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 Practice
Areas > Probate
CALIFORNIA PROBATE PROCESS
By
John B. Palley, Attorney at Law
More Info at
www.californiaprobate.info
PROBATE
PROCESS TIME-LINE (click image to enlarge)
THE PROBATE
PROCESS
Probate is the court administered process of distributing
a deceased persons estate to those entitled to receive the
decedent's assets. Although generally not a pleasant
experience, it can not always be avoided. I plan most of my
client's estates with which will avoid the need for a probate
at their death. Not everybody, however, came to me for their
estate planning needs, and thus many people will have their
estate's probated after they pass away. This process is timely
(roughly from date of death to distribution of assets) and
costly (a statutory fee of up to 6% is possible), but is
required by law in many instances. The purpose of this article
is to discuss how the probate process works in California when
you select John B. Palley to be your probate attorney.
Article Contents
THE BEGINNING STEPS
It is a good idea
to start the probate process as quickly as possible after the
death of the decedent. Obviously, funeral and burial
arrangements, and other family matters need to be addressed
first. Once these personal matters have been taken care of,
it's important to get the probate process started. The process
begins by hiring a competent attorney who can handle the
probate for you, leaving you with as little responsibility as
possible in regards to the decedent's estate. I pride myself
on meeting with you to determine what needs to be done,
efficiently filing all court documents, and moving the probate
process along toward the earliest possible conclusion.
GENERAL PURPOSE OF
PROBATE
In general, all
steps in the administration of the estate will be directed
toward three goals: collection and management of assets,
payment of debts and taxes, and distribution of the balance of
the assets as provided in the will. While it is the attorney's
job to take care of preparing all legal documents, conducting
all legal filings, making all court appearances, and in
general move the probate toward a conclusion; it is the
executor's job to make sure all assets are found, a list of
creditors is made, and that proper disbursements are
eventually made.
If you end up as
executor, you are limited in the duties you can conduct
without court approval. It is thus important to communicate
with your attorney before doing anything related to the
decedent's property or creditors. If appropriate we will ask
the court to grant you authority to administer the estate
under the Independent Administration of Estates Act. The
authority, if granted, will enable you to take certain actions
in administrating the estate without court approval by simply
giving notice of your proposed actions to persons having an
interest in the estate. We will provide you with further
guidance on this "notice of proposed action" as the
administration of the estate progresses. We recommend,
however, that no actions be taken without conferring with us.
DOCUMENT INTENSIVE
PROCESS
The probate process
if full of standardized forms and other hand drafted legal
pleadings that need to be filed with the court and mailed out
to various interested parties. From time to time, throughout
the process, documents are submitted to the probate court and
reviewed by court representatives or the probate Judge. If all
materials are in order as required under the California
Probate Code and local court rules, the court order will be
prepared and submitted to the judge for signature without the
need for a personal appearance by myself as attorney or you as
the representative. If any document is missing or requires
additional information to support the petition, the court
clerk will notify our office before the hearing to enable us
to submit in advance the necessary information. In most
circumstances, this will eliminate the need for a personal
appearance by us or by you, until the final hearing.
At the outset, I
should point out that it will be my responsibility as your
attorney to see that all the steps in the administration of
the estate are taken, including the preparation of all
necessary documents. From time to time we communicate with our
client about various aspects of administration of the estate,
and are always available for telephone calls by the client
with questions.
COLLECTION AND MANAGEMENT
OF ASSETS
After you have been
appointed executor of the estate, you are to take possession
of all the decedent's property. We will help you do this and
will advise you on the management of estate assets.
Securities, jewelry, deeds to real property, bank statements,
and other assets must be managed very carefully by the
representative. This is necessary because we will prepare an
inventory and appraisement of the estate's assets, which will
require a complete list of all the decedent's assets.
Some assets do not
go through the probate process, but I will still help you
administer them. For example, life insurance, joint tenancy
property and revocable trusts, generally do not go through the
probate process.
You should prepare
a list of all the decedent's life insurance policies. We
should also know about any beneficial interest they had in
anyone else's life insurance policies. After we have examined
those policies, we will be available to help you or any
beneficiary complete and file the forms.
