Most people know that although football star O.J. Simpson was found not guilty for the murders of his ex-wife Nicole Brown Simpson and Ron Goldman criminally in 1995, he was found responsible for their deaths in a 1997 civil case. The Brown and Goldman families were awarded over $33 million by a civil jury, much of which O.J. Simpson was able to avoid paying. With the recent death of Simpson, the question of whether his estate is responsible for paying the balance of this judgement is front and center.
When an individual passes away, the management of their debts and outstanding financial obligations doesn't simply vanish. Among these obligations, civil judgments stand out due to their potential impact on the estate of the deceased. A civil judgment is a court order that requires the debtor to pay a certain amount of money to the creditor. But what happens to such judgments when the debtor dies? Can creditors still pursue payment from the estate of the deceased? Let's delve into the intricacies of this matter and explore the legal landscape surrounding civil judgements against deceased debtors.
The Estate: First Stop for Creditors
Upon death, the assets of the deceased are compiled into what is known as the estate. The estate is responsible for settling any outstanding debts, including civil judgments. In legal terms, the estate becomes the new debtor. This doesn't mean, however, that creditors can directly access the assets; they must go through a legal process.
Probate Process: A Gateway for Creditors
The probate process is the legal procedure through which the estate of a deceased person is administered. During probate, the executor or administrator of the estate notifies creditors, pays debts, and distributes the remaining assets according to the will or state law if there's no will. It is during this legal process that creditors, including those holding civil judgments, can make claims against the estate. Each state has its own probate laws and since Simpson resided in Nevada, the estate would be settled there.
Claiming Against the Estate
For a creditor to claim against the estate, they typically need to file a claim within a specified period of time outlined by state law, known as the "creditor's claim period." This period allows creditors to come forward with their claims of debts owed by the deceased. The executor of the estate then pays these debts out of the estate’s assets before distributing the remainder to the heirs. If a creditor fails to file a claim within this period, they might lose the right to collect the debt.
Priority of Debts
Not all debts are treated equally when an estate is being settled. There are laws that specify the order in which debts should be paid from the assets of the estate. Generally, funeral expenses, last illness expenses, and taxes take priority over other debts, which include most civil judgments. If the estate doesn’t have enough assets to pay all debts, some creditors may not get paid.
Exceptional Assets: Beyond the Reach of Creditors
It’s important to note that not all assets of the deceased are subject to probate and thus might be beyond the reach of creditors. These can include life insurance policies, retirement accounts, and other assets that have a designated beneficiary. Such assets pass directly to the beneficiaries and are generally not used to pay off debts, including civil judgments.
Estate Planning Tools
There are also a number of estate planning strategies that can protect assets from creditors but it’s crucial to navigate these options carefully within the boundaries of the law, as improper asset protection can lead to allegations of intent to defraud. Some of these strategies include Irrevocable Trusts, Life Insurance Trusts, Retirement Protector Trusts, Domestic Asset Protection Trusts, and Family Limited Partnerships which can all add a layer of protection from creditors. Some states allow for certain types of assets to be exempt from creditor claims, such as a portion of the primary residence (Declared Homestead Declaration) and retirement accounts.
Legal and Ethical Considerations
It is critical to approach assets protection with transparency and within legal boundaries. Asset protection planning should be done proactively, long before any judgements or creditor issues arise. Once a claim or lawsuit is foreseeable or pending, transferring assets to protect them from creditors may be considered fraudulent and could be reversed by the courts.
Given the complexities and legal nuances of asset protection and the fact that it can vary from state to state, it will be interesting to see how any claims against the estate of O.J. Simpson play out. It is unknown what the size of his estate is as he reportedly lived off his NFL pension which was exempt from creditors.
It is advisable to consult with qualified trust and estate professionals who specialize in estate planning and asset protection to provide guidance with an individual’s specific situation. One tool nearly all California homeowners can use to protect themselves is a Declared Homestead Declaration to protect a portion of their equity from most judgement creditors.
If you, a friend, or family member would like legal help with this protective device or other estate planning help, please reach out to our Intake Department at 760-448-2220 or at https://www.geigerlawoffice.com/contact.cfm. We have offices in San Diego County (Carlsbad) and Orange County (Laguna Niguel), but we assist can families throughout California as well.
