0:00 [Music] who are you and where are you going what do you [Music] want hello and welcome to trust and Estates weekly I'm your host Kevin bemel and we're here every Monday at 10: a.m. Pacific time to talk about all of those things relating to Estate Planning and the administration of trusts and Estates legal issues accounting issues tax
0:37 issues people issues uh pretty much anything that you can think of that relates to those areas and uh um this is both from the standpoint of handling your own Estate Planning and administration as well as being a professional like me who helps other people with with this H this particular area so so today I'm going to talk about uh common probate problems and I'm going to do this for two reasons one is so you can understand the kind of hurdles that
1:12 you may face in a probate and the other is hopefully to drive home the message that I've made a few times which is that you are very well advised to get to to create a trust if you have any property of any uh significant value now here in California the law was recently revised so that there's a streamlined probate process that used to apply only if you had a very small estate um I I I don't
1:48 recall the exact number but when I say very small like low F low five figures um that has been increased to $750,000 now um lest you think that that's um you know going to exempt a lot of Estates I I actually don't think it will because here in California the median home price is significantly higher than the rest of the country so you know if you own a home for example um you're not going to be exempt
2:23 um if you own a successful business you're not going to be exempt so um if if you have again any kind of significant assets by the by the way if you have um uh individual retirement accounts or 401K accounts th those kind of things while there are way that that you know have a significant amount of money in them $750,000 or more so if you don't designate beneficiaries on death those sort of things um you'll still get caught up in the regular probate process
2:58 and you may say well I don't have an account that's at 750,000 well but if you have two accounts you know and between them they add up to that and and may or maybe you have a house and it's it's worth you know say $450,000 and you've got a $400,000 um total of of retirement accounts so you can and you don't have a trust and you haven't designated be beneficiaries on death so you'll get swept up into the regular probate process and someone who deals with it on virtually a daily basis I can I can tell
3:36 you for sure it's it's nothing you want to be involved in if you can avoid it so um I I made I I spent time over the LA um last couple of days and and revised it this morning my my list of uh common probate problems so as as you'll see if you um if you look at the notes after this show posts on our YouTube uh channel the the problems basically fall into two categories one is the process the process of probate and the other is
4:12 the people involved not that people are automatically a problem but but people um they are they are a significant source of problems I'll put it to you that way um whereas sometimes it's not the people that are causing the problems it's just the process of probate itself okay so uh let's start with number one which is intestate succession now I've talked about this at length on other shows so I'm not going to spend a lot of time on this but
4:48 intestate succession means that someone has died they didn't leave a will they didn't leave a trust and so there's there's no document or let me let me be precise here there's no valid document saying what it is they want to have happen with their property after their after their death so um you know if you have a will a valid will okay if you have a trust so you're not going to die in testate if if you don't then what's going to happen is
5:23 your estate is going to be handled according to the the laws contained in the probate code which may or may not be in accordance with your wishes um and and the the the sad thing is um even if someone is very sure what your wishes are the person administrating the estate even if it's that person who's sure what your wishes are uh may not have the discretion to follow your wishes so let me give you an example let's say that um and and this
5:58 this applies to to you or or you know obviously if you're a professional so let's say someone has a long long-term uh partner girlfriend boyfriend whatever and um and that person also has uh two children so you may know for a fact that they want um the long-term partner to get let's say half of their estate when they die um if they die in test state that person is going to get exactly zero and it doesn't matter how sure you
6:33 are that the person would have wanted their partner to get part of the estate uh probate law does not allow that unless they've established some kind of um essentially quasi marriage um and that's not an easy thing to do under under California law so uh th this is why you you you know don't want to die intestate you don't want to let your clients die in testate okay if you want to know more about that please go to my YouTube channel and you you'll you'll find the show on intestate
7:08 succession and and and and it'll deal with that in Greater depth okay the next which is not intestate but is um a similar process problem is unclear or missing estate planning documents or errors in the will or in the estate plan all of these things will cause problems so um these mistakes can can include unclear wording missing signatures um improper witnessing of the documents um and and they can render the documents
7:44 invalid um they can make them liable to disputes okay so um um if there's ambiguous language in the document that can be a problem okay let let's say that there's uh language uh in a will that says a particular property is supposed to go to a particular air and then it's found that that property was subsequently sold um so you've got what amounts to you know an an well the
