Estate Administration FAQ

A California estate executor (also called a personal representative or administrator) has extensive fiduciary duties and responsibilities governed by the California Probate Code. These duties begin immediately upon the decedent's death and continue until the estate is fully administered and closed. The executor essentially steps into the shoes of the deceased person to manage their financial affairs, pay debts, and transfer property to rightful beneficiaries.

Primary responsibilities include: locating and securing all estate assets including real property, bank accounts, investments, personal property, and business interests; filing the petition for probate with the appropriate superior court; providing required notices to all heirs, beneficiaries, and creditors as mandated by California Probate Code Section 8110 and Section 9050; preparing and filing an inventory and appraisal of all estate assets within four months; managing estate assets prudently including maintaining insurance, paying mortgages, and collecting rents or other income; paying valid debts and taxes from estate funds; filing all required tax returns including final income tax returns and estate tax returns if applicable; keeping detailed records and providing accountings to beneficiaries; and ultimately distributing remaining assets to beneficiaries according to the will or California's intestacy laws.

Throughout the administration process, the executor must exercise reasonable care, skill, and caution, and must act solely in the beneficiaries' interests without self-dealing or conflicts of interest. California Probate Code Section 16040 imposes the "prudent person rule" requiring executors to administer the estate with the care, skill, prudence, and diligence that a prudent person acting in a like capacity would use.

Under California Probate Code Section 16000 et seq., executors owe the highest fiduciary duties recognized in law to estate beneficiaries. These duties are analogous to those owed by trustees and require the executor to place the beneficiaries' interests above their own personal interests at all times. The fiduciary relationship creates a position of utmost trust and confidence, and California law holds executors to extremely high standards of conduct.

The primary fiduciary duties include: (1) Duty of loyalty under California Probate Code Section 16002, requiring the executor to act solely in the beneficiaries' interests without self-dealing, conflicts of interest, or personal profit beyond statutory compensation; (2) Duty of impartiality under California Probate Code Section 16003, requiring fair treatment of all beneficiaries without favoritism based on personal relationships; (3) Duty of prudent administration under California Probate Code Section 16040, requiring reasonable care, skill, and caution in managing estate assets equivalent to that of a prudent businessperson; (4) Duty to keep beneficiaries informed under California Probate Code Section 16060, including providing accountings and responding to reasonable requests for information; (5) Duty to avoid delegation of duties that the executor can reasonably perform personally; and (6) Duty to keep estate property separate from personal property and properly identified as estate assets.

Violation of these fiduciary duties can result in surcharge (personal liability for losses), removal as executor, denial of compensation, and in egregious cases, punitive damages. Beneficiaries can petition the court under California Probate Code Section 17200 to compel the executor to perform duties, provide accountings, or to seek the executor's removal for breach of fiduciary duty. The standard applied is strict, and executors cannot escape liability by claiming ignorance of their duties or good intentions if their actions caused loss to the estate.

Yes, executors can be held personally liable for losses to the estate resulting from breaches of fiduciary duty, negligence, or failure to follow probate procedures. California Probate Code Section 9600 specifically provides that a personal representative is liable for losses caused by breach of fiduciary duty. This personal liability means that the executor may have to pay from their own funds to compensate the estate or beneficiaries for losses caused by their wrongful actions or negligence.

Common situations resulting in personal liability include: self-dealing or using estate assets for personal benefit; negligent management of assets such as failing to maintain insurance, allowing property to deteriorate, or making imprudent investments; failure to timely collect estate property or income; improper distributions to beneficiaries before paying creditors or taxes; commingling estate funds with personal funds; failing to file required tax returns resulting in penalties and interest; continuing the decedent's business without court authorization when losses occur; selling estate property without proper authority or for inadequate consideration; and paying invalid creditor claims or failing to object to excessive claims.

Under California Probate Code Section 9653, if an executor distributes estate assets without paying or adequately providing for creditor claims, the executor is personally liable to unpaid creditors up to the amount improperly distributed. Similarly, California Probate Code Section 10380 makes executors personally liable if they sell estate property without proper court authorization when required. The probate bond (if required) provides some protection to the estate, but beneficiaries can also pursue the executor personally beyond the bond amount. To protect themselves, executors should maintain detailed records, seek court approval for questionable actions, consult with a probate attorney when uncertain, and consider obtaining errors and omissions insurance.

California Probate Code Section 9650 authorizes executors to open estate bank accounts in the name of the estate using the estate's tax identification number. Proper management of estate finances is critical to fulfilling fiduciary duties and maintaining clear records for the final accounting. The executor must never commingle estate funds with personal funds, as this violates the fundamental fiduciary duty to keep estate property separate and identifiable.

The executor should establish a separate estate checking account titled properly (for example, "Estate of John Doe, Deceased, Jane Doe, Executor") and deposit all estate income including rent, dividends, interest, and proceeds from asset sales into this account. All estate expenses should be paid from the estate account with checks or electronic transfers that create a clear paper trail. The executor should maintain meticulous records of all deposits and disbursements, including dates, amounts, payees, and purposes. Bank statements, cancelled checks, and receipts should be retained as these will be needed for the final accounting.

