The beneficiaries listed on the life insurance and 401K are entitled to those assets. If you believe the doctors or hospital caused issues, you need to assert those claims not do your own offset. You will open yourself up to liability. How much is in the other assets. If its more than $150K, probate is necessary. Regardless, because you indicate there could be bills, you would be wise to consult a probate attorney.
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Mr. Shultz has provided his customary outstanding response. I agree with him and would simply add that, if the other three assets were titled in your sister's name alone, with no beneficiaries named, then probate will be necessary, unless the total value is less than $150k. Family agreements do not eliminate the need for probate.
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First, if you believe you have a claim for medical malpractice, consult with an attorney practicing in that area. Whether the estate needs to be administered depends on the value of assets. Consult with a probate attorney for the best way to handle the estate.
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I would simply add that your "fair split" may require gift tax returns. You definitely need a probate attorney.
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