SECTIONS 19320-19326 - California Statutes

PROBATE CODE

SECTION 19320-19326

19320. If it appears that a debt of the deceased settlor has been
paid or is payable in whole or in part from property in the deceased
settlor's trust, then the trustee, the surviving spouse, the personal
representative, if any, or a deceased settlor's probate estate, or a
beneficiary may petition for an order to allocate the debt.

19321. A petition under Section 19320 shall include a statement of
all of the following:
(a) All debts of the deceased settlor and surviving spouse known
to the petitioner that are alleged to be subject to allocation and
whether paid in whole or in part or unpaid.
(b) The reason why the debts should be allocated.
(c) The proposed allocation and the basis for allocation alleged
by the petitioner.

19322. If it appears from the petition under Section 19320 that
allocation would be affected by the value of the separate property of
the surviving spouse and any community property and quasi-community
property not administered in the trust, and if an inventory and
appraisal of the property has not been provided by the surviving
spouse, the court shall make an order to show cause why the
information should not be provided.

19323. (a) At least 30 days before the time set for the hearing on
the petition, the petitioner shall cause notice of the time and place
of the hearing and a copy of the petition to be served on the
surviving spouse in the manner provided in Chapter 4 (commencing with
Section 413.10) of Title 5 of Part 2 of the Code of Civil Procedure.
(b) At least 30 days before the time set for the hearing on the
petition, the petitioner shall cause notice of the time and place of
hearing, together with a copy of the petition, to be mailed to each
of the following persons who are not petitioners:
(1) All trustees of the trust and of any trusts to which an
allocation of liability may be approved by the court pursuant to the
petition.
(2) All beneficiaries affected.
(3) The personal representative of the deceased settlor's estate,
if any is known to the trustee.
(4) The Attorney General, if the petition relates to a charitable
trust subject to the jurisdiction of the Attorney General, unless the
Attorney General waives notice.

19324. (a) The trustee, the personal representative, if any, of a
deceased settlor's probate estate, and the surviving spouse may
provide for allocation of debts by agreement so long as the agreement
substantially protects the rights of other interested persons. The
trustee, the personal representative, or the spouse may request and
obtain court approval of the allocation provided in the agreement.
(b) In the absence of an agreement, each debt subject to
allocation shall first be characterized by the court as separate or
community, in accordance with the laws of the state applicable to
marital dissolution proceedings. Following that characterization, the
debt or debts shall be allocated as follows:
(1) Separate debts of either spouse shall be allocated to that
spouse's separate property assets, and community debts shall be
allocated to the spouses' community property assets.
(2) If a separate property asset of either spouse is subject to a
secured debt that is characterized as that spouse's separate debt,
and the net equity in that asset available to satisfy that secured
debt is less than that secured debt, the unsatisfied portion of that
secured debt shall be treated as an unsecured separate debt of that
spouse and allocated to the net value of that spouse's other separate
property assets.
(3) If the net value of either spouse's separate property assets
is less than that spouse's unsecured separate debt or debts, the
unsatisfied portion of the debt or debts shall be allocated to the
net value of that spouse's one-half share of the community property
assets. If the net value of that spouse's one-half share of the
community property assets is less than that spouse's unsatisfied
unsecured separate debt or debts, the remaining unsatisfied portion
of the debt or debts shall be allocated to the net value of the other
spouse's one-half share of the community property assets.
(4) If a community property asset is subject to a secured debt
that is characterized as a community debt, and the net equity in that
asset available to satisfy that secured debt is less than that
secured debt, the unsatisfied portion of that secured debt shall be
treated as an unsecured community debt and allocated to the net value
of the other community property assets.
(5) If the net value of the community property assets is less than
the unsecured community debt or debts, the unsatisfied portion of
the debt or debts shall be allocated equally between the separate
property assets of the deceased settlor and the surviving spouse. If
the net value of either spouse's separate property assets is less
than that spouse's share of the unsatisfied portion of the unsecured
community debt or debts, the remaining unsatisfied portion of the
debt or debts shall be allocated to the net value of the other spouse'
s separate property assets.
(c) For purposes of this section:
(1) The net value of either spouse's separate property asset shall
refer to its fair market value as of the date of the deceased
settlor's death, minus the date-of-death balance of any liens and
encumbrances on that asset that have been characterized as that
spouse's separate debts.
(2) The net value of a community property asset shall refer to its
fair market value as of the date of the deceased settlor's death,
minus the date-of-death balance of any liens and encumbrances on that
asset that have been characterized as community debts.
(3) In the case of a nonrecourse debt, the amount of that debt
shall be limited to the net equity in the collateral, based on the
fair market value of the collateral as of the date of the decedent's
death, that is available to satisfy that debt. For the purposes of
this paragraph, "nonrecourse debt" means a debt for which the debtor'
s obligation to repay is limited to the collateral securing the debt,
and for which a deficiency judgment against the debtor is not
permitted by law.
(d) Notwithstanding the foregoing provisions of this section, the
court may order a different allocation of debts between the deceased
settlor's probate estate, trust, and the surviving spouse if the
court finds a different allocation to be equitable under the
circumstances.
(e) Nothing contained in this section is intended to impair or
affect the rights of third parties. If a trustee, a personal
representative, if any, of a deceased settlor's probate estate, or
the surviving spouse incurs any damages or expense, including
attorney's fees, on account of the nonpayment of a debt that was
allocated to the other party pursuant to subdivision (b), or as the
result of a debt being misallocated due to fraud or intentional
misrepresentation by the other party, the party incurring damages
shall be entitled to recover from the other party for damages or
expense deemed reasonable by the court that made the allocation.

19325. On making a determination as provided in this chapter, the
court shall make an order that:
(a) Directs the trustee to make payment of the amounts allocated
to the trust by payment to the surviving spouse or creditors.
(b) Directs the trustee to charge amounts allocated to the
surviving spouse against any property or interests of the surviving
spouse that are in the possession or control of the trustee. To the
extent that property or interests of the surviving spouse in the
possession or control of the trustee are insufficient to satisfy the
allocation, the court order shall summarily direct the surviving
spouse to pay the allocation to the trustee.

19326. Notwithstanding any other statute, funeral expenses and
expenses of last illness, in the absence of specific provisions in a
will or trust to the contrary, shall be charged against the deceased
settlor's probate estate and thereafter, against the deceased settlor'
s share of the trust and shall not be allocated to or charged
against, the community share of the surviving spouse, whether or not
the surviving spouse is financially able to pay the expenses and
whether or not the surviving spouse or any other person is also
liable for the expenses.