Articles Posted in Probate

Let’s Subtract the Money Johnny Got From His Share of the Estate

TYPICAL SITUATION

A father dies without a will leaving an estate of $100,000.  Under the laws of intestate succession which apply because there is no will, his 4 children are to receive equal shares of the estate which would be $25,000 each. However, during the 10 years leading up to his death, the father had transferred $20,000 cash in total to his son Johnny thus creating a pre-death transfer.   There was no documentation stating whether the $20,000 was a gift or a loan or an advancement against Johnny share of the father’s estate.

Siblings arguing over money

California Law Solution to Pre-Death Transfers

These pPre-death transfers and other similar types of situations have the potential for endless litigation to try to determine what was intended at the time the money was transferred. The state legislature solved this by establishing the following rules.  A decedent’s gifts to an heir during his life will be deemed an advancement against  his or her share of the estate only if one of the following conditions is satisfied:

  1. The decedent declares in a contemporaneous writing that the value of the gift is to be deducted from the heir’s intestate share of the estate or that the gift is considered an advancement against the heirs share of the estate. OR

WHAT IS IN THE ESTATE AND HOW THE PERSONAL REPRESENTATIVE FIND AND MANAGE IT?

PROBATE ESTATE ADMINISTRATION

Probate Asset Inventory & Collecting – If a person passes away leaving money or property there may need to be a probate court administration of the estate. If there is a living trust and all of the deceased person’s assets have been placed into the living trust prior to death, there is no need for a probate court administration and the procedures discussed in this article would not be applicable to a living trust situation. The point of a probate court administration is to get somebody appointed as the administrator or executor of the estate (also known as the personal representative) who has authority of the court to handle to inventory and handle the money and property and accounts of the deceased person. Upon appointment by the court, the administrator will obtain a form signed by the court entitled letters of administration. The personal representative will then take the letters of administration over to all banking and securities institutions and have the accounts transferred out of the name of the deceased and into the name of the personal representative.

COLLECTING AND INVENTORYING THE ASSETS

In probate estate terminology the personal representative’s initial and most important responsibility is the “marshaling” of all assets and property interests held in the decedent’s name and/or owned by the decedent. This would include the decedent’s separate property and one half interest in community property held with his or her spouse. “Marshaling” is further described as the process of discovering, identifying, and taking possession and control of the decedent’s assets so that they can be used to pay the taxes, creditors claims, and expenses of administration and ultimately distributed to the estate beneficiaries.

Probate Asset Inventory & Collecting – Identify ALL Real & Personal Property

Collecting of of all assets and property interests

CAN A DECEASED PERSON’S ESTATE ESCAPE PAYING DEBTS & TAXES?

PROBATE ESTATE ADMINISTRATION

Can we avoid paying debts?If a person passes away leaving money or property there may need to be a probate court administration of the estate. If there is a living trust and all of the deceased person’s assets have been placed into the living trust prior to death, there is no need for a probate court administration and the procedures discussed in this article would not be applicable to a living trust situation. The point of a probate court administration is to get somebody appointed as the administrator or executor of the estate (also known as the personal representative) who has authority of the court to handle the money and property and accounts of the deceased person. The personal representative is also responsible for paying the debts and taxes before the estate is distributed out to the heirs.

CREDITORS

Probate Debts & Taxes – Persons or companies who are owed money by the deceased person are known as creditors. Creditors include those with contract claims, tort claims (as an accident claim for example), or otherwise.  They California and local government agencies including the franchise tax board are generally subject to the same creditor claims and notification rules.  However, taxes owing to the federal government are covered by federal law.

NOTIFICATION TO CREDITORS

NOTIFICATION TO CREDITORSThe personal representative is required to notify the creditors so that the time limit for filing their claims with the probate estate starts to run. The initial notification to creditors is the publication of the notice of petition to administer estate in the local newspaper which is done as part of the procedure of filing the probate case with the probate court. The personal representative does need to send out a notice to “all known and reasonably ascertainable creditors” in the mail.  The court published form used for this notification contains a warning to creditors to file their claims within the applicable time limits which are the last to occur of the following dates: four months after the date the personal representative is appointed by the court or 60 days after the date the notice to creditors was mailed. It is incumbent upon the personal representative to notify every conceivable claimant so that these time deadlines begin to run because the estate cannot be closed and distributions cannot be made until these time periods have run.  The special limitations on creditors claims are designed to speed up the administration of a probate estate. Without these certain time periods, creditors would be allowed to file lawsuits far into the future. Typically, a claim on a written agreement or account which is unpaid can be sued on up to four years from the date of payment is due. The creditors claim rules supersede the 4 year limit.

