Lack of trust funding and the small probate estate

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INTRODUCTION

It seems a day does not go by without speaking to a potential new client regarding their parent’s trust not being properly funded. There are different reasons this happened but the end result is they need to hire an attorney. This blog post focuses on the interplay of the small probate estate and funding a trust post-mortem.

HOW IT HAPPENS

A trust does not get funded for so many reasons. The most common are:

1) Client did trust themselves (or with on-line service or forms) and didn’t get assets into the trust;

2) Client hired a paralegal or inexperienced attorney and they didn’t properly take care of trust funding;

3) An asset was acquired after the trust was established;

4) The asset was an oddball thing that even a good attorney might miss.

IT SEEMS TO OBVIOUS

After death the lack of trust funding always seems so obvious. Of course, you have 20-20 hindsight and you can actually see the asset is NOT IN THE TRUST. However, it’s much harder during life. The most common problem is probably that clients, when they set their trust up, see the asset listed on a schedule of assets and thus assume that means the trust is funded. This is simply not the case. You have to take active steps to “fund” the trust.

WHY SMALL ESTATE

Why does this article focus on small estates?  Quite simply put the vast majority of trust funding omissions can be corrected by a procedure other than a full probate.  The most common choices are:

1) A Heggstad petition (probate code 850);

2) An Affidavit re: real property worth less than $50,000 (probate code 13200);

3) A Succession to real property petition for real property worth less than $150,000 (probate code 13150);

Using one of these three options can clear the vast majority of assets to a trust. NONE of these are full probates.  That’s a totally different thing.

YOUR CASE

If you want to see which options might work for YOUR CASE let us know. We can generally offer a free analysis to make sure your case is done as efficiently and economically as possible.

Law Firm with actual PROBATE COURT EXPERIENCE

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EXPERTS AND SPECIALISTS

Every “probate lawyer” you talk to says they are a probate “expert” or a probate “specialist.”  Of course few really are.  When I say that I mean it because 1) I was a former Sacramento Bee probate “expert” when I wrote for the Bee and 2) I am a Certified Specialist in probate law as determined by the State Bar of California.

MY EXPERIENCE

I often tout how many probates I have done to show my experience. I have probably done 700 probates at this point in my career. I do not count but that’s a pretty reasonable guess. It could be more.

OTHER EXPERIENCE

However, with all my accolades, degrees, classes I have taken, classes I have taught, and all of my probate cases I have completed there is one thing I can not say. I have never worked at the probate Court as an attorney.  Frankly speaking I do not know of any, until now, in the

courthouse.sac Law Firm with actual PROBATE COURT EXPERIENCESacramento region who have this experience.

OUR NEW ATTORNEY

On Monday June 10, 2013 the law offices of Meissner, Joseph & Palley are pleased and excited to announce the addition of Evelyn E. Skall to our team.  Evelyn has spent the majority of her 25 year degree working at the Sacramento County probate Court where she has advised the Judges on their cases. She has probably worked on countless thousands, if not tens of thousands, of probate cases. She has dissected cases filed in all types of probate matters. Now she will be working for us doing

the same thing… except without advising the Judge of course.

CASE REVIEW

Ms. Skall will be reviewing our probate Court filings for accuracy and to make sure it meets up with the specifications the Court requires. Even though I have filed 700 probate cases the Court attorneys occasionally find stuff that could have been done differently. We will now have that Judicial type review IN OUR OFFICE!

WHAT THIS MEANS FOR OUR CLIENTS

I believe that our probate clients will be getting the best possible care and accuracy of any law firm in California.  With my experienc

e representing clients, coupled with Ms. Skall’s courthouse experience, we will be second to none!  Our filings will be even more accurate than before!  Plus, since probate cases are based on the statutory fee schedule it won’t cost you more.

CONCLUSION

The addition of Evelyn E. Skall to the team at Meissner, Joseph & Palley, Inc. will make us second to none in California for probate attorneys. Our work will be efficient as always but even more accurate than before! Also, as stated above, since attorney fees in standard probate cases are based on the statutory fee schedule our clients won’t pay any more for this incredible level of service!

 

The Probate Real Estate Auction

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OBJECTING TO A NOTICE OF PROPOSED ACTION

In a recent blog post I explained what happens in the probate real estate process. That post focused on how to respond to a notice of proposed action. Now, let’s take it a step further and talk about what happens AFTER YOU OBJECT TO A NOTICE OF PROPOSED ACTION….

I OBJECT!

So you got the NPA (notice of proposed action) in the mail, you thought about it, you talked to your friends, you debated, and finally you OBJECTED! You did it. You signed the form, on page 2, where it says OBJECT and you sent it to the attorney. Of course, you did this within 15 days of the notice being sent (or at least before the house closed escrow).

