One of the reasons why people might prefer to avoid tying up all their estate assets in probate is the anticipated delays of courtroom proceedings.
There are rules to be followed when it comes to court proceedings, which necessarily take time. If a person wants some of their property, at least, to bypass these delays and go directly to their heirs and successors, they structure their estate to pass or transfer outside of probate.
But even within the bounds of probate proceedings, there may also be ways to speed up certain transactions.
For the sale of real estate, for example, which in itself may take weeks or months – if the sale is a fully supervised court process that completes only upon court order, it may take even longer.
In this article we take a look at one method allowed by the California Probate Code to speed up the sale of real property.
Full Authority under the IAEA
The Independent Administration of Estates Act (IAEA) is a framework in California probate law that allows a personal representative to manage and settle an estate with reduced court supervision.
The IAEA is codified in the California Probate Code and distinguishes between the authority granted to the personal representative in his or her Letters of Authority.
This authority may either be limited or full.
Limited authority means that the personal representative cannot, without court supervision, do certain transactions involving real property, including sell real property, exchange real property, grant an option to purchase real property, or borrow money with the loan secured by an encumbrance upon real property. (Probate Code §10403)
Full authority, on the other hand, allows the personal representative to do a number of transactions without court supervision, including selling or exchanging real estate. (Probate Code §10511)
But while the grant of full authority under the IAEA dispenses with the need to secure prior court approval, it does not mean that the personal representative’s authority is now unlimited or unchecked. The traditional limitations still apply, including adhering to the required standard of conduct or ordinary care and diligence in acting for the best interests of the estate.
The Notice of Proposed Action (NOPA) Requirement
Another standard that delimits the authority of a personal representative acting with full authority under the IAEA is referred to as the Notice of Proposed Action or NOPA.
The NOPA, as its name indicates, is mandatory notice to be provided by the personal representative of any action he is intending to undertake with respect to the estate administration, which notice must be served on all interested parties. This notice must be delivered before the proposed action is undertaken, with a window of 15 days for any objections from interested parties.
If the personal representative was intending to sell real estate probate property, for instance, and he or she has full authority under the IAEA, he must first give notice by delivering the NOPA to all interested parties – heirs, successors, devisees and other interested persons. If, after 15 days, and no objection has been received, the personal representative can proceed with the proposed sale.
This requirement is a safeguard that allows objections to be received, made of record and resolved before any transaction finalizes. But more importantly, it substitutes court supervision with the right of interested parties to review the personal representative’s proposed action. If no objection is received, the transaction is considered as procedurally proper, allowing the representative to proceed with the sale confidently while still protecting the estate and beneficiaries.
Objections and Restraining Orders
But what if interested parties voiced objections to a proposed sale?
There are several avenues for interested parties to intervene in a proposed sale. Once they have received the NOPA, they can block the sale, demand further review, or even seek a restraining order to prevent the sale.
Effectively, an objection from an interested party to a proposed sale brings the entire transaction under court review. While it is true that this delays the process further, the right of interested parties to intervene is just an additional safeguard under the IAEA provision to protect the interests of the estate.
The personal representative may then alter or modify the terms of the proposed sale thereby resolving the objection. Or they can address the issue within the court process – either by responding to a TRO or voluntarily seeking court confirmation of the sale.
Closing a Sale under the IAEA
Once all objections have been resolved, or the 15-day window has lapsed without any objections from interested parties, the personal representative may proceed with the sale of the property.
It must be noted, however that a sale under the IAEA, while effectively taking place outside of the traditional court-supervised process, is not exempt from review.
The personal representative’s actions in selling real property will still be put under scrutiny before the estate is settled and the probate closed. The transaction will be examined and the personal representative’s actions reviewed.
For instance: Was the sale necessary? Did the personal representative act in the best interests of the estate? Did the personal representative secure the best value for the property? Did the personal representative have any conflict of interest in this transaction? Were all the statutory requirements, including the NOPA properly followed? Was there a breach of fiduciary duty?
Speed vs. Strict Compliance
With all the potential risks that a personal representative might be liable for with an IAEA sale, it might seem easier to just follow the traditional, court-supervised process of selling real estate.
Sometimes, however, speed is essential and the personal representative’s duty to get the best value for property must be balanced with the need to act quickly. Perhaps the proposed sale balances the need to preserve the value of the entire estate by selling a heavily mortgaged property with accruing interest or taxes. Quick action prevents further financial loss and protects the estate overall.
With the IAEA full authority, a personal representative is able to act quickly, but with full transparency if done according to prescribed notice procedures.
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If you are a personal representative, you can use IAEA authority to streamline real estate transactions without court approval. We highly recommend you consult with a qualified probate attorney before finalizing any real estate transaction to ensure you are compliant with all applicable laws and rules.