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Been Approved as an Administrator/Executor of an Estate in California? What Now?

Powers of a Probate Administrator or Executor Under the Independent Administration of Estates Act (IAEA)

Nature of the Independent Administration of Estates Act (IAEA)

The IAEA effectively recognizes that many aspects of estate administration are routine and that court supervision is generally not needed to protect the rights of persons interested in the estate. As to these matters, an IAEA representative must give interested persons advance notice and opportunity to object, but does not have to seek court authority, approval, confirmation or instructions before taking an action unless an objection is timely made.

Accordingly, the IAEA does not completely relieve appointed persons of court supervision. Some actions in estate administration are deemed to present such “obvious or extraordinary risks of prejudice” to the rights of persons interested in the estate that court supervision will always be required.  For example, court supervision must be obtained for potential conflict of interest transactions between the estate and the personal representative or the representative’s attorney; see Prob.C. § 10501(a)(5)-(10), ¶ 9:21 ff.).

 Ordinary Estate Administration vs. Administration With IAEA Authority

 Making an intelligent decision to request IAEA authority and properly exercising IAEA authority require an understanding of the nature of “court supervision” under ordinary (non-IAEA) estate administration versus the scope of powers exercisable with IAEA authority. The IAEA refers to those actions that may be taken without “court supervision” and those actions that require “court supervision” whether or not IAEA authority is granted. “Court supervision” is defined in the IAEA as “the judicial order, authorization, approval, confirmation, or instructions that would be required if authority to administer the estate had not been granted” under § 10400 et seq. [Prob.C. § 10401 (emphasis added)]

IAEA representatives may take many estate administration actions without first obtaining the court approval, authorization, confirmation or instructions that would otherwise be required under general “estate management” law (Prob.C. § 9600 et seq.). Such “court supervision” of IAEA actions is required, if at all, only if a “notice of proposed action” must be given and an objection to the noticed action is timely made. [See Prob.C. § 9640: “Nothing in this part [dealing with “estate management”] limits or restricts any authority granted to a personal representative under the [IAEA] … to administer the estate”]

Although IAEA authority might excuse the need for “court supervision,” it does not reduce the personal representative’s fiduciary standard of care. In contrast, personal representatives who are not granted IAEA authority must administer the estate under all of the normal “court supervision” rules. These general rules regarding “court supervision” are codified in Prob.C. §§ 9610-9613.  In practice, the specific court supervision statutes “swallow up” much of a personal representative’s power to take action on significant administration matters (investments, borrowing, sales, exchanges, etc.) without court supervision for persons not granted IAEA authority.

Powers and Duties Exercisable Without Court Authorization Under IAEA

Generally, the powers and duties of a personal representative with IAEA authority may be exercised without court authorization, instruction, approval or confirmation. However, even if court supervision is not specifically required, a personal representative always has the option of requesting court authorization, instructions, approval or confirmation. [Prob.C. § 9610].  When court supervision (court authority, approval, instructions, etc.) is obtained, the court’s final order or judgment (including orders settling interim or final accounts) generally releases the personal representative and the representative’s sureties from “all claims of the heirs or devisees and of any persons affected thereby based upon any act or omission directly authorized, approved, or confirmed in the judgment or order.” [Prob.C. § 7250(a)].

In contrast, IAEA representatives who take action under the IAEA without court supervision are not protected by § 7250(a) unless and until their accounts reporting the IAEA transactions are settled by final court order. (For this reason, the IAEA gives IAEA representatives the option of requesting court supervision even when not otherwise required.

 “Full Authority” vs. “Limited Authority” Under IAEA

An IAEA representative may be granted either “full authority” or only “limited authority.”  “Full authority” means all-inclusive IAEA authority—i.e., an IAEA representative with “full authority” has all of the powers granted by the IAEA to administer the estate, except to the extent that decedent’s will withholds any specific powers (Prob.C. §§ 10404, 10502,). [Prob.C. § 10402]. “Limited authority” means authority to exercise all of the powers granted by the IAEA (again, subject to decedent’s withholding of specified powers) except the powers to:

                • Sell real property;

                • Exchange real property;

