How to probate when a husband and wife die a year a part

I had a really interesting fact pattern today that I wanted to share. I got the perspective client’s permission to share but, of course, names are changed for privacy. Sadly Gina’s mom, Molly, died in December of 2015 and her dad, Donald, died in December of 2016. A crappy 12 months for Gina we can all agree. They owned a house in Sacramento county.

A very common scenario we see is where the decedent’s home ends up in one spouse’s name alone. This is often done for financing purposes where one spouse has great credit, one spouse has bad credit, one spouse is employed, one spouse is self employed, etc…. Several of those factors were present here. So there is a house in Molly’s name as her “sole and separate property.” That is, Donald actually deeded his interest in the house to Molly as her sole and separate property.

Our goal is to get the house into Gina’s name in the most efficient and cost effective manner possible. Oh ya, I forgot to mention, Gina is an only child.  For simple math let’s say the house is worth $500k with a $250k mortgage.  Let’s assume no other assets of significance to keep this simple.  Gina has options. Let’s discuss them.

OPTION A:

Gina could treat the house as her mom’s separate property. That is what the deed says so that is a very reasonable approach. By doing that there would be a probate for a $500,000 house. At the conclusion of probate, due to the laws of intestacy, Gina would get 1/2 of the property and the other 1/2 would go to dad’s estate. The cost would be roughly $13,000 in attorney fees and roughly $2,000 in court costs for a total of $15,000.

That’s not all though. Then dad’s 1/2 has to be probated.  Let’s assume $250k value so about $8,000 in attorney fees and just under $2,000 in court costs.

Yikes up to $25,000 in probate fees and costs… but that’s not all.  Let’s assume the house appreciated $50,000 from Molly’s death until Donald’s death. Based on the Sacramento real estate market in recent years that is a reasonable guess. That would slightly reduce the cost of the probate by $1,000 (that is the cost of probating a $450,000 house rather than a $500,000 house) but still all in at $24,000.

However, that’s not all… bigger still is 1/2 of that $50,000 gain would not step-up in basis at Donald’s death thus leaving Gina with a tax basis in 1/2 of the property $25,000 less than current value. If we assume 25% between federal and state capital gains tax that’s about $5,000 or $6,000 more.

In summation I think option A would cost Gina about $30,000.

OPTION B:

My preferred plan is option B. Let me explain.  Yes, the deed says “sole and separate property” but does it always mean that?  We have, many times, successfully used a spousal property petition even when the title says that it is separate property. Again, remember, this deed is only in Molly’s name alone due to financing reasons. The reality is it was community property.  Title is just a presumption and that presumption would be easily knocked down.

So we would prepare a spousal property petition (SPP) to transfer the property, 100%, from mom to dad.  Different attorneys charge different amounts for preparing an SPP but let’s just call it $5,000 between attorney fees and court costs as an estimate.

The SPP would move the property 100% to dad’s estate.  We would then probate dad’s $500,000 house. The cost would be about $15,000 for that probate

The total of attorney fees and court costs with option B is thus $20,000.

PLUS Gina gets a FULL STEP UP IN TAX BASIS so will not have a gain on sale and thus avoids about $5,000 or $6,000 in capital gains tax. Gina is the big winner here!

There are always other facts to consider. In this case I asked about creditors and confirmed that Donald was not on Medi-Cal. That is, I don’t want to create a large estate for dad and then have dad’s estate go to creditors.

Please remember that each case can have other unique factors so talk to an attorney before trying this on your own.

-John

 

The California probate process speech

I feel thankful that NBI and other organizations consistently ask me to come talk about estate and probate law.  Yesterday I had the pleasure of speaking for almost two hours on probate law to a group of attorneys and paralegals. My topic outline is below. I get a real charge out of talking to a group and sharing my knowledge. Should your organization need a speaker please do not hesitate to reach out to us!  -John

 

I. HOW TO FILE AN ESTATE IN PROBATE COURT
9:00 – 9:50, John B. Palley
A. Distinctions Between the Modest and Larger Estate
B. The Estate Timetable and What Needs to Be Done
C. Steps for Proving the Will
D. Steps for Challenging the Will
E. How to Prepare and File the Inventory
II. WORKING WITH EXECUTORS AND ADMINISTRATORS
9:50 – 10:40, John B. Palley
A. Duties of Executors or Administrators During the Probate Process
B. Paralegal Contact With Executors or Administrators
C. How Misconduct and/or Removal of Executors or Administrators is Handled
D. Compensation
E. Special Administration
F. Duties of the Attorney for the Executor – Who is the Client?

