Estate Administration

No. The term “probate estate” refers to any property subject to the authority of the probate court. Assets distributed outside the probate process are part of a person’s “non-probate estate.” California has “simplified procedures” for transferring property for estates worth under a certain amount (from $20,000 to $150,000 depending on the circumstances and the kind of property). There is also an easy way to transfer property to a surviving spouse, property held in Joint Tenancy or Community Property with Right of Survivorship, and life insurance and retirement benefits.

Not necessarily. Talk to a probate lawyer. There may be debts or tax claims that make probate a better option for you. If there are a lot of issues to handle, going through probate allows you to pay the person who deals with the creditors and taxing authorities.

No. The benefits can be paid directly to a named beneficiary. Money from IRAs, Keoghs, and 401(k) accounts transfer automatically as long as the persons are named as beneficiaries. Bank
accounts that are set up as pay-on-death accounts (PODs) or “in trust for” accounts (a “Totten Trust”) with a named beneficiary also pass to the beneficiary without probate.

No. When a living trust holds title to some of the decedent’s property, that property also passes to the beneficiaries without probate.

The cost of probate is set by state law. When all the costs are added up – these may include appraisal costs, executor’s fees, court filing fees and certified copies, costs for a type of insurance
policy known as a “surety bond,” plus legal and accounting fees–probate can cost from 4% to 7% of the total estate value, sometimes more. If someone contests the Will, there could be thousands of dollars of litigation costs.

California law says the personal representative must complete probate within one year from the date of appointment, unless s/he files a federal estate tax. In this case, the personal representative can have 18 months to complete probate. If probate has not been completed by that time, the personal representative must file a status report to the court to explain what still has to be done and how much time that will take.

If the personal representative does not report to the court, the beneficiaries can ask the court to order him or her to file an accounting or take other actions to close probate. The court can remove the personal representative and appoint someone else. Sometimes there are circumstances that can make probate take longer. If there is a Will contest (a claim filed with the court that all or part of the will is not valid), or the size and complexity of the estate requires extra time, or it is hard to find beneficiaries, the process can drag out. Some probate cases take years to resolve.

In California, probate hearings are in the Probate Department of the Superior Court in the county where the decedent lived at the time of his or her death. If you have to file a probate petition in another state because there is real property in that state, the courts in that state may use a different name.

If there is a Will, the person named as executor will usually be appointed as the personal representative – this means s/he is responsible for managing the estate and following probate Rules
of Court and procedures. The executor has no authority to act as personal representative until s/he is appointed by the court and formal “Letters Testamentary” are issued by the Court Clerk.

If there is no Will, or if the Will doesn’t name an executor, or the person named as executor in the Will is unable to be executor or does not want to be executor, the probate court appoints someone called an administrator to handle the process. The Court usually chooses the closest living relative, or a person who will inherit some portion of the decedent’s assets.

The personal representative does not have to be a legal or financial expert. But, s/he must have reasonable prudence and judgment and be very careful, honest, loyal, impartial and diligent. This is called a “fiduciary duty” — the duty to act with good faith and honesty on behalf of someone else.

The personal representative should have good organizational skills and be able to keep track of details. It is preferable if he or she lives nearby and is familiar with the decedent’s finances. This makes it easier to do tasks and find important records.

The following people cannot be the personal representative:

• a minor,
• a person subject to a conservatorship or otherwise incapable of performing the duties of personal representative,
• a surviving business partner of the decedent, if an interested person objects (unless the Will names the partner as executor), or
• a non-resident of the U.S. (unless the Will names the non-resident as executor).

Not usually. But, in some situations the Court requires the personal representative to ask the Court’s permission to sell real estate or business interests owned by the estate.

The personal representative cannot do any of the following things without the Court’s permission:

• pay fees to himself or herself,
• pay fees to his or her attorney,
• make a preliminary distribution of property to beneficiaries (with a few exceptions), or
• close the estate.

If the personal representative lives outside of California, the court may require that s/he get a surety bond (an insurance policy that protects the estate beneficiaries in the event of the personal representative’s wrongful use of the estate’s property), even if the Will waives this requirement.

