Legal Question in Wills and Trusts in California
May a successor's attorney deny a creditor claim from a beneficiary's wife for decedent's funeral and bills paid because the beneficiary received proceeds of decedent's Pay-on-Death bank account exceeding creditor claim amount? POD beneficiary and wife freely assumed decedent care-giver needs over last decade of life. The POD account was set up prior to execution of the Trust. Successor arranged and accompanied decedent's creation of Trust though sometime later, grew estranged from decedent, as seems historically the case in her relationship with POD recipient [originally co-trustees; POD beneficiary resigned when successor unwilling to cooperate]. The Trust makes no mention of POD account and specifies expenses to be paid from Trust estate. Estate includes real property with clouded title. Trust decedent preceded in death by ex-spouse. Successor's attorney also handled ex-spouse's estate with successor then acting as conservator. Neither their divorce nor death of ex-spouse recorded in address of joint tenancy title or transfer of ex-spouse's share of real property to heirs. Extraordinary fees anticipated to accommodate clearing title for Trust-instructed sale as discussed in a letter to all beneficiaries from successor's attorney explaining that creation of Trust severed joint-tenancy and complicated things. Letter also stated denial of creditor claim of POD recipient's wife as due to husband being named POD beneficiary of bank account and its amount. Before disclosing that she represented successor trustee, successor's attorney ignored POD beneficiary's seven letters of inquiry [including inquiry as to her representative status] and 2 offers to purchase real and personal property while not ignoring those of two other beneficiaries and one non-beneficiary, whose offers to purchase are substantially lower. With the 120-day contest period drawing to an end and Trust administration seeming on hold, successor's attorney asked that contested issues be brought to her first. But given her and successor's lack of response, are these actions otherwise questionable or simply things that under the circumstances, the POD beneficiary might do better to endure? [Please excuse multiple posts. Maneuvering one-to-one exchange of needed greater detail is like stepping on a rake...sorry, and thx! Hella-good website!]
2 Answers from Attorneys
A POD account is not part of the Estate or Trust. It belongs to the person named just like life insurance proceeds are paid to a named beneficiary without consideration of any provisions in a will or trust. The one should have nothing to do with the other unless there was some agreement that the person is named POD on the account for the express purpose of paying those expenses. So it seems these are legitimate that the trust should pay. However, please consult an attorney to make sure this claim is not a violation of a no-contest provision.
What you have to do is to consider the costs of litigation. If the creditor claim isn't for all that much, especially in comparison with the amount of the POD account, then let it go. This isn't a "loser pays" situation in which if you sue over the creditor's claim and win, the trust will have to pay your attorney fees. So if you sue, you get to pay your attorney fees, win or lose. You won't likely find any attorney willing to take a case like this on a contingency fee basis unless the amount of the claim is so high and the chances of winning or so good as to justify the attorney's risk that he or she won't get paid if you lose.
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