One common question that arises in the area of our practice which focuses on resolving disputes among executors, trustees, and beneficiaries is: "what will happen if someone files a lawsuit in Probate Court?" It's the client's "nickle" if legal fees mount up, so its not only a fair question, but a critical one.
The answer to that question is something everyone who is focusing on their own estate planning ought to know, and something a person who is involved in an estate administration should absolutely know. Not knowing can lead to bad decisions which are difficult and expensive to fix at a later date. I will explore this topic over a series of posts.
The "normal functions" of the Probate Court are simply:
-- to figure out who is entitled to the property of someone who died, and
-- to also administer the estates of people who can no longer legally take care of themselves (guardianships and conservatorships).
This series of posts will focus on the estate and trust litigation process, but the possibilities for disputes in guardianships and conservatorships are just as frequent and can be even more frustrating.
Difference Between Civil Litigation and Probate Litigation
What I often tell clients is that there is a big difference between general civil litigation and probate litigation. In general civil litigation: the vast, vast majority of disputes (which are not a matter of divorce proceedings) involve an insurance company as the ultimate paying party. General civil matters end up essentially boiling down to a war of attrition, where the insurance company who is defending the matter finally decides what the case is worth to go away. There are also a large contingent of employment related disputes, where you substitute an employer (usually a large one, since small employers do not have large amounts of money) for the insurance company.
In a probate or trust dispute litigation, however, there is rarely, if ever, an insurance company involved, the matters tend to be highly emotional (more on that below). The first "stage," if you will, is sorting out the dispute from the actual amount in dispute.
For example, in a $100,000 estate, the maximum amount in dispute is a maximum of $100,000. In a $1,000,000 estate, the maximum amount in dispute is $1,000,000 and so on.
Emotional Losses Can Exceed The Monetary Loss (Case Study)
The most common emotion we see is a client who has an "emotional loss" which far exceeds the monetary loss. Here is a case study in this which is common in our practice.
A brother was certain his sister had been taking advantage of their father prior to and after their father's death. In the first few hours of investigating, we found $40,000 had been improperly transferred. We wrote a demand letter and the sister agreed to reimburse the estate. Since the sister and the brother were splitting the estate -- that $40,000 improper transfer was worth $20,000 to the brother (the sister was entitled to the other half). At this point, the brother had spent only a few thousand dollars in attorneys' fees.
Then, a very familiar emotion kicked in. The brother was upset that his sister had taken $20,000 that should have gone to him. Brother also became upset that he had to hire an attorney to protect his rights. Based on this emotion, he embarked on a hunt to see what other improper transfers or expenses his sister "might" have made in the estate. After many more thousands of dollars in legal fees -- and at least a hundred hours of his own time -- he found a trip to the Home Depot for $325 that the sister charged to her father that she should have paid herself.
In the end, the case settled because both brother and sister realized that there was only so much involved and that a search, involving lawyers, for total certainty, was simply too expensive. They would both (especially our client) have to be satisfied with what I would call "partial certainty" - they did not know for certain that every nickel had been accounted for, but they did know that the overall result was relatively fair, and that more litigation was not worth it.
One reason that the case settled with a relatively small attorney cost was that opposing counsel was an experienced probate attorney who knew, from the beginning, how to advise his client about her duties and moreover, that the case should settle. In future installments, I will tell a horror story or two about what can happen if a general civil litigator is involved in a probate litigation.
Probate Litigation Lesson
We all have parents. Many of us have siblings. In any case no one has a perfect relationship with all members of their family. Thus, the lesson to be learned from the above story is that the death of a parent and an inheritance can fray almost any family bond. Before you make a decision based on those very understandable emotions, call us or any experienced probate lawyer. Although it may not seem like it, it could save you quite a bit of money down the road.
As a trustee or executor, you can be sure not to make an inadvertent mistake that riles up beneficiaries for no reason. As a beneficiary, you can be sure not to throw allegations at a trustee who may actually be doing their best. Either way you can replace emotions with knowledge, which is always a good deal.
An experienced and honest probate lawyer will help you create a strategy from the outside and not simply capitalize on the normal emotions that are inherent in these cases. When you need to be aggressive - they will also know how to be efficiently aggressive to help you win or obtain the best possible result.
Posted by Henry (Hank) J. Moravec, III, a partner at Moravec, Varga and Mooney, A Partnership.
For a free 30 minute consultation (telephonic or in person), you can e-mail Hank Moravec at hm@moravecslaw.com or call him at (626) 793-3210 or (818) 769-4221. The firm website is www.moravecslaw.com
The firm's office is located at 2233 Huntington Drive, Suite 17, San Marino, California 91108 and there is ample free parking.
