Probate Complications Caused By Multiple Beneficiaries

For many people who make wills, the most important provision is identifying the beneficiaries who will inherit financial assets, real estate, and sentimental personal property. These generous testators often want to leave something for everyone. Unfortunately, when vast numbers of family, friends, and loved ones become involved, the chances of a will contest can increase.

Complicated legal issues and property disputes often require the assistance of a probate attorney. The experienced Los Angeles estate litigation attorneys at Hackard Law serve areas throughout California, including Sacramento, San Francisco, Alameda, and Santa Clara. Below, they explain the potential complications raised in situations involving multiple heirs.

Common Problems For Heirs

Testators commonly identify many different heirs in a will, but at times, these numbers can become unwieldy. Such is the case in the recent passing of Frasier star John Mahoney. The Daily Mail reports that a will submitted to the probate court identifies 38 potential beneficiaries of Mahoney’s estimated $5 million estate. Unfortunately, the more heirs a will identifies, the more opportunities those people have to disagree.

One common dispute is the validity of a will. Testators can change wills by adding amendments (called codicils), writing entirely new wills, or simply revoking a previous will altogether. This creates a timeline in which the latest action controls the disposition of the estate. However, beneficiaries can challenge the validity of any action that alters this timeline.

If, for example, a testator writes a new will to benefit a distant relative who coerced the testator into revoking the original will, the beneficiaries of the first will can challenge the validity of the second one. They would initiate this challenge via a petition to the probate court. The court must then determine whether coercion produced the second will (which would make it legally ineffective). If so, the court would remove the second will from the timeline, and the original will would control.

Another problem that often arises is gifts that are no longer in the estate at the time of the testator’s death. Many people frequently buy and sell possessions throughout their lifetimes. As a result, a gift identified in a will (such as a particular piece of real estate) may have left the estate by the time the will is submitted to probate.

In such a case, the estate administrator has several options for resolving the matter. If the identified property was exchanged for another, the beneficiary could receive the new property. If it was liquidated for cash, the beneficiary might claim the cash value of the sale of the property. This becomes a problem in an estate without much cash and with many claims against its assets.

In such a case, the estate administrator may simply decide to award the beneficiary nothing. The law allows for this. Because the testator no longer owned the gift, it was no longer available to give. Such a beneficiary, however, should not simply allow the estate administrator to decide to rescind the gift without argument. The beneficiary may petition the probate court to determine any interest in the estate.

A similar problem arises with residual gifts. The so-called residue of an estate includes any assets that remain after making all gifts, settling all legal claims, and resolving all other liabilities. The residual gifts awards these remaining estate assets to a particular person, charity, or other legal entity.

Estates that have many claims against them often do not have any residual gifts to give. In this case, the residual beneficiary is left with nothing. But where assets do remain, and the residual gift is made to more than one beneficiary, disputes can arise. Who gets what assets? Must the estate sale the assets, or can the beneficiaries share the tangible property? Can one beneficiary buy out the other’s interest in lieu of selling the asset? These are all possibilities that the residual beneficiaries must consider. Many residual beneficiaries can negotiate a settlement of the residual gifts. Others petition the probate court to determine the disposition and distribution of residual estate assets.

Beneficiaries Who Control the Estate

One of the most complicated estate issues arises when one beneficiary is also in a position to control estate assets. A beneficiary who is appointed the executor or trustee has the authority to dispose of property and distribute the trust or estate’s assets. Other beneficiaries often challenge these actions.

One such case is resulting in heated litigation over millions of dollars in estate assets around the Napa area.

According to the Napa Valley Register, a wealthy area businessman died in 2006, leaving an estate valued at about $92 million. One of his daughters was appointed the trustee of his charitable foundation. The foundation, which controlled nearly $38 million from the estate, was intended to benefit disadvantaged children.

Now another daughter has brought suit to demand an accounting of the trust’s assets. Among other claims, the woman claims that her sister has improperly supported her own lifestyle with trust assets. These include the purchase of a Land Rover and a $2.4 million condo in Santa Barbara, building horse stables on her own property, and a $15 million investment in a real estate company. The trustee allegedly made these purchases with trust assets, but defended them as legitimate investments for the foundation. Now, more then a decade after their father’s death, the sisters continue to litigate his assets in the probate court.

Effective Litigation to Protect the Rights of Legal Heirs

Despite complications, legal heirs do have the right to enforce their inheritance rights in state probate courts.The probate litigation attorneys at Hackard Law have decades of experience in effectively challenging improper estate planning documents or estate administration, and helping heirs explore their legal options to determine the best method of asserting their legal rights. We help beneficiaries throughout California protect the wishes of those who have passed. Call (916) 313-3030 from Santa Clara or (213) 357-5200 from Los Angeles (or from anywhere in California), or write to us online to schedule your free consultation.