The Personal Representative must:

• decide if there are any probate assets;
• locate the decedent’s assets and manage them during the probate process. This could take up to a year or longer and may involve deciding whether to sell real estate or securities
owned by the decedent;
• receive payments due to the estate, including interest, dividends, and other income (e.g., unpaid salary, vacation pay, and other company benefits)

• set up an estate checking account to hold money that is owed to the decedent — for example, paychecks or stock dividends;
• figure out who is going to get what and how much under the Will. If there is no Will, the administrator will have to look at state law (Probate code Sections 6400 – 6414, called
“intestate succession” statutes) to find out who the decedent’s heirs are and determine each heir’s share of the estate;
• value or appraise the estate’s assets;
• give official legal notice to creditors and potential creditors of the probate proceeding and the deadlines for creditors to file claims, according to state law;
• investigate the validity of all claims against the estate;
• pay funeral bills, outstanding debts, and valid claims;
• use estate funds to pay continuing expenses — for example, mortgage payments, utility bills and homeowner’s insurance premiums;
• handle day-to-day details, such as disconnecting utilities, ending leases and credit cards, and notifying banks and government agencies — such as Social Security, the post office;
• file tax returns and pay income and estate taxes – including a final state and federal income tax return covering the period from the beginning of the tax year to the date of death;
• after getting the court’s permission, distribute the decedent’s property to the people or organizations named in the Will, or to the decedent’s heirs if there is no Will; and
• file receipts for distribution and wrap up any closing details for the estate.

No. If you choose not to serve, the Court will probably appoint the alternate executor to be the personal representative. If there is no alternate executor, or if that person doesn’t want to serve, the Court will appoint someone to serve. The Court usually appoints a capable family member or an independent professional fiduciary. If you decide to be the personal representative, you can resign at any time. But, you may have to give an “accounting” to the Court for the time you served.

Yes. In addition to your out-of-pocket expenses to manage and settle the estate, personal representatives usually earn a statutory fee of 2% – 4%of the probate estate. The percentage decreases as the size of the estate increases. The Court must approve all fees and expenses. And, in extraordinary circumstances, the Court may allow other fees.

Fees are taxable as ordinary income and must be reported on your personal income tax return. So, if you are the personal representative and the sole beneficiary of the estate, it usually does not make sense to take any fees. But, the money you get as beneficiary from the estate is income tax free.

The court may lower or deny compensation and can replace the personal representative with someone else. The personal representative may even have to pay for any damages he or she caused.

A personal representative may be held liable for:

• improperly managing the assets of the estate,
• failing to collect claims and money due the estate,
• overpaying creditors,
• selling an asset without the authority to do so, or at an inappropriate price,
• not filing tax returns on time,
• distributing property to the wrong beneficiaries, or
• distributing property to beneficiaries before all creditors have been paid, etc.

No. But, it may be a good idea if the estate is complex. A lawyer can help you meet all deadlines and avoid mistakes and delays. A lawyer can sometimes help avoid disagreements among family members over minor or major issues. But the lawyer represents the interests of the personal representative, not the beneficiaries.

You may not need a lawyer if:

• you are the sole beneficiary,
• the decedent’s property consists of common assets (like house, bank accounts, insurance, etc.)
• the Will is simple and straightforward, and
• you have access to good Self Service materials.

In most cases, the personal representative may never see the inside of a courtroom. But, s/he will have to go to the Court Clerk’s office.

If someone files an objection to the Will, or produces another Will, a “Will Contest” has begun. Will contests are not uncommon, but few people actually win one. Still, they can cost a lot of
money and time.

Only a person with “standing” can contest a Will. This means the person must have a personal financial stake in the outcome.

Examples of people with standing to contest a Will are:

• a child or spouse who was cut out of the Will
• a child who receives one third of the estate if a sibling receives two thirds,
• children who feel that the local charity should not get all the parent’s assets,
• anyone who was treated more favorably in an earlier Will.

Sometimes, there is a Will contest because someone wants a different person, bank, or trust company to serve as personal representative for the estate, or as a trustee of trusts created by the Will.

Most challenges to Wills are by potential heirs or beneficiaries who got little or nothing. Will contests must be filed in Probate court within a certain number of days after receiving notice of the death, or petition to admit the Will to probate, or issuance of Letters Testamentary to a personal representative.

Examples of reasons to challenge a Will are:

• there is a later Will which, if valid, would replace the earlier Will;
• the Will was made at a time the decedent was not mentally competent to make a Will;
• the Will was the result of fraud, mistake or “undue influence”;
• the Will was not properly “executed” (signed by the decedent);
• the so-called Will is actually a forgery;
• for some other reason (such as a pre-existing contract) the Will is invalid.

If there is a Will contest, you should hire an experienced lawyer. The probate court may invalidate all of the Will or only the challenged portion. If the entire Will is found invalid, the proceeds will probably be distributed according to the state laws of intestacy, unless there is a prior revoked Will that is revived and admitted to probate.

If a person dies without a Will (known as dying “intestate”), the probate court appoints a personal representative (known as an “administrator”). The major difference between dying testate and dying intestate is that an intestate estate is distributed according to state law (known as “intestate succession”). A testate estate is distributed according to the instructions left by the decedent in his or her Will.