Year: 2014

Inventory and Appraisal-Valuing the Probate Estate

One of the many important steps in a probate case is the inventory and appraisal. The executor or personal representative of the probate estate must have a good working knowledge of the property owned by the decedent upon their death as this is the property that will be subject to the probate. Furthermore, with the initial filing of the probate case, the personal representative must make a declaration of the property in the probate petition and an approximate value thereof.

Part of the many responsibilities of the executor is to collect all of the assets if the estate. Thereafter, the executor is charged with building the inventory and appraisal, an itemization of the assets and their valuation, to be filed with the court in the probate case. Extra effort early in the case will lead to a more accurate filing and eliminate the need for additional filings throughout the probate case and probate administration as additional assets are discovered. The inventory aids the executor in fully appreciating the nature and scope of the property subject to probate, informs interested parties as to what property comprises the probate estate and if applicable will be beneficial in the filing of estate or income tax returns. Additionally, an accurate and complete inventory and appraisal will make preparing a petition for final distribution and closing of the probate case that much easier as those items must be specifically detailed as part of the closing process. Fees for the personal representative, probate referee and the attorney for the estate are all based on the value in the inventory and appraisal, exclusive of debts.

As the case progresses, the personal representative must compile an itemization of the assets and submit the itemized inventory to a probate referee who is appointed by the court. The probate referee will appraise those items required by law for them to appraise and the executor will appraise those items that he or she is responsible for. Generally, the personal representative shall be responsible for valuing cash and cash equivalents such as checks, accounts in financial institutions, brokerage accounts and proceeds of life and accident insurance. The probate referee shall value all other property in the estate.

Certification of Trust-Keeping the Bank Out of Your Trust

An important aspect of using a trust is ensuring that the trust is properly funded with assets that are appropriate for being held in trust. While not all assets should be held in trust, particularly those with a tax deferral aspect, most bank and financial accounts should be properly funded in the trust by conveying title of the assets to the trustee. This entails reaching out to the bank or financial institution and transferring existing accounts to the trustee or in some cases re-opening the accounts in the name of the trustee depending on the bank or financial institution’s policies.

Often the bank or financial institution will ask for a copy of the trust. While the question is legitimate so that the financial institution can verify the trustee, its powers and validity, this is an intrusion upon the assets owners privacy and unnecessary. Under the probate code, the asset owner who is desirous of retitling assets in the name of the trustee may present the financial institution with a certificate of trust in lieu of providing a complete copy of the trust instrument.

A certificate of trust is a signed summary of the trust and its relevant terms. At a minimum, the certificate should set forth the name of the person or persons who created the rust, the name of trustee, the tax identification number of the trust, the power of the trustee and whether or not the trust has been revoked or modified. The important matter is that those provisions of the trust that address disposition of the trust assets and distributions do not have to be disclosed and may remain confidential.

Under certain circumstances any bank or financial institution who refuses to accept a properly completed certification and instead demands the trust itself may be sued for damages and attorney fees related to the refusal to accept the certification. While the bank or financial institution has legitimate concerns, anyone outright demanding a complete copy and refusing to accept a certification that complies with law should be seen as probably a good sign that the particular bank or financial institution will not be the best choice in terms of cooperation and ease to work with for the trust accounts. In those cases the trustee should look elsewhere for banking and financial services.

Probate Bond-Do I Need One

A probate bond is an assurance that typically takes the shape of a surety, signed jointly by the Executor/Personal Representative and the bond company. The goal of the bond is to ensure that representative of the estate carries out their responsibilities in strict compliance with the will, probate code and applicable court rules. If the representative falls short of fulfilling their responsibilities then either a creditor, beneficiary, an heir or other protected party may seek redress upon the bond to cover their loss and potentially costs of recovery.

Generally, every representative appointed by the court must post a bond unless there is an exception. Under Section 8481 of the California Probate Code a bond is not normally required if the will waives bond or if all of the beneficiaries waive the requirement of a bond unless the will specifically requires one. However, even if the will waives a bond, the court or an interested party may petition for the requirement that the representative obtain a bond.

This may occur when the estate has creditors and the court may dictate that a bond be procured for the amount of outstanding debts. Additionally, if the representative is not a resident of California the court will require a minimum bond in the amount of $12,000.00.

Because a bond is a surety contract, the issuing company will want to review the credit worthiness of the representative before issuing the bond. If there is the potential that the proposed representative may not be bondable due to poor credit or other matters it is important to consider alternate representatives named in the will, or otherwise, before petitioning for the will to be admitted to probate. If a problem is discovered after filing a petition for probate and a hearing is held, the parties will have to repetition for another party to be appointed which will delay the beginning of the administration for several months and perhaps longer.

Selecting a Trustee

The selection of the right person or institution is key to having a successful trust and is often overlooked when the trust is created. Typically the person who creates the trust will serve as the initial trustee which works well for most and during the period which the trust is revocable. However, what happens when that person passes or suffers a disability or accident that renders them incapacitated is where things become more challenging. At that time the party designated as a successor trustee will succeed to the office and perform the functions and duties as outlined in the trust document and be subject to fiduciary duties imposed by law.