WHAT IS IT WORTH?

Before I go on it’s important to remember that without a time machine, to travel ahead a year or two, it’s IMPOSSIBLE to know what a house will be worth. I once heard that, with the stock market at least, a price is determined when half the people think it’s going up in value and half the people think it’s going down. Houses are not that much different.timemachine 300x300 The Probate Real Estate Auction

WAS THAT THE RIGHT CHOICE?

Each case is unique and different. It’s almost impossible to really “know” if it  was a good choice merely by looking at the raw numbers provided by the probate attorney.

WHAT’S THE HOUSE REALLY “WORTH?”

Let’s analyze a hypothetical case.   Let’s say a house is appraised for $375,000 by the probate referee. First thing to ask is when was the appraisal done?  Date of death or was it a “reappraisal for sale?” So let’s say there is an appraisal that says it’s worth $375,000. Is it? Did the appraiser go out to the house or do a “drive-by” appraisal? In my experience the probate referees usually do a drive-by so the accuracy is questionable; it’s more of an average.  Is the house in question in better or worse condition than average? Does it need work?  If the house is selling for $300,000 is it definitely too low?  It’s really hard to know just looking at the raw numbers.

home 300x211 The Probate Real Estate Auction

WHAT’S THE ACTUAL SALES PRICE?

Plus, don’t just look at the apparent bottom line number. Make sure you look through all pages of the contract. Look for buyer’s credits, requests for repairs and how the closing costs are to be divided. The actual sales price can be heavily clouded by these other things which can drastically change the bottom line.

BEFORE COURT – WHAT HAPPENS?

So, you have objected… now what?  In some cases when the buyer learns of the objection she will walk away from the deal. There are so many investors out there right now and investors don’t want to tie their money up in deals that can drag on for months. Thus many of them will WALK!   If this happens the sales process starts over. At least in the current HOT HOT HOT real estate market you are likely to get another buyer fast… or at least hopefully you will. It’s like a good game of chess… you need to think about your move carefully!

chess The Probate Real Estate Auction

AT COURT

So, you have objected, the buyer hasn’t walked, well then what? The Executor’s attorney will have caused notice to be sent to the buyer and all interested parties of the sale. The attorney also will cause publication to be made in the legal section of an appropriate newspaper; but do any real buyers read that or just other investors?  The buyer, and others, may show up in Court to bid or at least watch the bidding. In my personal experience there are typically NO bidders at Court. Thus, it usually only delays the process but, in some cases, a bidder or two emerge to raise the price!

THE BIDDING PROCESS

The bidding process is an auction and the probate Judge is the auctioneer. She literally calls out the property for sale, the terms of the sale, and asks if anybody wants to bid on the property. The first overbid is about 5% over the contract price. The exact formula is laid out on California Judicial Council form DE-260. If nobody overbids the Judge calls out “going once, going twice, and SOLD” or something very close to those exact words. It’s literally an AUCTION!

AFTER THE AUCTION

After the auction the sale can be closed within a few days by taking the certified Court Order to the title company. The Executor’s attorney will take care of that.

 

Getting your probate case approved in Court

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Introduction

I was on a CourtCall today appearing live, though by telephone, in the Lake County probate Court.  As I waited my turn to speak to the Judge I thought about what everybody does while waiting for a probate Court hearing to start…

lake.county.court 300x225 Getting your probate case approved in Court

I daydreamed about what I had done to be ready for today’s hearing and how that would make for a great blog post.  That is, as I semi-listened to make sure my case wasn’t called, I confirmed to myself all of the things that I had done to improve the odds of my matter being approved today and not being delayed.


Before filing

Before even filing one document I am thinking ahead. Where are potential threats?  In this case, I realized, my client lives out of state. Any time you have an out of state Administrator or Executor the Court has discretion to impose the requirement of a bond. That is, the probate Judge decides if there will be a bond or not. This is just one example of the type of thing I think about BEFORE filing the petition for probate. If you want more information about surety bonds here is a link to a bond application for a California probate case.

Before the Court Date

So once you have a Court date then what? Again we try to think ahead! First of all we make sure all the procedural matters get done on time. A probate is like a high hurdles race so plan ahead before each hurdle arrives!hurdles.probate 300x225 Getting your probate case approved in Court

- we publish in a local newspaper of general circulation;

- we send notice of hearing to all entitled to notice;

- we send the proposed order to the Court;

- we checked for calendar notes.

On the Court Date

The morning of the Court hearing I always review my file to make sure I am familiar with the basic facts. I do not want to be surprised if the Judge asks me a question. I am the attorney for the proposed Executor so I really should know the answer to any question the Judge asks. lake.county.court 300x225 Getting your probate case approved in Court

After the Court Date

Once Letters Testamentary issue it is on like Donkey Kong! It is time to take action and get the probate MOVING… and working toward the next probate Court hearing date!

