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Old 01-12-2010, 04:47 PM   #21
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Seems to me that the debt should be offset against the inheritance. That is what would happen in my state anyway.
Darn, I say I'm disgusted with the thread and then you come along with something germane and knowledgeable.

So I understand your response, and from a layman's viewpoint I think it makes perfect sense. Just deduct from her share whatever it is that she owes. It's fair and should make everyone happy. However, I keep coming back to the point that says the executor has a duty to go after all debts owed, and has to get the court's authority to write off any bad debt.

So, if she has to go after all the debts including this one, and her alternatives on any unpaid debts is to sue or get it declared unpayable and removed from the estate's inventory, how does she legally go about distributing the remainder according to the scheme of "here's your share minus what you owed"? I don't think my SiL who owes the debt would balk and demand her "full" share, but people do weird things when it comes to money.

Edit to reply to Martha's edit regarding offset provision: I haven't found it. Doesn't mean it's not there. I did find an provision for exchanging things of value but that read more along the lines of like value.
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Old 01-12-2010, 04:50 PM   #22
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Sounds like a lawyer's really gonna earn their pay on this one. Not for their legal knowledge but rather for their minefield-negotiation skills.

By taking the matter to probate court the executrix would be able to fulfill the intent of the law, if not the precise order/letter of it. The probate court's interpretation would be officially blessed, and their approval of her actions would shield her from accusations of liability or negligence. And once the probate court verifies that no estate tax (federal or state) is applicable then they probably don't care how it's worked out.

Other beneficiaries could complain and file suit against the executrix, but they have a choice: their small pieces of the pie in a reasonably prompt manner, or bigger pieces of an ever-smaller pie maybe someday and having to pay their own legal bills. That usually avoids a protracted fuss.

Then there's the issue of whether beneficiaries want to disclaim their share, and to whom the disclaimed proceeds would go...
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Old 01-12-2010, 05:10 PM   #23
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I went through a similar thing when my mother died, except that the 2 siblings who owed money were left real-estate and not cash.

Since this happened in Canada it may not apply. As executors I was required to "report to the court when demanded". I lawyer friend told me that this was never (unless a beneficiary demanded it). The "cash" heirs agreed to "inherit" the debt and eventually signed releases saying they approved the job the executor did. Estate finished, no report to court and everyone happy.

YMMV.
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Old 01-12-2010, 05:12 PM   #24
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This is the reason why all our our assets are in a revocable living trust, probate is a pain.
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Old 01-12-2010, 05:30 PM   #25
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Sounds like a lawyer's really gonna earn their pay on this one. Not for their legal knowledge but rather for their minefield-negotiation skills.

By taking the matter to probate court the executrix would be able to fulfill the intent of the law, if not the precise order/letter of it. The probate court's interpretation would be officially blessed, and their approval of her actions would shield her from accusations of liability or negligence. And once the probate court verifies that no estate tax (federal or state) is applicable then they probably don't care how it's worked out.

Other beneficiaries could complain and file suit against the executrix, but they have a choice: their small pieces of the pie in a reasonably prompt manner, or bigger pieces of an ever-smaller pie maybe someday and having to pay their own legal bills. That usually avoids a protracted fuss.

Then there's the issue of whether beneficiaries want to disclaim their share, and to whom the disclaimed proceeds would go...
I don't want to give the wrong impression and make it sound like my in-laws are all lining up at the attorneys doors. They're not so crazy or even greedy to try and screw someone out of some money knowing it just comes off everyone's share and could wipe out the estate. But ignorance on the subject reigns.

If anything drags this into a lawsuit it will be done on basically good intentions that are executed horribly wrong.

They've already tried to do some well meaning things that the attorney had to put a stop to because they were illegal. They didn't know they could get an emergency order to pay for FiL's funeral expenses, so one SiL put it on her Discover card. Then she realized she couldn't pay it off and the interest was killing her. One brother volunteered to reimburse her for the expenses and they decided that the estate would just write him a promissory note so he would get reimbursed off the top. The attorney told them they screwed it up because while you can get money to pay for the funeral, borrowing money to pay for it is not allowed.