Riders should be
issued on policies of insurance on the decedent's property,
adding your name, as executor, as an insured. After the estate
assets have been appraised, we will review the policies to be
sure that the coverage is adequate. Full insurance protection
is extremely important to you, because your personal funds may
be at stake.
For your
protection, we recommend that you take out a public liability
insurance policy, the details of which we will be glad to
discuss with you or your agent. It is prudent to call an
insurance company to determine the availability of "public
liability insurance" for yourself as the estate's
representative for the estate property. You should locate all
insurance policies or contact the decedent's insurance broker,
who may have all the necessary information. You should notify
all insurance companies of the decedent's death and of the
change of address for future premium notification. The
coverage under the policies will continue after the decedent's
death for the benefit of the estate as long as the premiums
are paid. The executor has the right to exercise all incidents
of ownership over the policies.
It may become
necessary to sell some of the estate's property, either
because an item should be disposed of to avoid needless
expense or loss through depreciation in value, or to raise
cash to pay expenses, taxes, or legacies. Certain assets can
be sold only with court authorization. Because probate sales
are subject to many technical rules, you should not make any
arrangements for the sale of assets without consulting us. We
will send you a schedule of the estimated cash requirements of
the estate to help you determine what, if any, assets should
be sold.
After consultation
with us, you may retain auditors, accountants, attorneys, or
other tax experts for any action that they may lawfully
perform in computation, reporting, or preparing tax returns,
in payment of taxes, or in any negotiation or litigation that
may be necessary.
Our office can
prepare and file the federal estate tax return and the
California estate tax return, as well as the federal and state
income tax returns. You may prefer, however, to have your or
the decedent's accountant prepare some or all of these returns
if the accountant is familiar with the decedent's assets and
the preparation of these somewhat specialized tax returns. In
any event, it is critical to assign the responsibility for
these returns to assure timely filing.
The decedent's
final individual income tax returns (federal and state) are
due at the normal due dates; i.e., the 15th day of the fourth
month following the close of the decedent's tax year. This is
usually April 15. This date remains the same as if death had
not occurred.
As executor you are
required to invest all cash not needed to administer the
estate in interest-producing investments. However, there are
limitations on the kinds of investments you may make. An
executor may deposit estate funds in accounts at banks or
insured savings and loan associations in this state or invest
in United States obligations maturing in one year or less or
in certain common trust funds or mutual funds without court
approval. With court approval, other investments may be made.
The law provides
considerable leeway for the executor's independent action
unless the will expressly precludes administration of the
estate under the Independent Administration of Estates Act.
Actions under this law require minimal court supervision in
the sale of estate assets, the payment of debts, and the
conversion of investment assets to another form.
HANDLING DEBTS AND TAXES
When the petition
to admit the will is submitted to the court, a concurrent
notice to creditors is published in the manner required by
law. The notice must be published even if there are no known
creditors.
Creditors must
present their claims within four months after the issuance of
letters testamentary appointing you to serve as executor.
(This issuance of letters occurs after the notice is
published, so there is a date certain for this four-month
period.) Any claims not presented are forever barred from
collection. This includes claims you yourself may have, e.g.,
any sums you may have advanced to pay last-illness or funeral
expenses. Claims should be made on special forms and must be
approved by both you and the court before you can make
payment. Accordingly, all claims should pass through our
hands. For your own protection, you should not pay any claims
without consulting us. We will be happy to provide blank forms
to you or any creditors who need them.
California has no
inheritance tax for any resident who died after June 8, 1982,
except for the "pick-up" tax associated with the statutory
allowable credit for state death taxes under Internal Revenue
Code 2011.
Depending on the
gross value of the estate, it may be necessary to file a
federal estate tax return. The federal estate tax return and
the tax are due nine months after death. The estate has the
option to value assets as of the date of death, or under
certain circumstances as of six months after death. Before the
date on which the tax is due we will make a rough calculation
of the federal estate tax to enable us to provide you with an
outline of the estate's cash needs for death taxes. A general
outline of cash needs for all administration expenses will be
made as soon as possible.
It will be
necessary to prepare and file federal and state income tax
returns for the decedent for the period ending with the date
of death. You may also be required to file income tax returns
for the estate for each year until the final distribution. We
will give you our recommendations about these matters after we
have had an opportunity to study them in detail.
