Filing a Will

Humboldt Superior Court

When a person passes away and has written a will, certain duties arise. For example, the custodian of the original will must lodge it with the probate court within 30 days of learning of the testator's death. 
Prob C §8200(a). If the custodian fails to do so, he or she is liable "for all damages sustained by any person injured by the failure." Prob C §8200(b).

The custodian is the person in possession of the will. This person may or may not be the will's executor.

The will is to be delivered to "the clerk of the superior court of the county in which the estate of the decedent may be administered." Prob C § 8200(a)(1). For instance, if the decedent resided in Los Altos, CA (my hometown), his or her will would be lodged with the clerk of the Santa Clara County Superior Court. Prob C §8200(a). The exact courthouse is located in San Jose at 191 N 1st Street. Some counties only have 1 courthouse, such as Modoc, whereas larger counties, such as Santa Clara, have multiple courthouses. A quick check of the county's website will reveal the location of the courthouse where the will should be filed.

Furthermore, the custodian is to "mail a copy of the will to the person named in the will as executor, if the person’s whereabouts is known to the custodian, or if not, to a person named in the will as a beneficiary, if the person’s whereabouts is known to the custodian." Prob C § 8200(a)(2).

In the past, no filing fee attached to the lodging of the will. That is, the will could be lodged free of charge. On a couple of occasions I lodged the will of a deceased testator as a favor for the family of the former client because I occasionally go to the local superior court. However, effective June 27, 2012, a filing fee attached to the lodging of the will. The relevant law reads, "the fee for delivering a will to the clerk of the superior court in which the estate of a decedent may be administered, as required by Section 8200 of the Probate Code, is fifty dollars ($50)." Govt C §70626(d).

Once filed, the will becomes public record. Thus, the general public is free to inspect the will if they so desire. A copy of the will may also be obtained for a fee. Some wills may be read online through the website of the Alameda County Superior Court. 

Slayer Statutes

The topic of morality is often brought up in how it interacts with the law. Issues such as same-sex marriage, abortion, capital punishment and even taxation all have some hint of morality embedded in them. All these hot-button issues typically invoke a visceral response from most people. Still there are some issues which are almost universally regarded as immoral.  For example, I would assume, if not expect, all would agree with the sentiments of California Civil Code § 3517, which states "No one can take advantage of his own wrong."

The Probate Code has a similar statute, in that it punishes those who commit an immoral act, namely the feloniously killing of another human being. This is known as California's slayer statute. It should be noted that the killing of another must be considered a felonious act. In other words, if you kill somebody in self-defense, justifiable homicide, this would not be considered a felonious killing. Conversely, if you murdered somebody, this would be considered a felonious killing. 

Prob C § 250 

(a) A person who feloniously and intentionally kills the decedent is not entitled to any of the following:

(1) Any property, interest, or benefit under a will of the decedent, or a trust created by or for the benefit of the decedent or in which the decedent has an interest, including any general or special power of appointment conferred by the will or trust on the killer and any nomination of the killer as executor, trustee, guardian, or conservator or custodian made by the will or trust.

(2) Any property of the decedent by intestate succession.

I can reasonably assume that the state of Illinois has a similar slayer statute. I bring this up because of the interesting case of Urooj Khan.

Mr. Khan was the holder of a winning lottery ticket worth $425,000. A few days before he was to collect his lottery prize, Mr. Khan died of presumably natural causes. However, an unnamed relative came forward to ask for a closer inquiry. A toxicology report revealed that Mr. Khad's blood contained lethal amounts of cyanide. The natural conclusion was that Mr. Khan had been poisoned and his death was re-classified as a homicide. At this point, nobody has been charged with a crime. 

Apprasing an Estate

When somebody passes away, the decedent, they leave their possessions behind. For as the common refrain goes "you cannot take it with you."  In legal speak, these possessions are known as the decedent's "estate."

One of the first steps that an executor or trustee must do when administering a decedent's estate is to value the items in the estate. The principal reason why an executor or trustee needs to do this is for estate tax purposes. That is, it must be determined if the value of the decedent's estate eclipsed the estate tax exclusion amount. If the decedent's estate is under the threshold amount, no estate tax is due. Conversely, if the decedent's estate is above the threshold amount, an estate tax will be due albeit the amount will be dependent upon the amount over the threshold amount. 

Another primary reason to value the decedent's estate is because many estates are distributed in percentages. For instance, a trust might call for a 50% distribution to the daughter and a 50% distribution to the son. The trustee would be breaching their fiduciary duty to the beneficiaries if they just "guessed" as to the estate's value and distributed off of that valuation. Rather, the trustee must reasonably value each item in the estate and then distribute the estate. The following are items typically found in a decedent's estate and how to value them.

