PROBATE

THE PROBATE PROCESS

Probate is the legal process for transferring assets (e.g., houses, cars, stocks and bonds, boats, etc.) from a deceased person’s name to his or her estate so they can be sold or distributed to the heirs. The probate court oversees the settlement of an estate. If there is a will, the probate court judge validates the terms of the will including the appointment of the Personal Representative who is called the Executor and is charged with administering the estate. If there is no will, the court will appoint a Personal Representative who is called the Administrator, who is responsible for administering the estate.Probate takes placein the county of the decedent’s residence.

Estate Executor’s Duties During the Probate Processconsists of the following 10 tasks:

1.Reads Your Will
2.Safeguards Your Assets
3.Petitions the Court For Probate of Your Will
4.Assembles and Inventories All of Your Assets
5.Procures Appraisal of All of Your Assets
6.Administers Your Estate
7.Makes All Your Tax Deductions
8.Settles All Proper Claims
9.Distributes Your Probate Estate
10.Obtains Final DischargeClick on Executor’s Duties for further detail on the above tasks. Selling real estate through probate court involves a highly regulated process, specialized documentation, rigid deadlines, and the court’s oversight.A number of additional parties beyond the real estate agent or agents is involved in a probate real estate transaction: Executor or Administrator, attorney for the estate, court personnel including the judge, the heirs, and in many cases the estate CPA.Probate also entails specific disclosure documents and requirements and purchase contracts that are different fromthose used in other real estate transactions.

Below is a summary of the typical steps involved in a probate transaction:

APPOINTMENT

Appointment of the Executor or Administrator of the estate. If there is a will, in most cases, the decedent has named anExecutor who is designated to oversee the settlement of the estate including the distribution of assets. If no Executor is named or if the named Executor is unable or unwilling to serve, or if there is no will, the court appoints an Administrator to perform thesefunctions. The Executor or Administrator is the individual who has the authority to list, market, and sell the property. The Executor once appointed can list the property for sale, but the sale cannot close until the Letters Testamentary have been issued by the court, which grants the Executor the authority to transfer title of the real property.

APPRAISAL/PRICING OF PROPERTY

If qualified under the Independent Administration of Estates Act (IAEA), the Executor determines the list price for thereal property, typically taking into account input from a real estate agent as well as the needs and priorities of the estate. Sometimes a Probate Referee is asked to provide a value or is required in cases of limited authority.For those listings involving court supervision, accepted offers must be 90% or more of the Probate Referee’s appraised value.This is one area in which the real estate agent should be closely involved so that the sale is not hampered by an outdated and/or off-target appraised value.

LISTING AND MARKETING OF THE PROPERTY

The property is then listed for sale and marketed to the public in such a way so as to attract the best offer that meets the objectives of the estate. When an offer or offers come in, the real estate agent helps the Executor/Administrator in negotiating terms that best meet the needs of the estate.

NOTICE OF PROPOSED ACTION

Once the property has an accepted offer, the Executor mails a Notice of Proposed Action to all heirs, providing the terms of the proposed sale. The heirs have 15 days to review the notice and assert any objections. If there are no objections, the sale may proceed without a court hearing.

NOTICE OF SALE

If the Executor/Administrator does not have full independent powers under IAEA, or if one of the heirs objects to the Notice ofProposed Action, the Executor/Administrator must publish a notice of the sale in a generally distributed local newspaper (unless the
will stipulates otherwise).

APPLICATION FOR CONFIRMATION HEARING

The attorney for the estate then applies for a court date for the confirmation hearing, at which time the sale will be executed. The court date is generally within 30 to 45 days of the application filing date. A copy of the application and details concerning the sale aremailed to all interested parties.

CONTINUED MARKETING OF PROPERTY

Even after the court date has been set, the real estate broker may continue to show and market the property in an effort to secure an “over-bidder” thereby potentially increasing the ultimate sales price.

OVERBID PROCESS

During the court confirmation hearing, the original contract price may be overbid by another buyer, in which case the overbidding party must appear at the hearing with a cashier’s check in hand in an amount totaling at least 10% of the final sales price. The minimum overbid price is 5% +$500 above the original contract price.

WINNING BIDDER / CLOSE OF ESCROW

If there is more than one over-bidder, the highest bid prevails. The winning bidder gives their cashier’s check to the Executor/Administrator and escrow is opened. Escrow closes approximately 30 to 45 days from the date of the court hearing.As alluded to above, the process of probate differs considerably depending on whether or not the probate qualifies under the California Independent Administration of Estates Act (more commonly called the Independent Powers Act), which usually allows the Executor of a probate estate to sell real estate without court approval or the overbid process.The probate court grants the Executor of a probate estate one of three levels of powers depending on the will, if there is one.The three powers are:NO POWEREvery single proposed action by an Executor requires a court hearing for approval.Decades ago, virtually all probates were handled in this fashion, but is very seldom used any more.Courts realized when 99%+ of proposed actions by Executors go unchallenged, why have a court hearing if no one objects? The result was the Independent Powers Act, which allows the Executor to take certain actions without court approval, unless the heirs object.

LIMITED POWERS under the Independent Powers Act

Gives the Executor the right to do anything except sell real estate.

FULL POWERS under the Independent Powers Act

Gives the Executor the right to do anything including the right to sell real estate. Wills may stipulate whether the Executor is to be granted full authority or limited authority and whether or not the Executor must post a bond.If the will states full authority/no bond, the Executor should have full power; if it states full authority / bond required, the Executor must post a bond in order to have full powers, otherwise, he orshe would have limited powers.

Many experts believe that going through the court confirmation process required of Executors / Administrators having Limited Powers actually diminishes market value rather than accomplishes the goal of protecting and increasing value, arguing the court confirmation / overbid process:

Scares away many potential buyers
Attracts bottom fishers
Produces lower offers due to the increased complexity, uncertainty, and risk

As the chart above demonstrates, the process of selling real property in probate is far less cumbersome under FULL POWERS than it is under LIMITED POWERS. While a court order confirming a proposed sale arguably gives the Executor more protection than written consent by all of the heirs, if an heir has consented to a sale, it will be difficult for him to complain later. Ultimately, it is up to the Executor/Administrator in consultation with the attorney for the estate to decide to what extent he or she wishes to exercise their FULL POWERSauthority (if such authority is granted) so that the best interests of the estate are achieved.Of course, if FULL POWERS are not granted, he or she has no choice but to comply with the LIMITED POWERS process.

The following provides the Probate Timeline:

The sale of Probate Real Estate involves specialized training and knowledge. Our Team has earned the Certified Probate Real Estate Specialist (CPRES) designation and can be located on the US Probate Services directory at https://www.usprobateservices.org/probate-resource-directory/listing/39001.

In addition to the listing and sale or property management of any real estate, we can assist by providing other related services as follows:
1.Estate Sales, Personal Property Sales
2.Locksmith
3.Trashout, Cleaning
4.Handyman, Contractor Repairsor Improvements
5.Painting, Carpet Cleaning
6.Pool Service
7.Landscaping
8.Storage
9.Moving