Probate book for your KINDLE – download it now!

As my avid readers know I was excited to release a book about the California probate process a couple months back. In all honesty sales have been better than expected. It took a while to get the Kindle format working but it should be up and running now. Go to Amazon and check it out.

Probate Book Cover

Here is the table of contents which gives you an idea of the topics covered:

Table Of Contents

Author Introduction. 3

Experience of Meissner, Joseph & Palley Law Firm
In Probate. 3

Types Of Probate. 3

Common Issues Faced By Practitioners In
Probate Process. 3

Is Probate Necessary?. 3

The People Involved In The Probate Process. 3

Timeline For The Probate Process. 3

Common Issues In The Probate Process. 3

Technical Terms Used In The Probate Process. 3

Common Terms Used In Probate. 3

Basic Facts About The Probate Process. 3

Letters In Probate And Filing Claims. 3

Probate, Taxes And W-9 Forms. 3

Selling Probate Property And Assets. 3

The Final Petition In The Probate Process. 3

The Role Of An Attorney In The Probate Process. 3

Costs In Probate Cases. 3

 

Here is the terminology list from the book as a sneak peek:

Terminology

  • Administrator – Person named to administer the probate if not named in will
  • Court Reporter – The person who types notes of what is said in Court and does not exist in all probate court rooms
  • Decedent – The person who died
  • Executor – Person named to administer the probate in the will
  • File Examiner – Is typically an attorney, but sometimes a non-attorney, who works at the court and advises the Judge on each case
  • Judge – The probate Judge is a Superior Court Judge who is in charge of the process
  • Lawyer – Typically the Personal Representative is represented by their own legal counsel
  • Personal Representative – Includes Executor, Administrator and Special Administrator
  • Probate Referee – State appointed official who appraises probate assets
  • Special Administrator – Person named to act on behalf of the estate on an emergency or temporary basis

 

 

Heggstad petition v. full probate after death of first spouse

I spoke to a potential new client recently who has a very common scenario. For this blog we will call them Mr. and Mrs. Smith.  He and his wife have a trust from the early 1980’s.  It appears to be a fairly standard trust. Along with it they also have “pour over” wills as most people have.  Mrs. Smith died recently with an asset out of their trust.

In about the year 2000 they bought a home together in the Sacramento area.  They bought the home “as community property.” That is the deed says “John Smith and Jane Smith, husband and wife as community property.”  Unfortunately the CP with right of survivorship law had not come into effect in that year. Thus California did not yet have an automatic community property ownership option yet.

As a probate attorney when I see husband and wife as community property, but without the words “with right of survivorship” I immediately think of doing a spousal property petition. That is an abbreviated petition in the probate court to transfer the property from one spouse to another.  It is a pretty quick petition and fairly routine when the property is titled in community property. However, a spousal property petition does not work when there is a pour over will. In this case Mr. and Mrs. Smith have the standard pour over will to their trust. Spousal property petitions only work between a husband and a wife; not a trust. So the SPP will not work. What other options does Mr. Smith have?

I believe his only two options are:

  1. A Heggstad petition pursuant to California probate code 850; or
  2. A full probate.

I have blogged other times about the Heggstad petition so I’ll keep it brief here. A Heggstad petition is a way of transferring property to a trust by showing that the decedent intended for the property to be in a trust. With real estate the intent should be shown by a specific writing. The most common writings are: 1) a specific listing of real estate on a schedule of assets, 2) a specific mention of the property in the trust document (i.e. “I give the property located at 1234 Main Street to my son Bob….”), 3) a signed but unrecorded deed, or 4) other written statements such as a letter to an attorney asking for a deed to be prepared. If successful a Heggstad petition should be done in about 8 weeks. The result will be a court order that is recorded in the county recorder’s office.

In this case there is none of the above written intent. I thus think the odds of a Heggstad petition working are probably 50%, at best. In fact, 50% is really the most generous I can be and that’s hoping the Judge is feeling generous. To increase our chances of success I would have Mr. and Mrs. Smith’s children sign consents to the petition and file those with the court.

