2009 California Probate Code - Section 11440-11446 :: Chapter 3. Allocation Of Debts Between Estate And Surviving Spouse

11440.  If it appears that a debt of the decedent has been paid or
is payable in whole or in part by the surviving spouse, or that a
debt of the surviving spouse has been paid or is payable in whole or
in part from property in the decedent's estate, the personal
representative, the surviving spouse, or a beneficiary may, at any
time before an order for final distribution is made, petition for an
order to allocate the debt.

11441.  The petition shall include a statement of all of the
following:
   (a) All debts of the decedent and surviving spouse known to the
petitioner that are alleged to be subject to allocation and whether
paid in whole or 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.

11442.  If it appears from the petition 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 estate 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.

11443.  The petitioner shall give notice of the hearing as provided
in Section 1220, together with a copy of the petition and the order
to show cause, if any.

11444.  (a) The personal representative and the surviving spouse may
provide for allocation by agreement and, on a determination by the
court that the agreement substantially protects the rights of
interested persons, the allocation provided in the agreement shall be
ordered by the court.
   (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 decedent 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 decedent'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 decedent'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 decedent'
s estate 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 personal representative 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.

11445.  On making a determination as provided in this chapter, the
court shall make an order that:
   (a) Directs the personal representative to make payment of the
amounts allocated to the estate by payment to the surviving spouse or
creditors.
   (b) Directs the personal representative 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
personal representative. To the extent that property or interests of
the surviving spouse in the possession or control of the personal
representative are insufficient to satisfy the allocation, the court
order shall summarily direct the surviving spouse to pay the
allocation to the personal representative.

11446.  Notwithstanding any other statute, funeral expenses and
expenses of last illness shall be charged against the estate of the
decedent 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.