Starting probate as a creditor

I have a new case where the decedent’s son contacted me about starting a probate. He wasn’t quite ready as he had other things going on in life. Well, last week he called, in a panic, because one of his mom’s creditors had started probate! That’s right. A creditor, in a California probate, can start the probate process for you whether you like it or not.

In most probate cases it’s better to be in control. There are a variety of reasons for that which is beyond the scope of this post. However, trust me, control is good in probate!

With a creditor’s claim you lose your leverage to negotiate. Think about it. If a creditor is in the driver’s seat it’s a lot harder to suggest they take a haircut on their claim. Plus there are likely going to be added costs.

We can salvage the situation by paying the creditor and then filing our probate case. The creditor has been pretty easy to work with to clean it up but still… why get to this position?

Don’t let this happen to you. Start your probate before someone does it for you.

Oh ya, guess how much the creditor’s claim was for? Only $6,000. That’s right they started probate over a $6,000 creditors claim. Don’t let this happen to your probate case!

Share/Bookmark

Sacramento Probate Court Continuances

I pride myself on rarely having to seek continuances in probate court. That is, I try to be prepared and take care of my business BEFORE the court date so as to avoid continuances. Historically continuances, in Sacramento county, have been 4 weeks out.  I am speaking of the Sacramento probate court when I say Sacramento county. Each county is a little different of course but the trend is being seen in most counties of California as I work throughout the state.

The last year, or so, it’s been moving toward 6-8 weeks at times in Sacramento. Today, I had to ask for a continuance in a case as there are some heirs who want more information. The court date is too close (next week) and thus a continuance was agreed to so we could answer all of their questions. Ok fine but guess what… the case just got delayed THREE MONTHS.

Yes, the next available continuance day after the January 8, 2014 hearing is April 8, 2014. Let me repeat… THREE MONTHS!

As I have stated before if you do a probate case yourself or hire an inexperienced attorney you face an increased risk of a continuance. If a continuance is three months that means your case will be at least 3 months longer than it need be. Plus, it can happen again, and again, and again….  Before you know it your probate case takes a year longer than it should. Forget the rest and hire the best from day one!

 

 

Does a legal separation cut off inheritance rights

A prospective client asked me this question the other day and I said I didn’t know the answer off hand. Sort of funny that I didn’t know as I have been doing this since 1994. That is, I have focused my law practice on estate planning, trust and probate law for all these years. During that time I have been asked some pretty arcane questions so you would think a straightforward question would be easier to answer. Not always….

The first question is will or no will!?

That is, if a person has a will and there marriage ends by divorce any provision to the ex-spouse is nullified by the divorce. That is, the ex gets nothing just like most people would want.  See California probate code section 6122 below.  In particular look at section (d). It very clearly indicates that the key is to look at the legal separation paperwork.  See California state form FL-100. This is the petition for dissolution OR legal separation.

Also, look at probate code 78 (pasted below). It defines “surviving spouse” (the key component in many inheritance laws) and clearly does NOT specify legal separation.

I thus conclude a legally separated individual CAN inherit from their “ex” spouse after death!

Good luck to you!  -John

California Probate Code 6122. (a) Unless the will expressly provides otherwise, if after executing a will the testator’s marriage is dissolved or annulled, the dissolution or annulment revokes all of the following:
(1) Any disposition or appointment of property made by the will to
the former spouse.
(2) Any provision of the will conferring a general or special
power of appointment on the former spouse.
(3) Any provision of the will nominating the former spouse as
executor, trustee, conservator, or guardian.
(b) If any disposition or other provision of a will is revoked
solely by this section, it is revived by the testator’s remarriage to
the former spouse.
(c) In case of revocation by dissolution or annulment:
(1) Property prevented from passing to a former spouse because of
the revocation passes as if the former spouse failed to survive the
testator.
(2) Other provisions of the will conferring some power or office
on the former spouse shall be interpreted as if the former spouse
failed to survive the testator.
(d) For purposes of this section, dissolution or annulment means
any dissolution or annulment which would exclude the spouse as a
surviving spouse within the meaning of Section 78. A decree of legal
separation which does not terminate the status of husband and wife is not a dissolution for purposes of this section.
(e) Except as provided in Section 6122.1, no change of
circumstances other than as described in this section revokes a will.
(f) Subdivisions (a) to (d), inclusive, do not apply to any case
where the final judgment of dissolution or annulment of marriage
occurs before January 1, 1985. That case is governed by the law in
effect prior to January 1, 1985.