For investment accounts and securities, California Probate Code Section 16047 requires executors to invest estate funds according to the Prudent Investor Rule, considering the purposes of the estate, distribution requirements, and other relevant circumstances. Executors should generally avoid speculative investments and maintain sufficient liquidity to pay debts, taxes, and expenses. When managing financial assets, the executor should: review all account statements regularly; ensure adequate insurance coverage on all estate property; maintain real property by paying mortgages, property taxes, and insurance; collect all income and rents; pursue amounts owed to the decedent; and avoid unnecessary risks or speculative ventures unless specifically authorized by the will and court.

California Probate Code Section 10950 requires executors to provide detailed accountings showing all financial transactions during estate administration. The final accounting is a comprehensive financial report that accounts for every dollar that came into the estate and every dollar paid out, from the date of death through the proposed final distribution. This accounting must be filed with the court as part of the petition for final distribution and served on all beneficiaries and heirs.

The final accounting must include several key schedules: Schedule A listing the inventory of all assets on hand at the beginning of the accounting period (date of death) with values from the Inventory and Appraisal; Schedule B showing all gains on sales, including real property, securities, and personal property, with details of sale prices, costs, and net proceeds; Schedule C listing all losses on sales with similar details; Schedule D showing all receipts of principal including collections of debts owed to the decedent, insurance proceeds, and other asset recoveries; Schedule E listing all receipts of income including interest, dividends, rents, and business income; Schedule F detailing all disbursements including funeral expenses, administration costs, attorney fees, executor fees, creditor claims paid, and taxes; and Schedule G showing property on hand at the end of the accounting period available for distribution.

Each entry must include sufficient detail for beneficiaries to understand the transaction, including dates, amounts, payees, and purposes. Supporting documentation such as receipts, invoices, bank statements, and cancelled checks should be available for inspection. California Probate Code Section 1061 allows interested parties to petition for a more detailed accounting if the provided accounting is insufficient. Executors who fail to provide adequate accountings or who cannot account for estate funds may be denied compensation, surcharged for losses, or removed from office. The accounting must be verified under oath, and the executor certifies that it is complete and accurate to the best of their knowledge.

California Probate Code Section 10300 governs the sale of estate real property by executors. Generally, court approval is required before selling real property unless the will specifically grants the executor independent authority to sell property without court confirmation under the Independent Administration of Estates Act (IAEA) provisions in California Probate Code Section 10400. The procedures and requirements differ significantly depending on whether court confirmation is required.

For sales requiring court confirmation, the executor must file a petition for authority to sell real property, providing detailed information about the property, proposed sale terms, and reasons for the sale. The petition must explain why the sale is necessary or advantageous to the estate. Notice of the hearing must be given to all beneficiaries and heirs at least 15 days before the hearing. Additionally, California Probate Code Section 10300 requires publication of a notice of sale once a week for two successive weeks in a newspaper of general circulation. At the hearing, the court considers the proposed sale and may approve it if the price and terms are in the estate's best interests.

An important feature of court-confirmed sales is the overbid procedure under California Probate Code Section 10311. At the confirmation hearing, other prospective buyers may submit higher offers, creating an auction-like process. The initial offer must be increased by at least 10% of the first $10,000 plus 5% of any amount exceeding $10,000. The court then confirms the sale to the highest bidder. For sales under IAEA, if the will grants authority and the executor elected IAEA powers, the executor can sell property with only notice to beneficiaries, without court confirmation, unless a beneficiary objects. California Probate Code Section 10501 requires at least 15 days' notice to beneficiaries before the sale, during which time beneficiaries can file objections requiring court approval. The executor must still obtain fair market value and act in the beneficiaries' best interests, but the process is faster and more flexible than court-confirmed sales.

Under California Probate Code Section 9250, executors must review each creditor claim filed against the estate and either allow or reject it, in whole or in part, within 30 days of filing. If the executor fails to act within 30 days, the claim is deemed allowed. This evaluation process is critical because executors can be personally liable for paying invalid claims or rejecting valid claims improperly.

To determine validity, the executor should verify several requirements: (1) The claim was filed on the mandatory Judicial Council form (DE-172) as required by California Probate Code Section 9152; (2) The claim was filed within the statutory deadline—either four months from the date letters were first issued or 60 days from when notice was mailed to the creditor, whichever is later, per California Probate Code Section 9100; (3) The claim is supported by adequate documentation such as invoices, statements, contracts, or promissory notes evidencing the debt; (4) The debt is not barred by the statute of limitations or other defenses the decedent could have asserted; (5) The claim represents a valid debt actually incurred by the decedent, not someone else; (6) The amount claimed is accurate and reasonable.

For claims the executor wishes to reject, California Probate Code Section 9250 requires written notice of rejection be sent to the creditor. The notice must inform the creditor that they have 90 days to file a lawsuit to enforce the claim or it will be barred forever. If a rejected claim is not prosecuted within 90 days, it is permanently barred. Executors should reject claims that are untimely, unsupported by documentation, inflated beyond reasonable amounts, or otherwise invalid. However, executors should be cautious about rejecting claims that may be valid, as improper rejection can lead to costly litigation. When in doubt about a claim's validity, the executor should consult with the estate's attorney before acting. Allowed claims are then paid according to the priority system in California Probate Code Section 11420, with funeral expenses, estate administration costs, and secured debts receiving priority over general unsecured claims.