8:21 document will be the document probably is clear in that that person if that was the only thing they were entitled to get under the will they're going to get nothing but the person who's now getting nothing may not like that and so unless there is language in the will that says something to the effect of if you know an asset or or a property um under this will is no longer owned by the estate at the time of death um and and therefore you know that person is effectively disinherited um there may be grounds for
8:57 some kind of dispute that gets into the other category the people category okay which we'll I'll talk about in a little while okay if a doc if a will is missing signatures if it's not properly witnessed that can be a problem now there's um again I'm not going to talk a lot about wills I've talked about them in other shows so I've I've talked about holographic wills and and such things um I know here in California the the law has loosened up a
9:32 little bit it's not as strict as to what the court will admit as a valid will um nonetheless um when there are potential problems with a will that that leaves it that leaves that will open to challenge by someone who may perceive that they're going to be damaged by the will being admitted to probate um and the flip side is if if the will doesn't appear to be valid at all um but it names somebody as an heir that that will incentivize them to uh
10:10 potentially uh file uh the will for probate and that can cause a delay um in in the in the probate of an estate in fact I have a case like that right now where we were um 10 or 11 months into the probab and estate and uh a a party who in interestly had already gotten a substantial inheritance um even though the uh the uh decedent did didn't leave behind any valid documents um but they found this sort of typewritten thing
10:47 that they claim as a will they submitted it for probate and they've Delayed Action on the probate now for almost three months so uh and and of course cost the estate um a lot of money so anytime you have ambiguous unclear documents uh that that can be a problem so um again um that's that's a that's a process problem but one that can also lead to a people problem okay um another um process problem is uh complex assets
11:23 or business interests so if if an if an estate has you know straightforward property car a car bank accounts real estate um all of those you know it it they they go they can go through probate pretty easily they're they're fairly easy to determine their value you know you can go online right and get the value of a car through Kelly Bluebook I think it's doc or whatever the website is um real estate you can have an appraisal done for a house you can go to
11:59 you know Zillow or realtor.com or whatever and get a pretty pretty good valuation of what the house is worth bank accounts are whatever the bank account is worth right same with retirement accounts so those kinds of assets are easily dealt with um and to a certain extent the same is true of of of for example jewelry um but once you get into complex assets things like uh artwork um uh horses uh that one comes to mind I used an example in another show just recently about a particular breed of horses and the only person in
12:35 the country who had the ability to uh determine what those horses were worth was the heir to the horses in that particular estate so um when you have these kinds of assets that are difficult to appraise or to to determine a value that's a problem included in that is business interests it's it's in particular closely held businesses meaning a business that uh doesn't have stock traded on an exchange so you know if someone owns a part of AT&T ain't no
13:12 big deal right you can get the value of that stock very easily um because the you know the stock is traded on the New York Stock Exchange and and that's all you have to do but if someone owns their own business right uh getting an accurate valuation of that business can be very difficult and interestingly enough in some ways the smaller the business the more difficult because um small businesses are often valued just on rules of thumb so property management companies for example are typically
13:47 valued at one times one times their annual gross income so if a property management company generates $300,000 a year it's generally considered to be worth about $300,000 um but um you know to have an actual appraisal done could be expensive relative to the value of the asset okay so for for larger more sophisticated businesses uh and the other problem with small businesses are oftentimes is um because they're owned by you know a sole
14:23 owner or maybe just a couple or a couple of Partners so a lot of the expenses that may be run through the business are not legitimate expenses in terms of valuing the business so the business owners may run expenses through the business that are really their personal expenses okay and th those are you know they shouldn't be taken into account when the business is appraised okay that's by the way one of the reasons why smaller businesses oftentimes are appraised as a multiple of gross income because gross income is
14:59 easy to determine and then you don't have to start going through all the expenses and figuring out is this a legitimate business expense is this not right now for a larger business even though it may not be publicly traded um but one where maybe there you know there's uh a number of Partners involved there's a formal LLC structure or a partnership structure and there's a tax return done for the business uh as a separate entity every year and k1s are issued to the partners the investors whatever so that will be a little bit easier to Value
15:35 because those the tax returns and the finan and financial statements are probably being done on a regular basis as our tax returns so that information is available uh to a business appraiser in order to Value the business uh so um but nonetheless it is harder to do that um and that that is a complexity and so um another complexity is having uh assets that are in a foreign jurisdiction so um I have had a couple of cases where there might have been uh Assets in Mexico so I just dealt with a
