California probate proceedings involve court oversight while administering someone’s estate. Typically, either someone’s estate plan determines who inherits their property or state law dictates who receives their assets.
Property that belongs to a testator becomes part of their estate, but some of their financial obligations could become the responsibility of the estate as well. Those financial responsibilities could significantly reduce the total value of someone’s estate and therefore what their beneficiaries or heirs inherit. For example, the following three costs often reduce how much people inherit when a loved one dies in California.
The cost of attorney representation and time in court can add up to thousands of dollars. The more conflict there is around an estate, the more costs there may be to cover. Probate costs typically require payment before beneficiaries receive any assets from the estate.
Any financial obligations owed by the decedent could become the responsibility of their estate when they die. Credit cards, student loans and medical debts all typically require repayment before beneficiaries inherit from an estate.
There are several kinds of taxes that impact an inheritance. Estate taxes are one concern. California doesn’t collect an estate tax, but the federal government does. While estate taxes are only due when someone has millions of dollars in property when they die, there could be income taxes due during the probate process. The representative of the estate needs to cover tax obligations before distributing assets to beneficiaries.
Understanding the financial obligations that influence probate proceedings can help people understand what they could likely inherit after someone dies and what portion of a loved one’s estate is likely to be diminished due to outstanding obligations.