Estate of Betsy Lee Bogatz

Case Number

24PR00025

Case Type

Hearing Date / Time

Tue, 09/10/2024 - 09:00

Nature of Proceedings

Petition for Final Distribution

Tentative Ruling

Probate Notes:

Appearances required.

After review of the Declaration filed on August 29, 2024, the following defects still persist or must be explained at the hearing:

Supplement re: Unexplained Charges in Escrow Statement. The Escrow Statement submitted by the Petitioner contains three transactions that are suspicious and not readily ascertainable by the Court as described.  It appears that during escrow, over $8,000 was disbursed to “Todd McChesney” without explanation as to why these debts were owed.  Petitioner must appear and explain why over $8,000 was disbursed through escrow as reimbursements without court approval.

Extreme reserve request.  Petitioner requests $12,000 for a reserve amount for back taxes on the real property that was sold during administration.  This indicates that the estate is not in a condition to be closed.

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.)

Thus, the court should find the estate is not in a condition to be closed, or order the reserve to be set at $12,000 and set a review hearing to confirm the tax burden and account for the payout of the reserve.