When Minnie Wilson’s father died at the age of 96, she immediately listed his home for sale. Although her father’s estate had not yet been probated, Minnie knew she and her sister, Linda had inherited the house. He stated that in his Last Will and Testament. Since neither sister wanted the home, Minnie thought she would help the process to sell it move right along. Minnie had two kids in college and the proceeds from the sale would be useful in paying their tuition.
Unfortunately, even if Minnie managed to sell the home before her father’s estate was legally probated, the sale would be ruled invalid. Under California law, only the executor of an estate has the legal authority to conduct real estate transactions and only the Probate Court can grant the authority to do so. It is also up to the court to determine how property sales will be conducted.
Even if Minnie were the sole beneficiary of her father’s Will, she has no legal claim to any assets until the estate is administered by the court-appointed executor and approved by the Probate Court.
Generally, when a California resident dies with a valid Will, an executor—nominated by the Will– petitions the Probate Court for what is called Letters Testamentary. This document appoints the executor and outlines the authority granted to the executor to dispose of real and personal property, including homes or vacant land, in the estate. The authority can be full or limited, and that designation impacts how and when real property can be sold. Usually the letters are issued very early on in the probate process.
Not all real estate distributed by the Will must be sold. For example, a testator may grant certain heirs or beneficiaries the option to purchase real estate before listing it for public sale or instruct that the property be deeded to certain heirs or charities. Real estate sales normally occur to satisfy creditors or other obligations, or to ensure an equitable distribution of the value of the property is made to multiple parties.
Full authority permits an executor to conduct all aspects of a real estate transaction without the supervision or approval of the court, including listing property for sale, accepting offers to purchase, granting options to purchase, securing title insurance, and transferring ownership to a purchaser. Without the Letters Testamentary, however, a title company cannot issue title insurance. Without title insurance, the sale cannot take place. The grant of full authority to the executor not only makes the process of listing and selling real estate more efficient, it also ensures that the sale is legal and binding.
An executor with full authority may be required to post a surety bond, a form of insurance against inappropriate or fraudulent acts. However, all beneficiaries under the Will may waive the requirement for a bond. An executor also has a fiduciary duty to all heirs to maximize an estate’s assets, requiring that real estate is sold at fair market value. In addition, an executor with full authority is required to provide 15 days written notice of an impending sale to all heirs or beneficiaries listed under the Will, as well as the court. That provides beneficiaries with the opportunity to object to terms of the sale.
When the Probate Court grants the executor only limited authority, the court supervises the disposition of the real estate and no sale may take place without court approval. The sale actually takes place in the courtroom. This is a less efficient process, and may extend the time it takes to dispose of real estate in an estate.
In many cases, the extent of the executor’s authority is specified in the Will, and the grant of powers by the Probate Court is a formality. In cases where the executor is not granted any powers by the Will, it falls to the court to set appropriate boundaries. The court may, for example, grant full authority to only certain assets.
While it may appear that the grant of authority is an easy decision, it actually requires careful thought. If a testator or maker of the Will does not fully trust the named executor, limited authority to dispose of real estate may be more appropriate. A limited grant of authority can be used to protect not only the assets in the estate, but also the rights of the beneficiaries.
California law specifically outlines the right and responsibilities of executors granted full or limited authority to dispose of real estate. It may be wise to review those provisions with an estate planning attorney to ensure your wishes concerning your assets will be followed.