Shuttleworth Law Firm

Determine Estate Assets

scott shuttleworth — Sun, 14 Dec 2008 21:54:51 +0000

Not all assets owned by the decedent become "probatable assets". Property that passes outside of probate include property held in joint tenancy or any other form of title where there is a right of survivorship and accounts with a payable on death designation (also referred to as a beneficiary designation) or a transfer on death designation.

Although at first blush determining the assets of the estate seems simple and straightforward, determining assets of the estate is a ripe area for disagreement. Some of the more common examples are allegations as follows:

Surviving spouse claims property of the estate is their community or separate property.
Mom or dad put a child’s name on a bank account for convenience but it was not mom or dad’s wishes that it go to the child as a joint account owner. Instead, it was agreed that after death the account would be divided up amongst the son’s siblings (mom and dad’s other children) as the rest of estate was in the will. The argument is that the money was held in trust for the benefit of the other children
A person, during life, gave something away but did not deliver it before they died. The person was who was given the item files a lawsuit for that item to be delivered in accordance with their agreement.

Claims to determine an asset of the estate must be filed be filed within strict time limits or the claim is forever lost.

An inventory and appraisal of all estate property should be prepared and filed by the Personal Representative within four months of Letters being issued.

See Probate Code

Obtaining Consent of Beneficiary

scott shuttleworth — Wed, 10 Dec 2008 15:58:47 +0000

Sometimes trustees are concerned that their proposed actions are permissible by the trust, but remain afraid to act because of the fear that a beneficiary will, with the benefit of hindsight, hold them liable for one reason or another, including some unforeseeable change (e.g. holding on to stocks or homes with the hope they will rise in value when they don’t or selling too early in good market).

In order to reduce the potential for liability, California law allows a trustee to obtain the consent of the beneficiary prior to acting to ensure that the trustee’s actions will not be second guessed later by way of a lawsuit. While the law does not state that consent is required to be in writing, it is highly highly highly recommended that it be in some form of writing signed by the person giving consent.

Obtaining consent is the simplest and easiest way to minimize trustee liability and should be used for any act of significance. If the beneficiary does not consent, then there are other more formal methods of reducing or eliminating trustee liability.

The California law on beneficiaries consent is primarily found in Probate Code 16463, which is as follows:

§ 16463. Consent of beneficiary to relieve trustee of liability for breach of trust
Text

(a) Except as provided in subdivisions (b) and (c), a beneficiary may not hold the trustee liable for an act or omission of the trustee as a breach of trust if the beneficiary consented to the act or omission before or at the time of the act or omission.

(b) The consent of the beneficiary does not preclude the beneficiary from holding the trustee liable for a breach of trust in any of the following circumstances:
(1) Where the beneficiary was under an incapacity at the time of the consent or of the act or omission.
(2) Where the beneficiary at the time consent was given did not know of his or her rights and of the material facts (A) that the trustee knew or should have known and (B) that the trustee did not reasonably believe that the beneficiary knew.
(3) Where the consent of the beneficiary was induced by improper conduct of the trustee.

(c) Where the trustee has an interest in the transaction adverse to the interest of the beneficiary, the consent of the beneficiary does not preclude the beneficiary from holding the trustee liable for a breach of trust under any of the circumstances described in subdivision (b) or where the transaction to which the beneficiary consented was not fair and reasonable to the beneficiary.

Probate Fees and Costs

scott shuttleworth — Wed, 12 Nov 2008 05:30:26 +0000

Probate carries with it significant costs, payable primarily to the attorney(s) and executor(s) who administer the estate . The attorney and executor fees are set by California statute and are based on the gross, not net value, of the probatable estate (e.g. You own a home with $500,000 but with a $490,000 loan, fees are based on $500,000 not $10,000).

The statutory attorneys fees are as follows:

4% of the first 100,000

3% of the next 100,000

2% of the next $800,000

1% of the next $9,000,000

.5% of the next $15,000,000

The executor gets an identical amount.

“Extraordinary Fees”, over and above the statutory fees, may be awarded for “extraordinary” services. Typically, this involves unusually complicated estates or litigation.

By way of example, if an estate valued at $500,000 was probated (a typical value for a California home), the minimum fees would be $13,000 for attorneys fees, $13,000 for executors fees, court filing fees (currently $320.00) and probate referee appraisal fees.

