If you are the beneficiary of a California Will, there’s a few things you need to know in order to understand and protect your rights. Here’s the Top 10 things you must know as a Will Beneficiary:
1. The Last Will Controls
Sometimes people create more than one Will. Under California law, the last Will made usually wins. But that depends on whether the decedent had the capacity to create a Will and was not subject to undue influence. The key is to find the last Will created. And it must be an original.
2. Executor’s Attorney is not Your Attorney
This may sound strange if you are not used to this process, but even though the executor’s attorney is paid from the estate (essentially paid from your assets) that attorney is NOT your attorney. The executor (or administrator if its an intestate estate) has the right to hire an attorney and that attorney advises the executor ONLY. Want your own legal advice? That’s fine, but you will have to hire and pay for your own independent lawyer. Welcome to probate!
3. The Empty Will Syndrome
You are named as a beneficiary under a Will, so what? A Will only controls assets that pass through the probate process. In todays complicated world, there’s precious little that passes through probate. Joint tenancy accounts or real property, life insurance, retirement account, trust interests, paid-on-death or transfer-on-death accounts all pass outside of probate. That means the Will does NOT control those assets. If there are no assets that pass through probate, then you (as a Will beneficiary) are a beneficiary of nothing. Congratulations, don’t spend it all in one place!
4. A Will is not a Will until a Court will call it a Will
So you think you have a Will? The court will be the judge of that. In California (and most places throughout the U.S.) Wills must be “admitted” to probate. Probate comes from a Latin word meaning to prove. The beginning of the probate process is meant to prove the Will is, in fact, a valid and enforceable Will. In admitting a Will to probate, the Court is essentially finding the Will to be a valid documents—in other words, the Will was proven to be a true Will.
5. Know your Bonds
The default rule in probate is that every executor or administrator is required to obtain a surety bond. A bond is not insurance, not exactly. A bond provides a source of funds that is paid out to the probate estate in the event the executor or administrator breaches a fiduciary duty. But a bond does not automatically pay out once an executor breaches a duty—quite the contrary. Most bond companies will enter the matter and fight in favor of the executor’s actions if a breach of duty is raised. If a Will beneficiary prevails, then the Court can order payment to the estate by the bonding company, and the bond company then has the right to sue the executor to recover payment.
Bonds are good and important to protect the interests of a beneficiary. But most Wills have a provision that waives bond, which the Court will do if the Will allows it. Also, the beneficiaries as a group can waive bond, assuming all beneficiaries agree to do so. The bond does cost the estate in the form of a bond premium. But it usually is a small price to pay for the protection a bond provides.
6. Inventory and Appraisals
All probate estate assets MUST be inventoried and appraised by a probate appraiser (sometimes called the probate referee) assigned to your probate case. The only thing that is not appraised by the probate referee is cash. It does not matter that you have your own appraisal or you have an appraiser you want to use. The probate referee is the only one who can appraise your estate assets.
However, there are times when a probate referee will use an independent appraiser’s information to assemble an appraisal. This typically happens with unique items that are outside the probate referee’s area of expertise, such as appraisal of race horses. But most estate don’t have race horses, so be prepared to work with the probate referee assigned to your case by the court.
7. Creditors Claims
The primary purpose of the probate process is to protect creditors. There is a mandatory waiting period of 120 days after the estate is opened (and Letters are issued) during which creditors are allowed to make claims against the estate assets. And creditor’s claims take precedence over any rights of the beneficiaries. In fact, every executor is required to notify all known creditors and provide them with a copy of the claim form (to make it as easy as possible for the creditor’s to submit a claim to probate).
8. Reports and Accounting
If you have a probate estate that does not require an estate tax return to be filed (which means your estate is worth less than $5 million—most are), then your executor must either close the estate or file a report within 12 months of the estate being opened. If an estate tax return is due, then the deadline is 18 months. Reports allow the probate court to review what is occurring in the estate and ensure nothing is amiss while the estate waits to close. As a beneficiary, you have the right to object to the report if it contains anything to which you disagree.
9. Court Order required for distribution
You cannot receive any assets from the estate until a court order is issued. It does not matter than you are a beneficiary and entitled to the assets, the property does not legally belong to you yet. It belongs to the estate and it remains an asset of the estate (and in the executor’s possession) until a court orders the property to be distributed. Frustrating, I know, but that’s the rule.
10. Executor Fees, Attorneys Fees and Costs
We all love fees (being paid them, not having to pay them). Fees are a necessary part of the probate process. In probate, there are two categories of fees you need to know about, statutory fees and extraordinary fees.