Same story when they tried to give severance pay to FiL's caretakers. They all lost their jobs just before Christmas and were some very wonderful women who performed their jobs well above what they were getting paid for. I felt that the desire to give them something in return was pretty honorable and well intentioned, but unfortunately, since they were already paid up on their salary, the executrix had no legal authority to pay them anything extra. I volunteered to pay it myself, but I wanted the estate to recognize me as a creditor who got reimbursed off the top. Nixed for the same reason as the funeral expenses.

When I offered to pay the severance packages myself, with some IOU's from each family member promising to repay me after they got the inheritance, it just sort of went nowhere.

The only informal agreement that has survived probate so far is a plan to give the FiL's car to the caretaker. Her ride broke down so much that the family had been letting her use the old man's car for a year or so just so she could get to work. After the funeral they agreed to give it to her as a part of her severance because she had been the supervisor of FiL's care and her devotion to him was like he was her own father. That survived one phone call to the attorney and the car was pulled, at least temporarily. But since the car was a direct bequest to one son the family voted to override that bequest, "Bill, we're giving the car to her". Since then Bill's wife has been obviously nudging him into squawking about some part of his inheritance being give away as a family gift, and he's paying for it all. "Now, remind me what we decided about my car again?"

The result is that the executrix has been slapped down enough that she is laying low on everything. If the attorney tells her to do something she does it and that's all she does. When you factor in that she treats all of her siblings like they're dullards and plays power games by withholding information, the result is a group of people with money issues, no clue about probate, and some trust issues. I think most of the executrix's issue resolve around the long-standing issues she has with her sisters and brothers, but also because she is extremely insecure about not knowing what the hell she is doing. She just doesn't share any information that she doesn't have to. Since nobody else knows what is going on, or what is supposed to happen, they let their imaginations run wild.

If this deal results in a lawsuit (other than the executrix finds her hands tied on enforcing the debt) it will be because they cooked up some off the books deal to try and circumvent a system they don't understand and it blows up in their faces. Somebody will think they got ripped off because it didn't go down exactly as it was written in the will and all it will take is somebody going to the wrong probate attorney to "ask questions".
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Old 01-12-2010, 05:51 PM   #26
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Well... I guess some of the posts just rubbed you the wrong way...

I gave two methods that I have seen used... but a long time ago... (I used to do estate taxes... again, not a lawyer... but not someone making stuff up)...

For some reason you keep coming back to the 'must collect debt' like she HAS to get the money OR write it off... nevermind... not worth the trouble...
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Old 01-12-2010, 05:55 PM   #27
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Darn, I say I'm disgusted with the thread and then you come along with something germane and knowledgeable.

So I understand your response, and from a layman's viewpoint I think it makes perfect sense. Just deduct from her share whatever it is that she owes. It's fair and should make everyone happy. However, I keep coming back to the point that says the executor has a duty to go after all debts owed, and has to get the court's authority to write off any bad debt.

So, if she has to go after all the debts including this one, and her alternatives on any unpaid debts is to sue or get it declared unpayable and removed from the estate's inventory, how does she legally go about distributing the remainder according to the scheme of "here's your share minus what you owed"? I don't think my SiL who owes the debt would balk and demand her "full" share, but people do weird things when it comes to money.

Edit to reply to Martha's edit regarding offset provision: I haven't found it. Doesn't mean it's not there. I did find an provision for exchanging things of value but that read more along the lines of like value.
I think you might be getting to twisted up in the details of the probate code and collection/forgiveness of debts. My guess, and it is only a guess as I don't know Texas probate, is that the accounting filed with the court will show the offset of the debt against the distribution and it won't be a big deal. No debt is forgiven and none needs to be collected. (The inventory of estate assets, or whatever they call it in Texas, should show the claim against the sister.)

Edit: The uniform probate code specifically allows for offset of the heirs share against the present value of the debt. I don't think that Texas has adopted the uniform probate code but it might have a similar practice.
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Old 01-12-2010, 06:14 PM   #28
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Here is the provision of the Uniform Probate Code:
Section 3‑903. Right of Retainer.

The amount of a non‑contingent indebtedness of a successor to the estate if due, or its present value if not due, shall be offset against the successor's interest; but the successor has the benefit of any defense which would be available to him in a direct proceeding for recovery of the debt.


