Estate Administration

While still governed by the Probate Code, the summary administration (often called “small estate”) procedures are much less formal than the administration of a full-blown probate estate. This procedure is used to transfer the individually owned assets of the decedent when the total value does not exceed $100,000 ($50,000 if decedent died prior to July 1, 2022). Here, assets are distributed to the proper beneficiaries (those identified in the will or by intestate succession when no will exists) through the use of “Small Estate Affidavits.” These affidavits are presented to the various companies that hold the decedent’s assets and cause each company to transfer ownership to the beneficiary. This process is commonly used for (but not limited to) distributing: bank accounts, car titles, real estate, and for the re-issuance of any check not yet cashed made payable to the decedent or the decedent’s estate.

If a decedent passes away after July 1, 2022, and their individually owned assets exceed $100,000, a formal probate estate is required. The probate administration process can proceed down a couple of different tracks: supervised or unsupervised administration. Unsupervised administration is generally preferable and occurs when certain statutory requirements are met (a couple of them being: the agreement of all parties to the estate to proceed without supervision, and the estate being solvent) which allows the personal representative (on the advice of the estate attorney) to administer the estate without the court’s supervision. As long as all the parties to the estate can get along and there are no complex legal issues, it’s generally possible to proceed with unsupervised administration. Here, the formal probate process is followed, and the personal representative keeps the court updated as various milestones are achieved throughout the administration process. In many cases, the personal representative and estate attorney can fully administer the estate without ever going to court. This process is less costly than a supervised estate, and you can generally expect to pay the estate attorney a fee of 1-3% of the estate’s value for his or her services. Supervised administration is much more tedious, and usually occurs when the parties to the estate can’t get along, pursue or threaten to pursue estate litigation, or there are other complex legal issues. Essentially, the personal representative must ask for, and be granted, the court’s permission to carry out each and every act necessary to administer the estate. All of this adds necessary work for the personal representative and the estate attorney, and can drastically increase the attorney fees. The following is a general synopsis of what to expect from an unsupervised probate process when someone passes away (again, this is a general overview, not an exhaustive list):

• Gather Information: The proposed personal representative collects all the necessary estate planning documents, personal information (including the death certificate, and the full names, dates of birth, contact information of the parties to the estate–the personal representative, the beneficiaries, and the creditors), and the financial information (income sources, assets, and debts) of the decedent in preparation for meeting with the estate attorney.
• Meet with Estate Attorney (creating the Game-Plan): When meeting, we’ll identify the specific assets requiring probate, properly identify the parties to the estate by reviewing the estate planning documents or referencing intestate laws if there is no Will. I will then explain the various documents I will be preparing the signatures I’ll need in order to submit the petition to the court to open the estate. After the meeting, you’ll be asked to continuously check the mail for any notifications the decedent receives post-death, and to do what you can to safeguard any property that may be at risk to loss or intrusion. Importantly, keep in mind that though you may be named as the personal representative, you do not officially have any power to act on behalf of the decedent until you are officially appointed by the court and have your “Letters Testamentary” or “Letters of Administration”. Generally speaking, the estate can be opened within a month after death, provided that the necessary information gathered and all necessary documents are signed and returned to me for court submission.
• Opening and Administering the Estate: Once all appropriate pleadings and documents are submitted to the court the judge will issue an order opening the estate. Now the personal representative has the power to act on behalf of the estate and will need to present their Letters Testamentary to any party it is conducting estate business with. The beneficiaries must be notified of your appointment by the court and should be provided with certain court documents and a copy of the Will (if they haven’t already). At this time a Notice of Administration to Creditors must be published in a local newspaper. The first date the publication runs will be the starting point of the 3 month creditor claim period. If a creditor files a claim, it must be paid if valid, settled, or denied–and if denied the court will hold what I call a mini-trial on the matter. During these 3 months, the estate cannot be distributed to beneficiaries and closed. During this time, the ongoing identification, collection, and management of assets will be ongoing so that the estate’s inventory and expenses can be appropriately accounted for to the beneficiaries and court. Depending on the types of assets involved in the estate, it may be necessary to hire other professionals (like CPA’s, financial advisors, realtors, appraisers, etc.) to assist through the process. Presuming there are no creditor claims filed, the estate can be prepared for final disposition after the 3 month period expires. At this time, any estate income tax considerations need to be examined as well, as the estate will be required to file an income tax return. However, estates are very rarely fully administered in such a short time period. As a rule of thumb, expect anywhere from 6 months to 2 years as a ‘normal’ probate proceeding timeline.
• Final Distribution State: When it is finally time to distribute assets to the beneficiaries, they should be presented with the estate’s final accounting (unless they waive their right to it) which shows them how estate funds have been expended, exactly what remains in the estate, and how each beneficiary’s share has been determined. Then once all beneficiaries express their consent to the final distribution, it is time to “cut the checks” (and of course gather written acceptance and receipt from each beneficiary of them receiving their share).

Thankfully, trust administration generally does not operate with any set timelines like probate; rather, a trust must be administered in a reasonable amount of time under the circumstances (some trusts do provide terms that set timelines for certain actions to be taken, but that is generally the exception to the rule). The same general principles and responsibilities of the personal representative in a probate case apply to the trustee during the administration of a trust–that is because the Trustee owes the same fiduciary responsibilities to the trust beneficiaries. However, the entire administration process happens privately, generally without any court involvement. Some trusts are fully distributed within weeks after the grantor’s death and some may take a considerable amount of time depending on the circumstances. The key benefit in trust administration is that the ‘rules’ feel much more relaxed. The informal nature of the process in comparison to probate usually alleviates a trustee’s anxiety about their responsibilities once the game-plan is in place. Again, the game-plan allows us to take a proactive approach to the administration process, which helps keep beneficiaries in the loop and avoids delays and prevents mistakes being made throughout the process.

No matter the type of estate administration proceeding you may be presented with, keep these 4 principles in mind if you wish to administer an estate with as few bumps in the road as possible–it’s simple, proceed with CARE:

• Communication: communicate as openly and honestly with each beneficiary (and the estate attorney) so that all parties remain informed, and never feel out of the loop.
• Accountability: Be able to account for every penny that comes into the estate, and every penny that goes out; therefore, document and organize all transactions and keep all receipts.
• Reasonableness: when making any decision, be objective and take all of the beneficiaries considerations and interests into account. Would a completely independent third-party make the same decision as you?
• Efficiency: not everything can be accomplished immediately in an estate (though we wish they could), and when things need to be done, prioritize the tasks and plan for them–you can avoid making a mountain out of a molehill.