Full v. Limited IAEA Authority in California Probate Cases

There are two types of authority your attorney can ask for in your probate case under the California Independent Administration of Estates Act (“IAEA”).   Which is better for YOU?   I look at each case individually and make the decision that makes the most sense for you the client. There are counter-balancing issues on each side.  Full IAEA is almost mandatory in some cases and is unnecessary in others.  Let’s discuss….

“Full authority” basically allows the Personal Representative (“PR”) to do almost anything they want without prior Court approval. That’s not to say they won’t be subject to later questioning by the Court or a beneficiary but they can take care of business without delay.  This includes selling personal property, selling stocks, and even selling real estate.  In some instances the PR is required to send a notice of proposed action 15 days prior to taking the action but not all cases.  That 15 day notice gives the beneficiaries the opportunity to object if they don’t think it’s a good decision. However, by and large with full authority the PR can take care of business without delay and this can be helpful.

This full authority is of particular importance when there is real estate that needs to be sold. This is because limited authority requires Court approval of the sale and in this horrible real estate market going to Court for confirmation often results in losing the buyer.  There are a few different ways for the PR to get full authority and different Judges rule differently but in generally the simplest way to get full authority is for the PR to post a surety bond (similar to insurance) or have all the heirs waive the requirement of a bond. It is my professional opinion that all efforts should be made to have full authority when there is real estate.  Without full authority it will be nearly impossible to sell the real estate for a good price.

What if there is not real estate?  Well then limited authority is probably fine.  There are no practical limitations for other assets and most Courts will issue limited authority without a bond or with a minimal bond amount.

Some Courts will dig deeper and see that with limited authority a PR could still easily abscond with the estate and thus require all assets be put into blocked accounts or not allow the PR to take control of any cash.  Again, each case and each Judge is different. The key is fully evaluating all assets and all risks before that first Court date so that the right choices are made. That is, whether you are the proposed PR or you are an heir of the estate. It’s important to pay attention before that first Court date. If you are an heir maybe you want the PR to be bonded!?  Hiring an attorney to help you is a good idea and we can do that.  We call it “beneficiary representation.”  It means to monitor the probate and secure your position in the probate so you get what you are entitled to. In some cases we can do that based on a future payment.

In the end there is a lot of thought into each box that is checked on the probate petition. Make sure you are aware what they all mean so you are protected as an heir and/or aware of your responsibilities as a PR. In either case we can help! 

-John

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Upside Down House and Probate – Probate Code 10360

So you just lost a loved one and now, to add insult to injury, you learn the house is upside down. That is, the house is worth less than your deceased loved one owes on it. Your first instinct, particularly if it’s the only “asset,” is to walk away. However, could you earn yourself some money and, at the same time, close out your loved one’s affairs in a proper way?

Well, you might have guessed that is a leading question. You might ask 10 or 20 probate attorneys about this and they may all tell you to walk away. However, I have personally used probate code section 10360, et seq., successfully since 2006 to reduce mortgages and get money into the pockets of the grieving loved ones!

How does this work you ask!?

Ok, let’s say your mom owned a house with a loan of $500,000 on it at death. It’s current value is $400,000 let’s say. There are no other assets subject to probate. I can put $11,000 into your pocket!  Yes, really!

Ok, ok, you want to know how it works. I should add, before I go on, this is a technical probate process, and one false move can create a foreclosure sale and you get nothing so act fast and act carefully!

The first thing we do is find a buyer who wants to pay whatever it’s worth. Let’s say $400,000. You can hire a Realtor to find the buyer and the Realtor will also get paid just like any other sale. Yes, really, I promise!

At the same time we file a petition in probate Court under California Probate Code Section 10360, and the following sections, which basically reduce a mortgage by Court order to pay “costs of administration” directly related to the sale.  What are these costs… well, it includes the costs of sale like back property taxes, liens, Realtor fees and title/escrow fees. Also, it includes an Administrator’s fee (that’s what you get), Court costs and attorney fees. 

Do the banks like this code section?  Probably not but they have enough foreclosed houses on their books so I don’t think they are that upset by the petition by and large. They usually squawk a lot but, in the end, agree to honor the Court order. It is, after all, a Court ORDER!

I have successfully gotten Court orders, under this probate code section, in multiple counties in California. I have no reason to believe it won’t work anywhere in California.  It is an incredible tool that most probate attorneys do not know about!

If you have an upside down house and the owner recently died let’s talk about it and see if we can’t probate it and get you a few dollars!

Also, I will associate with other attorneys to guide you through the 10360 process.

I look forward to hearing from you.  -John