Earlier today I spoke for two hours regarding the California probate process. The speaking engagement was for NBI and was entitled “The Probate Process from Start to Finish.”  Over the next couple of days I will publish my written materials.  This first section is about managing the inventory and appraisal which is an essential part of a California probate.  Please follow up with questions you may have.  -John

The Probate Process From Start to Finish

III.       MANAGING THE INVENTORY

10:15 – 10:55 –   John B. Palley

1. Statutory Requirements and How They Affect Your Case
   1. The Final Inventory and Appraisal (Judicial Council Forms DE-160 and DE-161) should be filed within four months after Letters are issued to a general personal representative (PC 8800) unless further time is granted by the Court. Failure to comply with the Probate Code exposes the PR to a petition for removal or suspension of powers. Sample “I and A” is attached as Exhibit JBP-1.

PRACTICE POINTER: While most Courts do not enforce this rule (with some noted exceptions) it is a good idea to follow this rule so that your client is in compliance with the rules detailing their job.    Thus you should calendar the 4 month date. If you can’t comply with getting the Final inventory done at least file a partial inventory, with as many assets as possible listed, to show you are attempting to comply with the rules.

1. Additionally, when filing the inventory, the PR, also is required to certify that a change in ownership statement has been filed with the CountyAssessor(or Recorder in some cases) in each county in which the decedent owned real property or certify that such a filing is not required because the decedent owned no such property. We generally file an Estate Change in Ownership with the County. Attached as Exhibit JBP-2.
2. Additionally, when filing the inventory, the attorney, is required to state if the bond on file in the case is sufficient to cover the assets being inventoried.

PRACTICE POINTER: If the bond is insufficient, immediately file an ex parte request for an order increasing the bond to a satisfactorily level.

1. Some assets can be “valued” by the PR and some have to be valued by a probate referee.  Most Courts automatically appoint a probate referee with each case.  However, there are some Courts which make you petition for a probate referee; among others, Los Angeles, requires you to ask for one in writing.Attached as Exhibit JBP-3.
2. 5.         In general terms, the Personal Representative provides the valuation of cash and cash equivalents such as checking and savings accounts. Probate Code section 8901 specifies the categories of assets valued by the Personal Representative: “The personal representative shall appraise the following property, excluding items whose fair market value is, in the opinion of the personal representative, an amount different from the face value of the property:

(a) Money and other cash items. As used in this subdivision, a “cash item” is a check, draft, money order, or similar instrument issued on or before the date of the decedent’s death that can be immediately converted to cash.

(b) The following checks issued after the date of the decedent’s death:

(1) Checks for wages earned before death.

(2) Refund checks, including tax and utility refunds, and Medicare, medical insurance, and other health care reimbursements and payments.

(c) Accounts (as defined in Section 21) in financial institutions.

(d) Cash deposits and money market mutual funds, as defined in subdivision (b) of Section 9730, whether in a financial institution or otherwise, including a brokerage cash account. All other mutual funds, stocks, bonds, and other securities shall be appraised pursuant to Sections 8902 to 8909, inclusive.

(e) Proceeds of life and accident insurance policies and retirement plans and annuities payable on death in lump sum amounts.”

6.    All other assets, including real property, personal property, stocks,

bonds and mutual funds are valued by the probate referee.

PRACTICE POINTER: A phone call or email to the referee can answer

many questions. Use them as a resource!

1. I often use partial inventories to help keep the process moving along. For example, the I and A, Partial No. 1, may have assets that need to be appraised by the probate referee.  I might file other items on the Partial No. 2.  This way I give the probate referee a chance to do her job and I still give my client a good chance of getting an inventory on file within four months.

PRACTICE POINTER: When using partial inventories it’s a good idea to get the items needing probate referee appraisal on one inventory. Get this to the referee as quickly as possible.  Then put cash, and other items you can appraise, on subsequent partial inventories.

1. However, pursuant to PC 8800(c) all inventories are supposed to be filed within four months unless the Court grants relief from this requirement. In my experience, the Court will typically grant a 60-90 day continuance merely by asking in the form of an ex-parte petition or in Court if the Court has calendared a follow up date for the inventory as some Courts do.
2. Some Courts even require an inventory to be filed which is called a “final” inventory.  That is, filing one, two or more “partial” inventories within four months may not meet the Court’s requirements and I have filed zero balance “final” inventories to show there are no additional assets and that the partial inventories already filed are all of the known assets.
3. A “supplemental” or “correctory” inventory can always be filed at a later date to update the Court and other interested parties.
4. A supplemental inventory is used to add assets you didn’t know about when you filed the “final” inventory. In my experience it tends to be small items but there is certainly no rule that says it can not be large valued items.
5. A correctory inventory is used to correct something from a previous inventory. In my experience I have provided details, on the correctory inventory, showing what is being corrected and what the correct value should be. It can also be used to correct an asset description. It is never to be used to add information. Attached as Exhibit JBP-4.
6. A reappraisal for sale has to be used in some cases. For example, if property is being sold at Court auction it has to sell for 90% of appraised value.  Thus, obtaining a re-appraisal for sale may be required to allow the sale to go through. A reappraisal also must be obtained for Court auctions when it’s been more than a year since death.  A reappraisal for sale can be obtained at any time.
7. It is important to put everybody on notice who has filed a request for special notice, by sending them a copy of a filed inventory.
8. In summary, the types of Inventories you may file:
   1. Partial – Used to appraise some of the assets when it is likely another inventory will be needed later.
   2. Final – Technically the one that must be filed within four months of Letters being issued. In fact, not used in every case.
   3. Supplemental – Often used late in the process, generally after a “final” I and A has been filed for a late found asset.
   4. Corrected – Used to correct a previous inventory that was filed wrong.  Could be used to show an asset didn’t actually exist, was valued wrong, etc….  It’s good practice to explain what is being corrected.
   5. Reappraisal forSale– If it has been more than one year since death it is sometimes required that a property be re-appraised before the sale can be confirmed.
   6. Property Tax Certificate –  A requirement in certain counties.
   7. Send a copy of the Inventory to those who request special notice as it is an item that is often of interest to interested parties.

PRACTICE POINTER: Make sure to calendar your four month date for the inventory to be filed and make sure that at least a partial inventory is on file by that date to show your client is attempting to comply with the probate code.  You never want to expose your client to a petition for removal (or suspension of powers) and filing all of the little rules helps prevent such a removal petition!