How to Determine Entitlement to Distribution of Decedent's Estate?

In the recent California decision In re Estate of Robert Flores, after an heir-hunter firm informed appellant Donald Carmody he was the heir of a nephew he never knew existed, he thought it was a scam.

He assigned any rights he might have in the nephew’s estate to his brother, John Carmody, believing any such rights were worthless.

However, the estate had value. John filed a petition under Probate Code section 11700 for determination of entitlement to distribution of the nephew’s estate.

He obtained a determination that he and Donald were the nephew’s heirs, each entitled to a 50 percent share of the estate. John died before the request for a final distribution order was submitted to the court.

When the administrator of the nephew’s estate sought a final distribution order that would take into account Donald’s assignment of his rights to John, Donald objected, claiming the prior order determining entitlement to distribution was final, binding, and prohibited the court from recognizing his prior assignment of his interest to John. The trial court rejected this claim.

The appellate court concluded the trial court properly gave effect to Donald’s assignment of his interest in the estate to John. John’s rights as an assignee were not raised or litigated in the section 11700 proceeding, which was limited to a determination of heirship.

John did not forfeit or waive his rights as an assignee by failing to assert those rights in the section 11700 proceeding, or by failing to file a statement of interest.

The appellate court therefore affirmed the trial court judgment.

Robert Allen Flores (Decedent) died intestate (i.e., without a will or trust). He was not survived by a spouse, registered domestic partner, children, parents, or siblings.

In 2018, American Research Bureau, Inc. (ARB), an “heir-hunter” firm, contacted brothers John and Donald to inform them that they were Decedent’s maternal uncles.

John and Donald were therefore Decedent’s heirs, and ARB offered to work with them in seeking a portion of the estate. ARB sent Donald a copy of a 1930 federal census record reflecting that John and Donald’s father had a first wife prior to marrying their mother. ARB informed Donald that his father’s first wife was the Decedent’s grandmother.

Donald was skeptical. Neither John nor Donald ever knew that they had a half sister— Decedent’s mother. Donald told John he thought they were being “ ‘scammed.’ ”

In e-mail correspondence, ARB assured Donald that ARB was “not a scam,” and added: “If you are still not interested in receiving your portion of the estate, we can work with you so that you can assign your share to your brother if you wish.”

John told Donald that he planned to “ ‘put in’ . . . for the estate of robert flores” because he “could use some pesos.”

That month, John signed an agreement assigning to ARB one-fourth of any interest he might have in Decedent’s estate. In November 2018, ARB e-mailed Donald again to inform him that it was “moving forward in this matter on behalf of your brother John,” and asked if Donald wanted to be included in the proceeding with ARB’s assistance.

Donald reiterated that he believed ARB might be “running a scam” and that “time will tell.” However, he also had “no problem assigning [his] share of this ‘estate’ to [his] brother.”

Meanwhile, Patricia McCluskey filed a petition requesting that the probate court appoint her as administrator of Decedent’s estate. McCluskey alleged she was Decedent’s first cousin, once removed, and that she and four alleged second cousins were Decedent’s heirs-at-law and therefore entitled to the estate. McCluskey did not identify John or Donald as potential heirs.

In January 2019, John filed objections to McCluskey’s petition on the basis that he, as a maternal uncle, was more closely related to Decedent and was entitled to inherit Decedent’s estate to the exclusion of McCluskey and the alleged second cousins listed in her petition.

Around the same time, John filed a competing petition for letters of administration nominating Brenda Depew as the administrator of Decedent’s estate. His petition identified Donald as Decedent’s other living maternal uncle.

In February 2019, the court denied McCluskey’s petition and granted John’s petition. The court issued letters of administration appointing Depew as the administrator of Decedent’s estate.

In 2019, John filed a “Petition to Determine Entitlement to Estate Distribution.” He listed himself and Donald as Decedent’s sole heirs-at-law and asserted they were each entitled to half of the estate.

The petition did not reference the assignment from Donald to John or the assignment from John to ARB. No other person filed a statement of interest asserting entitlement to distribution of Decedent’s estate or objecting to John’s petition.

The court granted the petition and, in October 2019, entered an “Order Determining Entitlement to Estate Distribution.” The order found that “[a]ll notices have been duly given as required by law,” declared that John and Donald were the “heirs-at-law of the decedent,” and found each was entitled to a 50 percent interest in the estate.

John died in 2020. In his will, he named his stepdaughters Kara Masteller and Dawn Bailey as beneficiaries of his estate, and Masteller as the executor.

In April 2022, the trial court concluded the issues presented in the “heirship petition” were “to determine who the heirs of the estate were and their respective percentage of interests in the estate.”

The October 2019 order “decided which individuals were statutorily entitled to inherit from the decedent but did not decide the distribution of those interests . . . .”

The court reasoned Donald could not invoke collateral estoppel because “the issues in the heirship petition and petition for distribution are not identical and the validity of the challenged assignment was not presented to the court for determination in the heirship petition.”

The court rejected Donald’s waiver argument, noting John had not sought such relief in the prior petition and instead had only requested that the court “determine conclusively, against any claims by any other potential heirs, who was entitled to inherit the estate of a decedent who died without a will.”

The court further indicated it gave “very little weight” to Donald’s “one-sided recitation” of a phone call during which John allegedly rescinded Donald’s assignment to him, and it found John had not waived or rescinded the assignment.