The estate is a
separate entity for federal and California income tax
purposes. It may elect the calendar year or any fiscal year
ending at the end of any calendar month within 12 months after
death.
You must also file
final federal and California income tax returns for the period
from January 1, 1998 through the date of death. These returns
are not due until their normal due date next April 15. After
we have all the necessary information we will give you our
recommendations about the selection of the estate's fiscal
year and related income tax matters.
DISTRIBUTING THE ESTATE
At any time two
months or more after the first issuance of letters
testamentary, it is possible to petition the court for a
partial distribution of estate assets. If the interests of the
beneficiaries and the creditors are adequately protected, the
court will ordinarily grant such a petition. A preliminary
distribution can cause adverse estate tax results if a
distribution occurs within the first six months after death
and we desire to value the assets on the alternate valuation
date (discussed above).
Distribution of any
portion of the residuary estate (but not specific gifts) will
have income tax consequences, because such a distribution
shifts taxable income from the estate to the distributees.
Before the expiration of the two-month period we should confer
about the desirability of making such a distribution.
Final distribution
of an estate can probably be made soon after the federal
estate tax return is filed (usually nine months after the date
of death). When all debts and taxes have been paid and the
estate is ready for final distribution, we will prepare for
your signature a final account and report based on your record
of receipts and disbursements. The account and report will
also ask the court to order distribution of the remaining
estate assets to the beneficiaries. About two weeks after the
account and report are filed, the court will hear the account
and report. At that time the court will probably enter a
judgment settling the account and report and ordering
distribution of the balance of the estate assets. We will then
help you distribute the assets and obtain the necessary
receipts. Ordinarily, assets should be distributed only on
court order. If you feel an exception should be made, please
consult us.
COMMISSIONS AND FEES
Compensation for
Ordinary Services. Under California Probate Code 901, you may
receive commissions on the amount of the estate accounted for
by you. You may either accept or waive the commissions for
your services as executor. If you accept your commissions, the
estate will be entitled to deduct them in computing the
taxable estate for death taxes or, alternatively, in
determining the taxable income of the estate. You will also be
required to report these commissions as income. On the other
hand, if you waive your entitlement to commissions, they will
neither be paid and taxed to you nor deductible by the estate.
Later we will give you an estimate of the amount of your fees
and commissions for ordinary services.
You are entitled to
further allowances as the court may consider just and
reasonable for extraordinary services, such as sales or
mortgages of real or personal property; contested or litigated
claims against the estate; preparation of the estate, income,
sales, or other tax returns, or adjustment, litigation, or
payment of any of those taxes; litigation relating to property
of the estate; carrying on the decedent's business under court
order; and other litigation or special services as necessary.
See also our instructions on expenses that you may incur.
Some of our
services are covered by the fee for ordinary services and some
by an additional fee or fee for extraordinary services. For
our ordinary services, we as your attorneys are entitled to
compensation at the same rate as your ordinary compensation.
For any extraordinary services, the Probate Code provides that
the court may set whatever fee it considers proper. You will
be interested in knowing which of our services are
extraordinary and which are ordinary, and the following
information may be of some help.
Services that the
court considers extraordinary for the executor are considered
extraordinary for the attorney as well. In addition to those
items, we frequently find that a decedent owned property in
another state, which usually requires extensive correspondence
on our part. If there is an ancillary (second) administration
in that state, we must render services not contemplated by the
fee schedule to assist and coordinate probate proceedings.
Examples of extraordinary service include: preparing the
estate's death tax and income tax returns, defending the
estate in lawsuits, negotiating valuation of assets for death
tax purposes to establish the fair market value, handling
unusual sales transactions, and the like.
We hope that this
general outline of your duties and the major events that will
take place during administration of the estate will be useful.
Although matters may arise that we have not mentioned, we want
to assure you that we will try to minimize any inconvenience
to you. Conversely, many of the matters mentioned above may
not arise in your administration.
If you have any
questions concerning probate in general or if you wish further
details about any of the matters we have mentioned, please do
not hesitate to call to set up an appointment to discuss.
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