The other option is a full probate. While the above only supplies about a 50% chance of success a full probate is a 100% chance of success. Unfortunately it costs more money and takes longer. In this case it would probably cost Mr. Smith about double the money that a Heggstad petition would.  Also a full probate is 7 months MINIMUM in time. However, the property can be sold during probate so upon the appointment of Mr. Smith as Executor, in about 6-8 weeks, he can close escrow. That is, 1/2 of the house would be owned by the estate and 1/2 would be owned by him as an individual.

Other options for Mr. Smith to consider?  One option I offered was to file the Heggstad petition and a full probate simultaneously. The advantage is that if the Heggstad petition is not successful the probate is already filed and ready to be approved. The added cost is probably $1,000, or so, for the initial probate costs (filing fee with the court and publication in the newspaper). If the heggstad petition is successful then the full probate would be dropped. On the other hand if the Heggstad is not successful then we move forward with the full probate.

It is unfortunate that Mr. and Mrs. Smith did not deed the property into their trust while Mrs. Smith was still alive.  However, they didn’t so, at this point, it is what it is. We need to clean it up so that Mr. Smith can get the house sold.

If you have a situation, like Mr. Smith, contact us to discuss YOUR best option!   -John

FREE CALIFORNIA PROBATE BOOK

It’s not on Amazon yet, there has been no official press release, but my book HOW TO LIVE AND DIE WITH CALIFORNIA PROBATE (A Layman’s Guide to Understanding Probate in California) has been printed and is in my hot little hands!  If you are in a position of being an administrator or executor of a California probate please contact me for a free copy of this book.  I can mail you a hard copy or email you a PDF.

front

 

Table Of Contents

Author Introduction. 8

Experience of Meissner, Joseph & Palley Law Firm
In Probate. 10

Types Of Probate. 14

Common Issues Faced By Practitioners In
Probate Process. 18

Is Probate Necessary?. 22

The People Involved In The Probate Process. 26

Timeline For The Probate Process. 30

Common Issues In The Probate Process. 34

Technical Terms Used In The Probate Process. 39

Common Terms Used In Probate. 42

Basic Facts About The Probate Process. 46

Letters In Probate And Filing Claims. 50

Probate, Taxes And W-9 Forms. 53

Selling Probate Property And Assets. 57

The Final Petition In The Probate Process. 62

The Role Of An Attorney In The Probate Process. 65

Costs In Probate Cases. 70

Pharmaceutical drug class action lawsuits in PROBATE COURT

We have handled many pharmaceutical drug class action and personal injury lawsuits in probate court.  Recently we have represented many people pursuing settlements in the Actos liver medication lawsuits. We are not the class action or personal injury lawyer. We are the probate attorneys who help when the person who took the medication passed away.  We have significant experience representing individuals in these cases and also have worked closely with the class action lawyers when asked.  If you lost a loved one and are pursuing a pharmaceutical drug class action or personal injury lawsuits, and need probate court help, please contact us.  We can help with probate, conservatorship or guardianship situations.  Likewise, if you are a class action or personal injury lawyer needing help for your California decedents or disabled clients we can help you. We are efficient, friendly and experienced. Contact us today to discuss how we can help YOU!  -John

 

Notifying the California Department of Health Services of a death

How does one go about notifying the California Department of Health Care Services (aka: “Medi-Cal”) of the death of a friend or loved one? You can have an attorney help you or just go to this handy link on their website.

Once there click on NOTICE OF DEATH.

Another screen is brought up where you put in a whole host of information about you, the decedent, their assets, etc….  Just fill it all in, honestly of course, and then wait for Medi-Cal to get back to you.

Don’t forget Medi-Cal generally will take a back seat to other costs of administration in a probate. So a large Medi-Cal bill does not mean you should just walk away from a piece of real estate. We can often get our client’s MONEY IN THEIR POCKET. Medi-Cal just wants the house sold and are ok to get paid after probate. The key is talking to an experienced probate attorney.

If you want to talk about Medi-Cal claims, probate, or any related subjects please contact us.  -John

Special Letters of Administration and Mortgage Companies

“My husband died and the mortgage company won’t talk to me.”

This is becoming a common statement that I hear. Mortgages and the actual deed to real estate are NOT connected. They are separate.  So, for example, if a spouse dies with a house in their name the other spouse can often use a “spousal property petition” to transfer assets to themselves without going through a full probate. However, the mortgage, or encumbrance against the property, does not transfer with the “deed” or title.

What?

Say it isn’t so Mr. California Probate Lawyer!

It’s true.

