What do I do when I receive a notice of proposed action?

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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.

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)

Real Property Transfers After Death and The Tax Assessor’s Office

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It sometimes seems that the real estate transfer forms which are required in a California probate do not work together. This is true. There are multiple systems working together and thus problems persist. You have the Courts, the assessor’s office, and the recorder’s office. Let me explain each one:

STEP ONE: The Inventory and Appraisal form (California form DE-160) is required to be filed within 4 months of letters issuing (Probate code 8800).  On that inventory it states that you HAVE notified the county, where any real estate was owned by the decedent, that the decedent died.

STEP TWO: Pursuant to step one we have to notify the county of death. That is done by filing an Estate Change in Ownership form (available on county assessor websites throughout California). This form indicates who the anticipated recipients are of the real estate. This of course is not always known.

STEP THREE: In response to receiving the Estate Change in Ownership form the county assessor’s office will likely generate a Parent to Child Exclusion form (available on county assessor websites throughout California – BOE-58). It technically needs to be filed within 3 years of death (and also BEFORE ANY SALE TAKES PLACE) but the county assessor usually requires it within 2 weeks and will re-assess if not received. The problem is that supporting documents are supposed to be filed with the Parent to Child form but we won’t have those until the probate is over.

STEP FOUR:After a petition is filed to end the probate a Court Order is received which distributes the property. The Court Order says who receives the real estate. It may be different than indicated above because things can change. If that happens you should do an “amended” Parent to Child Exclusion form.  The Court Order is recorded in the county Recorder’s office.  The Court Order should plainly spell out the address, APN number and legal description of the property. Also, the Court Order should plainly indicate who is to receive that property.

STEP FIVE: With the recording of the Court Order you should also send in a Preliminary Change of Ownership form. The “PCOR” is available on most county assessor websites in California. It’s important to file this, even if not technically required,” because it’s the tax assessor who sends out tax bills. If they don’t update their records a problem can ensue with a confused “ownership” of the property.

STEP SIX: The final, and optional, step is to record an Executor’s Deed. This just repeats what the Court Order says but sometimes is easier to get the legal “ownership” records changed.

If you have questions about any of the above let me know!

-John B. Palley

Making house calls like a doctor….

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I have had a couple of instances in the last few days where we have a new client where a house call will be in order.  The client, or their spouse or child, ask “why.”  They don’t want to spend the extra money for an attorney to go to their house. Let me explain the value of the house call and how much it improves the effectiveness of the wills, trusts and other legal documents. If a client is in a place in life where they can’t get out of the house they may also have a mental deficiency… or just the assumption that they have one. However, once these documents are contested the homebound client will most likely be dead and thus they won’t be here to explain how mentally competent they are. The arguments will fly, fast and furious, that they were of diminished capacity or that they were under undue influence. How can we prevent that?

When an estate planning lawyer meets with a client they generally write notes about the background of the meeting. Maybe the fact that the attorney met alone with the client or that the client was able to answer some questions. The questions they are asked will show that they understood the nature of their assets, who their family is, and other questions like that. The attorney will likely ask some general questions like who the president is as well. Basically the attorneys notes can be vital if that will or trust is ever contested. In fact, I believe it is much less likely to be contested at all if an attorney was involved in the drafting and, especially, if there was at least one face to face meeting.

Now, sometimes the people just don’t want to spend money for a face to face meeting or it just won’t work for some other reason. This is not to say the meeting is required but it’s good practice for sure.

If you have a homebound loved one make sure they get the best legal care possible. If they can’t travel to the attorney’s office please consider at least one home visit if not two (one for planning and one for signing). Failure to do so puts the documents at risk!

Good luck!

-John Palley

Probate process from start to finish

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Today I will be speaking to a group of paralegals at the Sheraton in downtown Sacramento on the probate process from start to finish. Here is a summary of the outline. If you want my full outline just ask and I’d be happy to share it!  -John

  1. HOW TO FILE AN ESTATE IN PROBATE COURT 9-9:45 John Palley
  1. Distinctions Between the Modest and Larger Estate
  2. The Estate Timetable and What Needs to Be Done
  3. Steps for Proving the Will
  4. Steps for Challenging the Will
  1. WORKING WITH EXECUTORS AND ADMINISTRATORS 9:45-10:30 John Palley
  1. Duties of Executors or Administrators During the Probate Process
  2. Paralegal Contact With Executors or Administrators
  3. How Misconduct and/or Removal of Executors or Administrators is Handled
  4. Compensation
  5. Special Administration
  6. Duties of the Attorney for the Executor – Who is the Client?
  1. HOW TO PREPARE AND FILE THE INVENTORY 10:45-11:45
  1. ADMINISTRATION OF THE ESTATE 12:45-1:30
  1. Creditors, disclaimers, cash management
  1. ETHICAL PERILS IN THE PROBATE PROCESS 1:30-2:30
  1. Ethics and avoiding malpractice
  1. DEALING WITH SPOUSE’S ELECTIVE SHARES 2:45-3:30
  1. Homestead, family allowance, and other under utilized tools
  1. UNDERSTANDING THE LAWS OF INTESTACY 3:30-4

A. Who gets what when if there is no will

VIII.CLOSING THE ESTATE 4-4:30

  1. Final accounting and ending the case

How permanent are the 2013 estate tax laws?

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If President Obama’s 2014 budget is any prediction of the future the 2013 “permanent” estate tax law changes are not very permanent. Or, put another way, only politicians would call them permanent!  I have read, in recent days, that President Obama is proposing going back to 2013 estate tax levels. That would mean a $3.5m exemption and a 45% tax rate. Read more on this web site HERE.