Spousal Rights in California Probate

September 16th, 2011

As I went through my outline from my 2008 presentation, for NBI, on California probate law I realized I had pretty extensive materials on surviving spousal rights. I hope you find it interesting! If you have any questions let me know or visit our website at www.californiaprobate.info

 

  1. DETERMINING IF SPOUSE’S ELECTIVE SHARE IS A REASONABLE   OPTION

            1:50 – 2:35  John B. Palley

  1. Protection for surviving spouse.  Pursuant to Probate Code 6500 et seq. there are procedures in place to protect the surviving spouse and children in different situations.  
    1. Pursuant to PC 6500 the decedent’s surviving spouse and minor children are entitled to remain in possession of the family dwelling and use the decedent’s personal property.  This for a period of 60 days after the inventory is filed or longer upon Court order.
    2. Pursuant to PC 6510 the Court may order the property of the decedent exempt from enforcement of a money judgment to the surviving spouse or minor children.
    3. Pursuant to PC 6540 the following are entitled to such reasonable family allowance out of the estate as is necessary for their maintenance according to their circumstances during administration of the estate:

a)      the surviving spouse;

b)      minor children;

c)      adult children who are incapacitated from earning a living and were dependent in whole or in part upon the decedent for support;

d)      upon Court order a family allowance can also be provided to other adult children who were actually dependent on the decedent and a dependent parent.

  1. Spousal Rights and Personality
    1. Surviving Spouse’s Right to Community Property.  Upon the death of a married person, one-half of the community property belongs to the surviving spouse and the other half belongs to the decent (PC 100).  However, a husband and wife may agree in writing to divide their community property on the basis of a non pro rata division, or on the basis of the division of each individual item of community property, or partly on each basis.   
    2. If the decedent died without a will (intestate succession) the decedent’s one-half of the community property passes to the surviving spouse (PC 6401).  Thus the determination of property as community or separate is crucial in cases of intestate succession.
    3. Upon the death of a married person, all the decedent’s property may pass to the surviving spouse without administration except: property passing to someone other than the surviving spouse under the decedent’s will or the law of intestate succession; property disposed of in trust under the will; and property in which the will limits the surviving spouse to a qualified ownership interest.  (PC 13500 et seq.)

PRACTICE POINTER: Though administration is not required by the probate code it may be required by the top lawmaker… a title company!  That is, at least a spousal property order confirming the asset belonging to and/or transferring to the surviving spouse.        

  1. Surviving Spouse’s Right to Compel Restoration of Community Property.  The surviving spouse may require the transferee of property in which the surviving spouse had an expectancy at the time of transfer to restore to the decedent’s estate one-half the property if all of the following are satisfied pursuant to PC 102:
  2. the decedent died domicilied inCalifornia;
  3. the decedent made a transfer of the property without receiving in exchange a consideration of substantial value and without the written consent or joinder of the surviving spouse; and
  4. the transfer is one in which the decedent retained an interest, or one in which the decedent held the property in joint tenancy at the time of death.   
    1. Surviving Spouse’s Right to Separate Property.  Under the laws of intestate succession, the surviving spouse is entitled to all, one-half or one-third, of the deceased spouse’s separate property when there is no will, depending on the relationship of the surviving family members (PC 6401).  For example, if the decedent left no children then the surviving spouse would receive 100% of the separate property, if 1 child then 50% to the surviving spouse, if 2 or more children 33% to the surviving spouse.  Again, this is the distribution as to separate property when the decedent had no will.
    2. Determining Alternatives for the Surviving Spouse – Disclaimers, Rights and Options.  In some circumstances, there may exist an agreement between the surviving spouse and the decedent with respect to disposition of property upon the decedent’s death.  The rights of the surviving spouse are governed by PC 140 et seq.
      1. A “waiver” means a waiver by the surviving spouse of any rights listed in PC 141(a), whether signed before or during marriage. These include:
        1. property that would pass by intestate succession;
        2. property that would pass by will executed before the waiver;
        3. a probate homestead;
        4. family allowance;
        5. the right to elect to take CP against the will;
        6. the right to take the statutory share for an omitted spouse;
        7. the right to be appointed personal representative;
        8. an interest in property subject to a non-probate transfer.
  5. A waiver under PC 140 must be in writing and must be signed by the surviving spouse. 
  6. Of course, not all waivers are enforceable. Probate Code section 143 provides that a waiver is enforceable unless the surviving spouse proves either of the following:
    1. a fair and reasonable disclosure of the property or financial obligations of the decedent was not provided to the surviving spouse prior to the signing of the waiver unless the surviving spouse waived such a fair and reasonable disclosure after advice by independent legal counsel. 
    2. The surviving spouse was not represented by independent legal counsel at the time of signing the waiver.
    3. PC 143(b) provides that Section 721 of the Family code does not apply if the waiver is enforceable under this section.  FC 721 relates to the fiduciary relationship between a husband and a wife; i.e. fair dealing.  It provides in full as follows:

 

§ 721. Contracts with each other and third parties; fiduciary relationship   

(a) Subject to subdivision (b), either husband or wife may enter into any transaction with the other, or with any other person, respecting property, which either might if unmarried.
(b) Except as provided in Sections 143, 144, 146, 16040, and 16047 of the Probate Code, in transactions between themselves, a husband and wife are subject to the general rules governing fiduciary relationships which control the actions of persons occupying confidential relations with each other. This confidential relationship imposes a duty of the highest good faith and fair dealing on each spouse, and neither shall take any unfair advantage of the other. This confidential relationship is a fiduciary relationship subject to the same rights and duties of nonmarital business partners, as provided in Sections 16403, 16404, and 16503 of the Corporations Code, including, but not limited to, the following:
(1) Providing each spouse access at all times to any books kept regarding a transaction for the purposes of inspection and copying.
(2) Rendering upon request, true and full information of all things affecting any transaction which concerns the community property. Nothing in this section is intended to impose a duty for either spouse to keep detailed books and records of community property transactions.
(3) Accounting to the spouse, and holding as a trustee, any benefit or profit derived from any transaction by one spouse without the consent of the other spouse which concerns the community property.

