Inheritance

Dear Liz: My niece’s father remarried when she was a child. Her father and her stepmother bought a house as community property in California. Ten years later, her father died. Not long after that, her stepmother died. The stepmother had no children, and my niece was the only child of her father’s. The stepmother’s niece took the house and sold it, and kept all the proceeds. Was my niece entitled to any of the proceeds?

Answer: Your niece needs to consult an experienced attorney, because the answer depends on a number of factors.

Estate planning attorney Jennifer Sawday of Long Beach points to California Probate Code Section 6402.5, which could give your niece priority over other heirs for the property’s proceeds — but only if the facts line up. If the stepmother died no later than 15 years after the father, didn’t remarry, didn’t have children, didn’t put the home in a trust and didn’t make a will after the father died, then the California probate court could consider your niece an heir, Sawday says.

That’s a whole lot of ifs, and your niece will need expert advice to proceed.

Dear Liz: My husband and I made a living trust in 2004. He died in 2018, so his half became irrevocable. But while we were settling his estate, no one mentioned (though I can see clearly in the 2004 flow sheet) that all the assets from his half went into a survivor’s trust, controlled by me. I had the option to disclaim those assets within a year, which I did not do, so now everything is mine. Is this standard? If so, how can it be considered irrevocable?

Answer: The structure you’re describing is pretty standard for living trusts, which avoid probate, the court process that otherwise follows death. Living trusts are considered revocable when they are created, meaning the creators can make changes during their lifetimes. Eventually, the trust usually becomes irrevocable, which means changes no longer can be made.

Your living trust was entirely revocable while both of you were alive. That means you could make changes or cancel the trust entirely. When your husband died, part of the living trust became irrevocable — the part that created the survivor’s trust. You had the option to disclaim those assets, which means refusing to accept them, but you couldn’t dictate where the assets would go at that point or otherwise change the terms of the trust.

If your living trust had created a bypass trust instead, then that would have been irrevocable as well but the structure would have been quite different. The assets in the bypass trust would not become yours. Instead, you would get the income from the assets but they would ultimately be passed to heirs designated by your husband.

As mentioned earlier, bypass trusts can be helpful in blended family situations. They also are used to avoid or reduce estate taxes, which are no longer an issue for the vast majority of people. (A public service announcement: If your estate plan was created prior to 2010, you need to have it reviewed pronto. It’s entirely possible your plan includes a bypass trust that’s no longer necessary and that could needlessly complicate your estate.)

Dear Liz: My brother passed away three years ago leaving no will. All of his bills have been paid. I am unable to transfer his stocks and retirement account to my name. I have repeatedly checked the unclaimed properties list to no avail. No probate was required because the estate was too small. Will you please assist me with the steps I need to file to make this transaction occur?

Answer: Each state has its own laws for small estates and how to transfer assets, said Jennifer Sawday, an estate planning attorney in Long Beach.

In California, for example, a small estate is one with $166,250 or less in assets. If your brother’s estate was under this amount, you can complete a form that’s commonly referred to as a small estate affidavit and present it to the financial institutions or a stock transfer agent to start the transfer process. You can search online for a sample form or ask an attorney for help.