The issue is whether Texas has something similar, or if not an actual statute, whether the practice is similar.
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Old 01-12-2010, 10:06 PM   #29
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In the jurisdictions I am familiar with:

1. the executor has a duty to collect all the assets of the estate - this will include money owed unless there is an explicit forgiveness arrangement recorded somewhere

2. an executor who fails to do this (or at least to try to do it) risks exposing him/herself to liability (i) by under reporting the value of the estate for tax purposes and (ii) reducing the value of the (other) beneficiaries interests in the estate

Most professional (as opposed to family/friend) executors will go to court and seek directions to avoid getting sued after the event. S/he will have to present the full facts to the court when doing so.

Without wishing to add to what appears to be an already difficult situation, unless it was the deceased's intention that the debt (inculding interest) be forgiven before the value of the estate was calculated, the debt should form part of the estate and either be collected for distribution or set off against the debtor's liability to the estate. Anything else represents a transfer of wealth to the debtor from the other beneficiaries without their consent.

That said, I would place preserving family relationships which matter to me ahead of the financial issues. I would probably suggest settling the estate on the agreed basis that the interest will be forgiven and the principal will be offset against the debtor's share of the estate.
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Old 01-13-2010, 07:58 AM   #30
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On the surface it seems simple to me. The executor, whose primary fiduciary responsibilities are to the estate, simply subtracts the amount of the debt owed to the estate from the amount that the debtor would otherwise have received. That would, I think, meet the legal intent of collecting on the debt.

That assumes that the amount that the debtor would have received exceeds the amount of the debt, which seems to be the case here.

It seems that the situation is made more complicated than necessary by misinformation, confusion, and the personalities involved. This is where the lawyer is worth his/her money.
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Old 01-14-2010, 11:49 AM   #31
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Here is the provision of the Uniform Probate Code:
Section 3‑903. Right of Retainer.

The amount of a non‑contingent indebtedness of a successor to the estate if due, or its present value if not due, shall be offset against the successor's interest; but the successor has the benefit of any defense which would be available to him in a direct proceeding for recovery of the debt.


The issue is whether Texas has something similar, or if not an actual statute, whether the practice is similar.
I searched the code and found there is no codified Right of Retainer in Texas. It may exist in practice, as the code says that the executor has to get court approval for bad debts not collected and any "legal offsets" that were made. No mention is made anywhere of what a "legal" offset is, so I can only assume it is either common law or mingled in some other code, most likely in the definitions of the business code.

I learned a lot about probate in Texas and the many differences it has to other state's probate system. For example, I wonder if any other state devotes an entire chapter to the inheritance rights for an estate's cattle or oil rights.

Thanks to Martha et al for the assist.
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Old 10-28-2011, 11:25 AM   #32
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We're dealing with the exact same problem here in NY and I would love to know what you did to resolve it. Hoping to hear from you...
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Old 10-28-2011, 12:33 PM   #33
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We're dealing with the exact same problem here in NY and I would love to know what you did to resolve it. Hoping to hear from you...
For my personal sanity, and the sake of marital harmony, I eventually washed my hands of the deal. Not that I didn't support my wife emotionally, but whenever the legality of all this came up I gave my standard smartass answer; "Maybe you should talk to an expert on this subject and get some competent advice."

Ultimately they allowed SIL an offset of her share equal to the remaining amount owed, and forgave the interest. I have no idea how this was accounted for in any report to the court, as the executrix continued to be a poor communicator right up the the bitter end (which was about two months ago). The majority of the heirs were by then desperate to get the remainder of the money in the estate and signed off on a waiver to forgo a final accounting.

As somebody previously wrote in this thread, there are no "estate police", and absent anyone raising a formal complaint the issue did not extend beyond the family's effort to work it out.

DW wanted at least an informal accounting of where all the money went, but by then one BiL was desperate for the money, the SiL who owed the debt was desperate for the money (but she has a nice Corvette), and the others didn't care one way or the other. So the Princess caved and signed the waiver just to get the beggars off her back.

Other than not marrying into a family of crazy people with no clue how to manage money, my best advice would be to get the heirs to communicate with each other. It is especially important for the executor to be as open and up front as possible about everything. If we could just follow the wisdom of Rodney King and "all get along", this sort of thing becomes a non-issue.

