After an individual dies, often the need arises (a) to probate part or all of that individual’s assets held in the decedent’s name, or (b) to proceed with a non-probate postdeath trust administration (“PDTA”) for assets held by a trust at death. Where blended families are involved (i.e. a second spouse survivor; children from prior marriages and different spouses), it’s not uncommon for assets and large dollar amounts, to end up with the wrong beneficiary or in the wrong trust, because of (a) a faulty PDTA asset allocation, (b) a failure to carefully read the testamentary instrument’s allocation language, or (c) because expenses and taxes do not get properly accounted for under the Principal and Income Act.
In a nutshell, with a probate and with a PDTA, the Palm Desert probate and trust lawyers Sanger & Molever firm prepares a fiduciary accounting. The fiduciary (i.e. the “executor” in a probate; the “trustee” in a PDTA) (a) inventories the decedent’s assets; (b) files the decedent’s “final” income tax returns; (c) pays all income taxes the decedent owes (plus estate taxes, if any); (d) pays all the decedent’s creditors; and (e) lastly retitles and distributes the decedent’s assets to the decedent’s beneficiaries. If the fiduciary fails to properly do the foregoing in a probate or in a PDTA, the fiduciary faces the specter of personal liability to the tax authorities and to the creditors, as well as surcharges to the beneficiaries.
Example: The decedent husband died survived by (a) his second wife, widow, and (b) his children from his first marriage. The deceased husband owned a large industrial building rented to Costco. Costco pays $100,000/month rent. The rent is due on the first of each month. Costco pays the rent on the fifth of each month. The deceased husband died on April 3. Costco’s $100,000 April rent check is received two days after the DOD, on April 5, when the widow’s income interest starts. The second wife widow is the income beneficiary of the husband’s trust; the children are the remainder beneficiaries of the husband’s trust. Is the $100,000 rent
— “rent” is an obvious “income” receipt —
(a) distributable to the second wife as the income beneficiary; or (b) to be allocated to principal, to be ultimately distributed to the decedent’s children from his prior marriage? Most likely, a fiduciary that failed to hire a tax law firm, will distribute the $100,000 — erroneously — to the second wife widow. Per Probate Code §16346(a), that $100,000 should have been allocated to principal, that ultimately will be distributed to the decedent’s children from his first marriage. If the fiduciary’s blunder is discovered, the fiduciary faces the specter of a $100,000 surcharge.
In most of the cases where Sanger & Molever have been hired to review a subtrust funding, or a principal and income accounting, the trustee has erroneously computed the subtrust funding, and the fiduciary income.
Sanger & Molever can provide counsel to beneficiaries who believe they didn’t get what the decedent wanted. The Palm Desert probate and trust lawyers Sanger & Molever firm can provide counsel to fiduciaries (executors and trustees) that will hopefully minimize the chances of lawsuits and surcharges (i.e. a $100,000 surcharge in the above Costco rent example), (a) for negligently allocating assets contrary to the explicit terms of the decedent’s testamentary instrument; or (b) for thoughtlessly allocating cash receipts and cash expenses contrary to the controlling principal and income law.
The Palm Desert Sanger & Molever law firm has invaluable experience representing fiduciaries defending surcharge actions brought by beneficiaries; and representing beneficiaries what want a fiduciary accounting reviewed, to make sure the fiduciary properly distributed what was properly due.