Insolven Estate, relatives taking things now

[Heir7]

What is the name of your state (only U.S. law)? Arizona

A distant relative of mine died 9 months ago and at the time of her death she owed about $490,000 in mortgages, home equity lines of credit, and $180,000 in credit cards. Her home has been forclosed, so all that was left in her estate in terms of assets were two checking accounts with about $40,000 in them.

She was never married and had no children.

No probate was ever started.

One of her relatives-- next of kin-- took all of the money out of her checking accounts (about $40,000) and took all of her personal possessions (computers, furniture, appliances, etc.) before foreclosure of her house.

He was NOT the "personal representative" or executor because probate was never started. But he was able to convince the banks to release the money to him.

The credit card companies have been calling several different relatives asking for information about the "estate."

They don't seem to do anything else but call people on the telephone. They have never bothered to open probate themselves, and now there are no assets left to claim.

My question is this-- what is likely to happen to the next of kin relative who took all of the money out of the checking accounts without going through probate for an insolvent estate?

Since he was not the executor, he had no fiduciary responsiblity to uphold. So will he get into any trouble?

And is it unusual for creditors to ever open probate?

I am guessing that because the estate is insolvent, the creditors will do nothing but call people on the telephone, and therefore, nothing will ever come of this incident.

The creditors don't want to go through the huge legal expense of hiring a local attorney to go through every account and every asset without any VOLUNTARY help or information from relatives.

What do you think?

 

[justalayman]

My question is this-- what is likely to happen to the next of kin relative who took all of the money out of the checking accounts without going through probate for an insolvent estate?

It all depends on who finds out and how much any of the creditors push the issue. This relative has stolen the money. They apparently committed some sort of fraud on the bank to convince them they were entitled to the money.

Since he was not the executor, he had no fiduciary responsiblity to uphold. So will he get into any trouble?

Absolutely. They stole the money.

And is it unusual for creditors to ever open probate?

No

I am guessing that because the estate is insolvent, the creditors will do nothing but call people on the telephone, and therefore, nothing will ever come of this incident.

If nobody says anything, nothing will happen. If somebody speaks up and turns in the thief, a lot could happen.

The creditors don't want to go through the huge legal expense of hiring a local attorney to go through every account and every asset without any VOLUNTARY help or information from relatives.

they have no idea if there was any money to attempt to claim so spending money on a 0 return is not a good thing these days.

 

[Heir7]

So, the best thing the rest of the family can do is to keep quiet, and not answer any phone calls from creditors and collection agencies, and this will all probably blow over after awhile.

Without any information, they will have a hard time figuring out what happened.

Aren't the banks at least partially responsible because they released money to someone after knowing the account holder was dead without any probate documents to authorize the release of funds? I was personally surprised that they did something like this.

And, I'm thinking, even if the creditors did try to prosecute him, they wouldn't get very far because he could just claim that he didn't know it was against the law to take the money since he was next of kin and the banks allowed him to do it without any probate information at all.

I will keep updating this thread to let people know if the creditors ever do open probate by themselves.

What I've noticed from doing a lot web searches about this issue is that creditors and collection agencies don't seem to do anything but call the dead person's relatives on the phone. And that some people are foolish enough to talk to them, give them information, and even voluntarily pay them money. And that seems to be what the creditors rely on-- voluntary payment and cooperation from the family of the deceased person. To try to force the relatives to cough up information and money involuntarily would take a lot of legal fees and court costs, and since they don't know how much if anything is left in the estate, they don't want to do that.

 

[mba761]

With regard to the bank releasing the funds, Yes, they can be liable. They wont be liable to you though, they're liable to the creditors. (Those bank account funds are an estate asset) Without having documentation, they can not (should not) release funds to anyone who is not an account holder. Banks are required to have a court order documenting the Personal Representative or something indicating who is entitled to the funds. These funds are actually an estate asset and belong to the creditors. UNLESS, the relative was named as Beneficiary on the bank accounts or the account was titled with the next of kin listed within the bank account documentation. Yes, this relative stole the money. If the family does nothing, the creditors likely wont find out. If the family reports this as stolen, the bank will have to answer to the creditors. (the bank very well may have been a creditor themselves)
Do you know for certain that this relative took the money? The reason I ask is because if the bank was also a creditor they may have had right of offset and may have taken the money themselves. Not unusual.

 

[anteater]

Aren't the banks at least partially responsible because they released money to someone after knowing the account holder was dead without any probate documents to authorize the release of funds? I was personally surprised that they did something like this.

I am surprised also. And suspect that the relative committed some sort of fraud in doing so.

And, I'm thinking, even if the creditors did try to prosecute him, they wouldn't get very far because he could just claim that he didn't know it was against the law to take the money since he was next of kin and the banks allowed him to do it without any probate information at all.

I doubt that any creditor would pursue criminal charges in any event. They would simply sue for the return of the funds.

And that some people are foolish enough to talk to them, give them information, and even voluntarily pay them money. And that seems to be what the creditors rely on-- voluntary payment and cooperation from the family of the deceased person. To try to force the relatives to cough up information and money involuntarily would take a lot of legal fees and court costs, and since they don't know how much if anything is left in the estate, they don't want to do that.

