Estate of Katherine M Schmerzler

Case Number

22PR00098

Case Type

Hearing Date / Time

Mon, 09/25/2023 - 08:30

Nature of Proceedings

Petition for Final Distribution

Tentative Ruling

Probate Notes:

Appearances required.  The following issues remain after supplement:

Excessive, unexplained “interest” fees.  The escrow statement contains nearly $33,000 of “interest” to the City of Lompoc without explanation. 

Questionable reimbursement claims.  The petition also shows a reimbursement claim for $24,193.45, over $8,400 of which is for money spent by the administrator for rental cars, lodging and petroleum costs. These expenses are questionable, but not outwardly offensive. If no objection by the heirs, the Court should likely approve them.

Proposed Order.  A proposed order must be submitted with relief that matches that requested in the petition. (Local Rule 1724(b), subd.(d).)  Please re-submit the proposed order again, and completely fill out all allegations and requested relief.  The most recent proposed order filed 9/14/23 does is defective at paragraphs 10, 11, 12 (discussed below), and 13.

Excessive reserve without explanation. Petitioner requests reserve of $7,500 without explanation of why such a high amount is required.  Petitioner must come prepared to explain why such a high reserve is required.  The following is from a well-respected treatise on this issue:

Although not required, it is advisable to include an estimate of closing expenses. Examples of estimated closing expenses include any estate taxes, interest, and penalties that will be paid after distribution; the cost of preparing final income tax returns for the estate; the cost of transferring securities to the distributees; the cost of reasonable storage, delivery, and shipping for distribution of tangible personal property to the distributees; and the cost of certifying and recording copies of the decree of distribution of real property. See Prob C §§11642, 11750, 11753–11754. Some courts require more detailed information about the nature and amount of the anticipated closing expenses. See, e.g., San Francisco Ct R 14.35(I)(3).

The personal representative may also wish to retain funds for any undisclosed or unknown liabilities, especially tax deficiencies later assessed against the decedent or the estate. Apart from the reserve for estate taxes, there are some drawbacks to setting the reserve aside specifically for possible future tax deficiencies. Such action indicates—especially if the reserve is a substantial one—misgivings about the validity of the estate's position. The reserve might also be considered a trust fund for payment of the taxes, thus extending the statutory period for assessment. See U.S. v Rose (3d Cir 1965) 346 F2d 985, 989.

In addition, if the personal representative requests that the court allow for a substantial reserve (or even a reserve of more than $5,000), some courts will refuse to characterize the distribution as "final" and will require additional accounts (or waivers) before permitting distribution of any balance of the reserve. For example, in Contra Costa County, the court will not characterize the distribution as final if the personal representative requests more than a nominal reserve. If the entire estate will be distributed to a single beneficiary, such as a trust established during the decedent's lifetime, a reserve may not be necessary.

(Cal. Dec. Est. Pract. (CEB 2023), §31.66.)

Accordingly, it is recommended the Court deem this estate not to be in a condition to be closed if the Petitioner does not show a reasonable cause for the high reserve.  At the very least, the Court should require a final accounting and petition for distribution be set a reasonable time after the last year’s tax liability is due.

Due to staffing limitations, processing times may be delayed. To assist in processing, attorneys and parties should include the next court date in the “Filing Description” field provided by the electronic service provider. That field is also used for further descriptions of the document being e-filed, so be sure to put the calendar date FIRST in the field – BEFORE any further description of the document being e-filed (e.g.: 06/28/16 For XYZ).

Meeting ID: 161 797 5412

Passcode: 8749009