  1. PC 144 provides that a waiver is enforceable if the Court determines either of the following:
    1. the waiver at the time of signing made a fair and reasonable disposition of the rights of the surviving spouse;
    2. the surviving spouse had, or reasonably should have had, an adequate knowledge of the property and financial obligation of the decedent and the decedent did not violate the duty imposed by 721(b) of the Family Code.
  2. PC 144 further provides if, after considering all relevant facts and circumstances, the court finds that enforcement of the waiver pursuant to subdivision (a) would be unconscionable under the circumstances existing at the time enforcement is sought, the court may refuse to enforce the waiver, enforce the remainder of the waiver without the unconscionable provisions, or limit the application of the unconscionable provisions to avoid an unconscionable result.
  3. PC 145 provides that if the language of the waiver or property settlement agreement provides to the contrary, a waiver of “all rights” (or similar language) in the property or estate of a present or prospective spouse, or a complete property settlement entered into after or in anticipation of separation or dissolution or annulment of marriage, is a waiver by the spouse of the rights described in PC 141(a).
  4. If the waiver, agreement, or property settlement is made after December 31, 1984, PC 147 provides that they are invalid insofar as it affects the rights listed in 141(a) unless it satisfies the requirements of PC 140-147.
  5. Rights of Election
    1. The surviving spouse may elect that all or a portion of the following property be administered in a formal probate proceeding so as to cause all of the marital property to be distributed under the decedent’s will.
      1. the decedent’s ½ of the community property or quasi CP;
      2. the decedent’s separate property;
      3. the surviving spouse’s ½ of the CP or quasi CP.
  6. Pursuant to PC 13502 this election shall be made in writing within four months of Letters issuing or at any other time as the court may allow upon a showing of good cause.
  7. The surviving spouse may elect to have all or part of the property transferred to a trustee under the decedent’s will or trust to be administered and distributed by the trustee.
  8. The surviving spouse may also elect to take community property (or quasi CP) against the decedent’s will.  
  9. E.     Spousal Property Petition  (PC 13500 et seq.)
    1. Although California law authorizes the deceased spouse’s property to pass to the surviving spouse without formal court proceedings, practical considerations may require some procedure to confirm the passing of the property (i.e. as mentioned above, title companies).  PC 13650 provides an optional proceeding to confirm to the surviving spouse the property that belongs to the survivor.  Sample Spousal Property Petition and Spousal Property Order are attached as Exhibits JBP 8 and JBP 9.
    2. A Spousal Property Petition is filed separately from a Petition for Probate, even if they are filed at the same time.  They should have the same case number.  Different courts require different levels of proof to substantiate the claim that the property is community property.
    3. If done properly an SPP takes under two months from start to finish so is much quicker than a full probate to conduct!

PRACTICE POINTER:  A Spousal Property Petition should always be the first petition you consider when dealing with a surviving spouse. It may not work in every case and may not be the best answer but you should always consider it as it is typically the most economical way to transfer property to the surviving spouse.  If you file a full probate, without considering the use of an SPP, the Court could ask for an allegation that the use of an SPP was offered to the client before filing the full probate.

  1. An Inventory and Appraisal is not required when using the SPP procedures. However, it may be done within three months of filing the SPP.
  2. Pursuant to PC 13550 the surviving spouse is personally liable for certain debts of the decedent chargeable against the property as described in PC 13551.
  3. Pursuant to PC 13551 the liability shall not exceed the fair market value at the date of death, less liens and encumbrances, of the decedent’s interest in the property.

            F. Other miscellaneous provisions relating to surviving spouses

 1.     Pursuant to PC13600 the surviving spouse may collect unpaid compensation up to $5,000 without procuring Letters by affidavit as laid out in PC 13601.

2.     Other petitions to avoid full probates may be utilized even if SPP won’t work such as Petition to determine succession to real property ($100,000 or less), 13100 declarations, etc….

 

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California Probate Code

September 16th, 2011

I have told you before that all answers are in the probate code, right!?  Most probate cases allow for simple sales of real estate that do not require Court confirmation before the sale. However, in some cases Court confirmation is required before the sale. What do you do then?  Well, I have a case right now going to auction at the Sacramento Probate Courthouse. Did you know they actually sell real estate sometimes just an old cattle auction!? It’s pretty funny to hear the Judge saying, “going once, going twice… SOLD!” However, they really do that. On rare occasions there are multiple bidders even. Sort of fun when somebody in the back row stands up, out of the blue, to make a bid.

 

 

California PROBATE CODE
SECTION 10300-10316

 

 

 

10300.  (a) Except as provided in Sections 10301 to 10303,

inclusive, and in Section 10503, real property of the estate may be

sold only after notice of sale has been published pursuant to Section

6063a of the Government Code (1) in a newspaper published in the

county in which the real property or some portion thereof is located

or (2) if there is no such newspaper, in such newspaper as the court

or judge may direct.