You are not advocating fraud, are you?

 

[Heir7]

With regard to the bank releasing the funds, Yes, they can be liable. They wont be liable to you though, they're liable to the creditors. (Those bank account funds are an estate asset) Without having documentation, they can not (should not) release funds to anyone who is not an account holder. Banks are required to have a court order documenting the Personal Representative or something indicating who is entitled to the funds. These funds are actually an estate asset and belong to the creditors. UNLESS, the relative was named as Beneficiary on the bank accounts or the account was titled with the next of kin listed within the bank account documentation. Yes, this relative stole the money. If the family does nothing, the creditors likely wont find out. If the family reports this as stolen, the bank will have to answer to the creditors. (the bank very well may have been a creditor themselves)
Do you know for certain that this relative took the money? The reason I ask is because if the bank was also a creditor they may have had right of offset and may have taken the money themselves. Not unusual.

Yes, one of the banks in question was also a creditor of the deceased relative. At first I saw a "Counter Debit" listed on the checking account statement cleaning out the entire account, and I assumed that the bank was merely paying off some of the debt owed to it. But then the relative in question admitted to taking the money out of the account. There was no beneficiary listed for the account. He used what is called an "Affidavit To Collect Personal Property", which is just a notarized sheet of paper claiming that he is entitled to claim the assets of the deceased person. There was no court stamp on it or anything like that. The banks were really asleep at the switch. I was shocked that they fell for this so easily.

The rest of the relatives never figured on getting anything out of this insolvent estate and so they don't care that he took the money for himself. They don't want any of it. They are only concerned that this might get him in some trouble. He is well known as the "black sheep" of the family-- never following rules.

The rest of the family will keep quiet about it.

But the creditor bank where the money was withdrawn by counter debit might have the Affidavit he used on file, and that might come back to haunt him.

Evenso, the $40,000 of checking account money doesn't come anywhere close to paying off the huge amount of debts owed. Assuming they could somehow get the entire $40K , The creditors would only get back pennies on the dollar of what was owed to them on a prorated basis if probate was opened.

 

[Heir7]

I am surprised also. And suspect that the relative committed some sort of fraud in doing so.


I doubt that any creditor would pursue criminal charges in any event. They would simply sue for the return of the funds.


You are not advocating fraud, are you?

They would file a lawsuit against him for the return of funds? As far as I know, he has already spent most of the money. He's pretty much judgment proof because he has virtually no assets, and like I said, he went through the money rather rapidly, so there's very little for them to get back at this point.

No, I am not advocating fraud. Just keeping quiet and not getting a relative in trouble.

 

[anteater]

....He used what is called an "Affidavit To Collect Personal Property", which is just a notarized sheet of paper claiming that he is entitled to claim the assets of the deceased person. There was no court stamp on it or anything like that. The banks were really asleep at the switch. I was shocked that they fell for this so easily.

If I recall AZ law correctly, the court has no involvement in this sort of affadavit. And AZ law likely has some sort of "hold harmless" provision for those handing over assets upon presentation of the affadavit.

Me? I'd tip off the creditors just to watch the fun.

 

[BlondiePB]

No, I am not advocating fraud. Just keeping quiet and not getting a relative in trouble.

Relative...smellative....a thief is a thief is a thief.

 

[Heir7]

If I recall AZ law correctly, the court has no involvement in this sort of affadavit. And AZ law likely has some sort of "hold harmless" provision for those handing over assets upon presentation of the affadavit.

Me? I'd tip off the creditors just to watch the fun.

Doesn't that seem like a huge gaping hole in the law that it would allow things like this to occur?

Do other states have something similar, or do they require probate before doing something like this?

It seems like it was written to moves things forward and get assets out of the deceased person's name without tying up the probate court's time, but along with it comes the possibility that something like this would happen.

What fun? I would be disowned by the rest of the family for turning him in.

I was just curious about it and now I know.

Thanks to everyone for answering questions. This is a great forum.

 

[justalayman]

They would file a lawsuit against him for the return of funds? As far as I know, he has already spent most of the money. He's pretty much judgment proof because he has virtually no assets, and like I said, he went through the money rather rapidly, so there's very little for them to get back at this point.

No, I am not advocating fraud. Just keeping quiet and not getting a relative in trouble.

fine, so he may be judgment proof. Is he jail house butsecks proof? If it comes down to it, the bank could alert the authorities to the probably illegal actions and the state would be the one to persue criminal actions. Like you said, the bank that was presented the affidavit may very well have a copy and when they realize they were screwed out of money may not be so happy.

 

[Heir7]

fine, so he may be judgment proof. Is he jail house butsecks proof? If it comes down to it, the bank could alert the authorities to the probably illegal actions and the state would be the one to persue criminal actions. Like you said, the bank that was presented the affidavit may very well have a copy and when they realize they were screwed out of money may not be so happy.

