November 17, 2022

U.S. Residency Requirement for a CA Administrator

If a person passes away without a will in California and a probate is needed to administer their estate, an administrator will need to be appointed by a judge. Typically, the administrator will be a relative of the decedent such as a spouse or child. However, Probate Code §8402(a)(4) requires that this person be a U.S. resident.

A recent published appellate decision addressed the issue of what constitutes U.S. residency for purposes of being an administrator.

Estate of El Wardani, 82 Cal.App.5th 870 (2022) 

"Ramsey Walter El Wardani died intestate in 2016 and was survived by his wife Janine and daughter from a previous marriage, Alexandria (Ali). Four years into a protracted probate dispute between Janine and Ali, the court removed Janine as court-appointed administrator of Ramsey's estate. It deemed her ineligible to serve in that role because it found that she was not a United States (U.S.) resident as required by section 8402, subdivision (a)(4) of the Probate Code"

"In short, as a matter of law, a resident of the U.S. under section 8402, subdivision (a)(4) is a person who actually lives in the U.S. and is not merely present temporarily. U.S. residency is not established by mere connections alone."   

"In her 2021 declaration, Janine asserted that she "frequently come[s] to the United States (252 days in 2019 and 2020)" and noted several contacts and ties in California. She stated that she grew up in California and has family here, holds a California driver's license, voted in San Diego County (including in 2016, 2018, and 2020), maintained medical providers and attorneys in California, and held bank accounts and paid taxes in California. Janine disavowed any intent to become a permanent resident or citizen of Mexico, explaining that she stayed in Mexico on a tourist visa and did not speak fluent Spanish. Yet in that same declaration, Janine confirmed that she still owned a home in Mexico. The only reason she stayed there was because "[she] own[ed] a house there, free and clear, where [she could] live inexpensively." She claimed her plan was to "sell [the] home in Mexico and return to live permanently in the United States" after the probate case was over."

"At best, while Janine had many contacts with the U.S. and visited frequently, there was no evidence that she actually lived anywhere but Mexico since moving there in 2014. Her bank accounts, doctors, and family gave her several reasons to visit California, but those visits did not establish residency on their own. Janine was not a person who lived in California and temporarily found herself in Mexico, but rather someone who lived in Mexico and made frequent but temporary visits to the U.S. Accordingly, sufficient evidence supports the court's finding that Janine was not a "resident of the United States" as required by section 8402, subdivision (a)(4), and there was no abuse of discretion in ordering her removal as administrator of Ramsey's estate."

October 24, 2022

Surcharging a Fiduciary

A fiduciary, whether a trustee or a personal representative, is generally required to produce an accounting prior to making distributions to the beneficiaries. If a fiduciary is ordered by a judge to render an accounting, then naturally it is prudent for the fiduciary to do so. Otherwise, liability can arise for this omission. A recent unpublished appellate decision involved a fiduciary who failed to provide an accounting to the court, when required to do so, and suffered the consequences.

On September 12, 2005, appellant filed a petition to be appointed executor of her father's estate. Appellant's petition was granted and she was appointed executor in November 2005. "After letters were issued, appellant proceeded to implement the transfer of the property listed in the will. Relevant to this appeal, in September 2006, appellant executed deeds for three properties the will stated should be transferred to Hulsey and Holtermann as joint tenants. Thereafter, in October 2006, appellant filed an ex parte petition seeking a final discharge of the probate. In November 2006, the probate court struck the letters it had issued to appellant after realizing the steps necessary to close the probate had not been taken by appellant." 

"No further filings were made in this matter until November 2019 when Holtermann filed a petition to reopen the administration of the estate."

In December 2019, "[n]oting he needed an accounting before he could enter any final orders closing the estate, the judge also issued an order instructing appellant to appear and provide an accounting. Appellant was not present at this hearing. The hearing on the petition was then continued to June 2020."

During a September 14, 2020 hearing, the trial court judge believed that "an accounting would help resolve outstanding issues before closing probate, the judge continued the matter to December 28, 2020, and directed appellant, through her attorney, to file an accounting by November 30, 2020. Prior to that hearing, Holtermann's attorney submitted a declaration to the court documenting attorney's fees he generated while pursuing the case for Holtermann."

"At the December 28, 2020, hearing, the judge learned no accounting had been submitted by appellant. The judge warned appellant's attorney that his client had a fiduciary duty to prepare the accounting before probate could be closed and might be subject to a surcharge if one was not provided. The court then continued the hearing, once again, to February 8, 2021."