   (b) The publication of notice of sale shall be completed before:

   (1) In the case of a private sale, the day specified in the notice

as the day on or after which the sale is to be made.

   (2) In the case of a public auction sale, the day of the auction.

 

 

 

10301.  (a) If it appears from the inventory and appraisal that the

value of the real property to be sold does not exceed five thousand

dollars ($5,000), the personal representative may in his or her

discretion dispense with publication of notice of sale and, in lieu

of publication, post the notice of sale at the courthouse of the

county in which the real property or some portion thereof is located.

   (b) Except as provided in Section 10302, posting pursuant to this

section shall be for at least 15 days before:

   (1) In the case of a private sale, the day specified in the notice

of sale as the day on or after which the sale is to be made.

   (2) In the case of a public auction sale, the day of the auction.

 

 

 

10302.  (a) If it is shown that it will be to the advantage of the

estate, the court or judge may by order shorten the time of notice of

sale to not less than five days.

   (b) Except as provided in subdivision (c), if the court or judge

makes an order under subdivision (a), notice of sale shall be

published as provided in Section 10300 except that the publication

shall be pursuant to Section 6061 of the Government Code.

   (c) In a case described in Section 10301, if the court makes an

order under subdivision (a), notice of sale shall be posted as

provided in Section 10301 except that the notice of sale shall be

posted at least five days before the sale instead of 15 days as

required by Section 10301.

 

 

10303.  Real property may be sold with or without notice, as the

personal representative may determine, in either of the following

cases:

   (a) Where the property is directed by the will to be sold.

   (b) Where authority is given in the will to sell the property.

 

 

 

 

10304.  (a) The notice of sale given pursuant to this article shall

state all of the following:

   (1) Whether the sale is to be a private sale or a public auction

sale.

   (2) In the case of a private sale, the place at which bids or

offers will be received and a day on or after which the sale will be

made or, in the case of a public auction sale, the time and place of

sale.

   (3) The street address or other common designation or, if none, a

legal description of the real property to be sold.

   (b) The notice of sale may state other matters in addition to

those required by subdivision (a), including terms and conditions of

sale.

 

 

10305.  (a) A sale of real property at public auction shall be made

in the county in which the property is located. If the property is

located in two or more counties, it may be sold in any one of them.

   (b) A sale of real property at public auction shall be made

between 9 a.m. and 9 p.m., and the sale shall be made on the day

specified in the notice of sale unless the sale is postponed.

   (c) The personal representative may postpone a public auction sale

of real property from time to time if all of the following

conditions are satisfied:

   (1) The personal representative believes that the postponement is

to the advantage of the estate.

   (2) Notice of the postponement is given by public declaration at

the time and place appointed for the sale.

   (3) The postponement, together with previous postponements of sale

of the property, does not exceed three months in all.

 

 

 

 

10306.  (a) A private sale of real property may not be made before

the day stated in the notice of sale as the day on or after which the

sale will be made, nor later than one year after that day.

   (b) In the case of a private sale of real property, the bids or

offers shall be in writing and shall be left at the place designated

in the notice of sale, or be delivered to the personal representative

personally or to the person specified in the notice of sale, at any

time after the first publication or posting of notice of sale and

before the making of the sale.

 

 

 

10307.  Whether a sale of real property is private or at public

auction, bids shall substantially comply with any terms specified in

the notice of sale.

 

 

10308.  (a) Except as provided in Section 10503, all sales of real

property shall be reported to and be confirmed by the court before

title to the property passes to the purchaser, whether the sale is a

private sale or a public auction sale and notwithstanding that the

property is directed by the will to be sold or authority is given in

the will to sell the property.

   (b) If the personal representative fails to file the report and a

petition for confirmation of the sale within 30 days after the sale,

the purchaser at the sale may file the report and petition for

confirmation of the sale.

   (c) Notice of the hearing on the petition for confirmation filed

under subdivision (a) or (b) shall be given as provided in Section

1220 to the persons designated by that section and to the purchasers

named in the petition, and posted as provided in Section 1230.

 

 

 

10309.  (a) Except as provided in Section 10207, no sale of real

property at private sale shall be confirmed by the court unless all

of the following conditions are satisfied:

   (1) The real property has been appraised within one year prior to

the date of the confirmation hearing.

   (2) The valuation date used in the appraisal described in

paragraph (1) is within one year prior to the date of the

confirmation hearing.

   (3) The sum offered for the property is at least 90 percent of the

appraised value of the property as determined by the appraisal

described in paragraph (1).

   (b) An appraisal of the property may be had at any time before the

sale or the confirmation of sale in any of the following cases:

   (1) Where the property has not been previously appraised.

   (2) Where the property has not been appraised within one year

before the date of the confirmation hearing.

   (3) Where the valuation date used in the latest appraisal is more

than one year before the date of the confirmation hearing.

   (4) Where the court is satisfied that the latest appraisal is too

high or too low.

   (c) A new appraisal made pursuant to subdivision (b) need not be

made by a probate referee if the original appraisal of the property

was made by a person other than a probate referee. If the original

appraisal of the property was made by a probate referee, the new

appraisal may be made by the probate referee who made the original

appraisal without further order of the court or further request for

the appointment of a new probate referee. If appraisal by a probate

referee is required, a new probate referee shall be appointed, using

the same procedure as for the appointment of an original referee, to

make the new appraisal if the original probate referee is dead, has

been removed, or is otherwise unable to act, or if there is other

reason to appoint another probate referee.

