Medi-cal liens, Probate Lenders, Debts and Fraud

Risk of expensive loans. Because probate is a public process, beneficiaires names and addresses, and what they might inherit, are listed on the court register.   Probate lenders, who often charge 300% interest, will reach out to beneficiaries and offer to give them a loan.   They tell the beneficiaries they might not get their distribution for a year, the distribution is uncertain, there may be creditor claims, etc.  Many beneficiaries will choose to take a probate loan rather than wait for their distribution. This sometimes happens even a few months before the distribution, which is a little heartbreaking.   The beneficiary ends up getting $15,000 instead of $65,000.  This is often available to trust beneficiaries as well, but since their information is not public, it is not as common to be targeted; the beneficiary has to look for it.     Direct distributions avoid this whole mess.  A beneficiary might try to take an early loan on the property they are inheriting, but it is practically very difficult.  

  

Risk of taxes reducing distributions. If a probate is opened, tax authorities have to be notified and past-due income taxes must be paid. We have seen many estates where years of unfiled delinquent taxes reduced the estate value to zero.   If that same estate had been distributed under a transfer on death deed or through beneficiary designations, it is much less likely that back taxes would have ever been known about or pursued.

 

Risk of Medi-Cal debts reducing distributions. If a probate is opened, Medi-Cal has to be notified and incurred expenses must be paid. We have seen many estates where these are significant amounts.   If that same estate had been distributed under a transfer on death deed or through beneficiary designations, it is much less likely that these costs would have ever been known about or pursued.

 

Risk of fraud. Fraud is common in probate court. Because a probate administration is a public filing, the name and address of executors, and the deceased person's information are made available to fraudsters.  Often, executors receive real-looking bills from scam artists and pay the bills. There is no way to get the funds back from these fraudulent creditors.  If no probate is open, then these fraudsters are avoided.