 

California Probate Code 78. “Surviving spouse” does not include any of the following:
(a) A person whose marriage to the decedent has been dissolved or
annulled, unless, by virtue of a subsequent marriage, the person is
married to the decedent at the time of death.
(b) A person who obtains or consents to a final decree or judgment
of dissolution of marriage from the decedent or a final decree or
judgment of annulment of their marriage, which decree or judgment is
not recognized as valid in this state, unless they (1) subsequently
participate in a marriage ceremony purporting to marry each to the
other or (2) subsequently live together as husband and wife.
(c) A person who, following a decree or judgment of dissolution or
annulment of marriage obtained by the decedent, participates in a
marriage ceremony with a third person.
(d) A person who was a party to a valid proceeding concluded by an
order purporting to terminate all marital property rights.

What can I expect at my upcoming probate Court date?

INTRODUCTION

I get asked this question a lot.  ”What can I expect at my upcoming probate Court date?”  Or, “how soon after my Court date will I have letters testamentary?”  Or even, “do I need to be at my Court date?”

COURT ATTENDANCE

Let me start with the last one… NO. Generally speaking there is no need for you to be at the probate Court hearing. The only exception is if the matter might be contested. In those cases your appearance is a good idea if you are local… or you can “appear” telephonically if you are far away.

IMMEDIATELY AFTER THE HEARING

In some counties they process the court documents right away. In those courts we can get the documents the same day.  Others take a month to process. You just don’t know as each court is different and most courts are not consistent.

FLY ON OUT?

Clients ask if they should fly out right after the Court date to start taking care of business.  Based on the above inconsistency I encourage clients, from out of state, to not fly in until we have the documents in hand.

CONCLUSION

Be alert and aware of your court date but be patient. Unfortunately no matter how prepared your attorney is delays can happen. The chance of delays is reduced when hiring an experienced and organized attorney but things happen!

The Issue of the predeceased spouse

INTRODUCTION

A little known area of California probate law relates to the issue of predeceased spouse. That is, the children of the first spouse to die. In some cases they have an interest when the second spouse, their “step-parent,” dies. This post is loosely based on a real case but, of course, the facts changed to protect the privacy.

FACTS

My client’s mom died in 2012. Mom died with no will. She had 2 children. Mom had been married to step-dad for about 15 years. They owned a home together among other things.  Step-dad just died. He has no children but has some other relatives.

THE LAW

It’s a little known law that in some cases the children of a predeceased spouse actually receive something from the probate estate when the second spouse dies with no will (i.e. intestate succession).  You start the analysis with California probate code 6402 which provides, in part,

“6402. Except as provided in Section 6402.5, the part of the
intestate estate not passing to the surviving spouse or surviving
domestic partner, as defined in subdivision (b) of Section 37, under
Section 6401, or the entire intestate estate if there is no surviving
spouse or domestic partner, passes as follows:
(a) To the issue of the decedent, the issue taking equally if they
are all of the same degree of kinship to the decedent, but if of
unequal degree those of more remote degree take in the manner
provided in Section 240.
(b) If there is no surviving issue, to the decedent’s parent or
parents equally….”

Notice it says “EXCEPT AS PROVIDED IN SECTION 6402.5…” What does 6402.5 say? It provides as follows:

“6402.5. (a) For purposes of distributing real property under this
section if the decedent had a predeceased spouse who died not more
than 15 years before the decedent and there is no surviving spouse or
issue of the decedent, the portion of the decedent’s estate
attributable to the decedent’s predeceased spouse passes as follows:
(1) If the decedent is survived by issue of the predeceased
spouse, to the surviving issue of the predeceased spouse; if they are
all of the same degree of kinship to the predeceased spouse they
take equally, but if of unequal degree those of more remote degree
take in the manner provided in Section 240….”

MECHANICS

Ok, so this appears to give the children of the first spouse a 1/2 interest in step-dad’s estate. However, how does this get done? What happens? Well, that’s where having a lawyer comes in handy!  A lawyer can help to protect the rights of the issue of the predeceased spouse. The attorney can make sure that the family of the step-dad do things right!

CONCLUSION

Hire an attorney to monitor a probate. An experienced probate attorney can protect your interests!

 

Pretermitted Spouse in California

INTRODUCTION

The #1 reason why you should review your estate plan when you get re-married is to avoid the pretermitted spouse problem.

