Estate Planning Practice Blog

How Long Should Probate Remain Open?

Speaking of probates, an estate should be opened for no longer than one year or 18-months without filing a petition to close or a status report.  If you are a beneficiary to a probate estate opened longer than this time period, you may have grounds for demanding a status report, filing objections or otherwise (in layman's terms) inquiring what's taking so long with the court.

The one year period is for estates where a federal estate tax return is not required.

The 18-month period is for estates where a federal estate tax return is required.

If, however, the estate's personal representative (also an executor or administrator) fails to petition for final distribution or to file a verified status report within one-year/18-month deadline under California Probate Code Sections 12200 and 12201, and the court finds that the prolonged administration was caused by factors within the representative's or attorney's control and not in the best interests of the estate, the statutory compensation may be ordered reduced.

To this extent, court discretion re statutory compensation is properly exercisable. See California Probate Code Section 12205.

Consult with your attorney to see what your rights are as a beneficiary of a probate estate.

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Estate Planning, Probate and Trusts involve complex areas of law. Individual circumstances must be considered before any advice can be given.  The general information above is not to be construed as legal advice, which can only be given after consideration of the unique facts of each matter. Please seek the advice or counsel of your attorney, financial advisor or CPA as it may be appropriate.

Initial Probate Filing Fees Changed for 2008.

The filing fee paid directly to the court to open a probate case (e.g., file a petition for probate) has been modified in 2008.

The filing fee is based on the value of the estate as it will be inventoried to the court.

The initial filing fee is now $320.00 for probate matters.

Before the filing fee was based on the estimated value of the inventory and was payable at the time the petition for probate was filed.  The filing fee schedule is set by California Government Code Section 70650 et. seq.

For example:

The fee is $320.00 for estates or trusts under $250,000;
the fee is $385.00 for estates or trusts of at least $250,000 and less $500,000;
the fee is $485.00 for estates or trusts of at least $500,000 and less than $750,000;
the fee is $635.00 for estates or trusts of at least $750,000 and less $1,000,000;
And so on ...

Now, the fee to file a petition for probate is $320.00 and when the estate closes the estate then pays the graduated filing fee amount based on the actual final inventory prepared during the probate.

So if the estate ultimately comes to $501,000, the total filing fee is $485.00 and since $320.00 has been paid initially, the estate will pay directly to the court clerk an additional $165.00 before the court will order the estate closed. This is a good thing because usually at the outset the heirs or beneficiaries of the estate tend to have little or no cash to pay for these filing fees and can pay these fees directly from the estate at the time it closes.

And in case you are wondering, attorneys fees and personal representative fees are also set by statute and payable when the estate closes.

But the Only Asset is a House.

A common question in a probate matter ...

My mother died and left her home in her name. That's all she had. And she didn't have a Living Trust. What happens when I want to keep the home, but we have to pay for probate expenses like attorneys fees and credit card bills?

The answer, in most cases ...

The home must be sold to pay debts and expenses unless the heirs buy it from the estate for the amount of debts and expenses. This means that the heirs have to come up with the money to pay for the expenses incurred in administering the estate in probate and it needs to be dealt with in a manner that will be approved by the court.

Attorneys fees for probate in California are set by statute and approved by court. See California Probate Code Section 10810.

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Estate Planning, Probate and Trusts involve complex areas of law. Individual circumstances must be considered before any advice can be given.  The general information above is not to be construed as legal advice, which can only be given after consideration of the unique facts of each matter. Please seek the advice or counsel of your attorney, financial advisor or CPA as it may be appropriate.

If No Will or Trust, Your Personal Representative Will Need to be Bonded

Funny how not having a Will or Trust to protect your loved ones  can also cost them more money.

If you do not have a Will or a Trust that waives bond, the court will require that your personal representative be bonded unless all of the heirs at law agree to waive bond. And even when they agree to waive bond and sign waivers, the court may still require that the personal representative be bonded. Judges can be funny that way.