                • Grant an option to purchase real property; and

                • Borrow money with the loan secured by an encumbrance on real property. [Prob.C. § 10403]

Fiduciary Standard of Care

All personal representatives—whether or not granted IAEA authority—are obligated to exercise “ordinary care and diligence” in the management and control of the estate (Prob.C. § 9600; Estate of Davis (1990) 219 CA3d 663, 671, 268 CR 384, 390—IAEA authority does not relax personal representative’s fiduciary duties). An IAEA representative’s powers must be exercised or not exercised subject to this standard of care (Prob.C. § 10502—“Subject to the conditions and limitations of this part and to Section 9600 (duty to manage estate using ordinary care and diligence). Thus, an IAEA representative is required to exercise a power granted by the IAEA to the extent ordinary care and diligence require the power to be exercised and may not exercise an IAEA power to the extent ordinary care and diligence require that the power not be exercised (Prob.C. § 9600(b)). A breach of the applicable standard of care exposes the representative to surcharge liability.

Categories of Actions by IAEA Personal Representatives

The following are the three categories of actions by IAEA Personal Representatives granted general authority.

  1.  Actions requiring court supervision notwithstanding the grant of IAEA authority (Prob.C. § 10501);
  2.  Actions that may be taken only after giving notice of proposed action (Prob.C. §§ 10510-10538),   which in turn will require court supervision if a timely objection is received; and
  3.  Actions that may be taken without giving notice of proposed action and, hence, without court supervision in all cases (Prob.C. §§ 10550-10564).
  1. 1.       Actions Requiring Court Supervision Notwithstanding IAEA Authority

Some estate administration actions present particularly significant risks of abuse of power or harm to the interests of persons interested in the estate. As to these actions, court supervision is always required … meaning that, notwithstanding IAEA authority, the representative may properly take the action only pursuant to the applicable court-supervised procedures governing the particular action (see Prob.C. § 1040).

In all cases, whether the representative has been granted full or limited IAEA authority, the representative must obtain court supervision in the manner provided by the applicable statute for any of these actions (Prob.C. § 10501(a)):

                                Allowance of the personal representative’s compensation (Prob.C. § 10501(a)(1));

                                Allowance of estate attorney compensation (Prob.C. § 10501(a)(2));

                                Settlement of accounts (Prob.C. § 10501(a)(3));

                                Subject to Prob.C. § 10520, preliminary and final distributions and discharge (Prob.C. § 10501(a)(4)) (however under Prob.C. § 11623 an IAEA representative may petition for authority to make preliminary distributions not exceeding 50% of net value of estate on shortened notice or ex parte (no notice) after time for filing creditor claims has expired);

                                Sale of estate property to the personal representative or the representative’s attorney (Prob.C. § 10501(a)(5));

                                Exchange of estate property for property of the personal representative or the representative’s attorney (Prob.C. § 10501(a)(6));

                                Grant of an option to purchase estate property to the personal representative or the representative’s attorney (Prob.C. § 10501(a)(7));

                                Allowing, paying or compromising a claim of the personal representative or the representative’s attorney against the estate (Prob.C. § 10501(a)(8));

                                Compromise or settlement of a claim, action or proceeding by the estate against the personal representative or the representative’s attorney (Prob.C. § 10501(a)(9));

                                Extending, renewing or modifying the terms of a debt or other obligation of the personal representative or the representative’s attorney owing to or in favor of the decedent or the estate (Prob.C. § 10501(a)(10)).

                                “Conflict of interest” transactions requiring court supervision under Prob.C. § 10501(a)(5)-(10).

                The “conflict of interest” prohibitions under § 10501(a)(5)-(10) do not require court supervision when all of the conditions of Prob.C. § 10501(c) are satisfied.

