TOP TEN THINGS YOUR EXECUTORS AND TRUSTEES NEED TO KNOW
I have identified the following items as the “Top Ten Things Your Executors and Trustees Need to Know.” This year is my 20th year in business as a zealous advocate providing legal services for clients who find themselves in need of legal guidance regarding probate and trust matters. While working with families and sometimes litigating estate and trust issues, I have seen the heartache, fighting and destruction of relationships firsthand. I am convinced that much of what I have seen and experienced, both in and out of court, could have been avoided if the Trustee and/or Executor received proper training, advice, and resources.
1. Administration. Both Executors and Trustees must complete the three main tasks of administration, which are (1) inventory estate assets; (2) pay creditors; and (3) distribute what’s left.
2. The Difference Between Executors and Trustees. A Successor Trustee is the representative that manages the Trust upon your resignation, incapacity, or death. An Executor is the court appointed representative that manages the probate estate upon your death. The difference is that Executors must obtain court approval for the distribution of an estate while Trustees do not need court approval to make a distribution .
3. Duties and Powers. The California probate code provides legal guidance for both executors and trustees. Both must fulfill duties. Both are granted powers. Executors and Trustees can hire attorneys to help them understand their duties and powers.
4. The Difference Between Wills and Trusts. The documents required upon your death include either a Last Will & Testament OR a Trust and a Last Will & Testament – Pourover Will. The difference is that a Will is not effective until your death while a trust is effective immediately during your lifetime. Even if you have signed a Trust, you will still need to sign a Pourover Will which leaves everything to your Trust.
5. Valuation Ranges For Determining Small, Medium, or Large Estates. In the state of California, a Trust is recommended for clients whose estate assets exceed $100,000 or if they own real property. A Last Will and Testament is recommended for clients whose estate assets do not exceed $100,000; or if they do not own real property. As of April 1, 2022, a small estate in California is defined as $184,500 or less.
6. Notice Requirements For Legal Heirs & Beneficiaries. Upon your death, your Executor/ and/or Trustee will need to notify your legal heirs and beneficiaries. The difference between the notice requirements is that trust beneficiaries have more time to contest the written document. The Notice of Hearing is provided 30 days before the court date which means the legal heirs and beneficiaries have 30 days notice of the court date and must contest within that time period. During a trust administration, the Trustee Notice is issued and the legal heirs and trust beneficiaries have 120 days to contest the written document.
7. Court Involvement. To be court appointed as the Executor, the probate attorney will file the Petition For Probate with the superior court. The estate representative must pay the filing fee in the amount of $435.00. The probate attorney will publish the legal notice in the local newspaper before the court date. The publication fee is approximately, $200 to $600 depending on the newspaper. Nothing can happen until the court date, which is scheduled at least 30 days from the filing date of the Petition for Probate. At the first court date the proposed executor/administrator will be court appointed and can commence administration so long as there are no objections to the Petition.
When there is a Trust, the trustee does not have to seek court appointment and can act as soon as they can provide proof of death in the form of a certified death certificate. The trustee only seeks court supervision if there are issues with the trust administration. During my law practice, I have had to seek trust supervision in cases seeking trustee appointment; conformation of trust assets when a Decedent has failed to properly fund the trust; and approval of accounting reports when there has been litigation or disagreement among the beneficiaries regarding the validity of certain trust documents and/or amendments as well as actions taken by a trustee.
8. Compensation. The accounting report filed with the probate court reports the fees the Executor and the attorney for the Executor are entitled to. For example, if the estate consists of one house valued at $300,000, the Executor is paid pursuant to Probate Code §10800 which provides “(a) Subject to the provisions of this part, for ordinary services the personal representative shall receive compensation based on the value of the estate accounted for by the personal representative, as follows: (1) Four percent on the first one hundred thousand dollars ($100,000). (2) Three percent on the next one hundred thousand dollars ($100,000). (3) Two percent on the next eight hundred thousand dollars ($800,000). (4) One percent on the next nine million dollars ($9,000,000)…” The Executor’s attorney is paid the same statutory fee which adds up quickly. For example, if the Decedent’s house is valued at $300,000 as of the Decedent’s date of death. The attorney receives payment in the amount of $9,000 and the Executor receives payment in the amount of $9,000.
Unlike the probate example, a Trustee is paid compensation pursuant to the terms of the Trust which will provide for “reasonable compensation” or “no compensation.” Unlike the probate fees, the fees paid to the trustee are not defined by the probate code but the going rate is about 1% based on the value of the estate accounted for. The attorney is hired by the Trustee and usually charges a flat rate for administration or bills by the hour to advise the Trustee how to fulfill their duties of administration which includes several financial, legal and tax steps.
9. Assets List/ Liabilities List. Both the Executor and Trustee must inventory estate assets which means that they need to identify what assets you own upon your death. Your Executor and Trustee must also pay your creditors so a list of current liabilities which include lease contracts, ongoing monthly expenditures and student loan and credit card debt will assist them in fulfilling their role. If you have a Trust, your real property and bank accounts need to be registered in the name of your Trust. This registration allows your assets to be distributed to your beneficiaries without the probate process. In my office, I assist clients with this process by preparing the Trust Certification; the Trust Transfer Deed(s) for Real Property; and the Itemized Schedule of Trust Assets. There are some assets which you will name a pay-on-death beneficiary this includes retirement accounts and life insurance.
10. Specific Gifts. Both an Executor and a Trustee can distribute specific gifts according to your wishes. This is a list that identifies the gift item and the gift recipient. Usually, a decedent is indicating who receives certain tools or jewelry or art or family heirlooms. Now with modern technology, people are also incorporating digital photos of the specific gifts. This list directs your Executor and/or Trustee to deliver the gifts if they are still part of your estate upon your death.
You can listen to attorney Christeson discuss the Top Ten Need-to-Knows for Executors/Trustees on KVGC on October 20, 2022 by clicking here
