Estate planning includes not just how to dispose of your assets, but also how to deal with any creditors you may still owe money to after your death. This includes lawsuits which may be pending or occur as a result of your death. In some cases, even if you leave no assets as part of your probate estate, an estate must still be opened in order to address such litigation.
Estate of DeMotto
Here is a recent example which is discussed only as an illustration and should not be taken as a correct statement of the law. A man died in 2013. The man was living with a woman-not his wife-at the time of his death. Their relationship began in 2001. Although the woman claimed he intended to provide for her in his estate planning, he did not name her as a beneficiary of his will or trust.
The probate estate itself had no assets, presumably because the man transferred all of his property into the trust. The woman then filed what is known in California as a “Marvin action” against the estate. A Marvin action refers to a 1976 California Supreme Court decision holding contracts between unmarried partners who lived together are legally enforceable. Here, the woman sought enforcement of the alleged promises made to her through judicial imposition of a “constructive trust” against both the man’s estate and his children, who were the successor trustees of his trust.
Since no estate was opened-as, again, there were no probate assets to speak of-the woman simultaneously filed a petition for appointment as administrator of the estate. The children objected. They claimed the woman was nothing more than a “gold-digger” trying to “enrich herself to the detriment of a no-asset estate.” Indeed, the children claimed the probate court had no jurisdiction to appoint an administrator over a no-asset estate, and in any case at least one other person-the public administrator-had priority right to appointment over their father’s lover.
The courts did not see it that way. Both the probate judge and the California Court of Appeal agreed the woman could be named administrator of the estate. As the Court of Appeal explained, although this was a “no-asset” estate, it actually did contain “property” in the form of the woman’s Marvin action. That is to say, under California law, a claim against an estate is considered its “property” for probate purposes. A person may open an estate simply to resolve a potential lawsuit against it.
It may seem counterintuitive that the person suing the estate could also be its administrator, but as the Court of Appeal noted, a creditor is an “interested person” and may be appointed if nobody with a higher priority files a competing petition. Here, the children suggested the public administrator had higher priority. That is true, the appeals court said, but the public administrator did not file a competing petition-nor, for that matter, did the children, who also have priority. Objecting to a creditor’s petition is not the same thing as filing a competing petition.
Need Advice On Your Estate Plan?
The above case is just an illustration and not a complete statement of California law. But it does highlight the importance of proper estate planning. If you need advice on drafting your will or trust from an experienced California estate planning attorney, contact the Law Office of Scott C. Soady in San Diego today.