The following briefly discusses some common questions regarding IAEA which is the Independent Administration of Estates Act governed by the California Probate Code.
What is the Independent Administration of Estates Act?
- Commonly referred to as IAEA, the Independent Administration of Estates Act is a series of laws that allow a personal representative to manage or administer most aspects of the decedent’s estate without court supervision.
- The authority to act under IAEA may be granted by the court upon petition by the personal representative or given by the decedent’s will.
- Authority is generally granted when probate proceedings are initiated yet it can be done anytime during the proceedings.
- If the decedent’s will expressly prohibits IAEA, or an interested party provides the court good cause for why the estate should not be administered under IAEA, the estate cannot be administered under IAEA.
- An objecting interested person who provides good cause to the court may convince the court to grant restrictions to the personal representative’s powers under IAEA. The authority to act then becomes limited authority versus full authority.
Full Authority vs Limited Authority under IAEA
- Under full authority the personal representative is allowed to sell real property, exchange, grant an option to purchase, or borrow money with a loan secured by real property at their discretion.
- Under limited authority the personal representative has the power the act under IAEA except:
- The powers to sell, exchange, grant an option to purchase, or borrow money with a loan secured by a loan on real property.
- If the decedents will prohibit IAEA then neither authority may be granted by the court.
Frequently Asked Questions Regarding IAEA
Are price and terms of real property sold governed by law under IAEA?
- With full authority a sale may be made on the terms and at the price determined by the personal representative. The sale is not subject to overbid and not subject to court supervision. The personal representative holds a fiduciary duty to maximize the estate’s assets. The law that requires the price to be at least 90 percent of the appraised value does not apply under full authority.
Does a personal representative have to give notice of a sale under IAEA?
- A Notice of Proposed Action must be given when selling real property without court supervision, in other words, with full authority. The personal representative must notify all entities and persons that have an interest and therefore may be affected by the proposed sale. The exception to this would be if the parties have waived notice or provided consent to the sale, in writing.
- The parties that need to be notified are:
- All persons name in the Will
- All known heirs who are entitled by law to property of a person who died without a will
- All persons who have requested special notice. For example beneficiaries of a trust or creditors
- If any property is to go to the State the Attorney General must be notified
How does the personal representative notify the parties?
- Notice is provided on a Notice of Proposed Action form. The notice provides the terms of the action the personal representative proposes to take. For example, selling real property. The form must include the following information:
- Name and mailing address of the personal representative
- Telephone number and name of who to contract to get more information
- A description of the proposed action which includes a description of the property, terms of the sale, the price and brokerage commissions
- An on or after date upon which the action will occur
How is the Notice of Proposed Action Given?
The notice is mailed or personally delivered to all parties entitled to receive it. The notice must be given no less than 15 days before the proposed action is scheduled to take place. The notice is generally prepared and managed by the attorney for the estate. When mailed, the notice is sent to the person’s last known address via first class mail.
Can a person who receives the Notice of Proposed Action object to the sale?
- Yes. Anyone who receives a notice can object to the proposed action simply by mailing or delivering their objection in writing to the personal representative at the address listed in the notice.
- An objecting party may request the probate court to restrain the personal representative from taking action without court supervision. If such a request is made to the court the court must grant the request. After the personal representative receives the written objection, or a restraining order has been issues, court supervision is required in order for the personal representative to take any action pertaining to the property.
Is the personal representative required to administer the estate under IAEA when full authority to do so is granted by the court?
- The short answer is no. The representative is not required to sell property under IAEA. The deciding factor will be what is best for the estate. Many factors must be considered. For example:
- It is much quicker to sell real property under IAEA than it is under a court supervised sale.
- The court does not need to confirm the sale and no overbidding under IAEA
- All terms and contingencies regarding the sale are agreed to by the personal representative
- Market conditions and general economic factors
- Overbids may increase the sales price and the amount that goes to the estate
- Ultimately the manner of sale should be what will most likely produce the maximum estate assets
- A probate broker that knows the local market will be able to advise and make recommendations to the personal representative. Time to market is crucial when a property is sitting empty. In the end, does it make sense not to sell under IAEA with full authority?
How does the sale of real property under IAEA affect the probate listing broker’s duties?
- The personal representative’s power to grant a probate broker the exclusive right to sell property is only for an initial period of 90 days. Extensions are also limited to 90 days.
- If the total amount of time of the original listing and all 90 day extensions to the listing exceed 270 days then the personal representative must provide a Notice of Proposed Action to all interested parties.
- The probate listing broker must comply with agency disclosure laws as well as conduct a visual inspection of the property and disclose what their inspection reveals.
- The probate broker may contract with the personal representative the amount of commission due the broker without court approval.