16:12 case like that recently and fortunately for the administration of the estate it turned out that the decedent had sold the the Mexico The Mex the property located in Mexico uh several years before he died so okay good right don't have to deal with that because dealing with property in a foreign jurisdiction where the laws are different where it can be more complicated to appraise a property because they don't have the data infastructure all of that complicates
16:47 the administration of a probate right so um what what do you do about these things well um first of all you know you want to be sure that indeed the estate owns the property that's that's the first thing you may need to if if the property is in a foreign jurisdiction you may need to hire someone who specializes in Probate in that jurisdiction I use the example of Mexico so um I reached I on one of the on another case that I was dealing with um
17:24 I spoke to a lawyer in Mexico I think he was in Mexico City if memory serves um and he explained to me what would excuse me what would need to be done in order to verify that uh there were Assets in the name of the deeded right and it's it's not as straightforward a uh a process as it is here in the United States because of how property titles and such are dealt with in Mexico so I I have I happen to have a friend who is uh essentially a lawyer who deals with across all kinds of all pretty much
18:01 every jurisdiction in the world he doesn't literally do the work but because of his practice he knows people all over the world who can handle these things and so when I have a when I have something like that I usually will get in touch with him and say hey here's what I've got can you would you refer me to someone who can help me with this so if you're a professional like me who are going to do these things um you know I advise you to build a robust Network so that you have people who can help you and and hopefully we'll do so as a professional courtesy initially um so
18:37 that you're not spending all kinds of fees just trying to determine whether um you know not so you're not spending a lot of money determining how am I going to even get this figured out right so they'll at least talk to you and say Here's what you'll need to do if you need to proceed with this right when there's actually work being done if there's an asset search being done for example well by all means that's something a professional should get paid for um but but you know for advice on how things uh you know should be handled um I know I do that as a matter of professional
19:13 courtesy um just to really to anyone who's involved as a professional in in trust and estate Administration right um so um so that's that's one way to handle it um another is to um you well I mean the other is is to actually engage uh the the professionals who handle that specific type of property and and and then they'll you know they'll make sure it's it's done correctly uh and and and it
19:48 can be difficult because um if you've got for example a business so uh let's let's say it's a cannabis business which is something that I've been dealing with quite quite a bit the last year or so in an estate so a lot of business appraisers will not not necessarily know how to appraise a cannabis business that is a specialty so uh make sure that the professional with whom you're dealing has the knowledge and expertise to be able to actually help you especially if
20:24 the estate is large enough that it's going to be audited by the IRS or it's going to pay estate taxes and therefore will be audited by the IRS at least a level one audit so you want to make sure that you're dealing with credible professionals who have the credentials um that will hold up in an IRS audit say okay so complex assets and business interests those those can be a problem they need to be dealt with uh carefully speaking of the IRS tax issues can be a big
20:59 complication uh for an estate now right now the uh the the estate tax exemption is is quite high it's about $14 million a person so if you've got a single individual who dies even if they die with a will with a trust okay um those those instruments do not exempt the estate from from estate taxes okay even uh death on benefits designations do not pull those assets out of the
21:36 estate for the purposes of valuing the estate for estate taxes okay that's why um when somebody inherits those things they inherit them um without uh you know paying P paying any taxes themselves uh so um uh uh when you have uh an estate that is larger than the estate tax exemption uh then you're going to be dealing with a whole set of issues relative to the
22:12 IRS now there are a few states that also still have um estate tax regimes in fact I talked about estate estate taxes um a couple of shows ago I think so um again if you want more details on this I refer you to that show um but the main thing when you're dealing with tax issues uh estate tax issues is get the return in as soon as possible okay um it'll generally take at least six months for
22:48 the IRS to audit that to do a level one audit on that return and they are going to do at least a level one but in some cases I I was uh talking with an accountant friend of mine last week he was telling me it's taking up to three years for the for the IRS just to do a level one audit okay so obviously that can significantly delay the closing of a probate so you want to get that uh estate tax return in as soon as possible to get the clock running okay now um
23:27 there can be other tax issues so I'm dealing with a tax issue in in in one probate where uh there's an LLC that uh that has essentially two members okay and the LLC owns five properties but several years before the decedent died uh there was an agreement made that two of the properties in the LLC would be treated as as if they were wholly owned by him and the other three
24:04 as if they were wholly owned by the other member and the reason they didn't spin off the properties and and wrap up the LLC was because there there are property tax consequences potentially meaning the properties could be reassessed for property taxes and and therefore the cost of operating them would could go up significantly and so they kept doing it this way now that one of the members has died um that that situation cannot continue because at some point the probate has to close and
