“If you have been called upon to act as a fiduciary for a loved one’s estate, it may be helpful to be familiar with the ins and outs of distributing an estate in California.”

THE INS AND OUTS OF DISTRIBUTING AN

ESTATE IN CALIFORNIA

Scott P. Schomer Los Angeles Estate Planning and Elder Law Attorney

The Ins and Outs of Distributing an Estate in California www.schomerlawgroup.com 2

A fiduciary, in the probate and estate context, is either an executor (or personal

representative) or a trustee, depending on how the property in the estate is

held.

The Ins and Outs of Distributing an Estate in California www.schomerlawgroup.com 3

The general steps in the probate process

In California, the probate process

is begun in the superior court in

the county where the deceased

was living at death. After the

initial petition is filed with the

court, a hearing will be set for

thirty days later. A notice of that

hearing must be published,

according to the court’s

procedures, to notify not only the

public, but also all potential heirs

and creditors.

The executor must take possession

of the estate’s assets, but only

those that are subject to probate.

If title to a particular asset needs

to be transferred to someone else, the executor takes care of that, as well.

The Ins and Outs of Distributing an Estate in California www.schomerlawgroup.com 4

Order of distribution of assets

When it comes time to distribute the assets of the estate, creditors will be paid

first. This includes all legitimate debts, as well as funeral expenses.

In California, all creditor claims must be submitted within four months after the

executor or administrator is appointed by the court. Next, the estate taxes must

be paid to the federal government and the State of California. The final

distributions are to the heirs or beneficiaries.

The Ins and Outs of Distributing an Estate in California www.schomerlawgroup.com 5

Distributing the inheritances

If there is a will or trust, which provides for specific gifts, of cash or property, to

specific

individuals,

then those

bequests are

distributed

first. After

those

distributions

are made, the

balance of the

property is

distributed to whoever is entitled to the remainder. In some cases, the property

can be distributed outright, but sometimes it must be transferred to a trust for a

particular person or persons.

Before you distribute to heirs, make sure everything else has

been paid

One of the biggest mistakes an executor can make is to distribute property to the

beneficiaries before all debts or taxes have been paid. Although the executor is

The Ins and Outs of Distributing an Estate in California www.schomerlawgroup.com 6

not generally liable for the debts or taxes of the estate, if there are insufficient

funds to meet the estate expenses, the executor might be personally liable. In

some states, you must obtain court approval before any distributions can be

made to the beneficiaries, which is a good thing. The estate tax consequences

can be surprising, so it is important to follow the steps carefully.

Administration of a trust

The major issue with administering a trust is understanding the difference

between the principal and the income. Often, the trust will provide for income to

be distributed to one person and the principal to someone else, or to the same

person at a

different time.

For instance, a

trust may

provide for the

income to be

paid to the

surviving spouse

upon the

decedent’s

death, but the

principal is to be

paid only in

The Ins and Outs of Distributing an Estate in California www.schomerlawgroup.com 7

specific situations. Then, upon the surviving spouse’s death, the remaining

principal may be paid to the decedent’s children.

Seek legal or financial advice when you need it

As the executor, never make any

assumptions about what should be

done. The terms of every will or trust

are typically very different. In other

words, there is no such thing as

“standard” distribution provisions. If you

do not have financial experience, it

would be a good idea to consult with a

professional about making investments

of the trust assets. That way you will

know which assets you should sell to

produce cash for expenses, taxes or

cash gifts, and how to minimize income

and capital gains taxes. You cannot

always rely on simply maintaining the

investments that were already in place.

The Ins and Outs of Distributing an Estate in California www.schomerlawgroup.com 8

Be sure to pay the estate taxes

Part of administering the estate include filing the annual income tax statement

(Schedule K-1) to each beneficiary who earned taxable income from a trust. An

annual income tax return must also be filed for the trust, usually by April 15th. If

the return is not filed timely, the administrator can be held personally liable for

any interest and penalties.

If you have questions regarding distributing assets, or any other trust

administration and probate issues, please contact the Schomer Law Group either

online or by calling us at (301) 337-7696.

The Ins and Outs of Distributing an Estate in California www.schomerlawgroup.com 9

About the Author

Scott P. Schomer is a graduate of Boston University School of Law and is

a frequent lecturer on estate planning and elder law issues, having

appeared on local and national television discussing the importance of

estate planning. Scott has an extensive litigation background and has over

the years obtained in excess of twenty five million dollars in judgments

and verdicts for his clients. Scott is a member of the Probate Volunteer

Panel and has been appointed by the Los Angeles Superior Court to

represent numerous parties in contested proceedings in the probate court.

Scott has also served as Judge Pro Tempore of the Los Angeles

Municipal Court and also been appointed by the court as an expert in

probate matters. Because of his extensive experience, Scott brings a unique perspective to

helping protect his clients.

SCHOMER LAW GROUP

Schomer Law Group is a professional law corporation that specializes in elder law, probate,

wills, trusts and conservatorships. We counsel clients on the unique legal issues relating to

advancing age. Whenever possible, we prefer to help clients plan for the future, avoid probate,

minimize taxes and solidify their legacy. We also help clients plan for possible incapacity and

long-term care. We help our clients deal with issues of aging with independence and dignity. In

addition to estate planning, our firm has considerable experience helping victims of elder

abuse. Our firm has aggressively pursued remedies and recovered assets belonging to our

elderly clients where unscrupulous individuals have taken advantage of the elderly because of

diminished capacity or other impairments.

8740 South Sepulveda Blvd, Ste 107

Los Angeles, CA 90045 Phone: (310) 337-7696

Website: www.schomerlawgroup.com