 

 

 

10310.  (a) Except as provided in this subdivision, at the hearing

on the petition for confirmation of the sale of the real property,

the court shall examine into the necessity for the sale or the

advantage to the estate and the benefit to the interested persons in

making the sale. If the decedent’s will authorizes or directs the

property to be sold, there need be no showing of the necessity of the

sale or the advantage to the estate and benefit to the interested

persons in making the sale.

   (b) The court shall examine into the efforts of the personal

representative to obtain the highest and best price for the property

reasonably attainable.

   (c) Any interested person may file written objections to the

confirmation of the sale at or before the hearing and may testify and

produce witnesses in support of the objections.

 

 

 

10311.  (a) Subject to subdivisions (b), (c), (d), and (e), and

except as provided in Section 10207, if a written offer to purchase

the real property is made to the court at the hearing on the petition

for confirmation of the sale, the court shall accept the offer and

confirm the sale to the offeror if all of the following conditions

are satisfied:

   (1) The offer is for an amount at least 10 percent more on the

first ten thousand dollars ($10,000) of the original bid and 5

percent more on the amount of the original bid in excess of ten

thousand dollars ($10,000).

   (2) The offer is made by a responsible person.

   (3) The offer complies with all provisions of law.

   (b) Subject to subdivisions (c), (d), and (e), if there is more

than one offer that satisfies the requirements of subdivision (a),

the court shall accept the highest such offer and confirm the sale to

the person making that offer.

   (c) The court may, in its discretion, decline to accept the offer

that satisfies the requirements of subdivisions (a) and (b); and, in

such case, the court shall order a new sale.

   (d) If the sale returned for confirmation is on credit and the

higher offer is for cash or on credit, whether on the same or

different credit terms, or the sale returned for confirmation is for

cash and the higher offer is on credit, the court may not consider

the higher offer unless the personal representative informs the court

in person or by counsel prior to confirmation of sale that the

higher offer is acceptable.

   (e) For the purpose of this section, the amount of the original

bid and any higher offer shall be determined by the court without

regard to any of the following:

   (1) Any commission on the amount of the bid to which an agent or

broker may be entitled under a contract with the personal

representative.

   (2) Any condition of the bid that a certain amount of the bid be

paid to an agent or broker by the personal representative.

 

 

 

10312.  If notice of the sale was required, before an order is made

confirming the sale it shall be proved to the satisfaction of the

court that notice of the sale was given as required by this article,

and the order of confirmation shall show that the proof was made.

 

 

 

10313.  (a) The court shall make an order confirming the sale to the

person making the highest offer that satisfies the requirements of

this article, and directing conveyances or assignments or both to be

executed, if it appears to the court that all of the following

requirements are satisfied:

   (1) Either the sale was authorized or directed to be made by the

decedent’s will or good reason existed for the sale.

   (2) If notice of the sale was required, the proof required by

Section 10312 has been made.

   (3) The sale was legally made and fairly conducted.

   (4) The amount for which the sale is to be confirmed is not

disproportionate to the value of the property.

   (5) In the case of a private sale, the sale complied with the

requirements of Section 10309.

   (6) If the sale is confirmed to the original bidder, it does not

appear that a sum exceeding the original bid by at least 10 percent

more on the first ten thousand dollars ($10,000) of the original bid

and 5 percent more on the amount of the original bid in excess of ten

thousand dollars ($10,000), exclusive of the expenses of a new sale,

may be obtained.

   (b)  Upon its own motion or upon the request of the personal

representative, the agent or broker, or any other interested person,

made at the time of the confirmation hearing or at another time, the

court shall fix the compensation of the agent or broker as provided

in Article 3 (commencing with Section 10160).

   (c) If it appears to the court that the requirements of

subdivision (a) are not satisfied, the court shall vacate the sale

and order a new sale.

   (d) If the court orders a new sale under subdivision (c) of this

section or under subdivision (c) of Section 10311, notice of the new

sale shall be given and the new sale shall in all respects be

conducted as if no previous sale had taken place.

 

 

 

 

10314.  (a) Except as provided in subdivision (b), upon confirmation

of the sale, the personal representative shall execute a conveyance

to the purchaser which shall refer to the order confirming the sale

and directing the conveyance to be executed. A certified copy of the

order shall be recorded in the office of the recorder of the county

in which the real property or some portion thereof is located.

   (b) Upon confirmation of a sale of the decedent’s interest under a

contract for the purchase of real property by the decedent and after

the purchaser has given a bond if one is required under Section

10206, the personal representative shall execute an assignment of the

contract to the purchaser.

   (c) A conveyance made in compliance with the court order

confirming the sale and directing the conveyance to be executed vests

in the purchaser both of the following:

   (1) All the right, title, and interest which the decedent had in

the property at the time of the decedent’s death.

   (2) Any other or additional right, title, or interest in the

property acquired by the estate of the decedent, by operation of law

or otherwise, prior to the sale.

   (d) An assignment made in compliance with the court order

confirming the sale of the decedent’s interest under a contract for

the purchase of real property by the decedent vests in the purchaser

all the right, title, and interest of the estate, or of the persons

entitled to the interest of the decedent, at the time of sale in the

property assigned. The purchaser of the decedent’s interest under the

contract for the purchase of the real property by the decedent has

the same rights and remedies against the vendor of the property as

the decedent would have had if living.