1. Home

A decedent's home is typically the most valuable asset in their estate. Hence, it is critical that the executor or trustee accurately value the home's value. The best method to value a home is to retain a licensed California real estate appraiser. While the temptation is their to use an online resource such as Zillow to save time and money, this temptation, much like almost all temptations, is best avoided. The crux is that Zillow's algorithm does not account for physical features inside and around the home. A real estate appraiser can spot a shoddy roof or the noise of rush-hour traffic, whereas Zillow's algorithm cannot. Though personally I use Zillow, I would never advise a client to use it as a basis for a home appraisal.

2. Bank Account

This is probably the easiest asset to value. If you are literate you can figure out how much money the decedent had in their bank account when they died. I trust you. 

3. Car

The bible for valuing a used car is Kelley's Blue Book. Though there are other resources, the KBB is the most popular guide for determining used car values. Personally I have used the KBB a few times when buying and selling a car. I have been very pleased with it.

4. Stocks

The advent of the Internet has made it much easier to gauge the price of a stock on the day the decedent died. Whereas in the past an executor or trustee might have to go to the library to locate an old newspaper to look up the stock price, the Internet has rendered this practice obsolete. Since stock prices can easily be found using Yahoo or Google Finance, an executor or trustee's job has been made much easier in this instance. A stock price is now just a proverbial click away.

However, if the decedent owned stock that was not publicly traded, a business appraiser will be needed.

Estate Tax in 2013

1. What is the Estate Tax limit in 2013?

The applicable exclusion amount in 2013 is $5M plus inflation.

2. What does this mean?

If an estate is valued at less than or equal to $5M, the Estate Tax will not be applied to the decedent's estate. However, if the decedent's estate exceeds $5M, then the Estate Tax will apply albeit only in regards to the portion above $5M.

For example, Danny Decedent died on New Year's day 2013 in a tragic hot air balloon accident. Danny's entire estate consisted of a $6M bank account because of his miserly ways. Since Danny's estate exceeded the applicable exclusion amount in 2013, $5M, the Estate Tax would apply to the excess, namely $1M. However, if Danny's estate was worth $4.5M, no Estate Tax liability would arise because it does not exceed the applicable exclusion amount.

3. What was the Estate Tax limit in 2012?

The Estate Tax limit in 2012 was $5.12M

4. Which year applies to a decedent's estate?

The applicable year is the year in which person passes away. The chart below summarizes the following years' Estate Tax regime. Consequently, if a person died in 2002, the $1M exclusion amount would apply or if a person died in 2007, the $2M exclusion amount would apply. 

Of note, it does not matter when a person writes their will or trust. I have been asked this question numerous times. Some people are under the impression that the year in which the decedent wrote their testamentary document controls. This is simply not true. I give them credit for creative thinking though. A trust written in 1985 by a 2005 decedent results in the application of the 2005 Estate Tax law, not the 1985 Estate Tax law.

As you can see by the below chart, the applicable exclusion amount has increased tremendously recently. In particular, the rise in the applicable exclusion amount easily outstrips inflation over this time. 

Year                   Amount Excluded         Maximum Tax Rate

2001                   $675,000                      55%

2002                   $1M                             50%

2003                   $1M                             49%

2004                   $1M                             48%

2005                   $1M                             47%

2006                   $2M                             46%

2007                   $2M                             45%

2008                   $2M                             45%

2009                   $3.5M                          45%

2010                   Repealed                      0%

2011                   $5M                             35%

2012                   $5.12M                        35%

2013                   $5.25M                        40% 

5. What is included in a decedent's estate?

Any personal, real or intangible property the decedent owned wherever located. In other words, everything you own basically. IRC §2031(a). There are other categories of items included in a gross estate but are too technical to explain succinctly.
 
6. What is not included in a decedent's estate?

Real property earmarked for a qualified conservation easement.  IRC §2031(c).

7. When is the Estate Tax due?

The Estate Tax return must be filed 9 months after the decedent's death unless an extension is granted. IRC §6075(a). The form used is IRS Form 706.

8. Can I get an extension?

Yes, a 6-month extension is automatically granted upon request. Treas Reg §20.6081-1(b). However, this does not extend the time to pay the tax. Generally speaking, the Estate Tax must be paid when the return is filed. IRC §6151(a). 

9. What is the Estate Tax's top rate?

The maximum rate in 2013 is 40%. 

10. Will California have an Estate Tax in 2013?

No, legislation recently passed by Congress to avoid the "fiscal cliff" eliminated the state Estate Tax credit. Therefore, there will be no California Estate Tax in 2013.