See Probate Code Sections 10800-10805, 10810-10814

Liquidate Assets to Pay Estate Bills if Necessary

scott shuttleworth — Sat, 08 Nov 2008 04:39:35 +0000

If the liquid assets of the estate are insufficient to pay administrative costs (executors fees, attorneys fees, costs of administration), then assets must be sold in order to pay the costs of administration and/or creditors to the extent the estate can pay them. Administrative costs of probating the estate (court fees, executors fees, attorney’s fees and other costs of administration) always have a priority over general creditors of the decedent.

Determine Estate Debts

scott shuttleworth — Sat, 08 Nov 2008 04:26:20 +0000

The Personal Representative give notice to those “reasonably ascertainable creditors” and determine the valid creditors of the estate. Generally speaking, a creditor of an estate has the latter of 4 months from the date “Letters” are issued by the court granting authority to the Personal Representative to act on behalf of the Estate or sixty days after notice to the creditor of the administration of the estate. If no creditor claim is filed within these time frames, a creditors claim will usually be barred.

Validated and timely filed creditor claims are paid in order of priority.

California Probate Code §§9000 through 9399

Establish Bond Amount

scott shuttleworth — Sat, 08 Nov 2008 04:17:27 +0000

A bond is insurance against the malfeasance or neglect of a Personal Representative resulting in a loss to the estate up to the maximum amount of the bond. Bonds are required unless the will expressly waives bond or all beneficiaries of the estate waive bond.

The bond amount will be based upon the net value of estate personal property, annual income of estate property plus value of real property if full IAEA powers are granted.

If bond is required, the proposed Personal Representative must obtain and file a bond before the court issues the “Letters” empowering him or her to act.

Probate Code §§ 8481. 8482.

Probate Summary

scott shuttleworth — Fri, 07 Nov 2008 19:09:45 +0000

The Probate process in California is designed to primarily accomplish the following:

Open Probate in Proper Jurisdiction
Establish Last Valid Will of Decedent, if any
Establish and Empower Personal Representative
Establish Bond Amount if Necessary
Determine Probatable Assets of the Decedent
Determine Valid Debts of Decedent
Liquidate Portions of Estate if Necessary to Pay Costs of Administration and Creditors All or Portion of Decedent’s Valid Debts
Distribute Assets of the Decedent to the Beneficiaries/Heirs.

The time for a probate to be conducted varies. At a minimum, a probate takes 6-8 months, but usually goes closer to 12 months if there are no problems. If there are objections to any issue, such as those detailed above, probates can last years absent proper administration.

Establishing and Empowering a Personal Representative

scott shuttleworth — Fri, 07 Nov 2008 06:09:40 +0000

The Petitioner will usually request to be appointed either executor or administrator of the estate (“Personal Representative”) and that he or she be empowered with certain rights. Typically, these requests are for either full or limited authority to administer the estate under the Independent Administration of Estates Act (“IAEA”). Full IAEA authority means they are empowered to do more without prior court approval (less judicial oversight), especially as it relates to real property (land and improvements on land).

Objections to establishment of limited or full authority typically must be made before the hearing on the Probate Petition.

Probate Code §§10400-10406

Establish Last Valid Will

scott shuttleworth — Fri, 07 Nov 2008 06:02:43 +0000

The person filing the Petition for Probate (“Petitioner”) will request that a will be validated or, if no will, that the estate be administered under the rules for intestate succession (the rules of who gets what when there is no will).

The Probate Petition will typically have a copy of the will they propose to be admitted as the decedent’s last will. Parties then have a limited time to object to the validity of the will. Objections regarding the validity of the will usually revolve around the following:

Executed Improperly
Executed without Testamentary Capacity
Will Procured by Duress
Will Procured by Undue Influence
Will Procured by Mistake
Will Procured by Fraud

In order to raise an objection to the validity of a will, a person must do so timely or they will likely lose their right to object forever.

Opening Probate in Proper Jurisdiction

scott shuttleworth — Fri, 07 Nov 2008 05:42:52 +0000

Typically, a California probate takes place in the county where the decedent resided at death by the filing of a Petition for Probate (“Probate Petition”) by a family member. However, where there is real property in a state other than where the decedent resided, an additional ancillary probate is opened in the other state where the real property(ies) is (are) located.

Probate Code §§ 7051, 8000