California Small Estates

 I have blogged extensively in recent weeks about the changes probate code 13100, et seq. Here are my notes from my 2010 NBI presentation on the small estates before the law change. Again, you can change the $100,000 to $150,000 starting January 1, 2012.

Contact me with questions!  -John

 

2.      Under $100,000 Real Estate – PC 13150

To qualify for this section the decedent has to have ownedCaliforniareal property at their death.  The total value can not exceed $100,000 as of the date of death.  The assets can be a combination of real and personal property.  The petition can not be filed until 40 days after death.

The first step is to have the assets appraised by the probate referee using the date of death value.  If the value is $100,000 or less then PC 13150 can be used.  A petition will be filed by the successor in interest or the out of state PR.  If there are multiple people entitled to the property then they all would sign the petition.  The petition is filed and there is a noticed hearing.

The requirements are much less stringent than a full probate.  Among other differences there is no bond requirement, there is no publication requirement and Letters will not issue.

An important distinction from a full probate is that the recipients are personally liable for the decedent’s debts up to extent of value of property at the time of death.  With recent steep declines in real estate value this can become a problem if it turns out the decedent had creditors at death.

Attorney fees are by agreement of the parties.  There are no fees for the PR when using this code section.

PRACTICE POINTER:  Just because a decedent has real estate worth less $100,000 at the date of death you should not immediately jump to PC 13150.  Yes, it’s a great option but if there are creditors or not all the recipients agree on what to do with the property a full probate may be a better option.  Consider it and explain the differences to your client.

PRACTICE POINTER: At the State Bar convention this year some colleagues suggested that the current value can be used for PC 13150 petitions. The probate code is possibly vague on this as PC 13151 uses the present tense.  Possibly the present value would be a consideration if the value has changed dramatically and your client wants to object to the 13150 petition.  Possibly, the current value argument would work!?

  1. Under $20,000 Real Estate – PC 13200

Probate Code 13200 is a little used section but can come in handy when you need to clear title to property which was of little value at the date of death.   There is a judicial council form for this.  It can be filed 6 months after death by the successor in interest.  The first step is to have the probate referee appraise the property as of the date of death and fill out an inventory and appraisal. The petition is notarized.  Then the petition is prepared and filed along with the inventory, a certified death certificate and the appropriate fee. If the decedent had a will a copy of the will should be attached. It is filed with the Court clerk who will issue one certified copy of the order for you to record.

Attorney fees are by agreement of the parties.  There are no fees for the PR when using this code section.

PRACTICE POINTER:  Keep 13200 in mind when attempting to clear title to timeshares, strips of land, desert land and other extremely low value pieces of real property.

4.     Under $100,000 Personal Property PC 13100

A very common non-probate transfer is the use of affidavits to transfer personal property not exceeding $100,000 in value. This is a cumulative $100,000 of qualifying assets even if at different financial institutions. Similar to the above you must wait 40 days after death before you can use this procedure. The valuation date is not the date of death but rather the date of the affidavit signing.  Though some financial institutions have their own forms most use attorney drafted forms that contain all the elements required by the probate code.  The form is generally notarized.  This only works for personal property. 

Unlike the other mini probate options there is no appraisal required.  Also, no bond is required. There is no publication.  The Court does not issue Letters. In fact, 13100 generally has absolutely no Court involvement whatsoever and is not filed in Court. It is simply a signed affidavit, under the penalty of perjury, declaring a number of items. This contributes the fraud (and/or mistaken use) that does happen with 13100 declarations.

A 13100 declaration will provide:

1.         That 40 days have elapsed since death;

2.         Total Californiaestate is $100,000 or less currently;

3.         No proceeding is now being conducted inCaliforniafor administration of the estate;

4.         Description of property (i.e. “Wells Fargo Bank account #123456);

5.         Names of successor in interest;

6.         No other person has a superior right;

7.         Attach death certificate;

The holder of property is specifically not liable for paying the money out pursuant to this section (PC 13106) which allows financial institutions to pay the money out without a huge ordeal generally.  Also, a 13100 declaration can often be used to get the items out of a safe deposit box.

Though fraud happens the probate code specifically provides for treble damages for fraudulent use. (PC 13110) 

A person who uses a 13100 declaration, and receives property, has personal liability up to extent of value they received.   The liability cap is based on fair market value at date of death.  In rare cases this can cause the recipient a problem!  (PC 13109)

PRACTICE POINTER: If you use 13100 or other probate avoidance device and then find out there substantial creditors it would seem likely that you could then open a probate and use PC 850 to get the assets into the probate estate.  This would be a way to get your client at least an administrator’s fee, if nothing else, since that is a priority payment before general creditors.

As indicated above, some financial institutions have their own small estate forms which they ask you to use.  Additionally, some institutions require an affidavit of domicile also as well as a W-9 showing the recipient’s social security number.  To avoid delays it’s not a bad idea to supply affidavit of domiciles and W-9s with the small estate affidavit form.

A key point with using PC 13100 small estate affidavits is that not all assets count toward the $100,000. PC 13050 specifically excludes a few items from the calculation:

1.         Joint Tenancy

2.         Spousal Property

3.         Property in Trust

4.         POD Accounts

5.         Vehicles, boats, mobile homes/RVs (DMV forms)

6.         Moneys from service in Armed Forces

7.         Up to $5,000 in salary/compensation from employment

Speaking of trusts 13100 small estate affidavits can be used by the trustee, that is the residuary beneficiary of a pour over will, to claim assets that are not in the trust.

Attorney fees are by agreement of the parties.  There are no fees for the PR when using this code section.

PRACTICE POINTER: If your client advises you she has unscrupulous family members, if not all cases, you should notify the bank before the 40th day after death, to try and put a freeze on the account, to avoid someone using this procedure.  Fraud happens a fair amount with this procedure.