That may happen. At this point, there isn't much that he could do about it since the money has been spent, and the rest of the family would not be willing to cough up $40K to keep him out of jail.

It won't be the first time he's been in jail, and I dare say it won't be the last time either.

I was surprised that the bank had not frozen the account at least to pay the debt owed to it. There were 3 different credit cards at that bank owed money, and the relatives get phone calls from 3 different collection agencies about those accounts. They are not very well coordinated.

I think the phrase that best describes probate is "You Snooze, You Lose." If creditors or beneficiaries want something out of an estate, they should jump on it immediately to keep the assets from disappearing. Creditors tend to rely too much on making phone calls, and not enough on actually doing something like hiring a local attorney to get the ball rolling on probate. They want to passively sit back and wait until the family opens probate and then they can file their claim almost for free with very little effort on their part. And that probably works in most cases, but in the cases where it does not work, they don't seem to know what to do other than make phone calls. Some of the assets were lost through foreclosure and repossession. If the creditors had opened probate promptly, they probably could have received some money out of those assets. Now it's too late.

 

[justalayman]

I think the phrase that best describes probate is "You Snooze, You Lose." If creditors or beneficiaries want something out of an estate, they should jump on it immediately to keep the assets from disappearing. Creditors tend to rely too much on making phone calls, and not enough on actually doing something like hiring a local attorney to get the ball rolling on probate. They want to passively sit back and wait until the family opens probate and then they can file their claim almost for free with very little effort on their part. And that probably works in most cases, but in the cases where it does not work, they don't seem to know what to do other than make phone calls. Some of the assets were lost through foreclosure and repossession. If the creditors had opened probate promptly, they probably could have received some money out of those assets. Now it's too late.

It is not the creditors place to open probate and in many cases do not have the legal authority to do so. What are they supposed to do, hire people just to watch the obits and check against their debtors list? You have to get real with this. Laws are only effective for those that respect the law. If a person is so low as to steal, they will find a way. That is when our penal system comes in to play.

You honestly have a very poor attitude about this. It is not the creditors duty to act as you have suggested. It is the responsibility of the family or an attorney hired for this purpose to take care of these matters.

Maybe this lack of concern of yours for anothers assets and the other persons lack of respect for any level of law are a sign of the downfall of our society. With the current state of banking affairs, I am not surprised to hear a story such as yours. People just don;t care about doing the "right thing" anymore. Maybe that is why we are where we are today and the financial mess our country is in.

 

[Heir7]

It is not the creditors place to open probate and in many cases do not have the legal authority to do so. What are they supposed to do, hire people just to watch the obits and check against their debtors list? You have to get real with this. Laws are only effective for those that respect the law. If a person is so low as to steal, they will find a way. That is when our penal system comes in to play.

You honestly have a very poor attitude about this. It is not the creditors duty to act as you have suggested. It is the responsibility of the family or an attorney hired for this purpose to take care of these matters.

Maybe this lack of concern of yours for anothers assets and the other persons lack of respect for any level of law are a sign of the downfall of our society. With the current state of banking affairs, I am not surprised to hear a story such as yours. People just don;t care about doing the "right thing" anymore. Maybe that is why we are where we are today and the financial mess our country is in.

What is causing the current crisis in our country is banks lending ungodly amounts of money to people who obviously can't pay it back. Credit has been far to easy to obtain.

Under Arizona Law, any creditor can open probate at 45 days after death. None of them have bothered to do that.

It is not the family's responsibility to open probate and pay creditors who were foolish with their lending practices. Opening probate costs money and is an enormous headache for the executor, not to mention the fact that it opens the executor up to lawsuits from creditors.

The "do nothing" approach is the best approach to use for insolvent estates because the heirs won't get any money out of the estate anyways, legally.

"Do nothing. In general, relatives and friends have no legal obligation to do anything under the circumstances --- to pay the debts, to communicate with the creditors, to open a probate, whatever (some exceptions: a surviving spouse or if someone has contractually agreed to do it). So, by far the simplest solution is to walk away from the problem --- don't get involved. And if you choose this alternative, you should not begin taking any action at all, for example, by communicating with the creditors, and then change your mind and decide not to get involved any further. If you decide not to be involved, don't get involved --- from the start. Let the creditors do what they think is best to protect their own interests.



The "problem," however, with this alternative is that even if you have no legal obligation to pick up the pieces of the Decedent's death, the creditors and their collection agencies will do everything they can to try to get you to assume and pay the Decedent's obligations --- a true guilt trip. And they likely won't take "No" for an answer and will continue to hound you. After all, all they want is to get paid, and they don't care where the money comes from, as long as sooner or later, eventually, they get paid.



Consequently, while you may have no legal obligation to assume and pay an insolvent Decedent's obligations, if you tough it out and don't pay the creditors, you may not be out any money --- but ... the problem is that this alternative will likely cost you emotionally, with your getting repeatedly badgered by the creditors and their collection agencies, who will likely make threats to affect your credit ratings etc. This is not a "cost free" alternative."


An Insolvent Decedent's Estate

 

[Heir7]

And with that info, I close this thread.