24:41 and so the uh interest the the the the interest in the LLC would have to either transfer to the airs or the LLC needs to be wound up and so um you know figuring this out um actually has has been quite difficult there's first of all there's not a lot of attorneys around who really have the depth of knowledge for dealing with probate I with property tax issues and and California is is a um a
25:17 difficult state anytime you have to deal with these kinds of things okay so um this is something that uh you know is is is is taking time far more time than I thought it would frankly trying to get down to what do we think is going to happen when when the LLC is you know when the property is is distributed from the LLC and and and how should it be done in order to minimize negative tax consequences so all these issues need to be looked at very very carefully before decisions are made and
25:53 action taken so uh what do you do about them again as soon as you see an issue like this arise start dealing with it first of all you know make sure all the members are consulted so there's uh an agreement on what is going to be done at least in principle going forward and number two make sure you are getting expert advice there may need to be legal advice accounting advice okay
26:29 um and and make sure that you know you're you're getting it from people who have dealt with these issues before to the extent that that's possible and and and and they can give you a sense of what's likely to happen by the way if it's a complex issue and an advisor is telling you this is what's going to happen I will be candid in saying I would I would be concerned about advice given with that level of certainty because in my experience almost nothing
27:06 in Probate is that that certain so they can say I I I I strongly think you know this is this is what's going to happen but but I I can't guarantee it okay so if someone's giving you a guarantee um I I I would I would you know start being skeptical okay my I was going to tring my Spidey Sense would start to tingle okay not that I have spidey sense okay so um the there the tax issues are another uh process um issue as well okay um so and then there
27:45 were just delays in in the probate process so I know here in California the probate courts are significantly overburdened at least here in Los Angeles County and so just the sheer number of cases working their way through probate versus the number of of Judges available means it's going to be a a slow process and that that it's a problem because you know heirs want their they want their inheritance and all of that so um
28:22 there's frankly not a lot you can do about it um the one thing you can do is when you have a hearing come up coming up and and here in Cal here in in uh California the way it works is there are probate attorneys who essentially work for the probate courts who let judges know if information is missing or documents haven't been uh drawn up correctly if there if there are aspects of the process that haven't
28:57 been done like the publication of notices that sort of thing so what when a hearing is coming up usually about two weeks maybe 10 days before the hearing the probate attorney will issue what are called probate notes and in those probate notes the most important things to look for are items to clear and whether the probate attorney is making a recommendation to the judge okay okay so if so if there are items to clear it's
29:32 extremely unlikely the probate attorney is going to make a recommendation uh if there are no items to clear the probate attorney may make recommendations so for example if the hearing is is for a petition on on a matter maybe it's a petition to confirm the lease a longterm lease of a property so if there are no matters to clear the uh probate attorney May recommend that the petition be granted okay now the judge doesn't have to accept the probate attorney's
30:09 recommendation um but but oftentimes they do um by the way um if there are no matters to clear the probate attorney still may not make a recommendation and surprisingly a few weeks ago we had a situation it was actually a lease that was submitted for for confirmation for court approval I should say and the there um there was one matter not cleared that I didn't think was at all relevant to the petition to to get approval of the lease and but as a
30:45 result of that the uh the probate attorney did not make a recommendation to the judge and to my great surprise um the judge despite there being an open matter um just granted approval of the petition without a hearing um and and we were done in what amounted to you know 10 minutes uh so you know these kind of things happen um but but the probate timeline can get stretched out by any
31:22 all of these problems that I've mentioned and the ones I still have yet to mention but it can also be extended just because the courts are so busy now in other jurisdictions the courts may not be as busy okay uh but the the flip side of that is uh in a um a rural jurisdiction maybe like Yuba County here in here in California um they may not see particularly complex issues um very often and so if you're doing a probate
31:58 in that county and there are some complex issues because the court may not be familiar with them that can also delay the process so that basically uh you know the administrator will be in a position of kind of educating the court as to what this is all about and what ought to be done and that that may take extra time so those are the kinds of uh delays now another thing that can delay the the probate process is missing
32:33 deadlines or failure to meet deadlines so uh there there may be uh uh certain the uh inventory and Appraisal uh here here in California is supposed to be done I believe at six or nine months after the de seeden has has has passed away um missing that deadline can cause uh delays um and and and the solution to that is get on top of it you know get the inventory and Appraisal done right