Or so I imagine it works out that way in sane families.
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Old 10-28-2011, 12:47 PM   #34
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Other than not marrying into a family of crazy people with no clue how to manage money, my best advice would be to get the heirs to communicate with each other. It is especially important for the executor to be as open and up front as possible about everything.
Or so I imagine it works out that way in sane families.
Thanks so much for the quick reply! Well, as far as not marrying into a family of crazy people...too late! And getting the heirs to communicate with each other ...again, too late. My husband has been very transparent and upfront with all involved, but only one sister seems to appreciate this. He does get a lot of stories of family problems from others...are there any sane families? Thanks again.
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Old 10-28-2011, 01:51 PM   #35
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It's odd how otherwise sane people lose all logic when it comes to death/funerals/wills. All too often family ties are so strained that permanent damage is done to relationships.
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Old 10-28-2011, 02:29 PM   #36
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...are there any sane families?
Add the prefix "in" to the word "sane", and I think you would cover most family situations (at least the one's I've had) ...
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Old 10-31-2011, 08:44 AM   #37
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Wish I had seen this thread before! We had something very similar, but even more tragic happen. What you guys worked out was very reasonable.

My wife's family had some business assets that were pretty valuable, in the $4-5 mill range. FIL died quite some time ago. For business reasons related to franchises, the had to gift a majority of the business stock to the BIL. BIL and my wife were the only children.

Once FIL died, BIL went wild. MIL couldn't and wouldn't control him. He was in and out of rehab and spent several months in jail for DUI probation violation. He spent business money like a drunken sailor. MIL for serveral years was getting a K-1 showing $100K+ in income that BIL was putting in his pocket while MIL paid the taxes on it. She didn't understand.

MIL died. BIL was off on a bender/drug binge. We discovered, among other things, that MIL had paid a $100,000+ Amex credit card bill one month, trying to hide his conduct from everyone. Poor MIL had around $200,000, 25% of the stock in a business that was about to go under and some real estate.

We tracked BIL down and got him sobered up for the funeral. He had been estranged from his wife for about 7 or 8 years and a divorce action was pending. Before he could get it done, he died at a very young age from either alcohol or drugs or the combination. He left behind a very pissed off widow who pretty much hated my wife and who had hated the MIL when she was alive. At the time, the BIL owed the business more than $1,000,000, not counting what wasn't even recorded, and owed the MIL another $600,000 or so that we could figure out. And, of course, his pissed off widow didn't want to pay it.

The short version is that there was a lawsuit. MIL had no real estate plan. We had to pay estate taxes. The pissed off widow did buy my wife out of the 25% of the stock, payable over time, and it is well collateralized. It was cheaper for the widow to do that than the deal with her husband's estate having to pay back the $1mill to the business.

It turned out okay, but the original poster who worked out a deal without a lawsuit made a smart move. The former SIL hasn't spoken to my wife in 4 years. The business had a pretty decent manager who has stayed on and kept it going, but the debt on it is huge. We're out of it.

The moral of the story is have an estate plan and talk to your kids about it. If you have parents, talk to them--easier said than done because many of them won't do it. Final moral is that lawsuits usually only really benefit the lawyers; if you can work something out that isn't quite fair to you but maintains some civility, you are better off.
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Old 11-02-2011, 09:56 AM   #38
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My former BIL ripped off his aunt to the tune of $1.8 million. The aunt was childless so the aunt's sister and his sister (my Ex) were robbed of an inheritance. He was a bank manager and we stumbled on the aunt's net worth from a bank statement stashed behind some tools in the basement.
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Old 11-02-2011, 03:24 PM   #39
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I was an executor. I probated the will, paid all taxes and probate fees, etc, and then offset the debt against the share of inheritance. No issues whatsoever. It was straightforward with no objection by the debtor.
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Debts owed to an estate
Old 02-18-2016, 09:30 AM   #40
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Debts owed to an estate

My brother borrowed money from my Mother a few years ago. He started paying the money back and died before he could pay it in full. He has 2 living children. My mother wants the money he owes reduced from the amount his 2 children would get. There are still 4 living siblings. She wants to do a codicil to her original will. How do we word this?
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