This is part of an on-going series of blog posts titled the "What Is..." series, where we attempt to explain, in simple terms, common estate planning terms and concepts. To read other posts in this series, click here.
You’ve probably heard the term probate, and you know there’s something that’s not good about it. But what is it?
Probate refers to the division of the Superior Court of California that handles issues related to conservatorship/incapacity, guardianship, or death. Each county in California has its own probate division.
Conservatorship: Conservatorships are legal proceedings that refer to a scenario where an adult can no longer make her own decisions, such as in the case of dementia or coma. If a loved one becomes incapacitated (e.g. through a sudden car accident, or stroke), someone will need to petition the probate court to be granted the legal authority to act on the loved one’s behalf. With this authority, that person (called a conservator) is able to call the insurance company or handle your loved one’s finances. A few considerations:
Conservatorships take time. Each county typically has only one probate judge. So if a crisis arises, and someone needs to be conserved, it can often take 6-8 weeks in a busy county to get that first court hearing.
Conservatorships are also expensive. The conservator must show the court that the incapacitated person’s money is being wisely spent. These accountings can take $3,000-$5,000 to prepare. And they’re required to be filed every year, or every other year. That’s not even mentioning the legal fees for hiring the specialized attorney you would need for these types of proceedings.
Conservatorships are also public court proceedings. It can often be humiliating to the person being conserved.
Thankfully, you can avoid the need for a conservatorship by planning ahead and creating a durable power of attorney and a trust.
Guardianship: Guardianships are legal proceedings that refer to minor children (anyone under 18 years old) who have either become orphaned or removed from their parents. Those children now need someone with the legal authority to act as the child’s parents. Only a court can give someone such legal authority. By planning ahead, you can nominate in your will who those guardians are in the event guardianship proceedings are necessary for your young children. You certainly do not want to leave such an important decision to the busy members of the probate court who do not know you or your children.
Death: When someone dies, the state needs to ensure that the person’s debts are handled (e.g., outstanding credit card debt, other loans, utilities, funeral and medical expenses), and that any remaining assets reach the dead person’s rightful heirs.
Like any other court proceeding, this is a public forum in which your debts and assets are uncovered.
Probate takes a long time. It often takes 18-24 months for heirs to receive any of the deceased person’s property. That means that if there are young children relying on their parents’ property to survive, it can take months or years before they see a penny.
In addition to the lengthy time that probate takes, it can also be costly. Probate fees--the compensation due to the representative of the estate and her attorney--are set by statute and are calculated based on the gross value of the estate. For example, a $1 million estate in California may generate as much as $46,000 in probate fees!
Most people want to avoid the time, expense, and public humiliation associated with probate court. By creating a comprehensive estate plan, including a trust, will, and power of attorney, you can avoid probate altogether at a fraction of the cost. Don’t wait until it’s too late.