The Probate Process in California
Responsibilities of Executor or Administrator
Out-of-State Issues During Probate
COMMON MISTAKES AN ADMINISTRATOR OR EXECUTOR CAN MAKE DURING PROBATE AND HOW TO AVOID THEM.
Many people have heard of the probate and estate settlement process but wonder what it is and what the probate process entails. To put it simply, probate is the process the probate court uses to make sure the deceased person’s creditors are paid through estate settlement and that anything left goes to the deceased’s beneficiaries.
Unfortunately, the probate and estate settlement process can be anything but simple, depending on the size and nature of the assets to be administered, the number of parties involved in the probate and estate settlement process, how well those parties get along, and many other factors. Complex probates and estate settlements are made all the worse by the fact that the family is in a state of mourning and under a great deal of stress. The last thing most families want to deal with at a time like this is the probate court system.
What follows below is a list of common mistakes that can be costly if not avoided.
NO OUTCOME IN MIND
Beginning with the end in mind provides clarity and focus throughout the entire probate process.
Although it can be an overwhelming experience (especially if the decedent is your close relative), it does not have to be stressful, if you have a clear reminder of and commitment to what the end goal is. Here are some examples: peace of mind, pay off debt and taxes a.s.a.p., settle with heirs, and maximize value of estate, just “be done with it and get it over” and others. Whatever the end goal is, it must be agreed upon by all so that you get support and have confidence in the decisions you make as the executor/administrator.
NOT EDUCATING YOURSELF ON THE PROBATE PROCESS AND DECIDING IF YOU NEED / WANT A LAWYER
You can educate yourself about the process. You will recognize situations where you are in over your head. It does make a lot of sense to talk to an attorney about the process and see what he/she thinks might be appropriate in your situation. You may then decide that you can handle this “pro per” meaning without a lawyer and represent the estate yourself as you go through the probate process.
You might decide to use an attorney because your case might be slightly complicated or the estate is not in your hometown or state or you simply have no time on your hands. Financial planners, CPA’s, local realtors, contractors and estate planning firms are experts in their perspective field and can give you specialized knowledge which pays off in both the short run and long term.
WAITING TOO LONG TO BEGIN THE PROBATE PROCESS
As time goes by taxes add up, creditors become pushier and heirs more impatient. Losing a loved one is devastating and moving forward can at times almost seem emotionally impossible. However, waiting too long will add pressure and demands from others to your mourning process. Give yourself time to mourn but also realize that the longer you wait the greater the demands.
FAILING TO QUICKLY AND PROPERLY TAKE CONTROL OF AND PROTECT ESTATE ASSETS
This is especially critical for real estate, which must be properly insured, secured against break-ins if vacant, and protected against loss for nonpayment of taxes and mortgages. If you are not in the same city or state this can become a challenge for you, especially if curb appeal suffers and squatters take over. A good realtor that understands your probate needs can also help you maintain the property by using people in his/her network. You must take exclusive control of an estate’s cash. Do not permit another person to have access to an ATM, debit or credit card, bank account.
FAILING TO PREPARE AN ACCURATE INVENTORY OF ASSETS
If the deceased’s estate has debts or the deceased owned real estate some form of probate estate administration will be needed. Preparing an accurate inventory of assets, which should only reflect assets that have actually been collected and placed under the control of the administrator or executor, is important. One must account for everything and understand where and how things will pass to the deceased’s heirs either under the Will or by intestate succession. For example, does the estate include jewelry, collections or family heirlooms to be passed on? Are there oil, gas or mineral rights or royalties that need to be disposed of?
NOT KNOWING YOUR OPTIONS WHEN IT COMES TO SELLING REAL ESTATE
Real Estate is the biggest component of the estate’s assets. Depending upon your desired outcome and goals you should know that you have options in real estate. The basic and straight forward approach is to list with a local realtor. You may also find yourself with real estate that needs some work and could therefore fetch a greater price after some repairs. If you do not have the cash for the repairs, but ample time on your hands, there are people I can refer you to that will gladly partner with you on the repairs. Finally, if you are in a rush, don’t have cash to fix up the real estate and just want to get done with it; an investor will pay cash for it. Knowing your options gives you flexibility which gives you power in your decision.
MARKETING REAL ESTATE TOO LATE
Do not make the mistake of waiting too long to market any real estate, if you’d like to settle the estate as quickly as possible. Once you have been approved as administrator or executor of the estate, you can begin soliciting offers on the real estate. In other words, parallel to handling everything else, you can list with a realtor, get advice, solicit offers and even go into escrow. Escrow will not close until you have acquired letters testamentary/letters of administration. As long as your buyers are aware of this, you will do fine. Be sure to use a realtor that understands probate.
CHOOSING FRIENDS OVER THE RIGHT PROFESSIONALS TO DO A PARTICULAR JOB
Now that you might need an attorney, realtor, tax advisors, financial planning and estate planning, you can find yourself surrounded by well meaning friends that want to help. E.g. you might have an attorney friend that practices business litigation that will help you with probate. This is where you must be cautious and make sure you pick your team of professional experts that will get the job done because this is all they do. Similarly, you might have a realtor friend that specializes in a certain area of town or other type of real estate that wants to list the real estate for you. Again, having a realtor with probate experience that specializes in the area of your real estate location will benefit you and ensure you get the most out of it.
NOT KEEPING ACCURATE ACCOUNTING RECORDS
When preparing accounts, failing to use proper schedules; failing to place entries on proper schedules; failing to adequately describe receipts and disbursements; lumping entries instead of itemizing them; and failing to correctly show carrying and market values, gains, losses, dividends, and interest payment for investments. If you are not comfortable with or not used to accounting and balance sheets, it makes sense to enroll a professional such as a book keeper or CPA to help you. At the time of settling the estate all numbers must align and make sense. If not, you might get objections from the heirs or maybe even a judge. In many cases where records were not properly kept, the probate process lasted up to 24 months when it should have taken half that time or less.
NOT PICKING UP MAIL FROM DECEDENTS PROPERTY
This is a simple one. As soon as you can, ask that the post office forwards all mail to an address or PO Box that you have access to. The reason being, that you may miss out on important notices and claims from creditors and/or lenders. Another good reason is that you do not want the property to be too inviting for burglars or vandalism. When mail piles up, it is a sure sign that the property is vacant.
NOT KEEPING OPEN COMMUNICATION WITH HEIRS
This goes back to the initial mistake “No outcome in mind” when you begin the process. At the outset of probate it is crucial that all heirs are on the same page and agree that you handle the estate. Along the way you may have smaller setbacks and it will not go as planned. Make sure you communicate every setback and progress. If an heir counts on his/her inheritance by a certain date based on the agreed upon goal you all set, then any delays will greatly impact the heir’s life.
FAILING TO CONCLUDE THE ESTATE
Once executors get to the end of an estate, oftentimes they just distribute the money without ever formally closing the estate. Before distributing assets, you can go to a court and get the okay from a judge, or if you want to skip that piece of the probate process and your family is all in agreement, you can form a family settlement. This gives everyone records of the estate administration so that they know where assets went and how much expenses were, so that the family can agree on these and not hold the executor liable for any mistakes. By documenting everything among family members, if later debt pops up, everybody agrees to give the money back and the executor has managed their liability. This must be prepared by an attorney and is a very powerful tool in protecting the executor’s liability