What To Do When Someone Lacks Mental or Physical Capacity?

WHAT IS A CONSERVATORSHIP?

A conservatorship is a court proceeding to protect a person and/or his or her property. Conservatorships are regulated by the California probate code and operate under the supervision of the probate court system.

How Does the Successor Trustee Handle the Bills and Debts of the Deceased Trustor?

LIVING TRUST ADMINISTRATION

Successor Trustee paying trustor debtsIf there is a living trust and all of the deceased person’s assets have been placed into the living trust prior to death, there is no need for a probate court administration. Creditor Rights? For probates, there are specific court-supervised formal steps required to notify creditors and for approval and rejection of creditor’s claims. The situation involving a trust is much less formal and the laws differ somewhat. The person who administers a living trust following the death of the trustors (the persons who created the trust) is known as the successor trustee.

The successor trustee’s job is to follow the directions in the trust for the distribution of the trust estate to the beneficiaries. The successor trustee’s job may also be to pay the debts and bills of the trustors before distributing the estate to the beneficiaries, depending upon how the trust is worded.

TRUST & BENEFICIARIES GENERALLY LIABLE FOR THE DEBTS

By law, a living/revocable trust is liable for the debts of the trustors. The death of the trustors causes the living trust to become permanent and irrevocable. However, the debts still remain and the creditors to whom the debts are owed have rights against the trust to collect the money owed if the trust was revocable at the date of death of the trustors. If the successor trustee does not pay the debts but instead distributes the trust assets to the beneficiaries, then the creditors can sue the beneficiaries. In other words, the trust assets passed to the beneficiaries are still liable for the debts of the trustors. If the beneficiaries are sued by the creditors then they can cross-complain back against the successor trustee for failing to pay the debts. For this reason, a successor trustee may want to use the optional trust creditors claim procedure discussed below.

Orange County Probate Court Litigation Lawyer

YOU CAN FILE LAWSUITS OVER PROBATE ESTATE MATTERS

PROBATE COURT SYSTEM

summons-740Part of the California Superior Court system is dedicated to administration of trusts and estates and the deciding of lawsuits over all aspects of trusts and estates. Probate court litigation lawsuits in the probate court are known as “petitions”. All counties in California have probate divisions with their own judges and staff and clerks which are separate from the Superior Court civil divisions and criminal divisions.  Probate court has its own set of laws, rules and regulations.

INITIATING A PROBATE PETITION

To start a probate court case a written petition is prepared which states what is being complained about, identifies the parties involved, and asks for specific relief. The parties are known as the petitioner and the respondent this is equivalent to the plaintiff and defendant in a civil case.  A probate petition is the equivalent of a lawsuit complaint filed in civil cases in the Superior Court. An example of specific relief would be to ask the court to remove the estate executor or the trustee of the trust for some sort of wrongdoing. Another example for specific relief would be to ask the court to make the estate executor or trustee pay back money that was wrongfully taken or spent.

TYPICAL MILESTONES

When a probate petition is filed with the court, the clerk assigns an initial hearing date which is typically 4 to 6 weeks away.  At or before the hearing date, the respondent to the petition must file opposition to the petition stating his or her defenses and point of view of the situation.  If opposition is not filed, the petition will be granted at the initial hearing. If opposition is filed then the court will set the case for a status conference and or settlement conference typically many months down the road. If the case cannot be settled after a settlement conference, the case will be set for a trial setting conference. At the trial setting conference a trial date will be established. Trials in the probate court are in front of a judge only as there are no juries. In Los Angeles and Orange County Superior Court it typically takes a year or longer to get to trial because of the shortage of judges and staff at the courthouse and because these types of cases can involve complex matters which take time to put together.

