Frequent need to return to court to get permission
Must prepare accountings and give notice
Public– probate becomes a matter of public record and some people really care about privacy
Because you have to file an inventory, public knows type and value of property and who gets property
How to AVOID probate
revocable trusts = MOST EFFECTIVE/EFFICIENT way to avoid probate!
Governing instrument = trust, prop held in name of trustee of RT and terms of trust dispose of prop
beneficiary designations (Payable on Deaths)- prop passes as contractual matter w/o crt involvement
Governing Instrument = K, BFY designation
BUT not completely adequate, PROBLEMS:
Not all assets lend themselves to beneficiary designations
Yes – life insurance, retirement plan, payable on death account
No – tangible personal property, real estate
Assets w/BFY designation still have to be coordinated with an estate plan to cover other assets
joint tenancy- prop passes through right of survivorship w/o crt involvement
Governing Instrument = deed that gave prop w/joint right of survivorship, transfers as matter of law
BUT inadequate, PROBLEMS:
Only holds for first death (what if surviving JT is already mentally incapacitated?)
Creditors can access JT’s interest in prop
CPWRS: Community Property with Right of Survivorship – (CA ONLY) property will automatically pass to surviving spouse. (no probate if have title in common)
Special situation, usu. CP disposed of in will or intestacy; or no probate cause in RT
Small Estates: (value <$100K, none of which is real property)> no need for probate
Not much protection, but don’t need a lot because of small amounts involved
BFY can simply sign and notarize affidavit and use affidavit to get property (go to the bank)
Only danger = false affidavit, but person under penalty of perjury, and small amt of $ involved
Utah – more streamlined probate
(follows uniform probate code)
California – very cumbersome probate
ALWAYS want to avoid
Appointment of Personal Representative
Informal = presumed (never appear before judge)
File application for probate with court clerk
Probate just ends when it’s over; no need to file a petition to close it
Clerk sends out Notice>all BFYs & intestate heirs
BFYs & Heirs can sign waiver of notice when application filed don’t need to wait 10 days if all waive
No objections w/in 10 days clerk can issue Letters of Administration
Objections (any time during probate) moves to FORMAL probate for contested issue
Formal= judge only hears & rules on objections
BFY can file petition w/crt to object to some issue
Rest of unobjected estate goes on unsupervised
Objection process still protects interested parties
Supervised Administration RARE= most crt involvement in estate administration
BFY (Have to be an interested party) can petition crt to grant supervised admin. if he feels crt needs to supervise what goes on (e.g., PR is doing a bad job generally; lacks trust)
PR can still do almost everything EXCEPT make distributions of prop from estate w/o crt approval
PR can still sell assets unless crt says otherwise
if BFY wants supervision for stuff besides distribution, can file individual objections to get supervision over those specific areas
So, MOST DIFFICULT process in UT similar to EASIEST process in CA (full IAEA) illustrates inconvenience of CA
Major differences between CA and UT
Degree of court supervision
Need for court approval
Don’t need to file open/closing in UT
Time/need to get on court calendar
Order for Final Distribution: can be signed by the PR (deed to BFY from PR granting real estate)
NOTE: Even though probate in UT is not nearly as cumbersome as in CA, revocable trustsstill provide benefits of simplicity and no court involvement for the following situations:
Avoiding probate altogether – no probate is better than any probate
What if decedent owns property in another state?
What if there is an emergency after decedent’s death that requires quick action?
What if person becomes incapacitated?
Appointment of Personal Representative File petition for probate in crt—either intestate or will—requests will (attached) to be admitted, asks for appointment of PR (“Letters”: testamentary/will; admin./intestate), requests IAEA powers (if not in will)
Schedule Hearing (>2 months) (if want to contest, need to do so before or at hearing)
Send Notice of Hearing (named BFYs under will and all who would be intestate heirs)
Proof of notice
Calendar Notes (Defects the court clerk has noticed in procedure—i.e., proof of notice, etc. Must get all cleared before hearing or hearing postponed> more 2 month waiting periods)
Hearing – judge admits will, opens probate, appoints PR, grants IAEA powers, issues Letters of Administration, sets fiduciary bond (insurance policy against PR taking assets), and rules on objections> if too complicated, sets new hearing
Order for Final Distribution – issued after petition and final accounting of estate; signed by JUDGE
Evidence that someone owns that property
Can record Order just like a deed provides notice for chain of custody of property
IAEA – Independent Administration of Estates Act
Purpose = gives PR power to act w/o crt permission
NOTE: still always need to file petition to open/close probate actions
Still need to send “Notice of Proposed Action”
PR must notify all interested in estate (BFYs, intestate heirs, creditors) about what PR plans to do w/asset regardless of PRs IAEA powers
ObjectionsPR has to get prior crt approval
No objections PR can proceed w/o crt approval after a certain time
FULLpowers – least amount of crt supervision
PR can do almost anything including buying/selling/mortgaging real property