33:08 away now interestingly enough I had a case where uh the inventory and Appraisal we purposely didn't do it because we we were going to apply to have it waved because it provided no value uh to the estate um because we were because the estate was so large we were going to have to get appraisals done on the property by qualified appraisers and generally speaking the IRS does not look at a probate referee as a qualified appraiser and so to pay the probate referee to do
33:45 valuations and then turn around and pay an appraiser to do it again didn't seem to be a proper use of estate assets and after six months um the court absolutely refused to grant our petition to wave the appraisal by the probate referee one of the most frustrating matters I've I've handled in a case um and so then we had to turn around and scramble uh to get the the inventory and Appraisal done um you know if I had to do it over again
34:20 I think maybe instead of applying for a waiver I would go to the um the probate referee and basically say look here's the situation um we just need you to you know throw something together um because we're still going to have to turn around and and do actual appraisals and maybe you know negotiate his fee so that it was as small as I could get it um go ahead and pay it rather than take the risk that in this case the judge just frankly I don't think understood the
34:56 issues involved and that's why she didn't Grant the petition so um these are the kinds of things um that that you know delay the process um other things that can delay the process are the difficulty in uh finding assets so um I mentioned this one where it appeared there might be property owned in Mexico and and so it it took me several weeks to get that figured out in the end it it's not going to delay the the probate
35:31 closing um but if in a smaller estate where maybe there was just you know a home that had to be sold and maybe a couple of other property you know pieces of property a couple of bank accounts or something um having to deal with a an asset in a foreign country and get that figured out it might um delay you know the the the probate process so um all of these things can can Del they they cause problems which which delays
36:06 the process or it may not cause problems per se but they're just they're things that have to be done and so they string things out and any delay okay Justified or not can sometimes upset The Heirs who in the end want to get their inheritance and so um when they are delays like this so then uh the people's side of of the problems um may come to the four okay um another problem in Probate is the the
36:45 legal and administrative costs they're going to be higher generally speaking than the administration of a trust because everything has to go through the court for approval okay and and whereas if you're administrating a trust the trustee is probably still going to get trustees fees um though the there's not going to have to be uh if if the trustee is knowledgeable and hopefully he is so then the need for legal advice is going to be much less and so a lot of money will be saved on legal advice um
37:22 documents there's not you know there won't have to be documents prepared and submitted to the court there won't have to be be appearances in court all of that goes away um in the administration of a trust okay now having said that there are occasions in the administration of a trust where a trustee May apply to the court to have one of his actions confirmed okay but that's going to be the exception rather than the rule okay and so the best way to avoid legal and administrative costs or not to avoid them but to reduce them
37:58 is to number one make sure that there's a sound estate plan in place and and especially if there are any kind of sizable assets um look into and probably create a trust or at least one trust in order to minimize um the the the necessity if not eliminate the necessity of dealing with the the probate courts okay um the last of the sort of process issues is prolonged
38:34 litigation so um I'm I'm dealing with um a a case right now where the original probate was filed four years ago okay and um there was a deor to the estate that was owed um about three times the three times the money that the estate was worth okay and so the heirs to the
39:09 estate were essentially faced with they're going to get nothing well so rather than face that reality they I don't know if they colluded with the lawyers or not um but they created a will submitted it for probate and it took the Creditor three years to uh to prove to the court that the will indeed was a fraud okay now the the amount of money at stake for the Creditor was large
39:44 enough that it made sense for the Creditor to spend that money okay um and and the but the end result is that uh you know what the Creditor is going to get to settle the debt is going to be partially offset by the the prolonged litigation and the cost of that litigation uh to you know to get to that place so what can be done in in in in a situation like this I I don't think there's anything that can be done there are unscrupulous people out there and
40:19 when money is involved um they will do they will do bad things to try and get a hold of of the money so um you know one has to be very careful um I will say that I'm involved in another situation where it's the same Law Firm that aided these heirs in submitting the fraudulent will for probate so I I think you know if you're in the business for any length of time you start to figure out who are the honest players and who are the dishonest players and if you see the
40:56 name of a dishonest player come up uh you know beware start communicating to the people involved um that uh you know this particular player has a reputation for for doing unscrupulous things and and so uh you know just caveat empor so to speak you know be beware um the other thing to do is to make sure that uh all the part are kept appropriately informed so they're not sitting in the dark and and and
41:33 don't get unnecessarily angry and end up filing some kind of litigation just because they they feel that they're not being treated properly so uh a as as an administrator for example uh I do my best to uh keep everyone informed I know on uh large you know large Estates um and even well even mediumsized Estates I'll I'll do you know a weekly update at the end of the week to everyone who is who
