How Debt is Deducted From the Estate

Dear Len & Rosie,

I have a 91-year-old mother and five siblings. My oldest brother has borrowed money from my mother on a few occasions and has stated that he has no intention of ever paying her back. There is no documentation on the loans and as executor of my mother’s will I need to know how to assure this debt is deducted from his share of the estate. The second issue is the same brother has a judgment against him for back child support. At the time he went to court for the back child support he put his house and assets in his son from his second wife’s name so now he shows no assets. I believe he is collecting Social Security as well. If and when our mother passes away  how can I assure that his debt to his ex-wife will be repaid or will he try to give his share to his second wife’s children.

Steven

Dear Steven,

When your mother passes and you become executor of her will or the successor trustee of her trust, you’ll have to follow the rules. You can’t simply deduct money from your brother’s share just to make it fair. A gift made by a parent to a child doesn’t count as an advancement against that child’s inheritance unless there is good evidence that this was your mother’s intention when she made the gift.

And if it’s been more than two years since your brother said he wouldn’t ever pay back the loans, it’s too late to sue him for a breach of contract. But it’s not too late. If your mother hasn’t lost the ability to make decisions, and if she’s willing, she should see an attorney to update her estate plan and spell out exactly how much money she wants deducted from her oldest son’s share to make up for what she gave him over the years.

Keep in mind that it’s your mother’s choice, not yours. The only definition of what’s fair that applies here is the one in her mind and in her heart. She may be unwilling to reduce her son’s inheritance. Some children just need more help than others. Also, if your mother decides to reduce your brother’s share, she should see the attorney alone, without you being there. Otherwise, you may be accused of undue influence and your mother’s updated estate plan may be invalidated.

As for your brother’s child support arrearage, most wills and trusts include a “spendthrift” clause that prohibits beneficiaries from assigning their interest in the trust or estate to anyone else, either voluntarily or involuntarily. These spendthrift clauses have the effect of protecting a beneficiary’s inheritance from creditor claims.

It seems completely unfair to parents owed child support that a spendthrift clause can prevent them from collecting on a child support claim. Fortunately, the courts agreed and voided spendthrift clauses against child support claims, and the Legislature also enacted California Probate Code section 15305 to cement the deal. As long as your brother’s ex-wife properly files a claim against your mother’s probate estate or trust before the money is distributed to your brother, she’ll get paid first out of his share.

Len & Rosie

Father's wife is hiding his will

Dear Len & Rosie,

My father died three weeks ago. He spent a lifetime saving money. He was married three times and had four children. He was also married to his third wife when he died. She says there is a will (although I think that there may be a trust) but she will not give me any information at all until she has a lawyer read it and explain it to her. She says she did not like the lawyer who prepared these original documents for my father. I’m worried about her stealing my inheritance.

Sally

If your father died with a will, and his third wife has it, she can’t keep it to herself. Probate Code section 8200 requires her to either file for probate or deliver the original will to the Superior Court in the county where your father resided on his death. If she’s not named as executor, she also has to mail a copy to the person named as executor in the will. She has thirty days from your father’s death to do this. If she doesn’t, you could petition the court to order her to cough up the will.

If there is a trust, it’s different. The successor trustee, whoever that is, is supposed to notify all of the beneficiaries and your father’s natural heirs (his children) of the existence of the trust within sixty days of his death under Probate Code section 16061.7. The notice also informs you of your right to a copy of the trust document. This only applies, however, if the trust became irrevocable as a result of your father’s death. If he and Wife #3 made a trust together that gave her the right to amend or revoke it after his death, then she’s not obligated to give you a copy.

It is important for you to understand that regardless of what your father’s will or trust says, his wife will inherit anything he owns in joint tenancy with her, and any accounts for which he named her as a beneficiary.

So what do you do now? First, get some information. You can obtain a copy of the current vesting deed (the last recorded deed in the chain of title) to your father’s home from either the County Recorder in the county where the property is located, or from a title insurance company. If there’s a trust, the deed should show that the property is in his name, or in his and his wife’s names, as trustees of the trust. If the deed is in joint tenancy with her, then it’s her home and there’s probably nothing you can do about it.

If the home is in your father’s name alone, then it’s subject to probate, which is good news for you, because your stepmother can’t transfer title without a court order, and you’re entitled to notice of any probate or spousal property petition she files in the probate court.

If another month passes, and she still won’t tell you anything, see a lawyer and have him or her write a vaguely threatening letter spelling out her responsibilities. It’s likely to be enough to get her into the office of an attorney who can make sure she does everything right.

Len & Rosie