Too many times, parties will name family members or acquaintances without giving much thought to the responsibilities placed upon that party and whether they are capable of performing the duties competently or without reservation. As a general rule, the party selected must have some degree of business acumen and discipline to address pressing issues that arise in administering the trust. An anecdote that I often use with clients is if they are considering naming someone as a successor trustee but when they visit that person and they have weeks of unopened mail unattended to then they probably aren’t the best choice for a successor trustee.

As a guide, the person selected must be able to take all actions that you would normally take in your place, such as paying bills, monitoring investments, filing tax returns, making payments for the benefit of loved ones, addressing insurance concerns and running a business if necessary. Additionally, the probate code places numerous responsibilities on a successor trustee such as proving notices, accounting to beneficiaries and allocating income and expenses among assets held in the trust.

California law imposes numerous fiduciary duties on the trustee, a breach of which can lead to personal liability for the trustee. Therefore the person designated must be capable of diligently performing their role as trustee and willing to do so in a responsible manner. Of additional concern is the makeup of the family members and family dynamics. Are there family members who may be more difficult than others? Is the person named able to handle difficult persons or act impartially amongst the interested persons? If the answer is yes then prudence dictates that selecting a professional trustee or trust company may be the best choice.

Independent Administration in Probate-Smooth Sailing or Choppy Waters?


Filing a probate case can at times resemble a maze; one of forms, court rules, procedures and unfamiliar processes. Having an experienced probate attorney is paramount for administering a probate estate timely, efficiently and as smoothly as possible. Navigating the probate court while grieving the loss of loved one can be challenging but is necessary to settle the affairs of the family member who has passed.

California law allows for two types of probate administration, independent and dependent. As the name implies, independent administration is conducted by the personal representative (executor) of the estate with greater independence from the court, but still subject to supervision and oversight by the court for many aspects of the case. This is important as it allows the personal representative to perform many functions without obtaining court authorization, approval, or orders as is required if the personal representative is acting under a dependent administration.

A personal representative may petition the court for one of two types of authority of independent administration, full authority or limited authority. Full authority allows the representative to take all actions and exercise all powers under the probate code whereas a representative with limited authority may take all actions and exercise all powers under the probate code except the authority to sell real property, exchange real property, grant an option to purchase real property and borrow money that is secured with real property belonging to the estate.

As a safeguard and a check upon the personal representative acting under full authority the law requires that a notice a proposed action be given prior to taking action and that any interested party be afforded an opportunity to object prior to the action being taken. Examples of actions that require a notice of proposed action are selling or exchanging real property, selling or exchanging personal property, borrowing money, settling claims against real or personal property, investing money and selling a business or ongoing concern.

Examples of actions that generally do not require a notice of proposed action are listing real property for sale for up to 90 days, leasing real property for less than one year, selling perishable or depreciating property, selling securities, compromise of a claim against the estate, compromise of a debt owed to the estate and allowance or rejection of creditors claims. While a notice of proposed action may not be required in these cases often, due to strategic factors or others reasons a notice may be prudent to protect the personal representative from claims of unhappy beneficiaries or creditors.

While independent administration may lead to less court involvement it should not be assumed there would be less responsibility upon the personal representative. On the contrary, as there is less court involvement, the personal representative and their attorney must stay vigilant in performing their roles to ensure a smooth administration in a short timeframe as possible. Due to the nature of independent administration and the probate code sections authorizing it, the personal representative must careful in discharging their duties as to avoid running afoul of the strict requirements of the independent administration process.


Avoiding the Probate in Small Estates-The Summary Proceedings

If your loved one passed leaving a Will as their only form of estate planning then the Will most likely must go through probate in the probate court in order to be valid as a testamentary device. However, if your circumstances are unique and fall into a few limited fact patterns you will be fortunate in that it is possible to avoid probate court and simply have the estate administered in one of several summary probate procedures.

Summary probate procedures work best when the number of heirs are limited and all parties are working together in a harmonious fashion. If there is a significant amount of acrimony among the heirs or heirs are scattered throughout the country the summary probate procedures can be a bit cumbersome.

Generally, these procedures work when the dollar value of the property owned by the probate estate does not exceed $150,000 in value and it has been more than 40 days since the date of death of the loved one. When calculating the value of the probate estate it is important to note that property held in joint tenancy, non-probate transfers, life estates, pay on death accounts and other assets are excluded from the cap.

The first summary probate procedure is collection of personal property via an affidavit. In this procedure all of the heirs or those entitled to receive the property may execute an affidavit for presentation to the holder of the property and demand that the property be delivered to them. The affidavit must contain those items required by the probate code and have a death certificate attached thereto.

The second summary procedure applies to real property and may fall into two categories. If the fair market value of the real estate does not exceed $50,000 then the property may collected via the affidavit procedure. Otherwise, if the property is valued at greater than $50,000 and the gross value of all other property of the probate estate does not exceed $150,000 then the heirs may petition the probate court for a summary proceeding to determine their right to inherit the real property.

One of the important factors to be considered before choosing a summary proceeding are creditor concerns and outstanding obligations of the deceased loved one. If there are outstanding bills and debts, those obligations will attach to the property and pass along with the property to the ultimate recipient. While, in the absence of any personal guaranty, the recipient is not personally liable for the debts, the creditor may look to the property received as payment on the outstanding obligation. When creditor concerns are a factor a full probate administration should be strongly considered to take advantage of the creditor claim process available in a probate administration.