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Probate Administration
 
PROBATE ADMINISTRATION

When a person dies without an estate plan or with only a Will, his or her estate must be settled through a court proceeding called “probate.” This section offers a detailed overview of the probate process. The major steps involved are as follows:
  1. Petition for Probate.  This process begins when an individual (usually a family member) files a “petition for probate.” In this petition, the petitioner asks the court to appoint a named person (usually himself or herself) as the executor (if there is a Will) or administrator (if there is no Will) of the estate. Subsequently, the court will establish a hearing date for the filed petition. Depending on the court’s workload, several weeks can pass before the arrival of the hearing date. During this period of time, virtually nothing can be done to settle the decedent’s affairs (absent an emergency). With the exception of a contest, the court will appoint the petitioner as the executor or administrator at the hearing.

  2. Collection, Inventorying and Appraising the Estate.  In this phase, the executor or administrator must marshal or collect the assets. This means that he or she must gain legal control over the assets of the estate (e.g., bank accounts, stocks and bonds, etc.), for they must be transferred to the executor’s or administrator’s name. At the probate hearing, the court appoints a “probate referee.” The executor or administrator submits his or her inventory to the probate referee, who then appraises each asset of the estate.

  3. Resolution of Creditor Claims.  When the court appoints the executor or administrator, a “creditor claims period” begins to run, within which the creditor must file a claim against the estate. If the creditor fails to timely file the claim, his or her claim is forever barred. In California, this period of time is generally four months. However, notice must be mailed to known or reasonably ascertainable creditors; depending on when the notice is mailed, such creditors may have up to an additional 60 days to file a claim.

  4. Disposition of Assets.  ases, the executor or administrator is required to sell assets, such as real estate. A sale is generally subject to court approval; this means that after the sale is negotiated, the court holds a hearing in which anyone can overbid the sale price. In effect, the court holds an auction! At the conclusion of the hearing, the court confirms the sale either to the original buyer, or to the person who submitted the highest bid. If, at the original probate hearing, the court gives the executor or administrator the authority to administer the estate under the Independent Administration of Estates Act, then the executor or administrator can bypass this court approval process. Instead, the executor or administrator would give a “notice of proposed action,” which calls for the executor or administrator to outline the material terms of the sale. The notice would be delivered to the beneficiaries, and unless a beneficiary objects to the sale of the proposed terms, the sale goes forward. If the beneficiary does object in a timely manner, then the issue is resolved by the court at a future hearing. If the beneficiary neither approves the sale nor objects to it, he or she is deemed to have approved it after the lapse of a certain period of time set forth in the notice of proposed action.

  5. Taxes.  The executor or administrator must file the decedent’s final income tax returns and pay any associated taxes. The executor or administrator must also file tax returns for the estate on an annual basis. If the estate has a gross value of at least $3.5 million, the executor or administrator will have to file an estate tax return, even if no tax is due. If a tax is due, the executor or administrator will need to pay the tax when the return is filed. The return is generally due nine months after the date of death. Unlike income tax returns, virtually all estate tax returns that show a tax due are audited. It can take the IRS several months to audit the return, and the executor or administrator cannot close the probate proceeding until the IRS approves the return.

  6. Preliminary Distributions.  After the creditor claims period expires, the executor or administrator may petition the court for permission to make a preliminary distribution to the beneficiaries. Due to the court’s workload, this process can take a few months.

  7. Reports and Accounting.  As the probate nears its conclusion and is in a position to be distributed to the beneficiaries, the executor or administrator must file a detailed report with the court. The report outlines in detail all of the actions of the executor during the administration process. It also shows the computation of the ordinary statutory attorneys fees and executor’s commissions. Unless waived by the beneficiaries, the executor or administrator must also file a detailed accounting of his or her management of the estate assets and liabilities, income and disbursements during administration. The accounting starts off with the inventory and appraisal of the estate. The inventory is followed by a schedule of receipts, a schedule of disbursements, a schedule of gains or losses on sale of assets, a schedule of preliminary distributions, and a schedule of assets on hand and available for distribution. The petition asks the court to approve distribution of the estate according to the terms of the Will. If there was no will, then the petition asks the court to approve distribution of the estate pursuant to the intestacy laws.

  8. Distribution of Estate.  Once the court approves the Executor’s or Administrator’s Report and Accounting, the executor or administrator may distribute the estate according to the terms of the court order. Each beneficiary will sign a receipt for the money or assets received by him or her, which the executor will file with the court. The executor or administrator will pay the attorney and himself or herself the fees approved by the court. When these actions have been done, the executor or administrator will file a Petition for Discharge; once the court approves the Petition for Discharge, the probate process is completed.

 
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