GENERALLY

California law, at probate code section 21610-21612, (which I will paste below for easy reference) presumes that a person wants to provide for later born children and/or later married spouses. It’s just fundamental black letter law in California and most states.  This is because the majority of people do not prepare an estate plan.  So, the California legislature jumped in with this law.  Today we will focus on the pretermitted spouses.  In a former blog post I spoke about the pretermitted child issue.

HOW IT WORKS

If a person prepares his or her last will or trust AND THEN MARRIES these laws kick in.  If this happens the new spouse is a “pretermitted spouse” and is entitled to a set percentage of the estate BY LAW. If the decedent has no kids then the spouse gets 100% of the assets. If one child the spouse gets 50%. If two or more children the spouse gets 33.3%. Basically, it works in conjunction with the laws of intestacy (i.e. a person dying with no will or trust).

IN REAL LIFE

Let’s look at a real life hypothetical.  Let’s say the decedent creates a trust in 2008. At that time he is single with two kids. Let’s say he has $145k in assets in the name of the trust. Then in 2009 he gets remarried. Let’s assume he does not amend his trust after marriage.  At the decedent’s death his wife is entitled to a statutory share of this trust.  In this case the spouse would be entitled to 1/3 and the other 2/3 would be given away by the trust.

The above assumes the trust can be found. What if the trust can not be found?  Obviously this creates a huge other issue from the standard pretermitted spouse case. First question is if the trust language can be established?  Can the drafting attorney be found? If so, even if he doesn’t have a copy of the trust he can testify from his file notes and/or recollection. That is, to help establish the terms of the trust and how the 2/3rd to the family should be distributed and who should be the trustee.

However, if the drafting attorney can not be found then the 2/3rd would be distributed by the laws of intestacy.  In this case each of the two children would receive 1/3 of the total.  So, in conclusion the spouse and each kid would each receive approximately $50,000.

CONCLUSION

If you get re-married go meet with your attorney immediately to review your estate plan!

 

 

CALIFORNIA PROBATE CODE SECTION 21610-21612

21610. Except as provided in Section 21611, if a decedent fails to
provide in a testamentary instrument for the decedent’s surviving
spouse who married the decedent after the execution of all of the
decedent’s testamentary instruments, the omitted spouse shall receive
a share in the decedent’s estate, consisting of the following
property in said estate:
(a) The one-half of the community property that belongs to the
decedent under Section 100.
(b) The one-half of the quasi-community property that belongs to
the decedent under Section 101.
(c) A share of the separate property of the decedent equal in
value to that which the spouse would have received if the decedent
had died without having executed a testamentary instrument, but in no
event is the share to be more than one-half the value of the
separate property in the estate.

 

21611. The spouse shall not receive a share of the estate under
Section 21610 if any of the following is established:
(a) The decedent’s failure to provide for the spouse in the
decedent’s testamentary instruments was intentional and that
intention appears from the testamentary instruments.
(b) The decedent provided for the spouse by transfer outside of
the estate passing by the decedent’s testamentary instruments and the
intention that the transfer be in lieu of a provision in said
instruments is shown by statements of the decedent or from the amount
of the transfer or by other evidence.
(c) The spouse made a valid agreement waiving the right to share
in the decedent’s estate.
21612. (a) Except as provided in subdivision (b), in satisfying a
share provided by this chapter:
(1) The share will first be taken from the decedent’s estate not
disposed of by will or trust, if any.
(2) If that is not sufficient, so much as may be necessary to
satisfy the share shall be taken from all beneficiaries of decedent’s
testamentary instruments in proportion to the value they may
respectively receive. The proportion of each beneficiary’s share that
may be taken pursuant to this subdivision shall be determined based
on values as of the date of the decedent’s death.
(b) If the obvious intention of the decedent in relation to some
specific gift or devise or other provision of a testamentary
instrument would be defeated by the application of subdivision (a),
the specific devise or gift or provision may be exempted from the
apportionment under subdivision (a), and a different apportionment,
consistent with the intention of the decedent, may be adopted.

 

 

Lost Money Resources for Life Insurance

Many people know that you can search for lost money on the California Secretary of State website as well as similar sites in most every other state in the union. Also, foundmoney.com is another great resource.

Lost money, found money, unclaimed property, or whatever you want to call it. They are ASSETS that should be in your trust or estate if you are administering one after death.

There are also resources for finding old life insurance policies. Here are a couple of key ones:

New York has a free service which searches all New York life insurance companies. Since many companies are housed there this is a great resource. It can be found here on this link.

Another great one, that currently costs $75, is at MIB.com.  They have a policy locator services for probate and trust cases. This is a great resource and well worth the $75 if you think your loved one took out a policy since 1996. The direct link is here.