42:08 is involved who wants to be you know get the periodic updates as to what the situation is with the administration so everybody's seeing the same report they're seeing the same information they have the same opportunity to answer questions um but the but the the bottom line is um if someone is in is intent in on suing they are going to to Sue and especially if you're de dealing with someone who's unscrupulous well so you know they are going to act in in in bad
42:43 ways and that'll just have to be dealt with okay so those are the process oriented problems um the people oriented problems uh not as many of those um and and they tend to come out of the proc come out of the process problems although not always so the first one isn't one that comes out of the process per se but it's locating heirs or Miss Missing beneficiaries so um you know especially if someone dies in testate
43:19 you don't have a lot of background information on the deed you may not know you know do they have children do they have a spouse um do they have brothers and sisters parents who are alive Etc so um there are there are professionals who deal with this so my friend Michael zwick who's been a guest on the show uh I think it was last year if I remember um he he that's his business he locates missing heirs among among other things um he also locates uh creditors um and
43:55 and locates uh uh assets as well okay so one of the things that you that you can do to deal with this problem is hire someone like uh Michael and and I I encourage you again I know I'm referring back to other shows uh more often than normal but um check out the show I did with Michael's Wick um where he talks about how how he how he works and and and the benefit that he can bring to the administration of an estate okay but um in in the end if if an air is
44:33 overlooked that can cause a problem because that person may you know find out about the administration of the estate and then they may intervene in a much more disruptive way than would have been the case if proper effort had been made and the individual had been identified so um obviously as an administrator or a lawyer you can only you know make best efforts and and sometimes people will be overlooked but I'm dealing with a case right now where it appears that two or three heirs were purposely overlooked
45:11 and so that caused a lot of consternation on behalf of one of The Heirs uh who had been identified who was very upset by the fact that that the three others or two others what whatever it was had been left out and so and I think rightly so by the way she filed a petition in court um to prevent the individual that was seeking to administrate the estate from doing so because it appears that the uh
45:46 that that that person purposely left out uh two or three of the airs so th you know those are the kind of things that can happen when a proper search and for for heirs and beneficiaries is is is not done okay um related to that is when a beneficiary has special needs so they may have disabilities they may be minors um and and they also may be getting government benefits that would be disruptive if they were to inherit money
46:23 so all of these things need to be taken into account um in both in the estate plan as well as the administration of the estate but they're all they're all problems that that arise sometimes in Probate um and and and if it is in Probate and it wasn't dealt with as part of the estate plan so now as the administrator you know you're you're you're D Duty bound to um uh to deal with that issue okay and there may be a
47:00 need to set up a Special Needs Trust um there may need be a need to set up a guardian M lium to represent say a minor who's in air okay all of those things need to be dealt with um and they and they need you know there again there there are professionals who deal with them uh typically they'll be a lawyer involved um now the court May appoint someone on essentially on the court staff as a guardian ad lium um a professional in essence um but but maybe a family member will s serve as that
47:35 Guardian so all of these things need to be worked out um and and all of the issues need to be considered uh a plan needs to be uh you know created and then that plan executed carefully to make sure that people who need Extra Protection get that protection okay so beneficiaries with special needs okay the next one is disputes among benef uh heirs beneficiaries family members perhaps over asset
48:10 distributions over anything okay so again I mentioned some of these in the in the process uh part of it but if a if there's a uh contesting of a will that usually is because there's a disgruntled uh Heir or beneficiary or or family member or or someone who feels that for some they're they've been wrongly left out um a as as an era beneficiary right and they feel that they're entitled to something so um that person may claim that a particular will
48:47 that's being probated or is is being set for probate is fraudulent and and and and and therefore the person died in testate they may say that have a valid will and this other one isn't valid that's could be another problem I've got a case where unbelievably an ex-husband is claiming that his exwife uh at the at just shortly before her death created a living trust making him the trustee of the living trust okay and in doing so he intends
49:24 he's intending to get a hold of half well at least half the value of the house and and he's claiming that it was a mistake the entire house should have been transferred to the the living trust now there's so many specious aspects of this I'm I'm not going to get into the details of the case but these are the kinds of disputes that arise uh when you have unscrupulous people involved right and so uh clear estate planning documents are
50:01 are can help avoid some of this so uh for example a clear will and a clear trust often times will not only identify who the beneficiaries or The Heirs are but they will also identify specifically those who are disinherited so that if if if a if a person who otherwise would have just been left out tries to do something if if it says in the will you know I specifically disinherit this individual
