Articles Posted in PROBATE

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A legal separation or divorce can have a profound effect on your estate planning. Under the California Probate Code, a “surviving spouse” has no inheritance rights if there is an “order purporting to terminate all marital or registered domestic partnership property rights.” Put another way, if you die without leaving a will, and you are legally separated from your spouse at the time of your death, he or she will not inherit under California intestacy law.

Court Rules Probate Code Language Does Not Apply to County Pensions

The Probate Code does not cover all property issues that may arise after you die. Many retirement and pension plans are governed by separate laws that allow you to designate a beneficiary independent from the provisions of your will or trust. A divorce or legal separation may not necessarily affect such designations.

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Doing business with family members is always complicated. It can get even more complicated if one family member dies before a business transaction is completed. Most of us are understandably reluctant to push a legal matter, even one involving estate planning, when a relative is ill or possibly dying. Unfortunately, California judges cannot allow whatever sympathy they might feel for the family to override the law.

Sister Waits Too Long After Brother’s Death to Enforce Contract

Consider this recent case from right here in San Diego. A woman and her husband entered into a real estate deal with her late brother. The brother was in the business of “flipping” properties. The sister and brother-in-law were looking to buy a house for themselves.

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There was a time when only legitimate children–i.e., children born to a lawfully married couple–could inherit property from a parent. Modern law in California and most states have largely eliminated the distinction between legitimate and illegitimate children, but it can still be an issue in some probate situations.

For example, a court in the Canadian province of Ontario recently denied a man a share of his late grandmother’s estate because he was born out of wedlock. The grandmother’s will, which she signed in 1977, left shares to each of her “children” or their descendants. Ontario law at the time defined “children” as only including those born in wedlock. Ironically, Ontario changed the law in 1978 to include illegitimate children, but the court in this case said that did not apply to pre-1978 wills.

Establishing Paternity When There is No Will

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If you die without a will, California’s intestacy law dictates how your estate must be distributed. For example, if you are married at the time of your death, your spouse is entitled to a certain share of your property under intestacy. But if you are legally separated when you die, then your spouse does not inherit.

Living Apart Does Not Necessarily Prove the Marriage is Over

What does “legally separated” actually mean? Is it enough if you and your spouse are living in different homes? A California appeals court recently addressed this question in the context of a tragic case from Los Angeles.

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Not every California estate has to go through a formal probate administration. If you do careful estate planning and transfer all of your personal assets into a living trust, for example, you can ideally leave no probate estate at all. But even if you do not have a trust, if you leave a California estate worth $150,000 or less, your heirs can use a simplified affidavit process to transfer certain personal property without going to court.

Court Penalizes Stepdaughter for “Fraudulent” Affidavit

The affidavit process only applies to personal property such as bank accounts and stocks, and not real estate, like your house. The person who has the legal right to inherit the property must file the affidavit after your death. If you have a will, that means the beneficiaries you named to inherit your property. If you do not leave a will–i.e., you die intestate–then your heirs under California law have the right to file the affidavit.

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A person is free to dispose of property as he or she wishes by making a will. There are cases in which a person may enter into a written contract to make certain provisions in their will in exchange for certain considerations. For example, a father may promise to make a will leaving his house to his daughter. In exchange, the daughter agrees to move in with her father and take care of him in his final years.

Court Rejects Breach of Contract Claim Due to Late Filing

When there is an offer, acceptance, and consideration, a contract to make a will is legally binding in California. This means if the person who promises to make the will fails to do so before he or she dies, the other party may have grounds to file a breach of contract lawsuit. Under California law, such lawsuits must be filed within one year of the decedent’s death.

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Many Californians are self-employed or own their own small business. If you are among this group, it is important to make appropriate provisions in your estate planning, especially if you have partners, employees, or family members who need to continue the business after your death. The type of planning required will depend on the specific legal structure of your business.

Sole Proprietorships

A sole proprietor is anyone who is self-employed and does not incorporate his or her business. This can include anything from a work-at-home consultant to someone who operates a retail store with multiple employees. Basically, if you file a Schedule C with your federal tax return and you do not have any partners, you are a sole proprietor.

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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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