This means that to handle an estate without a Will or Trust waiving the bond requirement, your personal representative will have to apply for a probate bond to cover the proposed value of your estate at an enormous cost to them. For example, if your estate is worth a million dollars -- say a medium sized home in CA along with some cash assets -- bond premiums could run approximately $2,000 for every year the estate is opened. The first year's premium is not refundable if the estate closes within a year.

A probate bond is designed to protect the estate in case the personal representative mismanages the estate or runs off with all of the estate assets. It is kind of hard to do when there's real estate involved, but the courts still require bond.

Qualifying for a bond also depends on the personal representative's personal net worth and credit worthiness. Some personal representatives won't qualify and the bond company will require that their attorney maintain control over the estate account in some agreeable fashion with the bond company.

A properly prepared Will or Trust can waive bond and the court will follow your request in your testamentary instrument.

One company that many attorneys use to obtain bonds is Bond Services of California. Their website has bond applications and other information.

As always, seek the advice of an estate planning attorney to prepare your estate planning documents.

Successful Petition for Extraordinary Fees for Client.

Being appointed a Personal Representative (PR) for an estate is lots of work. It is about winding up someone's life and reconstructing their affairs at the same time.  It means sorting through mail, calling financial institutions, paying bills and otherwise wrapping up what that person was involved with.

For some estates, it's more work than imaginable. And this work is fraught with emotions over losing a loved one as well.

Just yesterday, our firm was able to successfully petition the court for our client to receive extraordinary fees for handling a complex estate.  It is unusual for these requests to be granted, but we were able to convince the court it was proper under the California Probate Code.  And to wit, this estate was closed in less than a year it was opened. It's a "win-win" for everyone involved.

PRs are eligible for statutory fees for estate administration. This is same statutory fees that attorneys receive for representing an estate.  Where circumstances warrant, attorneys and PRs can petition the court for extraordinary fees. See California Probate Code Section 10800, et. seq. for PR fees and California Probate Code Section 10810, et. seq. for Attorneys fees.

Is Probate Required When There is a Just a House?

This probate question was posted today on a listserv I belong to.  It is a good question and one that is asked by many people.

"If a person dies without a will and has only her adult children as survivors, must those children pay the parent's creditors?  The estate has not been probated because the only asset was the mother's house, which all of the children agreed should go to one sibling who lived with their mother in the house and helped take care of things. Does that child now have to pay off the mother's credit cards?  Also, are they required to probate the estate?"

The answer is straightforward. Yes, probate must be opened.

If the house is in the name of the mother who died then probate must be opened. None of her children can transfer title of an asset that they do not own. Probate is the legal process of determining the chain of title for an asset belonging to someone who has died.

And yes, the creditors need to be paid. This is not an insolvent estate. The house is ostensibly worth hundreds of thousands of dollars in California. There should be enough equity even with a mortgage on the property to pay off the creditors. It may mean selling the home though.

Probate may be opened by any of the children. If a child doesn't open probate in a timely fashion, a creditor may open probate themselves.

If the kids want to give their share of the house to one sibling, they can either through disclaimer or assignment. You should consult with an attorney to determine how to handle this as there are many tax implications and other implications involved in this kind of decision making to give up an inheritance.

One way to avoid probate in this case was if the mother had a Living Trust. It always comes back to a Living Trust sometimes. In California, it is often the best thing to do when it involves your real estate. Talk to your estate planning attorney about these kinds of things.

Closing a Probate Estate.

Yesterday, I posted a quick tidbit about probate. 

One of things about opening probate is closing the probate estate. Thus, the ultimate goal of the probate process is the smooth transfer of title to the assets belonging to a decedent to the beneficiaries or next of kin.

Closing the probate is the final step and requires the following:

1. a Final Accounting, unless waived by the beneficiaries or next of kin;

2. a Final Report describing the actions taken during the probate and the status of the estate;

3. a Petition for Final Distribution itemizing who is going to get what asset.