50:36 so that's it they can claim all they want but the with the will says they're disinherited that can be a a a a much quicker route for resolving uh that particular problem um okay so disputes and and disagreements among among oh another type is just over the asset distribution so um you know depending on how the documents are written one particular heor may feel that he's been cheated and and and and that sort of thing another
51:12 dispute another area of dispute comes when um there are so-called Blended families where someone had maybe children by a first marriage and then got divorced or or his spouse died got re pardon me got remarried and now you have children from different marriages and they may resent that you know children from a second marriage are getting some of the assets or value of assets from what they view as you know their their mother or their father those
51:48 those kind of things and so again setting up a a wellth thought out ofate plan uh can help avoid this as can making sure that everybody is as much as possible is is kept is kept advised it is has an opportunity to give their input and then when decisions are made the those decisions are conveyed to them okay next on the people front now I'm using people in this case up broadly because uh like a corporation for example is a legal person not a flesh
52:24 and blood person you know like like us okay so uh debts and creditor Claims can be a problem um and uh they there there's usually a statutory period during which such claims have to be filed but that period only starts running uh when there typically when there's been a publication of the will so that there's essentially public notice that the estate is being is going to be administrated okay so and if there's reason to believe that a
52:59 particular uh person legal or or natural is a debtor to the estate that person may need to be informed directly uh so that they you know so that they have an opportunity to file a claim so all of this um you know this is all that's all part of the procedure um but family members may be unaware for example or heirs may be unaware that there were creditors uh you know that let let's say it's a parent who's passed away the children may not be aware of these
53:34 creditors that their parents have and so all of a sudden you know they were counting on a you know big pile of money and now it's reduced by the creditors claims okay um and uh now there may be disputed creditor claims so it may be that a the estate uh receives a claim from a creditor and and it's of questionable validity maybe the debt actually was paid off okay and now the Creditor is trying to double dip so those things need to be investigated as well again um my friend Michael's Wick
54:09 that's that's something he does finally I mentioned this in an example a little while ago there may be insufficient assets to pay for all the creditors effectively disinheriting the errors or beneficiaries and if that's the case um you know you're going to have a lot of unhappy people and in the example I gave to the point where they perpetrated a fraud trying to get a hold of the assets of the estate uh prejudicial to the creditor who is entitled to have
54:45 priority um you know a a as a matter of law but but e even in a will uh a decedent cannot give precedent to his heirs over his creditors so he may he may not identify his creditors in the in a will that doesn't mean that then in the administration of that will those creditors can be overlooked to the contrary the creditors still have to be satisfied before assets can be distributed finally um the the final
55:22 people issue is executive or administrator Ator or personal representative those are all names by which administrators go Um can could um uh perpetrate misconduct or could just be incompetent and I don't mean rank incompetence like that although that could be the case it could be they just didn't know they didn't understand the process they've never done it before and so they're doing their best but they you know they they make mistakes all of those can create delays they can create costs they can
55:57 create problems so first of all um there could be a conflict of interest so a particular an executive may also be an heir and um that could be a potential conflict of interest if the other heirs view that executive as self-dealing okay um and and and and as well that executive May funnel let's say the the sale of a property to somebody who then rebates a portion of the fee for handling the sale of the property to
56:32 that executive again that's a conflict of interest and and this is the kind of thing that other heirs may may be concerned about okay there may be negligence on the part of the executive personal representative okay um um they may not perform duties like filing a tax return like paying debts like you know Distributing assets appropriately all of those um you know are are they're being negligent they're breaching their fiduciary duties and by the way even if you're not a professional fiduciary like
57:08 me right um anyone who acts as a personal representative an executive administrator whatever that that places them in or places on them I should say a fiduciary duty okay and and finally there's you know outright fraud theft the very egregious level of misconduct um that that that some in which some personal Representatives May engage so what do you do about this well you you can one of the reasons why California created the role of licensed
57:44 professional fiduciary is to have a group of people um who can administrate Estates uh um in a neutral way in other words we never have uh we're never an heir to an estate that we're uh administrating as a professional fiduciary okay so we can we can be unbiased in how we handle things with respect to all of The Heirs um as well we know what we're doing we have to prove that in order to get the license