"An accounting was not provided by appellant at the February 8, 2021, hearing."

"The order also awarded Holtermann $3,500, designated as a "surcharge" against appellant for failing to provide an accounting to the court."

On appeal, the $3,500 surcharge was upheld. 

Holtermann v. Irvin, Tulare County Superior Court, case # VPR042397 

September 20, 2022

Objecting to an Accounting

A beneficiary of a trust who is dissatisfied with the performance of a trustee can request, under certain conditions, a court order to compel the trustee to submit an accounting to the court for approval. 

The accounting is essentially composed of four parts. First, the accounting will specify what trust assets existed at the beginning of the accounting period. Second, the accounting will specify the income generated from the trust assets during the accounting period, the receipts. Third, the accounting will specify the expenditures made in connection with administering the trust during the accounting period, the disbursements. Fourth, the accounting will specify the assets at the end of the accounting period. In light of the information disclosed in the accounting, one appellate stated that in "probate court, nothing speaks more eloquently or provides more insight into factual and legal issues than an accounting.” Christie v. Kimball (2012) 202 Cal.App.4th 1407, 1409.

An issue that occasionally arises is the beginning date of the accounting period. I've spoken to a handful of beneficiaries over the years who insist that the accounting period should begin the moment that the trustee exhibits signs of incapacity or has a major medical event. For example, the trustee has a stroke or heart attack. Still, a major medical event does not automatically trigger the trustee's replacement in every circumstance. Rather, the trust will specify a method of trustee succession in case of incapacity. Typically this entails the declarations of one or two medical doctors opining that the trustee is physically or mentally incapable of managing his or her financial affairs. 

A recent unpublished appellate decision focused on a beneficiary objecting to an accounting beyond the scope of the successor's trusteeship.

"On April 18, 2019, Wertz filed a petition for approval of an accounting of her administration of the Diana Engstrom Living Trust — 2007, from August 29, 2017 to January 2, 2019, and for an order approving the final distribution of the trust assets."

"On June 21, 2021, the court trial was held. The trial proceedings are reflected accurately in the court's subsequent minute order. As the court, noted Weigman asked questions about events that predated the accounting period or were irrelevant. "Objector although repeatedly . . . admonished by the Court, kept asking questions of events that allegedly occurred in 1988, 1997, 2007, etc. Further, Objector was unable to ask a relevant question approximately 90 [percent] of the time. She rambled on about conspiracies and stated on the last day of trial that if the court ruled in Petitioner's favor the stock market would crash the next day. The Court itself was asked inappropriate questions." 

In a predictable turn of events, the trial court's decision was upheld.

It is highly likely that the successor trustee initially assumed the office of trustee on August 29, 2017, since that was the beginning of the accounting period. Naturally the successor trustee would not have to submit an accounting for the period of time in which they were not the successor trustee, i.e. pre-August 29, 2017. Hence the beneficiary's objections to pre-August 29, 2017 events were beyond the scope of the trial and were properly overruled by the trial court.

Wertz v. Weigman, Case # 30-2019-01066813, Orange County Superior Court

August 18, 2022

Opening a Probate in California

In order to open probate in California, the petitioner will need to file a petition in the appropriate superior court. The petition will allege various details about the decedent. For example, the petition will state when the decedent passed away, the decedent's residence when they passed away, what assets the decedent had, did the decedent have a will or not, which relatives survived the decedent, etc. The allegations found in the petition will be received as evidence if uncontested. Probate Code §1022.

However, if the petition is objected to, then the petition may not be received as evidence. Evangelho v Presoto (1998) 67 CA4th 615, 620. Instead an evidentiary hearing, essentially a trial, is needed to resolve the matter.

A recent unpublished appellate opinion focused on the appointment of a personal representative in what was ostensibly an uncontested matter.

"On August 24, 2021, M. Nicole Fore (Fore) filed a petition for probate for authorization to administer under the Independent Administration of Estates Act (the petition) in connection with Estate of Michael Derik Marxsen (decedent). According to the petition, decedent passed away on August 9, 2021, leaving a will dated August 4, 2021. The petition reflects that Fore was decedent's fiancée, and that appellant Sheryl L. Benevento (Benevento) is decedent's mother. On October 14, 2021, the court approved the petition, appointing Fore as administrator with will annexed and fixing a bond at $110,886. Letters of administration with will annexed were issued the next day.

