Articles Posted in Trust and Probate Administration

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 did that kid get so much money to blow!

18 is the age of majority

When a child turns 18 years he or she is considered to be an adult under California law. In legal terms, children under age 18 are called “minors” and when they reach age 18 they are called “adults”. Minors and adults are treated differently as far as inheritance rights are concerned. Minors still have rights to inherit but any inheritance which comes to them is subject to certain legal controls because the law presumes that minors are not capable of handling money or property as well as adults.

Inheritance can occur in 3 typical ways

Inheritance Rights For Children – Minors can inherit money or property in the following types of situations:

  1. where a family member dies and does not leave a will (also called intestate succession);
  2. where somebody dies leaving a will which gifts money or property to a minor (also called intestate succession);
  3. and where trust is established naming a minor as a trust beneficiary.

The minors inheritance is handled differently in each of these situations.

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.

Image of confused man just put in charge of administering a Trust

I was just put in charge of a trust so what do I do?

Trust Administration Basics for Newly Appointed Trustees

Events triggering administration.    Trust administration is needed when or both of the Trustors (i.e. persons who created the trust) passes away or resigns voluntarily or becomes legally incompetent.

Basic responsibilities

The trust documentation must be consulted for exact instructions pertaining to the trust involved but most trusts typically involve the following steps.

BASIC STEPS PURPOSE/EXPLANATION
♦ Authorize successor Trustee Appropriate paperwork will need to be done to establish who is the successor trustee and to authorize the successor trustee to act on behalf of the trust and its accounts and properties.
♦ Notifications & certificates Original death certificates are needed and notices need to be sent as determined by what is in the trust.
♦ Formal notice to beneficiaries A formal notice in the form required by the California Probate Code must be sent to everyone mentioned in the trust.
♦ New tax ID# & banking A new tax ID# must be obtained from the IRS and some or all of the trust bank accounts will need the new ID# and new account signatures.
♦ Inventory of assets All accounts, personal property and real estate needs to be inventoried
♦ Notify creditors & pay debts All bills need to be paid and creditors notified
♦ Insurance & Pension Plans Notification of death and paperwork may be needed to get distributed.
♦ Real estate titles Documents need to be filed with the county recorder because of the death and the property tax situation considered
♦ Business & investment changes If the trust owns a business or shares in some type of investment involving other owners then various documentation will need to be done.
♦ Appraisals Appraisals of all real estate and valuable personal property are needed.
♦ Trust allocations & reports to IRS If the trust has assets from a husband and wife various accounting and allocations/reports to the IRS may be needed
♦ 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.
♦ Income, estate and gift tax returns Income tax returns for the trust and for the deceased person need to be filed as well as possibly estate and gift tax returns.
♦ Accounting & distributions Trust law requires a detailed formal accounting at least annually to all beneficiaries unless it is waived.  After the final accounting, if there are no objections to the accounting, the trust estate is distributed to the beneficiaries according to the instructions in the trust.

CALL  (949) 229-7034  to speak with Lawyer  David L. Crockett

Letting Some of the Kids Live in Mom’s House May Lead to Costly Litigation

Frequently we run across situations where parents will leave their residences to one or more of their children in their will or their trust. If they only have one child then the situation is usually okay but when there are multiple children and some are living in the house and some are not there can be problems. Allowing some children to live in Mom’s house messes up the other sibling’s inheritance.

Image of smug child who mom like more than sibblings

The Back Story

We were recently able to successfully solve a situation like this that had gone to court. The mom had died and left her house in a trust to her three adult children but it turned out that one of her adult children and his family resided in the house for many years. However the trust involved was not properly drawn up and only the adult child residing in the house had a copy of it. Then the adult child residing in the house met an untimely death and the other two adult children wanted to have the house sold. The three adult children had an informal arrangement among themselves as to who is going to pay the various household expenses, taxes, repairs and insurance. However, there were numerous accounting issues and arguments about who owed what to whom and the surviving spouse of the adult child who died filed a lawsuit with her version of what her husband was owed from the others.

The Surviving Spouse Had Listed The Home to Be Sold

Image of Orange County Home For Sale with Real Estate SignMeanwhile, prior to the filing of a lawsuit, the surviving spouse had signed a real estate listing agreement with a licensed broker to sell the house. The broker found a qualified buyer and wanted to close on the house sale. However, the title of the house was tied up with a notice of pending action because of the lawsuit filed by the surviving spouse. If the house sale did not close, all three of the adult children would have been liable for brokerage commissions, attorneys fees and further damages.