 

 

 

10315.  (a) If a sale is made on credit, the personal representative

shall take the note of the purchaser for the unpaid portion of the

purchase money, with a mortgage or deed of trust on the property to

secure payment of the note. The mortgage or deed of trust shall be

subject only to encumbrances existing at the date of sale and such

other encumbrances as the court may approve.

   (b) Where property sold by the personal representative for part

cash and part deferred payments consists of an undivided interest in

real property or any other interest therein less than the entire

ownership and the owner or owners of the remaining interests therein

join in the sale, the note and deed of trust or mortgage may be made

to the personal representative and such others having an interest in

the property. The interest of the personal representative in the note

and deed of trust or mortgage shall be in the same interest and in

the same proportions as the estate’s interest in the property prior

to the sale.

 

 

10316.  No omission, error, or irregularity in the proceedings under

this article shall impair or invalidate the proceedings or the sale

pursuant to an order made under this article.

 

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Sacramento Charitable Giving

September 15th, 2011

I had the pleasure of going to a presentation yesterday as part of the Sacramento Region Community Foundation’s Philanthropic Advisor’s Forum. It’s a group of other professionals (estate planning attorneys, CPAs, financial planners, etc…) who deal with clients who give to charities.  One speaker, Scott Hanson (from Hanson McClain Advisors), spoke about this new project that kicks off today. It’s called Give Local Now.  There will be billboards, TV ads, radio spots, print ads, etc… about this and all aimed at getting people to keep their charitable donations LOCAL in the Sacramento, Placer, Yolo and El Dorado counties area.  We saw some of the advertisements and they are first class productions!

The gist of it is that Sacramento, on average, gives less money than the rest of the country. Yes, economic times are tough here but the charitable giving even by our high income earners is significantly lower than high income earners elsewhere in the country. Looking at the numbers for our charitable giving was embarrassing!  On top of that a large percentage of people, in our region, give their charitable dollars to charities elsewhere.

This is our region. This is where we live. This is where we raise our kids.  This is where we will grow old.  Next time you are making a charitable donation think first if there is a local alternative!  Give Local Now!

The website is www.givelocalnow.org  

I encourage you to look at their website as it’s a great project. 

There are a ton of great options for including non-profits in your financial and estate plan.  Charitable remainder trusts, charitable lead trusts, testamentary charitable trusts, direct gifts, and the list goes on and on. If you want to talk about what options might help a local charity and put more money into your loved one’s hands down the road I encourage you to contact an attorney who has been deemed a Certified Specialist in Estate Planning, Trust and Probate Law by the State Bar of California Board of Legal Specialization.

Lastly, as always, you can contact me with questions or visit our website, www.californiaprobate.info for more information.

-John

 

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Michael Jackson Estate Distribution – Thirty Million

September 14th, 2011

Just saw this article about a very famous California probate case. I still want to know why he didn’t have a living trust although I have a guess… and yes it’s based on the size of probate attorney fees in California!  Article at:   http://www.thecmuwebsite.com/article/jackson-estate-will-pay-30-million-to-his-mother-and-children/

Executors for Michael Jackson’s estate plan to hand over $30 million to the Jackson Family Trust, which will benefit his mother, three children and some other charities the late singer supported. This, they say, is in line with Jackson’s will.

The estate has filed papers with the courts asking for approval of the pay out. The papers also reveal that the estate has generated $310 million since Jackson’s death in 2009, enabling it to pay off dozens of the singer’s creditors and to refinance other loans on more favourable terms.

The papers also note that Katherine Jackson is planning on selling the Jackson clan’s famous residence in Encino, California and will look for a new home for her and her late son’s three children.

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Partial Distributions in California Probate

September 14th, 2011

 Did you know you can get a distribution BEFORE 7 months is up in a California probate case? That’s true. Below are my notes from a 2008 seminar I presented on probate law to a group of attorneys.  Please review these notes, our probate website (www.californiaprobate.info) or contact me directly.  -John

  1. Partial Distributions
    1. Pursuant to PC 11620, a petition for an order for preliminary distribution of all, or a portion of, the share of the decedent’s estate is possible. It may not be filed unless at least two months have elapsed after letters are first issued to a general PR.  Additionally, pursuant to PC 11621, the Court shall order distribution if at the hearing it appears that the distribution may be made without loss to creditors or injury to the estate or any interested person.
    2. If the PR has IAEA authority a preliminary distribution may be made pursuant to PC 10520 as follows:

If the time for filing claims has expired and it appears that the distribution may be made without loss to creditors or injury to the estate or any interested person, the personal representative has the power to make preliminary distributions of the following:
(a) Income received during administration to the persons entitled under Chapter 8 (commencing with Section 12000) of Part 10.
(b) Household furniture and furnishings, motor vehicles, clothing, jewelry, and other tangible articles of a personal nature to the persons entitled to the property under the decedent’s will, not to exceed an aggregate fair market value to all persons of fifty thousand dollars ($50,000) computed cumulatively through the date of distribution. Fair market value shall be determined on the basis of the inventory and appraisal.
(c) Cash to general pecuniary devisees entitled to it under the decedent’s will, not to exceed ten thousand dollars ($10,000) to any one person.