Of course there are other services on the internet and this is just a start. You can also hire private investigators to really dig in to the search. Whatever you do I encourage you to not just watch. Get active and find that lost money!

-John Palley

Probate HORROR stories

The latest buzz amongst seminar givers, article writers and cocktail party know-it-alls, related to estate planning, is why you do not need a living trust. Or at least that is how many people hear it! With the tax changes of 2013 each of us can now give away up to $5million when we die without tax. Congress and the President called it a “permanent” change but by mid-April we are already talking about lowering the exemption. Though our house prices have gone up substantially, or we may have hit a homerun with a certain dot com stock, not too many of us will have $5million to give away when we die. The mistake that many people make is that they do not need a living trust, or even want to revoke the one they have, because they “only” have $400,000 in assets. This is a big mistake because the federal estate tax exemption has absolutely nothing to do with the California probate laws! I encourage you to talk to a qualified estate planning attorney before you decide if you really do not need that living trust!

I write this article as an attorney with a substantial amount of experience writing trusts, administering trusts after death and helping families through probate Court when their loved ones did not have a trust. Helping family members administer a trust after death is substantially easier and less costly than going through the Probate Court. A trip to the probate Court is generally required after death, in California, if total assets exceed $150,000.

Do you know what the financial cost of “going through probate” is? A $400,000 estate would generate a $11,000 attorneys fee, about $1,200 in Court costs and a $11,000 Executor’s fee. Yes, almost $25,000 to collect, divide and distribute your estate after you die! As the fees and costs are based on a percentage of the total assets these numbers go up as the size of your estate goes up! Interestingly the total estate size is based on the gross value of your assets and not the net and thus a house with a huge mortgage is valued at the fair market value and not the smaller net equity value! As a probate attorney I can assure you I love the attorney fee structures of probates!

Do you know how long a probate takes? Assuming we are able to meet every deadline, to the day, a probate can be completed in 7 months in most counties in California. However, any little hiccup and your probate will take 8, 9, 10 months… and in rare cases a year or two! I am working on one probate right now where the husband died in 1996 and we are still not quite finished with the probate for a variety of reasons! The probate attorney can help move things along but the Executor can stall things in a major way!

Yes, the fees and time delay of a standard probate are great. However, do you know what happens if you own real estate in another state. Most people claim they do not own real estate in another state but how many of you own a timeshare in Hawaii, a cabin in Tahoe or oil rights in Oklahoma? I encounter clients all the time with one of these “assets.” They are often not worth a lot but if not properly included in a trust it is likely your Executor will need to hire another probate attorney in that other state to help move the asset to your heirs. I recently worked with a client with timeshares in Hawaii, Nevada and Mexico. Additionally, they had oil rights in Oklahoma and Texas. Lastly, of course, was their house and everyday assets in California. The total value of the assets was $500,000. Due to the need for attorneys in multiple states the costs and fees were $40,000 and it took almost two years to get everything into the kid’s names! Not a “wealthy” person by some definitions but probate attorneys everywhere benefited from their lack of planning.

What about the first death between a husband and a wife, do you know what can happen there? Could your estate end up in probate? There is a common misconception that all assets owned by husband’s and wives belong to the other, automatically, at death. This can be the case but is not an automatic rule. Additionally, it is rare that a husband and wife, especially in a second marriage, successfully get all their assets into both of their names. Last year I was retained by a woman whose husband of five years had died. He had children from a first marriage, real estate in his name, a business in his name, lots of debt and of course no living trust! In addition to the costs and delays of probate this new widow had to fight with her husband’s sister about the widow’s interest in the family business, file a lawsuit to divide real estate her husband owned with a friend of theirs and fight with a large life insurance company over a life insurance policy that her husband had forgotten to change the beneficiary on. The mental drain was far worse than the financial drain though the financial cost was substantial!

Just because your estate might be below the $1.5million federal estate tax exemption level does not need you do need a trust. The costs and delays of probate are very real and have no connection to the estate tax exemption levels. All of the above can be avoided with a properly drafted and funded living trust. You can avoid the huge costs and delays of a standard probate, you can avoid any disputes at the death of either spouse and you can avoid the need for multiple attorneys if you happen to own assets in other states or countries. A living trust can save your family many thousands of dollars, avoid any delays and make sure your assets are distributed exactly as you desire! Do not let your family become the focus of an article like this… call a qualified estate planning attorney and get your living trust put together today!