How Do You Figure Out Who Gets What? – Inheritance with Simultaneous Deaths

LEGAL BACKGROUND: 2 WAYS TO INHERIT

Under California law a person can inherit money or property (1) as a result of being named in a legal document such as a will or (2) inheritance can occur because a person is related by blood or marriage to the deceased if there is no will.

AN EXAMPLE

Couple killed in auto accidentIt happens all the time – A married couple is in a serious auto accident. The man has children from a previous marriage and the woman doesn’t have any children. The man dies instantaneously and the woman dies four days later. Neither one has a will.  They own money and assets together which are community property (their “estate”). Who will inherit their estate?

SURVIVORSHIP CONCEPT

Under probate and inheritance laws the person who is called the “survivor” is one who lives the longest.  Thus, in the case of the example above,  if the husband dies first then the wife is known as the “survivor” or the “surviving spouse”.  The inheritance laws are set up on the general concept that the survivor will inherit the money and property of the one who dies first, especially if there is no will.

Probate is not needed to transfer ownership of joint tenancy property

Generally, Probate court is the legal way for ownership transfer on death

Probate court is generally necessary to transfer ownership of property and accounts upon someone’s demise EXCEPT for some narrow exceptions.  A major exception is property held in joint tenancy ownership. Attorney David Crockett can advise clients as to whether the joint tenancy exception is available and assist in preparing necessary documentation to create joint tenancies and to transfer the property to the survivor when one of the joint tenants passes away.

Type of property

Joint tenancy ownership is typically found in real estate ownership and in bank and securities account ownership.

Joint tenancy ownership

Creation

Joint tenancy property is created by deed, will, or other transfer to two or more persons in equal shares who are expressly declared to be “joint tenants”.  Thus, if the deed to the house owned by John and Jane Doe states the grantees to be “John Doe and Jane Doe as joint tenants” a legal joint tenancy is created.

Collection or transfer of personal property by affidavit will save Probate court delays and expense

Probate Exemption For Small Estates < $150,000

Generally, Probate court is the legal way for ownership transfer on death

Probate court is generally necessary to transfer ownership of property and accounts upon someone’s demise EXCEPT for some narrow loopholes. This loophole rises to the effect of creating a viable Probate Exemption. A major loophole is the collection or transfer of personal property by affidavit. Crockett Law Corporation can advise clients as to whether the loophole is available and assist in preparing necessary documentation.

Procedure for leveraging this Probate Exemption

The way it works is for the personal representative or heirs to prepare a sworn affidavit and present it to effect the transfer.  Typically bank accounts are transferred this way.  Some banks have their own forms and others will require you to bring them the correct form.  For transfer of vehicle titles, the DMV has its own forms to fill out found on the DMV website.

Someone passed away. The Will names me as Executor. What do I do?

This Article intended for estate personal representatives

Probate Administration Basics

Probate is a lot of work which could have been avoided by estate planning

Doesn’t matter if there is a Will or not. – Probate Court proceedings are needed to transfer ownership of assets, properties and accounts to the heirs.  If there is a Will but no living trust then Probate Court proceedings are needed.  If there is no Will and no living trust then Probate Court proceedings are needed.  There are some minor exceptions to this which include accounts of less than $150,000 and joint tenancy property.  The exemptions are discussed is separate blogs.

Events triggering probate administration

Probate administration is the legal process to organize a deceased person’s affairs under court supervision and to ultimately distribute his estate

Basic responsibilities

There are stringent laws and court rules about what an executor must do and what forms and reports must be filed with the Probate court.  Failure to follow proper procedures can have serious financial and legal consequences.

So, assuming a probate is needed – there are numerous things to be done and various filings with the court and various appearances needed at the Probate court.   Here is a general outline of what is to be done.  Expect all this to take a year or more because there are so many court steps.