58:20 and so um issues of incompetence um I don't want to say they are eliminated um they're not um but um they they they are reduced um and and why and and and you know in all cander the reason they're not eliminated is uh a professional fiduciary uh has the ability to handle not just the administration of Estates but also the handling of guardianships and conservatorships and so a lot of the people who have the same license since I
58:56 do actually come out of the healthc Care industry where they've spent their career taking care of people now that's critically important it's especially if you're a conservator uh where there are Health Care issues and that kind of thing um that need to be addressed but someone coming out of Health Care may not have the level of financial background for example that I have and so they may not you know have the expertise to handle the financial issues okay and that's why you you see professional fiduciaries essentially specializing so
59:32 I don't handle uh guardianships and conservatorships because I don't have the experience to deal with the health care matters so if I had a situation come up where perhaps there was a necessity for a conservator in in a matter I was handling so I would bring in somebody else to handle that aspect ECT of the matter to make sure that it was done compet competently because I couldn't likewise uh you will see among uh conservators and Guardians who are
60:09 really more sort of people focused if there's a large Financial aspect they they will bring in somebody to handle the financial side of things to make sure that it's being handled correctly as well so um so that's why you know I say you don't eliminate incompetence by bringing in a professional fiduciary but you do reduce it and and I would encourage you if you are thinking of bringing in a professional fiduciary make sure you talk to that person about what is their
60:45 knowledge what is their experience uh what is their training so you can have a sense as to whether they have competence in the area for which you're considering hiring them okay so that's one thing you can do to reduce uh e you know executive misconduct or or incompetence or I I I I think would have been better a personal representative uh um misconduct or incompetence um and another is is to make sure that whoever is handling things this is going to
61:20 sound funny but you but for those of you who watch the show regularly you know I'm a rabbi so it takes humility to administrate an estate and and the person administrating it has to be willing to say I don't know okay no administrator has seen everything it's it's there's always some new wrinkle that comes up and so they H the administrator has whether they're a professional like me or you know a a you know a family member whatever they've got to be willing to say I don't know
61:56 but that's the important thing but I will find out and then they will go search out that information and get it to make sure that whatever action is taken is the appropriate action okay so I covered I think about 11 um potential problems in the administration of an estate uh Vince thanks so much for for your comment really appreciate that um absolutely you know do my best to to make make sure the information that you get is is useful uh so thank thanks for watching very much um so so th these are
62:33 the most common ones the the list is not exhaustive and even among the ones that I identified you'll find combinations and permutations are seemingly Limitless right um PE we we people are endlessly creative um and and we can create for good we can create a lot of trouble too right that's the nature of of of humanity so um but but these these are the things to to watch out for and to consider and and if you're a professional uh if you're for example if you're in estate planning um you know these are the kind of things I encourage
63:08 you to think about how can they be avoided in the creation of an estate plan okay if you creating your own estate plan um these are things to ask your advisors how do I avoid these kinds of potential problems okay there there's no 100% solution but giving giving some attention some thought some consideration to them will increase the chances that that problems will be avoided so uh I thank you very much for joining me today a little bit longer
63:43 show than than I usually do um but but an important topic and um what what the a stitch in time saves nine right so um better to take a a little bit of extra time in identifying problems and how they can be avoided rather than having to deal with them now that you know an estate is in administration so so again thanks so much for joining me real quickly tomorrow at uh 10: am Pacific time Tuesday is my show business lessons from the military in honor of George Washington's upcoming birthday which is
64:19 on Saturday the 22nd I'm doing a show um business lessons from George George Washington's Rules of Civility it's a wonderful little book that George Washington wrote a classic and has some great pointers for how to improve how we deal with people in our businesses and then on Wednesday is my show people making money also at 10: a.m. Pacific time it's our monthly economic Echoes where we break down the economic data the economic indicators and see how is
64:54 this affecting my life life potentially what decisions do how how will it affect the decisions that I need to make for me my family my loved ones um my business right so we go through all of that um and then on Friday okay R I don't usually do a show on Friday but because George Washington's birthday is on Saturday and I don't work on Saturdays so on Friday at 10: a.m. Pacific time is a special edition of the way to wow shows in honor of George Washington's birthday I'm going to talk about his biography like
65:31 like I did for um Martin Luther uh for the Reverend Martin Luther King Jr and also for uh Abraham Lincoln talk a little bit about his biography and then read his Farewell Address that he gave to the his cabinet after his second presidential term was over so I invite you to join me for that as well one last thank you for joining me and wishing you a wonderful rest of the day signing off as I always do Marie darling you are and ever will be my bell courage at all times my friends