The most complicated part of dealing with trust and probate listing is the lack of agent knowledge about them. With a bit of knowledge probate and trust properties can be FUN. Heirs and family members also need to know about the process to make it easier for them. None of us gets out of this life alive.
PROBATE
INTESTATE
When there is no will or trust and a property owner passes their possessions and assets are intestate. This means the state, through its processes decides who gets what. If there are no heirs the state keeps (escheats... no not cheats) the assets of the estate. If there are heirs the process in California is as follows:
a. If the decedent was married, the question is whether the decedent owned community property, separate property, or a combination of the two.
b. The decedent's community property goes to the surviving spouse, who may have to file a spousal property petition to establish ownership.
c. The decedent's separate property is distributed as follows:
i. The surviving spouse receives all of the separate property if the decedent is not survived by issue, parents, brothers, sisters, or children of a deceased brother or sister.
ii. The surviving spouse receives one-half of the separate property if the decedent had only one child, or issue of a deceased child.
iii. The surviving spouse receives one-half of the separate property if the decedent left no issue, but left parent(s) or their issue.
iv. The surviving spouse receives only one-third of the separate property if the decedent left more than one child.
v. The surviving spouse receives only one-third of the separate property if the decedent left one child and the issue of one or more deceased children.
vi. The surviving spouse receives only one-third of the separate property if the decedent left the issue of two or more deceased children.
d. If the decedent was not married, the estate is distributed as follows:
i. To the decedent's children, who take in equal shares if they are in the same generation.
ii. If there are no children or other issue (issue is the legal term for children, grandchildren, great-grandchildren, etc.) living, the estate goes to the decedent's parents.
iii. If there are no parents living, the estate is distributed to the "issue of the parents." If the decedent had brothers or sisters, they will inherit the estate. If there are deceased brothers and sisters, and they had issue, the issue will inherit the share of the estate that the deceased brother or sister would have inherited.
iv. If there are no brothers or sisters, the decedent's grandparents will inherit the estate.
v. If there are no living grandparents, then the "issue of the grandparents" will inherit the estate. This could include the decedent's aunts and uncles, or if there aren't any aunts and uncles, the decedent's cousins. Generally, the oldest generation that has surviving issue will inherit, but if there are deceased issue in that generation, their issue will inherit their share.
vi. If there are no cousins, Probate Code section 6402 provides that the estate will be distributed to "next of kin in equal degree," generally meaning more distant cousins.
Court and other costs are between 2% and 15% depending on what types of assets are in the estate and what the costs of evaluation and liquidation might be.
PROBATE
When there is a will, but no trust, probate is required. There are expedited procedures for small estates, but when real estate is involved, probate is almost always triggered.
The authority level of the Personal Representative (PR-often referred to as an Executor) is determined by the probate court. When filing the probate petition the applicant requests either full or limited authority. The court issues a Letters of Testamentary which defines such authority.
LIMITED AUTHORITY
Under Limited Authority the PR has little authority to approve disposal of assets, especially real estate. The court is required to approve the sale of estate assets. Real property can be listed and sold, but is subject to court scrutiny prior to close. This can result in someone other than the contracted buyer showing up at the court and offering an "overbid". This can result in a bidding war, but most often does not. Generally, under limited authority the court will order an appraisal to determine value and offers at 90% or more of that value will be considered.
CAUTION TO REAL ESTATE AGENTS AND HEIRS: Probate assets cannot be liquidated with Letters of Testamentary. Individual heirs have no individual authority to sell real property. For example, when an owner passes who can sign the grant deed to pass ownership to a buyer. A death certificate is not sufficient for real property. A power of attorney, though useful in cases of incapacity, dies with the death of the P of A grantor. Without the Letters you don't even know who has the authority to represent the estate.
When soliciting a probate listing require a copy of the Letters of Testamentary before listing the property. Doing so without the Letters could be construed as fraud and will certainly cause problems down the road when escrow requires them to close. Further, without the Letters you cannot complete the listing. One of the questions in the MLS is Limited or Unlimited Authority. Without the Letters you don't know.
The costs of probate are largely determined by whether or not a probate attorney is hired. For larger estates an attorney is highly recommended. The cost of probate are between 2% and 15% depending on what types of assets are in the estate and what the costs of evaluation and liquidation might be and how much an attorney charges.
