Collecting and managing assets

Here’s a bit more from my NBI outline for the seminar I put on this past Tuesday at the Radisson in Sacramento.  I have more to come later.  Please let me know of any questions.  -John

A. Collecting, Maintaining and Managing Assets

1.  Generally speaking a PR has to wait until Letters are issued by the Court before taking any action. However, see PC 8400 (b) for limited exceptions. California Probate Code 8400: (a)A person has no power to administer the estate until the person is appointed personal representative and the appointment becomes effective. Appointment of a personal representative becomes effective when the person appointed is issued letters. (b)Subdivision (a) applies whether or not the person is named executor in the decedent’s will, except that a person named executor in the decedent’s will may, before the appointment is made or becomes effective, pay funeral expenses and take necessary measures for the maintenance and preservation of the estate. (c)The order appointing a personal representative shall state in capital letters on the first page of the order, in at least 12-point type, the following: “WARNING: THIS APPOINTMENT IS NOT EFFECTIVE UNTIL LETTERS HAVE ISSUED.” (Emphasis added)

2.     California Probate Code Section 9650 provides a nice summary of the PR’s job:

(a) Except as provided by statute and subject to subdivision (c):

    (1) The personal representative has the right to, and shall take possession or control of, all the property of the decedent to be administered in the decedent's estate and shall collect all debts due to the decedent or the estate. The personal representative is not accountable for any debts that remain uncollected without his or her fault.
   (2) The personal representative is entitled to receive the rents, issues, and profits from the real and personal property in the estate until the estate is distributed.
   (b) The personal representative shall pay taxes on, and take all steps reasonably necessary for the management, protection, and preservation of, the estate in his or her possession.  
  (c) Real property or tangible personal property may be left with or surrendered to the person presumptively entitled to it unless or until, in the judgment of the personal representative, possession of the property by the personal representative will be necessary for purposes of administration. The person holding the property shall surrender it to the personal representative on request by the personal representative.”

3.    The PR should take possession of the decedent’s accounts as soon as possible, and open estate accounts. One checking account and one savings account will suffice for many estates. Some estates may require separate accounts in order for separate business or real estate properties to be managed as well as to keep in line with FDIC insurance limits. All available cash is to be kept in interest-bearing accounts. (PC 962)

PRACTICE POINTER: Remember the FDIC insurance limit, is currently $250,000 per depositor, per insured bank. It’s ok to use multiple insured banks to make sure all money is protected!  Current relevant FDIC rules attached as Exhibit JBP-7.

4.    The contents of the decedent’s safe deposit box(es) should be inventoried and moved for safe keeping or have the boxes changed into the estate name.

5.    Property and casualty insurance policies should be continued in force and transferred to the name of the personal representative in that capacity. It is important that you notify the insurance companies of the death and the probate estate though to insure insurance is effective.

5.    Life insurance proceeds are not part of the estate unless the estate is

the beneficiary or if there is no named beneficiary. If life insurance proceeds are payable to the estate, a claim should be made as soon as Letters are issued.

6.    Personal Property creates many problems in estates. Monetary value is usually not the driving force either.  Often the issues are personal and can create very strong, and sometimes irrational, courses of action.  It’s important to appraise and transfer, or sell, depreciating assets as quickly as possible.  An estate or garage sale is acceptable but keep track of major items being sold.

PRACTICE POINTER: Selling cars to CarMax is a great way for a quick

sale but currently they do not buy from an estate.  I know some clients

have gotten around this rule but I do not know how.

7.     Stocks, bonds and other securities may be transferred to the PR’s name, or continue in the name of the decedent, throughout

administration. However, if they will be sold they need to be in the name of the PR in charge of the estate.

REALLY IMPORTANT PRACTICE POINTER: Advise your client, in writing, about their fiduciary duty in regards to holding assets such as marketable securities. Often there are no significant costs or taxes related to sale and thus I encourage the PR to liquidate.

  1. The PR must maintain the real property, insure it, reasonable protect it, and pay taxes and necessary utilities during administration.

PRACITCE POINTER: If the PR intends to sell I encourage my client’s to talk to a Realtor, or two, early in the process to find out what the property is worth and what is needed to be done to help a good sale.

  1. All sales of real estate must be confirmed by the Court unless the PR has IAEA authority. If using their IAEA authority then a Notice of Proposed Action is sent at least 15 days before the sale to all interested parties (including those that have requested special notice).  If any objections are received, even after the 15 days, prior to the sale happening then the PR should petition the Court for confirmation (i.e. a Court auction).
  2. If the real property is directed to be sold by the decedent’s will, or the

decedent’s will grants authority to the executor to sell the real property, the representative may, but is not required to, give notice of the proposed sale (PC 10303).  However, this author believes good practice would be to always send a Notice of Proposed Action except in the most unique situations.   The NPA should have material terms of the sale.

PRACTICE POINTER: Attach the final real estate contract to the NPA

and then you will guarantee all material terms are present.

Contact Me with any questions.

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