BASIC STEPS PURPOSE/EXPLANATION
♦ Consult and retain an attorney Because the probate process is so complicated, most people consult with an attorney who practices in the probate and trust field.  The larger the estate and/or the more heirs there are the more likely that an attorney will be needed to get the estate administered.  Typically, it takes a year or more to do all the legally required steps and to ultimately get the probate court’s permission to distribute the estate.
♦ File a court petition to get the executor appointed Until the Probate court appoints a personal representative (i.e. executor or administrator), nobody will have authority to act on behalf of the deceases and his/her accounts and properties.  Once appointed by the court, the personal representative will have a court form known as “Letters of Administration” with the official seal of the court which will identify him/her as the estate personal representative.
♦ Notifications & certificates Original death certificates are needed and notices need to be sent to the heirs in proper legal form and within legal deadlines about the petition to get the executor appointed.  The notification gives all heirs and interested persons an opportunity to object.
♦ Formal notice to heirs The process of petitioning the Probate court for appointment of the personal representative notifies the heirs.
♦ New tax ID# & banking A new tax ID# must be obtained from the IRS for the Probate estate by the personal representative and some or all of the deceased’s bank accounts and securities accounts will need the new ID# and new account signature cards to allow the personal representative to sign on the accounts.
♦ Inventory of assets All accounts, personal property and real estate needs to be inventoried and inventory reports on court forms must be made to the Probate Referee who is appointed by the court to appraise the estate assets.
♦ Appraisals Appraisals of all real estate and valuable personal property are needed typically for tax and for the estate inventory purposes.  Depending upon what assets are involved, the Probate Referee may be able to handle this but not always.
♦ Notify creditors & pay debts All bills need to be paid and creditors notified.  There are court required forms to be sent to all known creditors and publication procedures of a notice of death are required as well.
♦ Insurance & Pension Plans Notification of death needs to be done and paperwork may be needed to the insurance or pension companies to get the money paid over to the probate estate or to the named beneficiaries.
♦ Real estate titles Documents need to be filed with the county recorder because of the death and the property tax situation considered.  Ultimately all estate real estate must either be sold or distributed to the heirs.  The will and the cash needs of the estate to pay debts and taxes all have to be considered by the personal representative to figure out what to do.  If the property is to be sold, certain forms will need to be filed with the court and possibly there will need to be a court approval of the sale and an opportunity for overbids.
♦ Business & investment changes If the decedent owned a business or shares in some type of investment involving other owners then various documentation will need to be done and possibly various legal steps will need to be taken by the personal administrator so that the business will continue.
♦ Allocations of community and separate property If the deceased left a surviving spouse, then the property and money has to be sorted out between the probate estate and surviving spouse.
♦ Property taxation issues Determine property tax effects of the death on each parcel of real estate and consider options depending upon how property is to be disposed of. If residences or investment properties are to be inherited by the heirs and not sold, then the personal administrator has to determine what forms to file with the county and if exemptions are available to keep the property taxes from being increased.
♦ Income, estate and gift tax returns Income tax returns for the probate estate and for the deceased person need to be filed as well as possibly estate and gift tax returns. The deadlines for filing of these forms must be strictly complied with.
♦ Accounting & distributions Probate law requires a detailed formal accounting as part of the probate administration unless the heirs waive a formal accounting.  After the final accounting is filed with the court, and  if there are no objections to the accounting, the probate estate is distributed to the heirs in accordance with the instructions in the will of the deceased.  If the deceased died without any will, then the state laws on intestate succession are applied to determine who inherits the assets in the estate
♦ Most people opt for doing a living trust After having gone through all of the forms, paperwork, fees, and lengthy time for waiting for court hearings and necessary filings to be done, most people realize that it would have been a whole lot easier and cheaper if the deceased would have established and funded a living trust before he/she passed away.

Caution:

If the heirs don’t get along with the executor/administrator then expensive and lengthy court litigation can occur.  There can be litigation over any of the above steps if people don’t agree with how the estate is being handled.  Crockett Law Corporation  can guide the executor/administrator as to how to effectively communicate with the heirs and suggest ways to avoid disputes with cost everybody time and money.

Conclusion/Role
of the estate/trust lawyer

Probate is a lot of work which could have been avoided by estate planning through the use of a living trust or other techniques. Attorney David Crockett is available to advise and assist on all estate administration matters.

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