California Probate - Law Offices of Janet Brewer Blog

Will Contests and Probate Disputes: What You Need to Know

When figuring out how to distribute a deceased person’s estate, family members may raise will contests or probate disputes. Unfortunately, these conflicts increase the time to settle the estate. They also may create rifts between formerly close family members.

What Is a Will Contest?

As the name indicates, a will contest happens when one or more people raise a legal question about the deceased person’s will. Not liking the inheritances listed in the will does not create a valid reason for a will contest. Instead, the relatives or friends contesting the will must claim, for example:

• The deceased person did not have capacity at the time he or she made the will
• A later will supersedes the one at issue
• Someone had undue influence over the signer of the will
• An amendment or alteration to the will is valid or invalid
• Handwritten notations on the will are valid or invalid
• The deceased person did not follow legal formalities when making the will

Following legal formalities may come up in will contests when a deceased person used witnesses that have conflicts of interest, if there were no witnesses, if witnesses are deceased, or if other signature requirements were not met. When people make handwritten wills or do not use a lawyer, these mistakes may be more common.

What Is a Probate Dispute?

A will contest is a type of probate dispute. Probate disputes happen when a relative or friend of the deceased person has a legal basis for contesting distribution of the estate in the manner set forth by the will or by the court. They also may arise as to trusts or other legal structures that people use to distribute assets after their deaths.

During a probate dispute, distribution of the estate is put on hold. The person or people who believe that there is a dispute must argue their case before the court. An executor or administrator must represent the estate in the dispute, looking out for the deceased person’s interests and intent.

Once the judge reviews the law relating to the will contest or trust issue, he or she may make a decision right away, or the case may go to a hearing or trial. As soon as the dispute has been decided, the personal representative can continue distributing the estate. But the process can take months or years. For that reason, you may want to pursue mediation or private resolution of this kind of dispute. Talk to a trusts and estates lawyer for details.

Planning your estate? Look to Janet Brewer, Esq. for thorough and thoughtful probate and estate planning advice. Janet’s more than 20 years of legal experience will give you confidence and peace of mind. To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206.

What Are Executors and Personal Representatives in California?

When you get involved with distributing a relative or friend’s estate in California, you may not know the difference between an executor and a personal representative. Also, you may not understand what their roles are in estate distribution.

What Is an Executor?

Someone making a will to give away his or her assets after death should choose an executor. The executor takes care of gathering, valuing, and distributing all estate assets to heirs. He or she also pays off any debts of the deceased person. Many executors participate in the probate court process.

When an estate meets certain requirements, the family must present the will to a local probate court. The court verifies the will and appoints the executor named in it. If no executor is named, the judge will select one. If the executor named in the will has died, the judge will appoint the successor trustee who is named or select someone else.

What Is a Personal Representative?

The term personal representative refers to either an executor or administrator of a deceased person. Both of these people must be appointed by the probate court. Even if a will names an executor, the judge has the opportunity to name that person or choose someone else. Generally, the executor or administrator is a family member of the deceased person or someone in a trusted position (such as the deceased person’s lawyer or financial advisor).

When a person does not have a will or the court declares that the will is not valid, someone needs to manage and distribute the person’s estate. The judge appoints the administrator to carry out that process. An administrator has the same duties and responsibilities as an executor. The only exception is that there are no instructions in the will to follow when distributing assets. Instead, the administrator must follow the order of intestate succession. A surviving spouse and any children usually inherit first, followed by parents and more distant relatives.

If you have been named as a personal representative – executor or administrator – you may need legal help to carry out your duties. Talk to a local probate and estate lawyer for assistance.

Planning your estate? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning and probate advice. Janet’s more than 20 years of legal experience will give you confidence and peace of mind. To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206

Problems with Dual Ownership of Real Estate

When someone who owns real estate leaves it to two or more people, many problems can result. Even siblings or close relatives may disagree about what to do with the inheritance. Some simply may not want the hassle of owning real estate – especially with an unexpected co-owner. What should you do?

First Option: A Buyout

If you and a relative inherit a house, you probably each own half unless the giver stated otherwise in the will. The giver could specify ownership as a joint tenancy with right of survivorship or as tenants in common. When one co-owner does not want to keep the house, the other co-owner can choose to buy him or her out. This involves obtaining financing on only half the house’s value, getting an appraisal, transferring title, and paying any closing costs.

