What Happens When a Loved One Dies Without a Last Will and Testament in California?

By Aimee Calderon, CFP®

While we don’t see it often in our financial planning practice in Fullerton, California, the horror stories about people dying without an estate plan are certainly out there. The big celebrity mishaps always make the news. For example, the Queen of Soul, Aretha Franklin, passed away last year without a will. With an estate of at least $80 million, there is sure to be a line of long-lost relatives hoping to get a piece of this large pie.

Prince is another celebrity who seems to have put estate planning on the back burner before passing away in 2016 without a will. Almost three years later, his estate of more than $200 million is still tied up. It will likely take several more years and a lot of money before it is settled.

Unfortunately, dying without a will happens to non-celebrities as well. When a loved one passes away without proper estate planning, the dollars might be smaller, but the headache for the heirs can be just as big.

A will is the most basic form of estate planning. It simply states the final wishes of the will’s creator after they die. A will typically does the following:

  • Leaves instructions for what should happen to the deceased person’s property

  • Names an executor

  • Names guardians for children and their property

  • Decides how debts will be paid

  • Provides for pets

Intestate Succession

If your loved one dies without a will in California, they die “intestate,” and their assets will be passed to the closest relatives via the state’s intestate succession laws.

The intestate succession laws in California are complicated. You might think that a surviving spouse would be given the estate, but that is not always the case. If the decedent was married but is survived by parents, issue (a legal term for children, grandchildren, and great-grandchildren), siblings, or children of a deceased sibling, the surviving spouse will receive only a portion of the probated estate.

Probate

Without a will, a loved one’s wishes are unknown, and therefore California laws take over. With a will, a loved one’s wishes are known, and assets can be transferred once the will is proven.

For both of these scenarios, the loved one’s assets must be probated. Only assets that would be passed through a will need to go through probate. These include assets in one person’s name or retirement accounts that did not have a beneficiary designated.

Probate can be long, typically six months to two years in California. Probate can also be expensive. Most people choose to hire an attorney to guide them through the complicated process.

California has set up statutory fees for attorneys to charge on assets that go through probate. Here are the current rates:

  • 4% of the first $100,000 of the gross value of the probate estate

  • 3% of the next $100,000

  • 2% of the next $800,000

  • 1% of the next $9 million

  • 0.5% of the next $15 million

  • A reasonable amount (determined by the courts) for amounts above $25 million

With high real estate prices in Orange County, an estate of at least $1 million is common. The probate fees for a $1 million estate according to the chart above would be $23,000.

Here is a brief overview of the steps in the California probate process:

  1. Petitioning the court to open probate           

  2. Submitting the last will and testament (if applicable)

  3. Identifying, locating, and securing estate assets

  4. Categorizing assets (not all assets will go through probate)

  5. Valuing assets

  6. Notifying creditors

  7. Reviewing creditor claims

  8. Litigating any challenges

  9. Calculating estate taxes

  10. Selling assets (if necessary)

  11. Transferring assets

Avoiding Probate

The best and easiest way to avoid the headache and cost of probate is to do proper estate planning. In California, a living trust detailing beneficiaries and successor trustees will avoid probate and help the process of transferring assets go smoothly. After having a trust written, it is vitally important to have non-retirement assets titled in the name of the trust.

Retirement accounts cannot be held in the name of a trust. Instead, beneficiary designations on the retirement accounts direct their disbursement after death. Make sure beneficiary designations are up-to-date on all retirement accounts.

All of this estate planning can be overwhelming. In addition to an estate planning attorney, a fee-only financial advisor can help you navigate through the confusion.

Fee-only advisors, particularly CFP® certificants, take a holistic approach to your finances. Not only do they help organize your assets and give investment advice, but they also look at estate planning, tax planning opportunities, retirement planning, and insurance needs. Probate can easily be avoided, and utilizing the assistance of a fee-only financial advisor can help.

Schedule a 15-minute discovery call with a fee-only financial advisor to discuss your personal situation.

Aimee Calderon, CFP®