Typically the Final Accounting, Final Report and Petition for Final Distribution are included on one petition for the court's review, consideration and approval.

It takes alot of work to get to this process. So, again, to sound like a broken record, a Living Trust is often a better way to go for those who live in California and own property.

A Quick Tidbit About Probate.

In California, probate is the formal legal proceeding for the administration of a decedent's estate. It is what happens when someone dies with or without a Will and their assets are worth more than $100,000.

Estate administration has 3 main functions:

1.     Provide systematic collection of the decedent's assets (also called marshaling decedent's assets)

2.     Determine the liabilities of the decedent's estate and giving creditors a prescribed period of time to present their claims against the estate

3.     Distribute decedent's assets to those persons entitled to receive them either through a Will or the laws of intestacy.

Because of the statutory requirements for creditor claims, probate must remain open at least 4 months. Typically because of all of the other requirements a probate proceeding typically takes a year, if not longer, from start to finish.

Probate is often avoided when the assets are left in a Living Trust.  A Living Trust is often the best approach in California to avoiding probate.

For more information about probate or to set up a Living Trust, please email me or consult with an attorney in your area.

Probate Tidbit No. 5 -- Unpaid Bills and Debts of a Decedent.

Tidbit No. 5
In Probate Tidbit No. 2 posted recently, we discussed briefly Creditor's Claims in probate.

But what happens if the person who died left bills or incurred bills as a result of dying. Medical bills, unpaid credit card bills, the last gas bill, the you-name-it bill... are you responsible for paying these bills?

Generally, if you are not the surviving spouse, you are not responsible for paying the bills of someone who has passed away. A surviving spouse may be responsible for the bill as California is a community property state and that includes debts incurred during marriage.

If, however, you signed a guarantee, promise or any other contract that obligates you to pay -- of course you are on the hook for those bills.

Getting back to the substance of the post, if your loved one's estate is insolvent, contains no cash, has no assets that can be sold (car, house, etc.) and there are outstanding bills... you are not responsible for those bills personally.

Do not offer to pay a bill that is not yours.

If probate is opened for your loved one's estate, these Creditors (aka the folks demanding payment) should get notice through the probate proceeding and can file a claim against the estate to get paid. Hence, the Creditors Claim process as already discussed and relinked here.

What happens if the bill doesn't get paid? To put it bluntly, it's the Creditor's problem and will be written off as unpaid/uncollected. Do not interpret this as meaning it is ok to run up a shopping spree and then die broke. That just raises the interest rates and cost of goods sold for the rest of us.

It goes without saying that if you are unsure about a bill or other debt belonging to someone who has died, please consult with an attorney who handles probate as a routine part of his or her practice to determine how it should be handled legally.

Probate Tidbit No. 4 -- Executors, Administrators & Personal Representatives!

Tidbit No. 4
These terms are generally interchangeable, but there are differences:

Executor
Administrator
Personal Representative

First, an Executor is someone who is in charge of someone's estate who has been named or nominated in a Will.  An Executor is first nominated and then appointed by the court to act on behalf of an estate. When an Executor is appointed, the court will issue Letters Testamentary.

Second, an Administrator is someone who is in charge of someone's estate where there is no Will.  An Administrator is first nominated in a petition for probate and then appointed by the court to act on behalf of an estate. When an Administrator is appointed, the court will issue Letters of Administration.

Once Letters have issued, the Executor or Administrator can officially act on behalf of the estate.

Third, a Personal Representative is either the Executor or Administrator of someone's estate. It is a catchall term that refers to both.

I know this is a very simple way to explain these terms and there are more legal ramifications than explained here, but if you understand these differences you are off to a good start.

As always, it is a good idea to consult with an attorney when handling someone's estate. You never want actions that you take today to affect you years later.