Benevento's appeal is from the October 14, 2021 order appointing Fore as administrator with will annexed (the Order). Her appellate brief, however, does not identify or directly assert any claim of error by the probate court with respect to the issuance of the Order."

The crux of Ms. Benevento's appeal was that she did not timely file an objection to Ms. Fore's appointment as personal representative. A footnote describes this in detail:

"Under the heading "Statement of the Case" (capitalization omitted), Benevento states in her appellate brief that she and other family members appeared in court on October 14, 2021, "only to find [the case] was removed from the schedule since the presiding judge had made a ruling at 4pm on October 13, 2021." She does not argue in her appellate brief that the court erred in this respect. The record reflects that the court issued a tentative ruling on October 13 granting the petition, it received no objection by 4:00 p.m. that day, and that it therefore adopted the tentative ruling. (See Cal. Rules of Court, rule 3.1308(a)(1) [authorizing superior courts to adopt tentative ruling system under which, if a tentative ruling is posted "by no later than 3:00 p.m. the court day before the scheduled hearing. . . [and i]f the court has not directed argument, oral argument must be permitted only if a party notifies all other parties and the court by 4:00 p.m. on the court day before the hearing of the party's intention to appear"].)"

If Ms. Benevento had timely objected to Ms. Fore's appointment as personal representative, it is almost certain that Ms. Fore would not have been appointed personal representative on October 14, 2021. The reason being is that Ms. Fore's petition would have been contested and thus not be received as evidence per Evangelho. However, since Ms. Benevento did not timely file her objection, the court was obligated to receive Ms. Fore's petition as evidence and appointed Ms. Fore as personal representative on October 14, 2021.

Estate of Michael D. Marxsen, San Benito County Superior Court # PR 210006

July 18, 2022

Prioritizing Debts in a Probate Case

When a person passes away, they will invariably have some debt. This can take the form of a mortgage, a credit card bill, hospital expenses, cell phone bill, car insurance, etc.

A primary duty of any estate administration matter, whether probate or non-probate, is to itemize and categorize these debts. 

Once the decedent's debts have been itemized and categorized, the next step is to prioritize the debts. Yes not all debts are created equal. The following is the order of priority for creditors:

1. Administration expenses—for obligations secured by a mortgage, deed of trust, or other lien, only the administration expenses that are reasonably related to the administration of the secured property are given priority (Prob C §11420(a)(1));

2. Obligations secured by a mortgage, deed of trust, or other lien, including a judgment lien, to the extent that they can be paid out of the property subject to the lien—if the property is insufficient, the unsatisfied obligation is a general debt (Prob C §11420(a)(2));

3. Funeral expenses (Prob C §11420(a)(3));

4. Expenses of last illness (Prob C §11420(a)(4));

5. Family allowance (Prob C §11420(a)(5));

6. Wage claims (Prob C §11420(a)(6)); and

7. General debts (Prob C §11420(a)(7)).
A recent unpublished appellate decision addressed the issue of prioritizing debts:
"Appellant David Downs is serving as the administrator of the estate of Shawna Graham. The estate's primary asset is a piece of real property that Downs wants to sell for $365,000. The property is over-encumbered. Respondent Wells Fargo Bank, N.A. (Wells Fargo), is the beneficiary of a deed of trust on the property and is owed approximately $338,000; Matadors Community Credit Union (Matadors) has a security interest in a solar energy system installed on the property and is owed approximately $29,000; and decedent owed the Internal Revenue Service (IRS) approximately $40,000 in unpaid federal taxes. The costs of selling the property will be approximately $39,000, and Downs contends he and his attorney are entitled to approximately $66,500 in administrative expenses. If the property is sold for $365,000, there will not be enough money to pay all these debts."
The administrator then filed a petition to determine the order of payment if the property were to be sold. The administrator sought to have payment be made in the following order:
• $40,059 in federal taxes be placed in a trust account.

• $66,537 in costs of administration be placed in a trust account.

• $39,408 in costs of sale be paid directly to the parties to whom they are owed.

• $224,131 to Wells Fargo to partially pay off the mortgage.

• $0 to Matadors.

The trial court denied the requested order in its entirety. On appeal, the appellate court affirmed in part and reversed in part.

Estate of Graham, Placer County Superior Court, case # SPR0009820.