When a person passes away, their estate must go through the probate process. This process involves settling debts, distributing assets, and ending the affairs of the deceased. It is important to understand the order of priority when it comes to paying creditors and beneficiaries.
Debtsincurred with the United States or the state of California are paid first.
Reasonable expenses for managing the estate are then paid, even before the debts that the deceased person incurred during their lifetime.
Successioncases tend to move slowly, as many detailed steps are required to ensure that all creditors are paid, all assets are identified, all taxes are paid, and ownership of each asset is properly transferred. It usually takes four to six weeks after the decedent's death to appoint an executor or administrator. Even in the most routine successions, the law requires a minimum wait of four months after the notice has been issued to creditors before any action can be taken to distribute or close the estate.
If the case requires the preparation and filing of a federal estate tax return, the process can be expected to take even longer. Each decedent's financial circumstances vary widely, so some estates may require much more judicial intervention than others, which can increase the time needed to complete an estate case. The process remains the same: all assets are sold and the money is used to settle debts, but an order of priority is established. Claims filed within six months of the opening of the estate are usually paid in order of priority.
Typically, fees such as trust, attorney, executor and estate taxes are paid first, followed by burial and funeral expenses. Generally, each class of debtors must be paid in full before moving on to the next class of debtors. If there aren't enough assets to pay all secured creditors, for example, unsecured creditors won't be able to recover money from debts owed to them. The Probate Court issues testamentary letters or letters of administration naming the executor or administrator.
Succession is the legal process that formally appoints an executor to manage an estate and distribute assets to beneficiaries and creditors. The general rule is to go through a probate process with legal representation, carefully identify any debts that need to be paid, and determine how much will be left in the estate, if any, once all the debts are satisfied. The personal representative must identify, take possession, and manage probate assets until all debts have been paid and tax returns have been filed. There are several types of legal documents that can be submitted to the court to start a probate court.
In some cases, the person requesting the appointment will be responsible for legalizing the inheritance without hiring an attorney. The estate of a deceased person will not be processed in the probate court if there is a surviving spouse and the estate consists entirely of marital property, or if the deceased person's assets are held under joint lease with another person. Assets transferred by gift before death or held in certain types of living trusts are also not subject to probate. Once the estate meets its obligations, beneficiaries will receive their distributions from it in accordance with California law.
In terms of California taxes, the executor must file necessary state income tax returns, state trust income tax returns during probate period, and gift tax returns.