Articles Posted in PROBATE

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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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Estate planning for married couples in California often involves making a clear distinction between community and separate property. Community property generally refers to any asset acquired by either spouse during the course of the marriage. Under California law, when one spouse dies, half of the community property automatically goes to the surviving spouse, while the other half is distributed according to the terms of the deceased spouse’s estate plan (or if there is no applicable plan, according to California’s intestate succession laws).

Wife’s Separate Property Not “Re-Transmuted” to Community Property

Any confusion or disagreement over whether a particular asset is community property should be resolved before one spouse dies. Otherwise there may be litigation over who actually owns the asset. Here is a recent example from Orange County.

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When a person dies, some or all of their property is disposed of through a legal process known as probate. If the deceased left a valid last will and testament, that document appoints a person to oversee the probate estate—a personal representative—and names one or more beneficiaries to receive any property. In some cases there may be little or no property in the probate estate, particularly if the deceased created a separate revocable living trust, an entity that is not subject to probate.

The Basics of Opening and Administering a Probate Estate

In California, the person who has custody of a deceased individual’s will must either send the document to the named personal representative or bring it to the probate court clerk’s office in the county where the deceased lived at the time of his or her death. An interested party, such as the personal representative or one of the beneficiaries, must then file a petition for probate with the court. If the deceased failed to leave a will for some reason, a petition should still be filed, and the court will name an administrator to manage any probate estate.

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Administering a California probate estate is often a time-consuming affair. The personal representative (or executor) of your estate is responsible for gathering and maintaining all of your assets, paying any legitimate creditor claims, and ultimately ensuring all property is distributed according to the terms of your last will and testament. Depending on the size and complexity of your estate, the personal representative may end up spending up hundreds of yours settling your affairs.

How California Sets Compensation Levels

For this reason, California law recognizes the personal representative’s right to receive compensation for his or her services. The maximum allowable compensation for “ordinary services” is determined as a percentage of the total value of the estate. For estates valued at $100,000 or below, the personal representative’s compensation cannot exceed 4%. This means that, for instance, if you leave a probate estate worth $80,000, your personal representative cannot receive more than $3,200 in compensation.

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Elder abuse remains a major problem in California estate planning. Relatives, caregivers, and other parties often exploit their relationship with someone who is ill or dying in order to obtain an inheritance from their estate. Such undue influence is against the law, and an interested party may ask a probate court to nullify any provision in a will or trust that benefits the abuser.

Court Holds Disclaimer Does Not End Elder Abuse Petition

A California appeals court in Santa Clara recently emphasized the public policy importance of discouraging elder abuse in a recent decision involving an ongoing contest to a revocable living trust. The trust was originally created by a married couple in 1990. Upon the wife’s death, the trust was subdivided into two trusts, one of which remained subject to amendment or revocation at the husband’s discretion.

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A revocable living trust is a useful estate planning tool when you want to make provisions for your family members beyond your death. A trust need not distribute all of its assets upon your death. You may instruct your trustee to retain the trust principal and distribute only the income at periodic intervals to your designated beneficiaries. This can ensure your beneficiaries receive a steady stream of income for many years.

Ex-Wife Continues to Collect From Late Father-in-Law’s Trust

It is important to be as specific as possible when spelling out the conditions for any income distributions under a revocable living trust. A recent California probate case offers a useful cautionary example. In this case, a man created a revocable living trust in 1977 just before he died. The trust became irrevocable on his death and remains in force today.

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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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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.