Articles Posted in PROBATE

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In a typical probate administration, the personal representative named in the deceased person’s will must pay off any valid debts presented to the estate. What if the decedent was already in bankruptcy at the time of his or her death? What happens to the bankruptcy case?

Bankruptcy and probate are actually similar legal procedures. Both require a third party to take possession of a person’s assets. In bankruptcy that person is a court-appointed trustee, while in probate it is the personal representative. A bankruptcy trustee does not take all of a debtor’s assets, however, only those that are not specifically exempt from bankruptcy or creditor judgments. Those assets remain with the debtor and pass to his probate estate–and thus the personal representative–upon death.

Chapter 7 vs. Chapter 13

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There are a number of small questions you might have about to estate planning. For instance, what happens to your credit cards after you die? Does your estate have to pay the bill? Or can the credit card issuer go after your wife or children to collect the unpaid balance?

Credit Card Issuers Must Prove Debt

Death does not automatically terminate a credit card agreement. If the account was solely in the deceased person’s name, the credit card issuer may file a claim for the unpaid balance with the estate. If the account was jointly held with a spouse or another individual, that person may still be liable for the debt. Otherwise, a credit card company cannot pursue relatives for the debt.

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When you set up any kind of trust, it is important to consider the potential relationship between the trustee and any beneficiaries. In a revocable living trust, for example, the person making the trust often serves as the initial trustee. But when that person dies, a successor trustee must assume responsibility for the trust and make distributions to the beneficiaries according to the trustmaker’s instructions. Obviously, this process will go a lot smoother if there is a good relationship between the trustee and the beneficiary.

Trustee Ends Up Paying for Dealing With “Demanding” Beneficiary

Here is an example, taken from a recent unpublished California appeals court decision, of what can go wrong when there is a poor relationship between trustee and beneficiary. This case actually involves an irrevocable trust–one where the trustmaker does not serve as initial trustee and cannot amend or revoke the trust once it is made. Such trusts are commonly used for tax planning and charitable giving purposes.

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If you have multiple children, it is a natural desire to provide for them equally in your estate plan. For some types of assets this is no big deal. You can easily divide a bank account into equal shares. But other types of property, such as real estate, can prove trickier to deal with. In many cases it may not be practical for multiple children to jointly inherit a parent’s home.

Son’s “Obstruction” Delays Sale of Property

A recent case from Santa Clara offers a helpful illustration. Here, a father of three adult children owned a 2.9-acre piece of land including a residence. The property was held in a revocable living trust. When the father died, his two daughters took over the trust as successor co-trustees.

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There are many questions you may have when thinking about estate planning. In addition to worrying about making a will, or setting up a trust, and dealing with decisions about whom to leave your property, there are also more mundane issues to consider. For example, do you still have to file tax returns after your death?

It probably will not come as a surprise that the answer is “yes.” Tax obligations do not end at death. In fact, death raises a number of tax issues that your surviving spouse (if you are married) or the executor of your estate will need to handle.

Personal Income Taxes

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If you co-own real property with others, it is important to clearly establish each party’s interest. Among other reasons, this can have a significant impact on your estate planning because your will or trust can only dispose of your own interest in real estate. Your estate plan will not affect the rights of the other co-owners in most situations.

Brothers Fight Over Share of Mother’s Property

Here is an illustration from a recent California case. In 1978, a mother and her three children–two sons and a daughter–acquired a piece of real estate in Los Angeles. There were a number of title changes made to the property over the years. According to a 1986 deed, ownership was divided as follows: a one-third interest belonged to a revocable trust established by the mother, a one-third interest belonged to the daughter, and the final one-third interest belonged to one of the sons (who is the defendant in the lawsuit discussed below). In 2002, the daughter effectively transferred her one-third interest to her mother’s trust.

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Some people decide to write their own last will and testament without the assistance of an estate planning lawyer. While such wills are generally valid, provided they comply with the requirements of California law, there is always the risk that ambiguity in a will drafted by a non-attorney may lead to misunderstandings. Such misunderstandings can lead to litigation, which largely defeats the purpose of having a will in the first place.

Handwritten Will Leads to Lawsuit Over Woman’s Intentions

A recent South Dakota case illustrates the types of problems that may arise from self-drafted wills. The will in this case was written by a woman who was serving a jail term at a South Dakota women’s prison. The will was “holographic,” meaning it was handwritten by the woman. Holographic wills are considered valid in most states provided they are signed and in the testator’s own handwriting.

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California allows the spouse or heirs of a deceased individual to file a wrongful death lawsuit against anyone whose negligence caused the individual’s death. In many cases the personal representative or executor of the estate brings a wrongful death claim on behalf of the persons entitled to recover. If successful, wrongful death claimants may recover losses attributed to the estate, such as the decedent’s medical bills and funeral costs, as well as economic and non-economic losses suffered by the individual heirs.

Utah Court Rules Executor May Sue Herself for Wrongful Death

While most wrongful death lawsuits involve third parties unrelated to the estate or the decedent, the Utah Supreme Court recently examined an unusual case where the executor of an estate filed a wrongful death claim against herself. This may sound illogical, but the court said the case could proceed.

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Many parents do not get along with their children. It is an unfortunate reality, but in the context of estate planning, there is nothing that compels a parent to leave any of his or her property to an adult child. Nor is a poor parent-child relationship, in and of itself, evidence of a mental disability or a sign that the parent was not in his right mind when he excluded a child from his will.

Bad Relationship With Children is Not Evidence of “Delusion”

A recent California appeals court decision helps illustrate this point. This is an unpublished decision, so it is not considered binding precedent, but the case explains the law in this area. The case involves a 79-year-old man who died in 2011.

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A revocable living trust is a document appointing a trustee to assume custody of certain assets that you designate. You can serve as your own trustee during your lifetime. Upon your death, the successor trustee you name is then required to manage or dispose of the trust property as specified in the trust instrument.

San Diego Zoo Seeks Removal of Ineffective Trustee

Unfortunately, there are cases in which a trustee may fail to carry out the trust settlor’s instructions in a timely fashion. This, in turn, can lead to extended litigation. A recent case from here in San Diego presented such a scenario. This case is only an illustration and should not be construed as a complete statement of California law.

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