Executors have significant tax responsibilities that are critical to proper estate administration. Failure to file required tax returns or pay taxes can result in penalties, interest, and personal liability for the executor. The specific tax obligations depend on the estate's size, income, and other factors, but generally include both income taxes and potentially estate taxes.

Income tax obligations include: (1) Filing the decedent's final federal and California individual income tax returns (Form 1040 and Form 540) for the year of death, reporting all income earned from January 1 through the date of death, with returns due by April 15 of the following year or October 15 if extended; (2) Filing fiduciary income tax returns (Form 1041 federal and Form 541 California) for the estate reporting all income earned by estate assets after death, required if the estate has gross income exceeding $600 or any taxable income, with fiscal year elections available; (3) Making estimated tax payments if the estate will owe more than $1,000 in tax; (4) Obtaining an employer identification number (EIN) for the estate from the IRS; (5) Issuing Forms 1099 and K-1 to beneficiaries for distributions that carry out income.

Estate tax obligations depend on the estate value. For decedents dying in 2024, federal estate tax Form 706 must be filed if the gross estate exceeds $13.61 million (indexed annually for inflation). The return is due nine months after death but can be extended six months. California does not currently have a separate estate tax, having repealed it effective January 1, 2005. However, executors should be aware that California previously had an estate tax and may in the future reinstate one. Additionally, inherited IRAs and retirement accounts have special income tax rules under federal law that executors must properly handle. Before making any distributions to beneficiaries, prudent executors obtain tax clearance letters from the IRS (Form 4810) and California Franchise Tax Board confirming all taxes are paid, protecting the executor from later tax assessments.

Yes, California Probate Code Section 8520 allows executors to petition the court for permission to resign from their position. Serving as executor is voluntary, and while the person initially accepts the responsibility by filing the petition for probate, they are not permanently bound to continue serving if circumstances change. However, an executor cannot simply walk away from the position without court approval—they must follow the proper resignation procedure.

To resign, the executor must file a petition with the court stating the reasons for resignation, provide an accounting of all actions taken to date, suggest a suitable successor executor, and give notice to all beneficiaries and heirs. The court will typically grant the petition to resign if: (1) proper notice has been given to all interested parties; (2) a suitable successor executor is available and willing to serve; (3) the resigning executor has properly accounted for all estate property and transactions; (4) resignation will not unduly delay or prejudice estate administration. Upon approval, the court will accept the final accounting, discharge the resigning executor and their bond, and appoint a successor.

Removal is different from resignation and occurs when the court removes an executor for cause, either on the court's own motion or upon petition by an interested party. California Probate Code Section 8502 permits removal for numerous grounds including: waste, embezzlement, or mismanagement of estate property; failure to perform duties within a reasonable time; incapacity to properly execute duties; gross immorality rendering the person unfit to serve; conviction of a felony; conflicts of interest incompatible with proper administration; failure to file required accountings or inventories; or any other reason that would render removal beneficial to the estate. Common practical reasons for removal include the executor refusing to communicate with beneficiaries, engaging in self-dealing, making imprudent investments, failing to timely complete administration, or acting with hostility toward beneficiaries. Removal proceedings can be contentious, and the removed executor may be required to reimburse the estate for losses caused by their misconduct and may be denied compensation.

If an executor distributes estate assets to beneficiaries before properly paying or adequately providing for creditors, the executor can be held personally liable for the unpaid debts under California Probate Code Section 9653. This is one of the most serious potential liabilities executors face, as it can result in the executor having to pay creditors from their own personal funds rather than from estate assets that have already been distributed to beneficiaries.

California Probate Code Section 9653 specifically provides that if a personal representative distributes estate property without paying or adequately providing for a creditor's claim that is allowed or approved, the personal representative is personally liable to the creditor in an amount not exceeding the property distributed. This means the executor can be sued personally by unpaid creditors up to the amount of the improper distribution. The executor's personal assets may be seized to satisfy these creditor claims, and the probate bond (if any) may also be used to compensate creditors.

To avoid this liability, executors must follow proper procedures: wait until the creditor claim period expires (minimum four months from issuance of letters under California Probate Code Section 12200); properly notice all known or reasonably ascertainable creditors as required by California Probate Code Section 9050; review and allow or reject all filed claims; pay all allowed claims in full or set aside adequate reserves for disputed claims; ensure all taxes are paid or adequately provided for; and obtain court approval for the final distribution before distributing assets. If there are insufficient assets to pay all creditors in full, California Probate Code Section 11420 establishes a priority system for payment, and the executor must follow this priority order strictly. Distributions made before these requirements are met constitute premature distribution and violate the executor's fiduciary duties, exposing the executor to personal liability even if the distributions were made in good faith without intent to defraud creditors.