Second Option: Sale or Rental

If neither co-owner really wants to keep the house, you should consider sale or rental. Rental also could be an option if one co-owner wants to use it in the future (such as for a child’s housing when he or she gets older). Take into consideration the realtor costs if you are selling, and the property management costs if you are renting. Also consider the costs of future maintenance problems and regular upkeep. In either case, make a written agreement with the other co-owner specifying who receives what money and which tasks each person must perform.

Third Option: Private Dealings

If only one of you wants to sell but cannot afford financing, consider a private loan arrangement. Instead of an official bank loan, the co-owner who is keeping the house could make a loan to the other co-owner. If taking this route, write up a promissory note and consider including interest payments as well as a principal payment schedule.

Final Option: Partition

If you and the other co-owner truly cannot agree what to do with the house, you could file a request that the court partition the property. Partitioning means that the court orders sale of the house with proceeds divided among the co-owners. This process can be expensive and time-consuming – often far more than if co-owners simply agree to sell the house in the first place.

As you can see, many problems might arise if you and a relative inherit a piece of real estate. For more solutions, talk to an experienced estate planning attorney.

When a non-U.S. citizen co-owns real estate with a U.S. citizen – especially if the co-owners are spouses – many problems may result. For example, the non-citizen could end up owing a lot of money in estate taxes. Also, distribution of the non-citizen’s estate could be very complicated.

Estate Taxes and Real Estate with a Non-Citizen Co-Owner

Besides the difficulty of obtaining a mortgage, non-U.S. citizens usually have few problems owning United States real estate during their lifetimes. One big problem, though, can occur when the real estate is co-owned with a citizen and the citizen dies. If the non-citizen and citizen were married, the non-citizen likely will inherit the entire property. This could result in very expensive gift tax and/or estate tax liability due to the limited tax exclusions available for non-U.S. citizens.

Because of the all-too-common problems that arise when a non-citizen spouse inherits real estate, U.S. citizen spouses should consider forming QDOTs in their spouses’ favors. A qualified domestic trust maintains some of the tax benefits that a non-citizen spouse would enjoy if he or she was a citizen. The U.S. citizen spouse could even place his or her interest in the real estate into the QDOT trust.

Estate Disposition and Real Estate with a Non-Citizen Co-Owner

When a non-citizen co-owns real estate with citizens, the death of the non-citizen could cause a real estate headache for the other co-owners. In theory, the non-citizen would have made a will passing on his or her interest in the property to a specific person, making the transfer simple. But in practice, matters can be far from simple. The non-citizen may have citizenship in a country that requires expensive estate taxes even on U.S. real estate, or may have citizenship in a “forced heirship” country like France. Several different foreign heirs could now have co-ownership of the property along with U.S. co-owners. The new set of owners may disagree about what to do with the property.

This host of potential problems can be avoided if the non-citizen takes the time to do estate planning in the United States. Specifically, he or she should talk to an estate planning lawyer located in the state where the real estate stands and who is familiar with international issues.

Planning your estate? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience will give you confidence and peace of mind. To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206.

Creditor Access to Irrevocable Trusts in California

In California, creditors have limited access to irrevocable trusts because the trust creators cede all control of trust assets. But on rare occasions, the trust language could allow creditors to reach a beneficiary’s distributions from an irrevocable trust.

Can Creditors Reach a Settlor’s Assets in an Irrevocable Trust?

When a settlor creates an irrevocable trust and places assets in it, he or she gives up all control over the assets. The trust language specifies that the settlor cannot take assets out of the trust or make any other changes. Instead, the trustee takes legal title to the trust assets, managing them for the beneficiaries’ use in the future.

Because a settlor of an irrevocable trust no longer has any control over the trust assets, the settlor’s creditors cannot reach the assets in most situations. If the settlor dies, the trust assets are not considered part of the probate estate (and may not count for estate tax liability if transferred long before the settlor’s death). If the settlor goes into bankruptcy, creditors probably won’t be able to access the trust assets to pay off debts.

Can Creditors Reach a Beneficiary’s Interest in an Irrevocable Trust?

Often, creditors cannot reach a beneficiary’s interest in an irrevocable trust – however, one recent case in California created a narrow exception to this rule. Carmack v. Frealy, 2017 WL 1090497 (Cal. March 23, 2017). In the case, the beneficiary of a “spendthrift” irrevocable trust declared bankruptcy. At the time, he was entitled to several mandatory distributions from the trust principal (not just the interest) that the trustee had not yet paid. 