-John Palley

Anytime you need a probate and estate planning attorney for matters anywhere in California contact John Palley.  A Certified Specialist in Estate Planning, Trust and Probate Law as determined by the State Bar of California Board of Legal Specialization.  Contact by phone 1.800.965.1106 or email: john@californiaprobate.info

Selling A Home In Probate?

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How to respond to the Notice of Proposed Action

john palley probate services 300x200 Selling A Home In Probate?You have received a notice of proposed action in a probate real estate sale… now what do you do?  You have options.

Generally the notice says that you have until a date (15 days after the notice is mailed) by which you must object to the sale terms. In fact, you can object until escrow closes, even if after 15 days, but better to object right away in most cases.

So you can object, consent or do nothing.

Should you object?  Each case is different.

The Possible Result of an Objection

By objecting you create a Court auction. A Court auction costs money. There will be Court costs (likely close to $500 to file the petition to confirm the sale) and attorney fees (the probate attorney is entitled to extraordinary fees for work done related to real estate sales). For example, if you are a 50% beneficiary of an estate each dollar spent is coming half out of your pocket. To ballpark it let’s say it costs $3,000 between fees and costs to do a petition to confirm sale that would mean $1,500 coming out of your pocket.

Will the probate Court auction earn more money?  Sometimes yes and sometimes no. In my experience the majority of cases do NOT get overbids at Court and thus the first bid is ultimately sold to at the original price.

Worse yet, especially in recent years when the real estate market was falling, many deals fell out of escrow when a Court auction was created. However, things are better now and that’s less likely. A concern still though.

On the other hand maybe by objecting the executor of the estate will go back to the buyer and try to get a few thousand more if that will satisfy you. Life is a negotiation!

Can you do anything to encourage more bids at Court? The Court auction is literally a public auction governed by the probate Judge. Anybody can show up and bid. Advertising in a legal newspaper is required but that only gets investors who actually read those ads. If you want real buyers you need to tell Realtors, tell friends, take out pretty ads in the real estate section of the paper, etc…. Marketing 101!

At the end of the auction the Judge says “going once, going twice… SOLD.”

In the end, as stated above, each case is different.

Let’s talk about YOUR case specifically!

-John Palley

Cleaning up estate plan messes after death

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“I can get a trust done for $500, on the back page of Rolling Stone magazine, so why should I pay you $2,000?”

My answer is simply, “we will find out after you die how good your five hundred dollar estate plan is.”

I mean that with all sincerity. It MIGHT be just fine. On the other hand I have seen some horrendous trusts ($500 or more) that I have had to clean up after death. Some so-called “estate planning attorneys” create huge messes after death with poorly written and poorly executed documents.

Get it done right before you die so your family doesn’t have to deal with this!

On the other hand, if you are reading this blog after a loved one has died you have come to the right place. We clean up bad estate plans, after death, all the time!

Cleaning up a bad estate plan after death usually requires much more work and much more money than if things had been done right in the first place. However, I have seen so many bad estate plans I have had a lot of experience cleaning them up.

There are many different alternatives for cleaning up messes.  The most common fixes to estate planning messes:

1) Heggstad petition to get assets into the trust.

2) Petition for succession to real property worth less than $150,000.

3) Probate code 13100 small estate affidavits for personal property.

4) Spousal property petitions when one spouse dies.

5) Full probates in the worst messes.

Contact me to discuss how we can best clean up the mess you find yourself in!

-John Palley

Does a life insurance beneficiary change by divorce?

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How would you feel if your evil ex-husband or witch of an ex-wife received your life insurance after you die?  Talk about rolling over in your grave!?

Upon filing for divorce, in California, there are automatic restraining orders. Among them, you are not allowed to make changes to non-probate transfers without the consent of your soon to be ex-spouse. This means you can make a new will (since that’s a probate transfer) but you can not change your trust, IRA, 401k or life insurance beneficiary.

Yes, some people die during extended divorce proceedings and their not quite ex-spouse gets the asset. This is not the outcome many want but it’s often unavoidable. However, after the divorce is complete it is avoidable but you might have to take action!

