The administration of an estate includes not just distributing a person's property, but collecting any debts owed to the deceased. This is why it is important to make a will naming an executor who can act in your name after you are gone. The executor stands in your place and can take any legal action to collect what is owed to you—and, by extension, the designated beneficiaries of your estate.
Here is an illustration from a recent California case of a situation where an executor must act to protect a deceased individual's property interests. This case is discussed for information only and should not be taken as a statement of the law in California. The deceased in this case passed away in 2010. Sometime prior to his death, he and his wife divorced. In the course of divorce proceedings, the couple's marital residence was sold. The husband's share was deposited into a client trust account maintained by his divorce attorney. For some reason, the attorney never released the funds to his client.
After the man's death, his executor sought payment of the funds, totaling more than $300,000. The executor obtained a court order directing the attorney to pay over the funds and provide a full accounting of his trust account. The attorney did not comply. Instead, he filed for bankruptcy.
This created a significant hurdle for the estate's recovery. Bankruptcy is governed by federal, not California law. Once a person or business files a bankruptcy petition, a federal bankruptcy judge enters what is known as an automatic stay—an order preventing any creditor from pursuing further collection against the bankruptcy filer until the judge directs otherwise.
This led to more confusion. While the bankruptcy petition was still pending, the probate court held a hearing on the estate's motion to double the attorney's liability as punishment for failing to comply with the previous orders. Although the probate court granted this motion after the bankruptcy stay was lifted, a California appeals court later held this was inappropriate. The probate court had no authority to conduct further proceedings while the stay was in effect. The appeals court therefore negated the double-liability award.
Getting Your Own Affairs in Order
This case illustrates just one example of the type of legal problem an estate may face. It also emphasizes the importance of careful estate planning. A will enables you to designate the person you believe most capable of managing your affairs. If you do not make a will, you forfeit the ability to make that choice.
It is also critical to your estate planning to maintain a current accounting of any assets and debts you have, including moneys owed to you. Such an accounting will make it much easier for your executor to quickly get up-to-speed on the financial condition of your estate. There are too many cases where an estate must be initiated years after a person's death because some previously unknown debt or property was discovered and requires administration.
A qualified California estate planning attorney can advise you on all of these issues. If you have any questions, contact the Law Office of Scott C. Soady in San Diego today.