Finally, the court determined Donald freely assigned his interest in the estate to John without duress. The assignment was enforceable despite the lack of consideration because Donald “believed nothing would come of ARB’s efforts and . . . valued his own interest in the estate at zero.”

Under section 11700, “[a]t any time after letters are first issued to a general personal representative and before an order for final distribution is made, the personal representative, or any person claiming to be a beneficiary or otherwise entitled to distribution of a share of the estate, may file a petition for a court determination of the persons entitled to distribution of the decedent’s estate.”

This proceeding is permissive. If no petition is filed under section 11700, the court may determine who is entitled to distribution in a final distribution order.

Notice of the proceeding must be given to each known heir and devisee whose interest would be affected by the petition, the Attorney General in some cases, the personal representative of the estate, and all persons who have requested special notice in the estate proceeding.

Section 11702 allows “[a]ny interested person” to appear and to file a written statement of the person’s interest in the estate in advance of the hearing.

If an interested person fails to timely file a written statement, the case is still at issue and may proceed. The interested person “may not participate further in the proceeding for determination of persons entitled to distribution, but the person’s interest in the estate is not otherwise affected.”

Section 11705, subdivisions (a) and (b), provide that the trial court “shall make an order that determines the persons entitled to distribution of the decedent’s estate and specifies their shares,” and “[w]hen the court order becomes final it binds and is conclusive as to the rights of all interested persons.”

While section 11700 allows any person claiming to be a beneficiary or otherwise entitled to distribution of a share of a decedent’s estate to file a petition, section 11702 concerns any other persons with an interest in the estate.

As noted above, under section 11702, any interested person may appear in a section 11700 proceeding and file a statement of interest. An interested person who fails to file a statement of interest may not participate further in the proceeding, “but the person’s interest in the estate is not otherwise affected.”

On its face, this language indicates that the failure to file a statement of interest does not amount to an automatic forfeiture of the interested person’s rights.

As a result, the effect of the proceeding on a person’s interest in the estate must depend on what is litigated and decided in the section 11700 proceeding.

In this case, the section 11700 proceeding determined only the identity of Decedent’s heirs and their respective shares of the estate. John’s interest as an assignee was contingent on Donald first being determined to be an heir of Decedent.

Even as an assignee, John was bound by the determination that Donald was Decedent’s heir and was entitled to a one-half share of the estate. John could not have subsequently argued that Donald was entitled to a greater or lesser share, for example.

Yet to conclude, as Donald contends, that John’s rights as an assignee to Donald’s share of the estate were eviscerated because he failed to file a statement of interest, we would have to ignore the express language of section 11702, subdivision (b)(2).

Indeed, Donald ignored section 11702, subdivision (b)(2) altogether. He maked no attempt to explain how his argument that John’s failure to file a statement of interest waived his assignee interest for all time can be squared with section 11702, subdivision (b)(2)’s provision that, other than preventing an interested person from participating further in the proceedings, the failure to file a statement of interest does not otherwise affect that person’s interest in the estate.

Donald’s arguments were also inconsistent with caselaw which has long drawn a distinction between heirs, devisees, and legatees, who have a direct entitlement to a share of a decedent’s estate, and persons whose only interest in the estate is derivative of the rights of an heir, devisee, or legatee.

Donald did not acknowledge the historical distinction courts have drawn between those with direct claims to an estate, such as heirs, and those with only indirect claims, such as the assignees of heirs.

Instead, he contended that because section 11700 concerns distribution, and allows for the participation of any interested person, the October 2019 order must be understood as finally adjudicating—and in this case eliminating—the rights of all other interested persons.

Yet, he failed to cite a single legal authority holding that where the claims of an heir’s assignee are not raised in a petition to determine entitlement to distribution, the court’s resulting order determining the identity or respective interests of the heirs moots, eliminates, or otherwise precludes those unadjudicated assignee claims.

Here, John’s section 11700 petition sought a determination of heirship, not his rights as an assignee. Indeed, John’s rights as an assignee could not be perfected until the probate court first determined the identity of Decedent’s heirs and their respective interests in the estate.

Under sections 11702 and 11705, the October 2019 order prevented John from challenging Donald’s entitlement to a portion of the estate as an heir, but it did not affect his contractual rights as Donald’s assignee, which were only derivative of and contingent upon Donald’s rights as an heir.

Likewise, in this case, John’s rights as an heir were different from his contractual rights as Donald’s assignee. The trial court could not order distribution consistent with the assignment until it had first determined the identity and shares of the heirs.

As explained above, under section 11702, the lack of a statement of interest did not affect John’s rights as an assignee. Donald was afforded an opportunity to contest the validity of the assignment prior to the issuance of the final distribution order. Even if the record could be construed as reflecting a bifurcation of the section 11700 proceeding, we would find any error harmless.

In sum, neither John’s petition nor any other filing in the section 11700 proceeding raised the issue of Donald’s assignment to John.

There was no request for distribution based on the assignment or challenge to the assignment. No interested party filed a statement of interest. The trial court’s October 2019 order determined heirship. John’s contractual rights as an assignee remained unaffected.

LESSONS:

1.         To avoid dying intestate, persons should have a will or even better, a living trust that specifies the beneficiaries of an estate.

2.         Donald made a bad decision without consulting an attorney or determining that ARB was a legitimate company.

3.         Donald's assignment was gratuitous on his part when he did not learn the complete information and there is no evidence that Donald would have been harmed by his suspected scam.