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Death does not automatically void any debts owed by the deceased. In the normal course of administering an estate, the personal representative named in the decedent’s last will and testament is responsible for paying any valid creditor claims presented. Indeed, once a person has died, a creditor may only enforce a debt through the probate courts. This includes debtors who obtain a civil court judgment against the decedent prior to death.

Claimant Waits Too Long to Challenge Illegal Creditor’s Lien

A recent case from Los Angeles illustrates the complications that can arise when creditors seek to enforce their judgments against a deceased debtor. In this case, a civil plaintiff obtained a $2 million judgment against the decedent in January 2012. The decedent passed away in August of that same year. Approximately two weeks after his death, the civil plaintiff filed a lien against a piece of real estate that the decedent owned in Malibu.

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In a recent post we discussed how Medi-Cal, California’s Medicaid system, can go after the assets of a deceased beneficiary recipient’s probate estate or revocable living trust for reimbursement of medical costs paid during the person’s lifetime. There is some good news for future Medi-Cal beneficiaries and their potential heirs. California’s recently adopted state budget includes important provisions designed to limit Medi-Cal “recovery” against estates. This is an important decision that will help many low-income California residents and their families by protecting their homes and savings from mandatory state seizure.

Legislature Adopts Important Protections for Medi-Cal Recipients and Families

There are actually two categories of reimbursements sought by Medi-Cal. The first is for “specified medical assistance, including nursing facility services, home and community-based services, and related hospital and prescription drug services” provided to California residents ages 55 and over. Federal law requires California to seek reimbursement from a recipient’s estate in these cases.

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There are many legal events that may affect your estate planning. For example, if you get divorced, the terms of your property settlement may require you to alter the terms of your will or trust. It is therefore important to resolve any potential legal question about your estate plan prior to your death, as any ambiguity may lead to costly and unnecessary probate litigation afterwards.

Children, Stepmother Spend Years Fighting Over Retirement Account

A long-running probate case from here in San Diego offers a helpful example. This case involves the estate of a man who died in 1998. The decedent’s prior marriage ended in divorce in 1977. The divorce included a property settlement, approved by an Illinois court, that required the decedent to make provisions in his estate planning such that the couple’s two children would receive one-half of his “net estate” upon his death.

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Paying for end-of-life care and final medical expenses can be a major problem for many California residents. California does offer federal Medicaid benefits for poor and disabled residents through the state’s Medi-Cal program. But Medi-Cal has a catch: once a recipient dies, the state is legally obligated (under federal Medicaid rules) to “seek reimbursement” from the person’s estate for any benefits paid.

This means Medi-Cal can go after the property in a deceased beneficiary’s probate estate or living trust. In many cases this includes the decedent’s home. When determining the eligibility of Medi-Cal benefits over the age of 55, the value of a person’s primary residence is excluded from income calculations. But after the beneficiary dies, the house becomes fair game for Medi-Cal officials seeking reimbursement.

However, there are a number of possible exemptions that heirs of a decedent may seek in order to avoid losing assets to a Medi-Cal claim. For example, if enforcing a lien against a property “would result in substantial hardship to other dependents, heirs, or survivors” of the decedent, Medi-Cal must waive its claim. Such “hardship waivers” are not automatically granted. The affected dependent or heir must apply for a waiver, and if it is denied, he or she may seek judicial review.

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An essential function of the personal representative of a probate estate is to identify and inventory the estate’s assets. Keep in mind, an estate’s assets at death may not be limited to property and funds in possession of the decedent at the time of death. If the decedent was a party (or potential party) to any civil lawsuit, any future proceeds from such a case may also be considered an estate asset.

Lawyer’s Statement Does Not Prove Intent to Disclaim Share of Judgment

A recent California case illustrates this point. This case is discussed here for informational purposes only and should not be treated as a complete statement of California law on this subject.

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Under California law, “Unless a trust is expressly made irrevocable by the trust instrument, the trust is revocable by the settlor.” This means that if you make a living trust as part of your estate plan, you are free to amend or revoke the trust at any time. You may, however, choose to make the trust (or part of a trust) irrevocable, in which case the trust should include clear language to that effect.

Court Upholds Husband’s Partial Revocation of Trust After Wife’s Death

Confusion over whether a trust is revocable can lead to litigation following the death of the settlor. Here is a recent example from here in California. This is only an illustration and not a binding statement of California law on the subject of revocable trusts.

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A conservatorship exists whenever a California probate court determines that a person is not capable of taking care of him or herself or managing his or her finances. In the case of an individual who suffers from a mental disorder, a court may order what is known as an LPS conservatorship if there is sufficient evidence that the person is “gravely disabled,” and “unable to provide for his or her basic personal needs for food, clothing, or shelter.” But merely having a mental illness does not, in an and of itself, justify imposing a conservatorship against a person’s will.

Court Reverses “Close Call” Conservatorship Order

A California appeals court recently addressed the type of evidence necessary to create an LPS conservatorship for an individual with a mental disorder. The subject of this case is a man suffering from schizophrenia. He had been hospitalized multiple times over the years and has been required to take psychiatric medications since he was a child.

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Marriage is not for everyone. Many couples are happy in long-term relationships that do not result in marriage or even a legally recognized domestic partnership. But if you are in such a relationship, you and your partner should consider the estate planning implications if one of you passes away. California law does not treat married and unmarried partners in the same way. A spouse has certain automatic community property and inheritance rights that an unmarried partner does not.

Partner’s Settlement Ends Up Hurting Her

That is not to say unmarried partners are completely unprotected. Since the 1970s, California courts have accepted and enforced contracts between unmarried partners. This can include oral promises to treat property acquired by either partner during the relationship similarly to community property. In these types of cases, commonly known as “Marvin petitions,” the surviving partner may seek to enforce these promises.

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Many people pledge money to charity as part of their estate planning. In California, charitable pledges are generally not enforceable in court unless the donor receives some consideration, thereby creating a binding contract. For example, if a college offers to name a building after you in exchange for your gift, that would be consideration for your pledge. If you pledge money contingent on other people making similar donations, that would constitute mutual consideration among all of the donors.

If you do make a binding pledge as part of your estate plan, however, make sure you consider the wishes of your spouse. Under California law, any community property held by a married couple is owned one-half by each spouse. This means you may not make a gift of your spouse’s share of such property without his or her consent.

Ex-Husband Cannot Pay for Pledges With Ex-Wife’s Share of Community Property

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For many of us the “paperless office” is a reality. Our personal and professional lives reside online through our laptops, smart phones, and cloud storage. But what does this mean for our estate planning?

Recently, an article on discussed the growing popularity of “digital document archives,” which offer specialized cloud storage for estate planning materials including wills, powers of attorney, and health care directives. The idea behind such services is to make it easier for family members or other fiduciaries to locate important estate planning documents. For example, if a person dies, his or her executor could go to a digital archive and promptly download a copy of the will.

Are “Digital Wills” Admissible in California?