  1. The request for preliminary distribution can be made ex parte, without a noticed hearing and thus can be done rather quickly if a beneficiary needs the money. 
  2. A specific devise does not bear interest until one year from the date of the death of the testator.  The interest rate on such a devise is three percentage points less than the legal rate on judgments in effect one year after the date of the testator’s death.  In order to avoid the accrual of interest, it is good practice to distribute the specific devise as soon as practicable by use of the preliminary distribution procedure.

PRACTICE POINTER: It should also be remembered that if a beneficiary needs the money right away, and it’s too early to qualify for a Court ordered preliminary distribution there are reputable companies who make probate advances. The rates are very steep but in a true emergency it’s a way to get cash to a beneficiary within 48 hours.

 

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Refinance Your Heirs into a Probate

September 14th, 2011

People throughout California create revocable living trusts to avoid probate Court after death. It’s smart. It’s simple economics. If you have a $500,000 gross estate probate will be over $15,000 after your death.  Having a living trust, which may cost $2,500, will avoid probate. That doesn’t even factor in the emotional cost of probate. Just simple economics says living trust good and probate bad.  However, many people have been lured by incredibly low interest rates to re-finance their homes. Typically mortgage companies will not loan money to a trust and thus the title and escrow companies require a deed to be signed which pulls the house OUT OF THE TRUST.  Most title companies are not good about preparing a deed to put the house back IN to the trust. Likewise, many people do not realize this is required.  After death they are often forcing their heirs into probate court!

I have seen cases which compound this problem. That is, where a husband and wife are married, but the re-fi is done in one spouse’s name alone.  Thus title is taken out of the trust and put into the name “John Smith, A Married Man as his sole and separate property.”  As you might have guessed this can cause a probate Court visit upon John’s death as there is no automatic passing to the surviving spouse with this titling. It’s not in a trust, it’s not joint tenancy and it’s not community property with rights of survivorship. Even worse, a spousal property petition can be not used since the distribution, by the pour-over will, is typically to the revocable trust and a trust is not a “spouse” and thus a spousal property petition does not work. Thus, many times the grieving widow is looking at a full probate!

Luckily in some cases we can file a probate code 850 “Heggstad petition” to expedite the transfer of the home back into the trust after death.  This is a probate court petition which resolves the problem much quicker than a full probate and for far less money.  However, it is still a visit to the probate court and still costs a lot of money.  The key is making sure your home, and other assets, are properly titled in your trust.

Contact me with questions or visit our website for more information at www.californiaprobate.info

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Disclaimers in California Probates

September 13th, 2011

Disclaimers are an incredible tool to be used in California estate planning, trust and probate law. Typically they are used after death in probate and trust administration settings. In some cases people call it “after death estate planning.” In any event it is a very powerful tool that not enough California attorneys know about. Below are my notes from my 2008 NBI seminar I presented on probate in California. As always contact me directly with questions or visit our website for more info at www.californiaprobate.info

 

 

  1. Disclaimers  
    1. A disclaimer is a procedure whereby a beneficiary (including an estate or trust) may chose to give up a right to an asset by signing a written document so stating.  Disclaimers are sometimes written into the estate plan (such as a disclaimer trust) and other times are used after death to change an estate plan after death. 
    2. A common example of a disclaimer is to reduce the taxable estate of a beneficiary.  Disclaiming, or renouncing one’s rights to the property, will cause the property (or at least a portion of it) to be taxed in the decedent’s estate rather than the disclaiming parties estate.
    3. A disclaimer may be made by the beneficiary or, if the beneficiary has a conservator, by the conservator by obtaining an order in the conservatorship under the substituted judgment rules.  Similarly a disclaimer on behalf of a minor or deceased person would be with Court order. 
    4. A disclaimer can be a whole or partial interest in just about any asset or power.  That is, there are cases where the specific disclaiming of a power written into a will or trust can correct an error in drafting or change in law or facts. The list of interests includes, but is not limited to the following at PC 267:

i)                    by intestate succession;

ii)                   under a will;

iii)                 under a trust;

iv)                 by succession to a disclaimed interest;

v)                  by virtue of an election to take against a will;

vi)                 by creation of a power of appointment;

vii)               by exercise or nonexercise of a power of appointment;

viii)              by an inter vivos gift, whether outright or in trust;

ix)                 by surviving the death of a depositor of a Totten trust account or POD account;

x)                  under an insurance or annuity contract;

xi)                 by surviving the death of another joint tenant;

xii)               under an employee benefit plan;

xiii)              under an individual retirement account (IRA), annuity or bond;

xiv)             any other interest created by any testamentary or inter vivos instrument or by operation of law;

  1. There are specific requirements which must be followed for the disclaimer to be effective.  The basic requirements for a disclaimer are:

i)                    in writing;

ii)                   signed by the disclaimant;

iii)                 identify the creator of the interest;

iv)                 describe the interest to be disclaimed;

v)                  state the disclaimer and the extent of the disclaimer;

vi)                 must be filed within a “reasonable time;”

