The Differences Between Estate Planning and Probate in California

Planning out what will happen to your assets after your death is important. Two terms you will encounter through this process include estate planning and probate, which are two legal processes that serve different purposes when it comes to asset and property management in the wake of someone’s passing. It’s important to understand the differences between estate planning and probate in California when making decisions about how to protect your property.

What Is Estate Planning?

Estate planning describes the process a person goes through while living to manage and designate what will happen to their assets after their death. In California, an estate plan often includes the following:

• A living trust, which allows you to give assets to beneficiaries without going through the probate process
• A will, which specifically outlines what happens to any minor children you leave behind, and who will inherit your assets
• A durable power of attorney, which appoints someone to manage your assets in the event of your physical or mental decline
• An advance directive, which appoints someone to make decisions about your medical care in case you can’t do so due to incapacitation

It’s never too early to start end-of-life planning. According to the Public Policy Institute of California, by the year 2040, California’s 65+ population will make up approximately 22% of the state’s population. As more residents plan for retirement and what comes after, estate planning becomes increasingly important.

Estate planning helps take the burden off your loved ones who are left behind trying to manage your finances and assets after you are gone. When done properly, estate planning can help families avoid probate and reduce taxes while settling your estate in the wake of your death. Hiring a qualified Huntington Beach estate planning attorney can help make this process simple.

What Is Probate?

Probate is the court-supervised process of settling an estate when a person dies without an estate plan. A person’s will is also validated in probate, their debts are paid off, and assets are distributed to the remaining next of kin or designated loved ones. Probate without an estate plan can complicate and prolong the settlement process. The value of an estate will determine if it must go through the probate process.

The probate process can be lengthy, depending on the complexity of the estate. All records from probate cases are public, and the value of the estate’s assets can be reduced due to the cost of legal counsel during the process.

The probate process includes the following steps:

1. Filing a petition with the superior court
2. Appointing an executor to manage the estate
3. Taking stock and appraising assets to determine value
4. Paying debts, taxes, and any other expenses
5. Distributing assets to beneficiaries

While estate planning is ideal, it doesn’t always happen before a person passes away. Hiring a knowledgeable estate planning lawyer can help you navigate the complicated process more smoothly.

The typical costs associated with probate cases include fees for filing, fees to administer the estate, and attorney fees. You will need to file documents with the court, put a notice in the newspaper, have an appraiser (possibly more than one) assign value to the assets of the estate, and do other tasks associated with the administration of the estate.

Fees for administering the estate are set by law and are often determined as a percentage of the total value of the estate. If the estate has a personal representative, they will be owed fees, and any attorney they have for representation will also be owed fees. Attorney fees are determined by law as well.

Generally, all fees for the attorney and personal representative are paid after the probate case is settled. Despite probate being a less favorable option for estate settlement, in fiscal year 2022-2023, Californians filed 60,286 probate cases.

How to Hire an Estate Planning Lawyer in California

If estate planning in California, it’s important to work with a lawyer familiar with the California Probate Code and California’s Inheritance and Gift Tax laws. Not only are these necessary for filing estate planning documents correctly, but working with an estate planning lawyer who is transparent and informative is crucial for such a deeply personal and complicated process.

Your estate planning lawyer can inform you of any applicable community property rules and any state requirements for living trusts and advance directives.

FAQs

Q: Is Estate Planning the Same as Probate?

A: No, estate planning is not the same as probate. Estate planning is often completed by the owner of the estate before they die, whereas probate is the legal process that loved ones of the deceased must go through to transfer or inherit property from the estate. Understanding the differences between these two processes can help you protect your property and assets as you manage your estate.

Q: What Are the Disadvantages of Estate Planning?

A: Though estate planning can help your loved ones avoid probate court, it does come with some disadvantages. The up-front investment of estate planning can be thousands of dollars and lots of time. The process involves several steps, including gathering your financial information and signing legal documents. You will also have to update your estate plan after every major life event, such as a major purchase, marriage, or divorce.

Q: What Is the 5-by-5 Rule in Estate Planning?

A: The 5-by-5 Rule is part of Internal Revenue Codes 2041 and 2514, which specify that a trust beneficiary may withdraw the greater of either $5,000 or 5% of the total trust’s value from the trust’s principal annually. The right to withdraw comes with most irrevocable trusts, where the owner of the trust (the grantor) gives the beneficiary limited access to the funds until a certain age.

Q: Is Estate Planning Better Than Probate?

A: Estate planning is always better than probate. Estate planning is less time-consuming and more cost-effective than probate. Probate requires attending court, while proper estate planning may not. Estate planning also gives the owner of the estate more control over who inherits what and when, protecting the privacy of beneficiaries such as minors. Overall, estate planning is better than probate.

Contact Kevin Rice, Attorneys at Law

As you and your loved ones plan for what life will look like after you pass away, you can get a proactive start when you hire an estate planning lawyer. The skilled attorneys at Kevin Rice, Attorneys at Law, can help you protect your assets and beneficiaries by walking you through the estate planning process, making you aware of all the options you have available.

Our principal attorney, Kevin Rice, was born and raised in Southern California, so he is more than familiar with the state’s laws. Schedule a consultation with us today.