Specifically, this means real property in estates valued over $750,000, or that was not the primary residence, can no longer take advantage of this expedited process.
Generally, it takes a long time for an estate to go through probate, so this section of the code is meant to facilitate the distribution and disposal of certain types of property in the estate. Normally an estate goes through administration proceedings and to state a claim as a beneficiary that person needs to file a petition. (Prob. Code § 11700-11701.) The petitioning person has to notify the other settled heirs and beneficiaries who can fight the petition. (Prob. Code § 1220.) Because of these lengthy and expensive disputes, estates under a certain value were made exempt from the estate administration process. (Bucholtz v. Belshe (9th Cir. 1997) 114 F.3d 923, 927.) Currently, sections of the Probate Code allow property in an estate under a certain value to be disposed of by a successor. Once this new bill is enacted it will limit the exemption to which the property applies.
What is the existing law?
The existing law has established that a successor of a decedent can dispose of a decedent’s real (and personal) property if the gross value of the estate does not exceed $166,250. The current code restricts some property from being included in the determination of the value of the estate, like property held in joint tenancy. The gross value of the estate that sets the threshold is adjusted every three years by the Judicial Council. Under the current code, successors just petition the superior court to dispose of the property. Successors can do so without getting a letter of administration and can petition the court without having to wait for the will to go through probate. (Estate of Post (2018) 234 Cal.Rptr.3d 661, 667.) The affidavit only needs to include good faith statements for disposal of the property into which the court rarely inquires. (see In re Rodriguez (Bankr. E.D. Cal. 2013) 488 B.R. 675, 679.) Currently, section 13158 of the probate code requires compliance with the code if an affidavit or declaration is furnished for personal property. The amendments incorporated Probate Code § 13158 into the amended sections.
How will this bill change the law?
The current code restricts property held in joint tenancy from being included in the value of the estate. The amendments significantly limit the property that is exempt from administration proceedings. With this bill, petitions will only apply to real property that was the decedent’s primary residence in California or had a gross value not exceeding $750,000. The bill also will require a successor who files the petition to give notice of the petition to each heir and devisee. This requirement of notice will likely increase the number of disputes about real property in estates.
What does this mean for partitions?
Because successors cannot simply dispose of the real property on their own, this will likely cause more property disputes. With the new bill requiring all heirs and devisees to be named, the other people will receive notice that the successor is attempting to dispose of the property. Because others are now being notified, they are much more likely to assert a claim or ownership rights to the property. The successor and other heirs are likely to have conflicting goals, with the successor wanting to dispose of the property and the heir wanting to assert ownership rights. These conflicting goals are likely to cause more partition actions to allow successors and heirs to get an equitable solution.
Partition actions can begin in probate court during estate administration or can be brought separately. If there is disagreement about distribution of real property, partition may be required. (In re Estate of Canfield (1951) 107 Cal.App.2d 682, 686-87.) This will likely be the case with the property that would previously have just been disposed of by the successor.
What is an example?
For example, Shawn is the successor of his dad’s estate with his sister that includes a vacation home in Lake Tahoe, which his dad bought in 1980 for $125,000. Under current law, the real property in the estate could be valued at its assessed value. As it is under $166,250, the Probate Code exempts the property from needing to go through an administration proceeding, as it is considered a “small estate.” Shawn can petition the court with an affidavit to dispose of the property based on this assessment. Similarly, Shawn would not need to notify Julie of the property disposal because of the exemption.
Following the new Assembly Bill, Shawn would need to notify Julie of the attempted disposal. If the property that is worth $125,000 was not the decedent’s primary residence it would not even be eligible for this type of expedited disposal. If the property was eligible but Julie wanted to contest Shawn’s disposal of the property he could. If Julie wants to assert an ownership interest in the property, he will begin a partition action. This would allow sale and distribution of the proceeds of the sale to heirs and devisees with an interest in the property. This partition action would take longer and be more complex than the disposal option under the current Probate Code.
Conclusion
With the new bill there is likely going to be an increase in partition actions. The Underwood Law Firm has a team of experienced lawyers who can help resolve your real property issues as they relate to partition and help you pursue solutions to ensure your property rights are protected. We are here to help.