Len's Sonoma Valley office provides a full range of legal services related to the administration of Decedents' estates throughout Northern California. If you are a personal representative or Successor Trustee and need a lawyer to guide you contact Len.
Probate:
Probate is the legal process by which the property of a deceased person
is transferred to others. Except where the value of the deceased person's
property is under $100,000, or the deceased transferred their property
into a trust prior to their death, formal court-supervised probate
proceedings will be necessary.
The process depends on whether or not the deceased left a will. If there is a will, and it names a person to be appointed as Executor, then that person, usually with the assistance of an attorney, files a petition with the Court to be appointed Executor and to admit the will to probate. Notice must be given to all persons named in the will, all known creditors of the deceased, and the deceased's natural heirs. Notice must also be published in a local newspaper.
Unless someone objects to the proposed executor or challenges the will, all of this is pretty routine. The Executor's first job is to gather and safeguard the deceased's assets so that it can be distributed to the heirs named in the will after the claims of legitimate creditors have been paid.
Creditors of the deceased can make claims against the estate within 120 days after notice of the probate has been published. Because of these potential claims, no money or other assets of the estate can be distributed to the beneficiaries until after the 120 day period has ended.
The Executor (again, usually with the assistance of an attorney), must then prepare a complete inventory of all of the deceased's property belonging to the probate estate, including real estate, bank accounts, stocks and bonds, and personal property. Property that passes outside of probate through a revocable trust, joint tenancy, or beneficiary designation doesn't count. The Court will appoint a Probate Referee to determine the value of the estate's non-cash assets, and this Inventory and Appraisal is filed with the Court.
Depending on the terms of the will, the Executor may have to sell property or other assets. The Executor must account to the Court and the heirs for every penny that comes into and goes out of the estate. When the time for creditor's claims has expired, and the estate's assets have been liquidated or are otherwise ready to be distributed, the Executor will submit to the Court and the heirs a probate accounting and a proposed Order for Final Distribution that divides the estate in the manner provided by the will.
If all goes smoothly, and depending on the type of assets and the distributions called for in the will and whether or not their are any disputes, the entire process takes approximately one year. If the estate is very large, and a federal estate tax return has to be filed for the deceased, then it can take even longer. Probate can easily last over two years, especially if there is a conflict between the heirs and the Executor. Both the Executor, and the Attorney hired by the Executor, get probate fees that are set by statute as follows:
4% of the first
$100,000
3% of the second $100,000
2% of the next $800,000
1% of amounts above $1,000,000
For example, the probate of a $600,000 estate earns the Attorney a fee of
$4,000 + $3,000 + 4 x $2,000 = $15,000
And since the Executor of the estate earns the same amount as the Attorney, the total statutory fees for a $600,000 estate come to $30,000.
If the deceased died leaving no will, then the process is a little different, but the costs are the same. Someone, usually a close family member, petitions the Court to be appointed Administrator. An Administrator is just like an Executor, but an Administrator must always post a bond to assure their performance, and the Court may choose to limit the power of an Administrator to take action without Court approval.
In the absence of a will, the deceased's property is distributed by way of "intestate succession". The rules of intestate succession are established by statute and vary from state to state, but essentially the distribution depends on the closeness of family relations. For more information on intestate succession see discussion in Wills, Trusts, and Estate Planning.
Trust Administration:
Sounds hard, doesn't it? The perceived horrors, expense, and duration
of probate is why many people get trusts. Trusts are marketed as probate
avoidance and tax sheltering devices. They work. However, many people
fall into the "Living Trust Myth", which is this:
The Living Trust Myth:
"Now that we have a trust, after we die, everything will go to our children automatically and they won't have to see an attorney or actually do anything to make it work."
There's just one problem with the Living Trust Myth. It's a myth. Trusts are easier to deal with than wills, because ordinarily your successor trustees will not have to go to court. However, depending on what kind of trust you have and the value of your assets upon your death, the process of Trust Administration can be very complicated.
Trust Administration can be easy. If you have a simple trust, without "A/B" split provisions necessary to shelter your property from federal estate tax, and if your successor trustee and all of the beneficiaries get along well with one another, they can agree to cut a few corners and make it simple. Trust Administration can be as easy as showing up at the bank with the Trust and a death certificate, closing the accounts, paying off the bills, and splitting up what's left between the beneficiaries.
However, the beneficiaries of a trust have the same rights to a proper accounting of the trust that heirs do with respect to a probate estate. The difference is that the court is not looking over the shoulder of the successor trustee to make sure that everything is done correctly. If the beneficiaries of the trust are not willing to waive an accounting, and most aren't, then the successor trustee has to keep the books and make sure everything is squared away, just like an executor. It's still better than probate, because the trustee and attorney fees will be less, and the process will take less time than probate, but there is still work that must be done.
Many successor trustees are sophisticated enough to do this on their own. But the majority are not. If you are the successor trustee of a trust, and it comes time to start dividing up the property, then you should consult with an attorney to see what has to be done, simply to protect yourself. A successor trustee who fails to carry out the terms of the trust can be held personally liable for a breech of fiduciary duty, even if the successor trustee meant well.
Also, if you and your spouse created an A/B trust to protect your children's inheritance from death taxes, then after one spouse dies, the surviving spouse, as the sole trustee of the trust, has a duty to conduct a trust "split". Usually, the deceased spouse's separate property and community property is put into a "Bypass" or "Credit Shelter" trust created to prevent the deceased spouse's property from being subject to federal estate tax after the surviving spouse's death. If the surviving spouse does not do the trust split, then the A/B trust will not work, and federal estate tax, reaching into hundreds of thousands of dollars, may have to be paid to the IRS.
Administering a trust during an A/B split is very complicated, and should be done with the help of an attorney and an accountant, both of whom are experienced in estate work. This process can be very expensive and time consuming, but when you consider the potential tax savings, it is usually worth it to most people.