PR MAY NOT engage in transactions btwn PR (in individual capacity) & estate or btwn his attorney & estate w/o crt approval (e.g. can’t personally borrow/lend $ from/to estate w/o crt)
LIMITEDpowers – intermediate crt supervision
PR can do almost anything w/o crt approval EXCEPT buy/sell/mortgage real estate OR personally engage (or PR’s attorney engage) in transactions w/estate
NONE – most court supervision
PR must get court approval for everything
Impact of IAEA on Fiduciary Bonds
Limited IAEA allows crt to set bond for liquid assets only BUT crt should increase bond if it approves sale of real estate
Ex– estate has $250K in stocks & $600K in real estate & PR has limited IAEA powers
PR can’t sell real estate w/o crt approval bond should be issued for $250K
But if crt approves sale of real estate, crt should see>is now $600K more liquid assetsbond should increase to $850K
Additional Probate Procedures
Ancillary Probate – when D owns out-of-state real property (outside state of D’s death residence)
Letters of Ancillary Administration–required for PR to have authority to transfer out-of-state prop
Rationale – one state does not have jurisdiction over real property in another state
E.g., UT Letters of Administration are not valid for property in CA
Problem = ancillary probate makes probate more expensive, lengthy, inconvenient, and public
Process
CA– crt opens ancillary probate and issues PR NEW, CA Letters of Ancillary Administration
Ancillary probate subject to same inconvenient process as regular probate
UT- easier than CA: applicant opens ancillary by filing doc w/crt w/Letters frm other state attached
Revocable Trusts avoid Ancillary Probate-Successor trustee just steps in & manages that prop w/o need for ancillary probate because the property is held in the name of the revocable trust
Special Administration-way to grant authority if emergency needs require action before PR>appointed
Process
File Ex parte petition w/crt you quickly get a hearing before a judge
Judge can issue Letters of Special Administration to the Special Administrator (fiduciary)
Letters of Special Administration–narrow– only give Special Admin authority to do what needs to be done on an emergency basis
Primary Letters of Administration issued later will replace Letters of Special Administration
State Comparison
CA – more frequent because it can take months before you can get PR to have that authority
UT – not as frequent because you can get a PR appointed much more quickly-informal
EX: D dies before real estate closing need someone with authority to complete closing
Revocable Trusts avoid Special Administration: immediate/automatic authority granted by law
Successor trustee just steps in and can act immediately without court involvement
Miscellaneous Probate Matters
Fiduciary Bond–insurance policy to protect BFYs against possibility that PR runs-off or mismanages assets
Usually waived in wills (but judge still has authority to require a FBond)
Trust PR
Don’t want to pay premiums
Generally, bond will be in amount of assets over which the PR has control over PLUS 1 year interest
CA–for limited/no IAEA powers, bond will be in the amount of liquid (i.e., non-real estate assets) fiduciary bond should be increased if court gives approval to sell non-liquid asset
If full IAEA authority, bond should cover value of real estate as well
Premium is usually 0.25% of estate value per year
Letters of Administration (aka Letters Testamentary) = physical evidence of your appointment as PR
Marital prop. in Community Property & Common Law States
Community Property States (CA)
Types of Property
Separate Property (SP) = any property that either H or W brought to the marriage (owned before marriage) AND any gifts or inheritance received during marriage PLUS income/appreciation/sale proceeds from SP
Community Property (CP) = everything else earnings by either spouse during marriage PLUS income/appreciation/sale proceeds on CP
Death– critical Q = what did the decedent spouse have the authority to dispose of?
Deceased spouse-can dispose of (or intestacy rules> dispose of) ALL his SP & ½ CP (his CP share)
No ability to dispose of surviving spouse’s SP or ½ share of CP
Surviving spouse – ALL her SP and retains ½ of CP
Miscellaneous Points
CP w/Right of Survivorship prop will pass to surviving JT by operation of law – NO PROBATE
Pre-nuptial/Post-nuptial agreements – can change the nature of the prop and alter what happens upon death
CA: Registered Domestic Partners – treated as if they were married for all purposes under the law
If rule applies to married applies w/equal force to RDP (only distinction = word “married”)
Common Law State (UT)
Types of Property
NOTE: marital and separate property terms are ONLY used in two isolated cases:
To determine elective share of surviving spouse if he’s disinherited by titled spouse (deceased spouse had title to all property in her name and left it to someone else)
In case of divorce
Separate Property (SP) = same definition as SP in a community property state
Marital Property (MP) = same definition as CP in a community property state
Distribution
Divorce
SP goes to owner of SP
MP distributed according to Equitable Distribution = Fair
Death – critical Q = how is title held? – ability to dispose of property at death follows Title
Rule = decedent at death has ability to dispose of whatever property is titled in his/her name
No inquiry into when property was acquired – just look at how title is held at death
Titled prop is disposed of through RT/Will of title-holding spouse or through intestacy for title-holder