Plus, mortgage companies are making it more and more difficult to communicate with them after death. Sure I have known of people who have pretended to be the decedent and that can last for years but eventually that will stop working. Plus it’s not legally correct to do that!

I recently encountered an interesting situation. Mom and son were thoughtful enough to prepare a deed, before mom died, to transfer her home to her son.

Now, since you read my blog you know this might have negative tax ramifications after death but, putting that aside, it avoided probate so in general it’s fine. However, the mortgage company really doesn’t care about the deed transfer. They do not care because the deed transfer is completely separate from the underlying mortgage. The client wants to talk to the mortgage company about a loan modification.  The mortgage company won’t talk to him since mom is dead. This is truly a problem.

What can be done?

Rightfully so the client wants to avoid a full probate. I do believe a full probate can be avoided.The answer is Letters of Special Administration.

Letters of Special Administration is basically a limited probate. It’s limited to whatever is specified in the petition. The more limited it is the more likely the court will approve it. We thus may ask for limited powers to communicate with XYZ Mortgage Company regarding loan 1234. Or maybe we will ask for general powers related to real estate.

See California probate code 8544 below:

8544. (a) Except to the extent the order appointing a special
administrator prescribes terms, the special administrator has the
power to do all of the following without further order of the court:
(1) Take possession of all of the real and personal property of
the estate of the decedent and preserve it from damage, waste, and
injury.
(2) Collect all claims, rents, and other income belonging to the
estate.
(3) Commence and maintain or defend suits and other legal
proceedings.
(4) Sell perishable property.
(b) Except to the extent the order prescribes terms, the special
administrator has the power to do all of the following on order of
the court:
(1) Borrow money, or lease, mortgage, or execute a deed of trust
on real property, in the same manner as an administrator.
(2) Pay the interest due or all or any part of an obligation
secured by a mortgage, lien, or deed of trust on property in the
estate, where there is danger that the holder of the security may
enforce or foreclose on the obligation and the property exceeds in
value the amount of the obligation. This power may be ordered only on
petition of the special administrator or any interested person, with
any notice that the court deems proper, and shall remain in effect
until appointment of a successor personal representative. The order
may also direct that interest not yet accrued be paid as it becomes
due, and the order shall remain in effect and cover the future
interest unless and until for good cause set aside or modified by the
court in the same manner as for the original order.
(3) Exercise other powers that are conferred by order of the
court.
(c) Except where the powers, duties, and obligations of a general
personal representative are granted under Section 8545, the special
administrator is not a proper party to an action on a claim against
the decedent.
(d) A special administrator appointed to perform a particular act
has no duty to take any other action to protect the estate.

The highlighted portion above is key as it should allow the Special Administrator to deal with the mortgage company and figure out a plan for the mortgage.

Fees in special administration cases are by agreement of the parties. The typical statutory probate fee schedule does not apply. I generally offer these on a flat fee basis to give the client’s the most certainty and avoid surprises.

I should add that special letters can be used in many other situations such as accessing bank accounts to pay mortgages and funeral expenses, investigate safe deposit boxes, and more. The key is getting the court order so it’s all legal!

-John

Help write the California probate code

People often complain about the California probate code. Now YOU can help fix it! According to this GCN.com article there will be a crowdsourcing feature to modify and amend the code on wiki.  GCN is the only website reporting this at the moment. Read about it here.

Sacramento Probate Court Continuances

I pride myself on rarely having to seek continuances in probate court. That is, I try to be prepared and take care of my business BEFORE the court date so as to avoid continuances. Historically continuances, in Sacramento county, have been 4 weeks out.  I am speaking of the Sacramento probate court when I say Sacramento county. Each county is a little different of course but the trend is being seen in most counties of California as I work throughout the state.

The last year, or so, it’s been moving toward 6-8 weeks at times in Sacramento. Today, I had to ask for a continuance in a case as there are some heirs who want more information. The court date is too close (next week) and thus a continuance was agreed to so we could answer all of their questions. Ok fine but guess what… the case just got delayed THREE MONTHS.

Yes, the next available continuance day after the January 8, 2014 hearing is April 8, 2014. Let me repeat… THREE MONTHS!

As I have stated before if you do a probate case yourself or hire an inexperienced attorney you face an increased risk of a continuance. If a continuance is three months that means your case will be at least 3 months longer than it need be. Plus, it can happen again, and again, and again….  Before you know it your probate case takes a year longer than it should. Forget the rest and hire the best from day one!