Death does not automatically void any debts owed by the deceased. In the normal course of administering an estate, the personal representative named in the decedent’s last will and testament is responsible for paying any valid creditor claims presented. Indeed, once a person has died, a creditor may only enforce a debt through the probate courts. This includes debtors who obtain a civil court judgment against the decedent prior to death.
Claimant Waits Too Long to Challenge Illegal Creditor’s Lien
A recent case from Los Angeles illustrates the complications that can arise when creditors seek to enforce their judgments against a deceased debtor. In this case, a civil plaintiff obtained a $2 million judgment against the decedent in January 2012. The decedent passed away in August of that same year. Approximately two weeks after his death, the civil plaintiff filed a lien against a piece of real estate that the decedent owned in Malibu.
In March 2013, the local sheriff was preparing to auction off the Malibu property to satisfy the plaintiff’s judgment when a third party claimant appeared. The claimant said that five years earlier, the decedent’s revocable living trust had transferred the Malibu property to the decedent and the claimant as “joint tenants.” This meant the claimant automatically assumed full ownership of the property upon the decedent’s death; it was not a probate asset subject to a creditor’s claim.
The creditor moved to invalidate the third-party claim to the property. A California civil court judge granted that motion in April 2013. The claimant did not appeal the order at that time. Instead, nearly two years elapsed before the claimant filed a new application to vacate the earlier order. The trial court denied the application, and the California Second District Court of Appeals affirmed that decision in a published opinion issued July 5 of this year.
The claimant’s basic argument was that the creditor’s lien against the Malibu property was illegal because it was executed after the decedent’s death. The creditor should have filed a claim against the decedent’s probate estate instead. The Second District agreed that the creditor “proceeded to enforce his judgment in a manner that unquestionably was improper.” But the problem was, the claimant waited two years to make this argument. Had the claimant appealed the civil judge’s order back in 2013, he likely would have prevailed on appeal. But now that order was “final” according to the Second District and could not be challenged.
Need Advice from a California Estate Planning Attorney?
If you are concerned about the possible impact of debts and creditor claims against your future estate, you should speak with an experienced San Diego estate planning lawyer who can walk you through the probate process and how it works. Proper estate planning can help avoid unnecessary confusion among creditors and family members and minimize the potential for costly litigation. Contact the Law Office of Scott C. Soady today if you need help preparing a will or trust, or any other estate planning matter.