  1. The disclaimer must be filed within a reasonable time after the person able to disclaim acquires knowledge of the interest.  PC 279(b) provides that, for certain specified interests, a disclaimer is conclusively presumed to be filed within a reasonable time if it is filed within nine months after the decedent’s death or within nine months after the interest becomes fully vested.  
  2. If the disclaimer is not filed within nine months after the decedent’s death or within nine months after the interest becomes fully vested, the disclaimant has the burden of establishing that the disclaimer was filed within a reasonable time after the disclaimant acquired knowledge of the interest.
  3. The disclaimer must be filed in the Superior Court in the county in which the estate of the decedent is administered, with the trustee, PR, other fiduciary, or person responsible for distributing the interest to the beneficiary, with any other person having custody or possession of or legal title to the interest, or with the creator of the interest. (PC 280)
  4. If the disclaimer affects real property or an obligation secured by real property, the disclaimer should be notarized and recorded in the county in which the property is located.
  5. An effective disclaimer is irrevocable and binding upon the beneficiary and all persons claiming by, through, or under the beneficiary, including creditors of the beneficiary. (PC 281)
  6. The disclaimed interest passes in accordance with the provisions of PC 282, which provides:

  “(a) Unless the creator of the interest provides for a specific disposition of the interest in the event of a disclaimer, the interest disclaimed shall descend, go, be distributed, or continue to be held (1) as to a present interest, as if the disclaimant had predeceased the creator of the interest or (2) as to a future interest, as if the disclaimant had died before the event determining that the taker of the interest had become finally ascertained and the taker’s interest indefeasibly vested. A disclaimer relates back for all purposes to the date of the death of the creator of the disclaimed interest or the determinative event, as the case may be.
(b) Notwithstanding subdivision (a), where the disclaimer is filed on or after January 1, 1985:
(1) The beneficiary is not treated as having predeceased the decedent for the purpose of determining the generation at which the division of the estate is to be made under Part 6 (commencing with Section 240) or other provision of a will, trust, or other instrument.
(2) The beneficiary of a disclaimed interest is not treated as having predeceased the decedent for the purpose of applying subdivision (d) of Section 6409 or subdivision (b) of Section 6410.

  1.    A disclaimer is ineffective if the beneficiary has accepted the interest sought to be disclaimed.  PC 285 provides that an acceptance occurs if:

(a) A disclaimer may not be made after the beneficiary has accepted the interest sought to be disclaimed.
(b) For the purpose of this section, a beneficiary has accepted an interest if any of the following occurs before a disclaimer is filed with respect to that interest:
(1) The beneficiary, or someone acting on behalf of the beneficiary, makes a voluntary assignment, conveyance, encumbrance, pledge, or transfer of the interest or part thereof, or contracts to do so; provided, however, that a beneficiary will not have accepted an interest if the beneficiary makes a gratuitous conveyance or transfer of the beneficiary’s entire interest in property to the person or persons who would have received the property had the beneficiary made an otherwise qualified disclaimer pursuant to this part.
(2) The beneficiary, or someone acting on behalf of the beneficiary, executes a written waiver under Section 284 of the right to disclaim the interest.
(3) The beneficiary, or someone acting on behalf of the beneficiary, accepts the interest or part thereof or benefit thereunder.
(4) The interest or part thereof is sold at a judicial sale.
(c) An acceptance does not preclude a beneficiary from thereafter disclaiming all or part of an interest if both of the following requirements are met:
(1) The beneficiary became entitled to the interest because another person disclaimed an interest.
(2) The beneficiary or other person acting on behalf of the beneficiary at the time of the acceptance had no knowledge of the interest to which the beneficiary so became entitled.
(d) The acceptance by a joint tenant of the joint tenancy interest created when the joint tenancy is created is not an acceptance by the joint tenant of the interest created when the joint tenant survives the death of another joint tenant.

  1.    A disclaimer must be a “qualified disclaimer,” as defined in the Internal Revenue Code (IRC) in order to avoid negative estate, gift, or generation-skipping transfer taxes.  The time limits required by the IRC for a qualified disclaimer supersede the time period set forth by state law. To be a “qualified disclaimer” under the IRS, the disclaimer must meet the following additional requirements:
    1. It must be an irrevocable and unqualified refusal to accept an interest in property.
    2.  The written refusal must be received by the transferor, his legal representative, or holder of legal title no more than nine months after the later of (1) the day on which the transfer creating the interest is made; or (2) the day on which the person making the disclaimer reaches age 21.  A disclaimer of an interest created by a decedent’s will must be made within nine months of the date of the decedent’s death, not within nine months after the will was admitted to probate.
    3. The person making the disclaimer must not have accepted the interest or any of its benefits prior to the disclaimer.
    4. The interest must pass to a person other than the person making the disclaimer as a result of the refusal to accept the property. A surviving spouse may, under this rule, disclaim an interest that, as a result and without direction on his or her part passes to a trust in which the surviving spouse has an interest (i.e. a “disclaimer trust.”).

PRACTICE POINTER:  Try to complete disclaimers within nine months of death. Try to get notarized to help establish when it was done if it was not a disclaimer that needs to be filed in the Court.  If you are meeting with surviving spouse who has a “disclaimer trust” make sure you advise in writing about doing the disclaimer within 9 months!

 

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California Probate Cash Flow

September 12th, 2011

More information from my 2008 presentation on probate in California is pasted below. This section is on managing the estate cash responsibily.  Failure to do so can make you personally liable so be careful!