Image of Tax Basis Increase

Gifting before death may cause huge capital gains taxes

INCOME TAX “BASIS” CONCEPT

Under our system of federal and state income tax, if the property is sold before death for more than what was pay for it then there is a capital gain. There are special rates which apply to capital gains the penny upon one’s tax bracket. To compute capital gains, you subtract the income tax basis of the property from the net selling price. The income tax “basis” is what was paid for the property in the first place minus any depreciation and adding any expenditures for capital improvements.

DEATH AFFECTS THE BASIS

Income Tax Basis Increase on Death of an Owner – The basis of property acquired from a deceased person’s estate or trust is generally it’s fair market value on the date of the decedent’s death. Thus, the children who inherit a property from their parents through a trust or through a probate proceeding will have a date of death income tax basis. This is known as the step-up in basis at death.

Reassess Property Tax on Death of an Owner

County assessor will reassess property tax on death of an owner unless prevented

THE PROPERTY TAX SYSTEM

Property taxes are administered by the County in which the real property is located. The County tax assessor determines the amount of property taxes based upon the fair market value of the property at the date of purchase plus a small amount of increase each year is allowed. The county property tax year goes from July 1 through June 30 tax bills are sent out typically in October and are payable in two installments: December 10 for the first installment and April 10 for the second installment.

INCREASE ON CHANGE IN OWNERSHIP

By law the County tax assessor is entitled to reassess the property and increase the taxes to current market value upon a “change in ownership” of a property. Thus, when you buy a house on the open market your property tax bill will be based on the price you paid for the house. However, if you receive a property as a result of an inheritance or a gift there may be exemptions from the change in ownership rules which would prevent the reassessment of taxes.

Save legal fees by learning Basic Trusts Terminology

Purposes of trusts

Trusts are used to hold money and property for specific periods of time, and to pay out the money and property according to detailed written instructions. Trusts are used to safe-keep money and property and prevent it from being paid outright to your heirs at age eighteen (18).

Purposes of trusts

Trusts are used to save estate taxes by “generation skipping.” Trusts are used to keep an heir from having the responsibility of handling money and property that he may be unwilling to handle, or that he is not experienced enough to handle. Trusts can also be used to benefit charities by causing money to be paid out over a period of time, rather than all at once. Trusts of certain types can be used for asset protection to keep creditors of the Trustors and/or of the Beneficiaries from reaching the money and property in the trust. Trusts can be used to save estate and income taxes.

Creation of trusts

A trust is created by a written document known as a declaration of trust, and is then funded by transfer of money into trust bank accounts and/or deeding or transferring of properties to the trust. The creator of the trust is known as the “Trustor” or the “Settlor.” Trusts can be and usually are custom tailored to meet the specific needs and desires of the Settlor. Trusts are usually prepared by attorneys because each trust is custom for the situation and there are many types of trust.

High probate attorneys and administrators fees are mandatory

Probate Mandatory Fees are High

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. Thus, if a person has not organized his/her ownership of assets, a Probate Court proceeding will be necessary to access bank accounts, pay bills and taxes and to transfer ownership to the heirs.

There are two major exceptions:

Please Don’t become a participant in a lost Will disaster

Will Definition

Can't Find WIllA Will is a written document which states to whom a person’s belongings, money and property are to be given upon death. A Will is typically effective upon a person’s death.

Original Will

A valid will may either be typed or handwritten (holographic). The original signed Will is necessary in general to be able to open a Probate Court proceeding to administer a deceased person’s estate and get legal Court authority to distribute the assets.

Potential disaster

Supposing a person made a Will but the Will was lost. That can be a disaster if the Will maker has died. If the Will maker is alive, he/she can simply make another Will and that would supersede the prior lost will if it is properly prepared. If the Will maker has died then there may be no way of knowing how the Will maker wanted his/her estate distributed. That could be disastrous to people who were named as heirs in the Will. If there is no Will or provable copy then the money and property would have to be distributed according to the laws of intestate succession. If there is no provable Will, then the law presumes that the Will maker intentionally destroyed the Will.

badges