Some beneficiary designations are automatically revoked, if they pay to the ex, by divorce.  Some are covered by federal ERISA law which is beyond the scope of this post and the rest are covered by California state law.  Many of these are governed by California probate code 5600 which provides as follows for nonprobate transfers after divorce (with my added emphasis):

5600. (a) Except as provided in subdivision (b), a nonprobate transfer to the transferor’s former spouse, in an instrument executed by the transferor before or during the marriage, fails if, at the time of the transferor’s death, the former spouse is not the transferor’s surviving spouse as defined in Section 78, as a result of the dissolution or annulment of the marriage. A judgment of legal separation that does not terminate the status of husband and wife is not a dissolution for purposes of this section.
(b) Subdivision (a) does not cause a nonprobate transfer to fail in any of the following cases:
(1) The nonprobate transfer is not subject to revocation by the transferor at the time of the transferor’s death.
(2) There is clear and convincing evidence that the transferor intended to preserve the nonprobate transfer to the former spouse.
(3) A court order that the nonprobate transfer be maintained on behalf of the former spouse is in effect at the time of the transferor’s death.
(c) Where a nonprobate transfer fails by operation of this section, the instrument making the nonprobate transfer shall be treated as it would if the former spouse failed to survive the transferor.
(d) Nothing in this section affects the rights of a subsequent purchaser or encumbrancer for value in good faith who relies on the apparent failure of a nonprobate transfer under this section or who lacks knowledge of the failure of a nonprobate transfer under this section.
(e) As used in this section, “nonprobate transfer” means a provision, other than a provision of a life insurance policy, of either of the following types:
(1) A provision of a type described in Section 5000.
(2) A provision in an instrument that operates on death, other than a will, conferring a power of appointment or naming a trustee.

At first blush PC 5600 seems pretty clear, right? It says nonprobate transfers, executed during marriage, are invalid after divorce. What could be more plain, right?  I mean I know life insurance is a nonprobate transfer so it’s covered I think….  However, then you get all the way down to subpart (e) and that’s a game changer for life insurance because it says, and I do paraphrase, “oh ya, never mind what we said above because this section does NOT apply to life insurance.”

So… hey, I am not done yet! I know a few of you are now contacting your life insurance agent just to make sure and that’s probably the right thing to do but let me finish!

Seriously though, take this as an opportunity to check ALL your payable on death beneficiary designations. Life insurance, annuities, 401ks, IRAs, last pay checks, bank accounts and any other assets that allow for a POA or payable on death. Many are changed, automatically, by divorce by many are not. Plus, even the ones that are automatically revoked could create a fight after death. Thus better to get it straight now while you are alive!

- John Palley

Trust Certification

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I am often asked to help walk a client through a trust certification form. Either for a re-fi on their mortgage or a new bank account. After filling out 25 of those, or more, the last year I thought I would post it here to help my readers know exactly what is needed. This is a sample trust certification or certification of trust or certified extract of trust or certified abstract of trust.  Here you go:

CERTIFICATION OF TRUST
PURSUANT TO CALIFORNIA
PROBATE CODE SECTION 18100.5

I/We, ________________________________________, [enter your names here] trustee(s) of the ______________________________ [name of your trust here] confirm the following facts1. The ________________________________________ [name of your trust] is currently in existence and wcreated on ______________________________ [Date your Trust was signed].

2. The settlor(s) of the trust are as follows: _____________ [enter your name(s) here]
3. The currently acting trustee(s) of the trust is/are:__________ [enter your name(s) here]
4. The power of the trustee(s) includes:
a. The powers to sell, convey and exchange ¨ Yes ¨ No (check one) [most likely YES]
b. The power to borrow money and encumber the trust property with a deed of trust or mortgage
¨ Yes ¨ No (check one)[most likely YES]
5. The trust is ¨ revocable; ¨ irrevocable (check one) [typically these are filled out for REVOCABLE trusts but of course some, especially after death, may be irrevocable] and the following party(ies) if any, is/are identified as
having the power to revoke the trust: ______________ [your name(s) here]
6. The trust ¨ does, ¨ does not have multiple trustees (check one). If the trust has multiple trustees, the
signatures of all the trustees or of any
of the trustees is required to exercise the powers of the trust.
7. The trust identification number is as follows:
(Social Security Number/Employee Identification Number) [typically the social security of either settlor goes here]
8. Title to trust assets shall be taken in the following fashion: ________________ [Your name(s) as trustee of the _____ trust, dated ______________ ]
CERTIFICATION OF TRUST PURSUANT TO CALIFORNIA PROBATE CODE SECTION 18100.5

The undersigned trustee(s) hereby declare(s) that the trust has not been revoked, modified, or amended in any
manner which would cause the representations contained herein to be incorrect. This certification is being signed
by all of the currently acting trustees and is being executed in conformity with the provisions of California Probate
Code Section 18100.5, Chapter 530, Statutes of 1993.
IN WITNESS WHEREOF, the undersigned have executed this document on the date(s) set forth below.
________________________________________
________________________________________
By: ____________________________________
Trustee
State of
County of
On ______________________________ before me, , Notary Public,
(here insert name and title of the officer)
personally appeared ,
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to
the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized
capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of
which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is
true and correct.
WITNESS my hand and official seal.
Signature ____________________________________(Seal)