  • 2.       Powers Exercisable Only After Giving “Notice of Proposed Action”

The following actions, regardless of the circumstances, may be taken by an IAEA representative only pursuant to the statutory notice of proposed action procedures:

        Sale or exchange of real property Prob.C. § 10511;

        Sale or incorporation of business;

        Abandonment of tangible personal property Prob.C. §§ 9780-9788;

        Borrowing money or encumbering property Prob.C. § 10514;

Grant of option to purchase estate real property Prob.C. § 10515;

Transferring property to person exercising option to purchase granted by decedent’s will Prob.C. § 10516;

Conveyance or transfer of real or personal property to complete decedent’s contract to convey or transfer the property Prob.C. § 10517;

Determination of claims to property … specifically, the power to “allow, compromise, or settle”:

        • A third party claim to real or personal property where decedent died in possession of or holding title to that property; or

        • Decedent’s claim to real or personal property title to or possession of which is held by another. Prob.C. § 10518;

DisclaimersProb.C. § 10519; and

Preliminary distributions:

      3.  Powers Exercisable Without Notice of Proposed Action or Court Supervision: Unless court supervision or notice of proposed action is expressly required by the IAEA, an IAEA representative may exercise a power without obtaining court authorization, approval, confirmation, instructions, etc. and without giving interested persons advance notice. Thus, as to these actions, the representative may elect to obtain court supervision (Prob.C. § 10500(b)) or elect to follow the notice of proposed action procedures (Prob.C. § 10580(b)), but does not have to do so.

The IAEA expressly authorizes IAEA representatives to exercise the powers set forth in Prob.C. §§ 10552-10564 without obtaining court supervision or giving notice of proposed action. (Note that non-IAEA representatives generally may not exercise these powers without court supervision.)

The §§ 10552-10564 powers are:

                (1)  Acting on claims by or against estate: The power to (Prob.C. § 10552):

                                • Allow, pay, reject or contest any claim by or against the estate (Prob.C. § 10552(a));

                                • Compromise or settle a claim, action or proceeding by or for the benefit of, or against, the decedent, the personal representative or the estate (Prob.C. § 10552(b));

                                • Release, in whole or in part, any claim belonging to the estate to the extent that the claim is uncollectible (Prob.C. § 10552(c));

                                • Allow a claim to be filed after expiration of the time to file the claim (Prob.C. § 10552(d)).

                (2) Commencing or defending legal actions: The power to commence and maintain actions and proceedings for the benefit of the estate; and to defend actions and proceedings against the decedent, the personal representative or the estate. [Prob.C. § 10553(a) & (b)].

                (3) Modifying obligations: The power to extend, renew or “in any manner modify” the terms of an obligation owing to or in favor of decedent or the estate. [Prob.C. § 10554].

                (4) Transferring property: The power to transfer or convey property “in order to carry out the exercise of a specific power” granted by the IAEA. [Prob.C. § 10555].

                (5) Paying taxes, assessments or expenses: The power to pay taxes and assessments, as well as expenses incurred in the “collection, care, and administration of the estate.” [Prob.C. § 10556(a) & (b)].

                (6) Purchasing annuity: The power to purchase an annuity from an insurer admitted to do business in California to satisfy a devise of an annuity or other direction in decedent’s will for periodic payments to a devisee. [Prob.C. § 10557].

                (7) Exercising options: The power to exercise an option right that is property of the estate. [Prob.C. § 10558].

                (8)  Purchasing securities or commodities to complete contract: The power to purchase securities or commodities required to perform an incomplete contract of sale where decedent died having sold but not delivered securities or commodities not owned by decedent. [Prob.C. § 10559].

                (9) Holding security in name of nominee: The power to hold a security in the name of a nominee or in any other form without disclosure of the estate so that title to the security may pass by delivery. [Prob.C. § 10560].

                (10) Exercising subscription or conversion rights: The power to exercise security subscription or conversion rights. [Prob.C. § 10561].

                (11) Repairing/improving property: The power to make repairs and improvements to estate real and personal property. [Prob.C. § 10562].

                (12) Accepting deed in lieu of foreclosure: The power to accept a deed to property which is subject to a mortgage or deed of trust in lieu of foreclosure of the mortgage or sale under the deed of trust. [Prob.C. § 10563]

                (13)  Satisfying mortgage or reconveyance under deed of trust: The power to give a partial satisfaction of a mortgage or to cause a partial reconveyance to be executed by a trustee under deed of trust held by the estate. [Prob.C. § 10564].

While this brief summary of California Probate Law and Administration may be a good starting point, it is always advisable to refer to the local court rules of the Probate Court you are before to ensure efficient and effective administration of the estate of a decedent.

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