The court had to decide whether the beneficiary had to give up his trust distributions to the bankruptcy creditors, and if so, how much of the distributions he had to give up. After examining relevant California law, the court determined that because some of the distributions had “vested” – in other words, the trustee was required to pay them to the beneficiary and in fact already should have done so – the distributions were effectively the beneficiary’s property and thus 100% available to creditors. For future distributions, the creditors could access 25% of them with the exclusion of payments made for the beneficiary’s support.

As you can see, beneficiaries may not want to pay such large proportions of their trust income to creditors. The trust language can affect creditor access. If the trust in this case had been purely discretionary, the trustee could simply have not made any distributions, and nothing would be available to creditors.

Planning your estate? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience will give you confidence and peace of mind. To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206.

Can an Estate Plan Help Protect Assets from Creditors?

If you have debts like many Americans, you may benefit from an estate plan that helps you protect assets from creditors. While it is difficult to fully shield all assets from creditors during your lifetime, a suitable estate plan could save your estate money in the long run.

How Could Creditors Access Your Estate Assets?

The most common way that creditors access assets in a debtor’s estate is by making claims during the probate process. When an estate is probated, the executor must issue notices to inform creditors of the debtor’s death and the opening of probate. Creditors then have the option of making a claim to attempt to recover the debts. Anyone who makes a creditor claim has priority in getting paid before inheriting relatives would. If an estate does not contain enough money to pay both creditors and relatives, then the relatives receive nothing. If there is not enough money to pay all creditors, then the debts get paid off in part.

As you can see, the probate process is not ideal for people with significant debts. Their estates could get reduced by creditor payouts to the point that relatives inherit nothing. With a few estate planning techniques, though, you can reduce the risk of creditor demands diminishing estate assets.

Estate Planning Techniques for People in Debt

People in serious debt have a few options when it comes to preserving their estates. For example, some choose to move assets into a trust that creditors cannot touch. In California, an irrevocable trust removes the assets from the debtor’s probate estate. As a result, creditors cannot make a claim against those assets during the probate process (with some limited exceptions). 

Other people choose to give away assets during their lifetimes to relatives, to ensure that the relatives receive inheritances without losing them to creditors during probate. Making lifetime gifts can have gift and estate tax consequences, though, so talk to a lawyer before you take this route.

Additional options for people with potential creditors include funding business entities with assets, planning for the costs of probate and taxes, and working to pay off debts now. There are many laws surrounding creditor access to the assets of a deceased or living debtor, so getting legal advice concerning your plans is always a good idea. Your lawyer may suggest even more options that you can use if you are worried about debts weighing down your estate.

Planning your estate? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience will give you confidence and peace of mind. To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206.

What Could Go Wrong If You Prepare Your Own Will?

If you are thinking about preparing your own will, you may not realize how many things could go wrong along the way. Learn more about the consequences of making a mistake in your will and why getting legal help is a better option.

An Incorrectly Prepared Will May Not Be a Binding Legal Document

When you sign a correctly prepared will, it is a binding legal document. The courts and your chosen executor have to follow your words when distributing your estate. If, however, your will is not legally binding, no one will have to obey your wishes listed in the document. Wills may not be legally binding for many reasons, including:

• Ambiguities in the wording
• Missing important language
• Handwritten notations over the typed text
• The signer lacked capacity to make a will
• Signature and witness formalities were not followed
• A later will supersedes the first one

As you can see, many things could go wrong if you decide to handwrite or type your own will at home. In addition, each state in the United States has slightly different laws regarding wills. Without focused legal knowledge shared by your estate planning lawyer, you could make an innocent mistake that has a major effect on your estate.

Your Life Circumstances Could Affect the Wording and Content of Your Will

Many people do not realize that wills are not one-size-fits-all. Different life circumstances and choice of estate distribution can require special language in a will or even additional estate planning structures. Some primary factors that may change your estate planning needs include whether your estate is large enough to potentially owe estate taxes, whether you or your relatives are U.S. citizens, if you have a relative with special needs who could inherit, which types of assets you own, and more.

Working with an estate planning attorney will ensure that you address your individual life circumstances in your estate plan, including your will. Handwriting a will at home or printing a form will off the Internet simply do not provide you with the knowledge you need to optimize your estate planning.

Planning your estate? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience will give you confidence and peace of mind. To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206.