It is never advisable to wait until you are on your deathbed to finish (or start) your estate planning. This is especially true if there are potential complications with your estate, such as a pending bankruptcy, divorce or other issues that might affect the distribution of your property. By waiting until the last minute, your estate plan may lead to confusion—and litigation—among your heirs.
Bankruptcy, Last Minute Estate Planning Leads to Litigation
Here is a recent example from here in California. This case involves a man who suffered a stroke in July 2011 and died in the hospital a few weeks later. While hospitalized, the deceased signed a will and revocable trust, as well as a quitclaim deed purporting to transfer 22.5 acres of land to the trust, with his sister serving as trustee. The will, meanwhile, named the deceased's daughter as executor. Complicating matters somewhat was the decedent's Chapter 13 bankruptcy petition, which was still pending at the time of his death but later discharged at the daughter's request.
Following the bankruptcy discharge, the decedent's son recorded the quitclaim deed transferring the land to the trust. The daughter, acting as executor of the probate estate, asked the probate court to determine whether the deed was valid; if it was not, the land would pass to the estate and not the trust. She further argued the quitclaim deed did not accurately reflect her father's wishes and conflicted with the terms of his bankruptcy discharge.
A probate judge ultimately rejected these arguments and held the quitclaim deed was valid. The evidence presented showed the decedent's main objective was keeping the land under family control. The son testified he had “tax problems,” and his father “intended to transfer the real property in such a way that the government would not seize the property.” And while the decedent was in a weakened state during his hospitalization, there was no medical evidence he lacked sufficient capacity to execute an estate plan. Indeed, at trial the daughter conceded her father was competent to make a will, even while simultaneously arguing he lacked capacity to sign the quitclaim deed.
Nor did the decedent's bankruptcy present any obstacles to the transfer by quitclaim deed. In a bankruptcy case, the debtor's property is given to a court-appointed trustee unless and until the bankruptcy is discharged by the court. Here, the bankruptcy court confirmed the land had been “revested” to the decedent, meaning he had full legal authority to transfer the property at the time he signed the deed.
The daughter appealed the probate court's decision. In an unpublished decision, the California Court of Appeal rejected the appeal and affirmed the probate court's confirmation of the deed.
Need Help Organizing Your Estate?
The case above illustrates how unusual circumstances may complicate an estate plan. If you have similar issues, it is imperative you act now and not wait until you are lying in a hospital bed to settle your affairs. A qualified California estate planning attorney can advise you on the best way to organize your estate or trust. Contact the Law Office of Scott C. Soady in San Diego today if you would like to speak with someone right away.