointly held property, and/or living wills.


California no longer assesses its own "estate tax." Instead it collects what is known as a "pickup tax" on estates subject to federal tax. The "pickup tax" is in the amount of the credit the federal government would allow estates otherwise assessed a state estate tax. Basically, it is a "use it or lose it" approach taken by the state, and results in no additional tax on the estate.

Individuals inheriting property are not required to pay income tax on the property they inherit. Moreover, there is no capital gains tax assessed on the inherited property. Beneficiaries are allowed a "stepped-up basis" in the property they inherit, and will only be required to pay capital gains tax on the increase in value of the property they inherit above the property's value at the time of the death of the decedent.

For property held as "community property," the survivor spouse acquires a fully stepped-up basis in the property. This can have significant capital gains tax advantages for long-held property such as real estate. If, on the other hand, property is held as "joint tenants with right of survivorship," ("jtwros") the survivor only acquires a stepped-up basis in 1/2 of the value of the property. For this reason, most married couples will want to hold property as community property. If they hold any property between each other as jtwros they should consult an attorney about possibly re-titling it as community property or execute a jointly signed, witnessed memorandum stating their intentions with respect to jtwros held property. The preferred method is to re-title the property to "community property." Because among married couples there exists differing intentions and objectives, both as a couple and as individuals to the marriage, it is important that none of these documents be executed except on the advice of an attorney. In some cases, a husband and wife may be best served with separate counsel.

For estates in excess of $675,000.00, the federal government will collect an estate tax. The percent and amount varies depending upon the total value of the estate. With careful estate planning, these taxes can be reduced or eliminated for estates of married couples having a value of up to $1.35 million. One thing estate planning cannot do is reduce or eliminate other taxes due, including any taxes due on estates under $675,000.00 (i.e, capital gains if property is sold by a beneficiary, income tax due on income earned by an estate between the time of the death of a decedent, and the distribution of assets, etc.)