Do you have questions about probate administration and the probate process? Find more information about probate below!
Probate costs fall into two basic categories - actual out of pocket costs and fees for services. The out of pocket costs must be advanced by the person seeking to be appointed Executor or Administrator, but are reimbursable. These costs include filing fees paid to the court, publication fees paid to a local newspaper and appraisal fees paid to a court-appointed appraiser called a Probate Referee.
Fees for services are paid to the attorney and to the executor or administrator. These fees must be approved by the court and are only payable at the very end of the administration process. Probate fees for the attorney and executor are based on the total fair market value of the assets included in the probate. All fees are paid by the estate.
To open a probate you must file specific paperwork with the court, identifying the person to be appointed as the executor or administrator. You must also provide an estimate of the value of the entire estate. The court will set a hearing date and you must then arrange for publication with a court approved newspaper, in advance of the hearing. You must also provide notice of the hearing to everyone who is entitled to be notified. On the date of the hearing, provided all the necessary notices have been given and the correct paperwork filed, the court will appoint an executor or an administrator to represent the estate.
The issuance of Letters Testamentary or Letters of Administration by the court business office marks the beginning of a 4 month Creditor’s Claim period. The decedent’s creditors must file a creditor’s claim form with the court and serve a copy on you or your attorney before the 4 month window closes, or within 60 days of receiving notice from the executor or administrator. It’s important to get these notices out as soon as possible after appointment. The executor or administrator is responsible for determining whether such claims are valid or not, and taking the appropriate action. A creditor who filed their claim timely but is rejected must file a civil action against the estate within 90 days or lose the right to do so.
The executor or administrator must also file a report with the court, and serve a copy on everyone entitled to notice, that identifies every asset of the estate and provides an appraised value for each asset. This is done using a court form called an Inventory and Appraisal. After the form is filled out, if the estate contains real estate, personal property or investments the form must be delivered to a court-appointed appraiser called a Probate Referee, who will fill in the values for each asset and return the form so it can be filed and served.
The majority of estates that require a formal probate proceeding include the decedent’s residence, that often must be sold in order to divide up the estate among the beneficiaries or heirs. The property must be listed so it’s exposed to the market and the highest price can be obtained. The court will usually not approve a real estate agent commission higher than 5%, unless it can be shown that selling the property was particularly difficult for some reason.
After the tax returns have all been filed, the creditor’s paid and the estate’s real and personal property has been liquidated it’s time to prepare a Report and Account.
The Report portion identifies all the things the executor or administrator had to do while administering the estate, confirms what notices were required and that they were sent out, what bills were paid or still need to be paid and calculates the statutory fee that the executor or administrator and their attorney is entitled to. The Report also identifies what assets are on hand and sets out a proposal for how to distribute them to the beneficiaries or heirs.
Attached to the Report is the accounting, prepared in the format required by the Probate Code. The entire document must be filed with the court and a copy must be served on everyone who is entitled to notice.
At the hearing the court will issue a ruling and direct that the final administration costs be paid (including the executors or administrators fees and attorneys fees) and that the remaining balance of the estate be distributed to the beneficiaries or heirs.
When those payments and distributions are made, the recipients must sign a receipt which are filed with the court, confirming they received what they were entitled to.
A surety bond is required for most probate administrations because the executor or administrator has full access to all of the assets belonging to the estate and could help themselves to those assets. The purpose of a bond is to protect the estate, the decedent’s creditors and the beneficiaries. If the executor or administrator does take estate assets the bond company pays the estate back and then pursues the unscrupulous executor or administrator. The bond premium is advanced by the executor or administrator and they are reimbursed by the estate.
After you’ve been appointed, it may take a week or more for the court staff in the business office to issue the paperwork, called Letters Testamentary or Letters of Administration, documenting your authority to begin collecting all of the assets that belonged to the decedent at the time of his or her death. You will need to obtain a TIN or tax identification number, from the IRS, then provide that and your Letters to a bank to open an estate bank account. At that point, you can begin “marshaling” or collecting and transferring cash from the decedent’s personal account into it. You will also marshal any investment accounts, personal property or real estate owned by the decedent.
There are other tasks that you will need to accomplish between the time you are appointed and the end of administration. Many of these additional tasks relate to required notices to various agencies and individuals. Other tasks involve tax filings, addressing creditor's claims, and creating a formal accounting in the format required by the Probate Code.
The executor or administrator is responsible for determining whether the decedent has neglected to file any tax returns when required to do so. The executor or administrator is charged with ensuring that the decedent’s unfiled and final tax returns are filed. In addition to filing the final tax returns, the executor or administrator must notify the California Franchise Tax Board of the estate administration. When the decedent, or the decedent’s pre-deceased spouse received MediCal benefits, a notification must be sent to the Department of Health Care Services. If an heir or beneficiary of the estate is incarcerated, a notice must be sent to the Director of the California Victim Compensation Board. Copies of all notices must be filed with the court and served on the heirs and others entitled to notice.
There are 3 kinds of property that an estate can hold. Real Property (houses, land or even timeshares), Intangible Personal Property (money or investments) and Tangible Personal Property or TPP (items that can be touched). Most TPP has more sentimental than monetary value. TPP is valued at “garage sale prices” which is often surprising to family who honestly believe that grandmother’s china cabinet must be valuable because she had it for many years. If the executor or administrator believes the estate has valuable antiques or fine art, they must take special care to let the Probate Referee know they should be separately appraised.
Probate accountings are different from the kinds of accountings most businesses do. The format and content of a probate accounting is specifically defined in the California Probate Code. Surprisingly, tax preparers or CPA’s usually lack the knowledge or experience to prepare a court compliant accounting without conducting research or consulting a probate attorney. The probate court will not approve an accounting that does not comply with the strict requirements of the Probate Code.
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