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Taking Proper Inventory of a Probate Estate

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.

This particular case is complicated in that it involves multiple estates from members of the same family. The first estate involves a grandfather who died several decades ago. His will established a trust to assume ownership of his 50% in the community property held together with his wife (the grandmother). The grandmother served as trustee, and upon her death, the trust assets were to be equally divided between the couple’s six children.

In the course of administering the trust, the grandmother sued one of her granddaughters, accusing her of fraud and undue influence against the trust. This lawsuit resulted in a settlement of $8.5 million. The grandmother decided to keep most of this money for herself, rather than place it back into the trust.

After the grandmother’s death in 2005, some of the six children decided to sue their mother’s estate, arguing her mis-allocation of the first lawsuit’s proceeds deprived them of their full inheritance under the terms of their father’s trust. With the permission of a California probate court judge, the successor trustee of the trust subsequently assigned to each of the trust beneficiaries the right to pursue the lawsuit against the grandmother’s estate.

Three days after the trustee made this assignment, one of the six children, a daughter, passed away. The lawsuit proceeded against the mother’s estate and resulted in a judgment of over $8 million. Under the assignment, each child would receive a prorated one-sixth share. In other words, each surviving child would receive a one-sixth share, and a one-sixth share would also be divided among the heirs of any deceased children.

When the administrator of the deceased daughter (who was also the decedent’s brother) filed an inventory for the estate, he did not list her one-sixth share of the judgment against the grandmother’s estate. The administrator subsequently claimed the decedent had “waived” her interest in the lawsuit proceeds just before her death. The only evidence presented in support of this claim was a statement from the daughter’s attorney, who said she told him that she was not in favor of the lawsuit and did not wish to share in any proceeds.

In a June 17 decision, the California Fifth District Court of Appeals, reversing a lower court’s judgment, held the attorney’s statement, taken by itself, was insufficient proof of the daughter’s decision to irrevocably waive her property rights in the proceeds of the lawsuit. Typically a waiver is made in writing and clearly manifests a person’s intent. Here, in contrast, the court found the attorney’s “conclusory declaration” about what his client may have wanted was not clear enough.

Need Advice From a California Estate Planning Attorney?

When it comes to estate planning, it is always important to be as clear as possible about your intentions and—whenever possible—to express those intentions in writing. If you have any questions or concerns, you should speak with a San Diego estate planning lawyer as soon as possible. Contact the Law Office of Scott C. Soady to speak with a qualified attorney today.

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