For more information contact me directly or visit our website at www.californiaprobate.info

 

  1. Managing the Estate Cash Responsibly
    1. As stated in the Duties and Liabilities of PR form the PR must manage the estate assets with the care of a prudent person dealing with someone else’s property.  The PR must be cautious and may not make any speculative investments.
    2. As soon as possible following appointment, the PR should take possession of the decedent’s bank and other financial accounts. All estate funds must be kept separate from the PR’s own funds of course. 
    3. Estate accounts should be opened in the name of the PR as Executor/Administrator of the estate of John Doe.  Additionally the PR, usually with the help of their attorney or CPA, should get a tax id (TIN or EIN) number for the estate and should use that for all new financial accounts opened.
    4. It is important that the PR be aware of the insurance rules at the financial institution where the money is being held and should consider multiple institutions if the total balances of the account(s) would exceed the insurance limits.
    5. All cash should be invested in interest-bearing accounts or other investments authorized by law.  It should be noted that different banks pay substantially different interest rates so consider looking around at different banks!  Also, note that certain type of money fund accounts are NOT guaranteed cash as our standard checking and savings accounts. Double check with your banker!
    6. If you have a bond where you the attorney agree to a “joint control account” make sure the account really is JOINT control.

PRACTICE POINTER: I generally advise PR’s to sell all marketable securities. Though a portfolio of Ford, AT&T and IBM may be good old blue chip companies what happens if the market goes down 10% in one day? Might a beneficiary decide to bring an action against the PR?  There generally is little or no tax consequence since most assets receive a full step-up in basis at death.  Thus the transaction fees are likely the only cost and they are generally not significant.

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Timeshares and Your Estate Plan

September 12th, 2011

A lot of people come home from a vacation with a souvenir they did not intend to ever buy… a shiny new TIMESHARE or ”vacation club” or even a fancy “fractional ownership!”   It seemed like a great idea after a couple of Mai Tais I am sure!  One of the sales benefits often gushed by the slick salespeople is that this timeshare can be given to your children and grandchildren after you die.  While this is often true, how many people actually factor this into their estate plan?  My wife and I have sat through several presentations in our years together as we have a hard time passing up a “deal.”  We got Tiffany candy dishes and $200 to spend at the Four Seasons one time at the Four Seasons Aviara.  Ok, that was our best deal to date but I’ll sit through another timeshare presentation if anybody can beat that!

So maybe you didn’t mean to buy it but you will enjoy it I am sure… but did you intend to create a multi-state probate after your death that can cost your kids many thousands of dollars?  Oh you tell me “it doesn’t matter because it won’t be worth anything anyway….”  That is possible but it can be difficult for your children to even sell (or give away) a valueless timeshare without going into probate and thus even a valueless timeshare can be a problem as it can create a creditor nightmare after your death as those annual maintenance fees keep coming and can affect the inheritance you leave for your children. As a California attorney I have a lot of clients who own timeshares in Hawaii, Nevada, Arizona and Mexico.

The simple answer is to title your timeshare in your living trust.  In some cases it’s as simple as notifying the timeshare company and filling out a form; usually a fee of some kind of as well, of course.  If it’s a deeded timeshare you will need to have a deed recorded.  In any of these cases work with your estate planning attorney to make sure it’s done right as some states, Hawaii in particular, has some wrinkles to iron out so the deed gets done right.

If you don’t have a living trust but you own a timeshare (especially a real estate timeshare) look into getting a trust now as a multi-state probate can be hugely expensive after death!

I have pasted a list of timeshare companies below. If you own one of them, or any other timeshare or fractional interest, and don’t want to leave your kids a mess get it included in your estate plan properly!

Contact me with any questions or visit our website at www.californiaprobate.info

-John

LIST OF TIMESHARES, VACATION CLUBS AND FRACTIONALS

Atlas, The Vacation Owners Club
Avalon Vacation Club
Aviawest Resort Club
Bluegreen Resorts
Club Absolute
Club Casa Dorada
Club Intrawest
Club Navigo
Club Regina
Consolidated Resorts
Defender Resorts
Diamond Resorts International®
Disney Vacation Club
Divi Resorts
El Cid Vacations Club
Embassy Vacation Resorts
Escapes!
Fairfield Resorts
Festiva Resorts
Four Seasons Residence Clubs
GeoHoliday Vacation Club
Global Exchange Vacation Club
Grand Pacific Resorts
Hilton Grand Vacations Club
Holiday Concepts Group
Holiday Inn Club Vacations
Hyatt Vacation Club
ILX Premiere Vacation Club
InnSeason Resorts
Island One Resorts
Legacy Vacation Club
Macdonald Resorts
Marriott Vacation Club
Mayan Resorts
Monarch Grand Vacations
MROP – ORE
Old Greenwood – Truckee, CA
PAHIO
Palace Resorts
Perennial Vacation Club
Pueblo Bonito Resorts
Raintree Vacation Club
Ritz-Carlton Club
Royal Aloha Vacation Club
Royal Holiday
Royal Resorts
Seasons Holidays
Shawnee Resorts
Shell Vacations Club
Silverleaf Resorts
Spinnaker Resorts
SPM Resorts
Starwood Vacation Ownership
Summer Bay Resorts
Sunterra Resorts
The Berkley Group
The Villa Group
Universal Vacation Club
Vacation Internationale
Vacation Village Resorts
Welk Resort Group
Westgate Resorts
World International Vacation Club
WorldMark, The Club
Wyndham Vacation Ownership

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California Estate Planning

September 11th, 2011

Love your family?  Then why is your estate plan not done and current?  Call a California Certified Specialist in Estate Planning, Trust and Probate law and get your affairs organized now!  Wills, trusts, powers of attorney for finance, living wills (aka: advanced health care directives), HIPPA releases, deeds to real estate and more.

For more information visit our website at www.californiaprobate.info

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