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A primary purpose of a will is to exactly identify who the testator wants to inherit their estate. If the person does not care, they can simply choose to abstain from writing a will and let the laws of intestate succession govern the disposition of the estate. Consequently, their next of kin, heirs to use legal parlance, would inherit their estate.
In a recent unpublished appellate opinion, the California Court of Appeal had to determine which individual the testator was referring to in their will.
"The decedent had two "Janets" in his life: (1) a daughter named Janet
Benninghoff, who was known as Janet Derickson before she married; and
(2) a companion, associate, paramour, or friend of sorts named Janet
Whelan. Whelan contends that she is "Janet Derickson [] Whelan." The
estate administrator and Benninghoff assert that Benninghoff is."
"A page entitled "Upon Death" lists five numbered clauses. The first
clause bequeaths a piece of real estate to "Janet Derickson nee Whelan."
The second gives another property to "Janet Benninghofen." The third
provides that "Janet Derickson-Whelan, Linn Derickson Jr and Judy
Hughes" will share equally in the profits from several of the decedent's
assets; the fifth specifies that upon the death of "Janet Derickson,
Whelan [¶] Linn Jr Derickson and Judy Hughes," the aforementioned profit
shares become part of a remaining trust. The fourth provides that the
equity in trust "other than items 1 and 2" goes to Hughes's three
children. A separate page entitled "Put in Living Trust" and the
following page list ten assets, including the homes referenced in the
first and second clauses of the "Upon Death" document."
The court ultimately held that
"Whelan prevails. Because she had a romantic relationship of some kind with the decedent, "Janet Derickson
[] Whelan" could plausibly refer to her; the two may well have planned
to wed at some point in the future. The same cannot be said of
Benninghoff, who has no ties to the surname "Whelan." And the will
provides for Benninghoff as "Janet Benninghofen" elsewhere. In light of
the language used and the circumstances surrounding the will's
execution, there is only one reasonable construction. Whelan is "Janet
Derickson [] Whelan."
Another excerpt from the opinion shed light on how the family viewed the decedent's lady friend:
"At some point before his separation from Mary Sue, the decedent began a
relationship of sorts with appellant Janet Whelan. The precise contours
of Whelan's status vis-à-vis the decedent are unclear. The decedent's
obituary dubbed her a "special friend." She has described their
association as "what politely might be termed an `extramarital illicit
relationship' for an extended period." In briefing before the probate
court, Mary Sue, Benninghoff, and the administrator used the more
colorful designation "paramour." However, in other briefing before the
probate court, the administrator opted for more distant language,
stating Whelan "was apparently an associate of the [d]ecedent, but the
extent of that relationship is unknown."
San Bernardino County Superior Court case # PROPS0900650.
A spousal property petition can be used by a surviving spouse to collect the community property of their late spouse. This method is preferable to probate because probate typically takes anywhere between 9-15 months to complete and a spousal property petition can be completed in roughly 2-3 months (depending on the court's calendar). The distinguishing feature is that the property in question must be the late spouse's community property. A spousal property petition cannot be used to collect the separate property of the late spouse.
A recent unpublished appellate opinion addressed this issue:
"Jackson and decedent had been married for 36 years when decedent died
in March 2016. Ten years prior, using funds she inherited from her
parents, Jackson had purchased a home (the property) in Rio Vista,
California, with title held by successor trustees of the family trust.
Jackson and decedent lived together in the home, and maintained the
property using community property funds. In 2011, the property was
transferred from the successor trustees to Jackson and decedent as joint
tenants.
Two years later, Jackson and decedent were struggling to pay their
expenses and determined they would take out a reverse mortgage on the
home. When they applied for the reverse mortgage, the lender advised
Jackson's name would need to be removed from title to the property
because she was not yet 62 years old and thus, did not qualify. In order
to obtain the reverse mortgage, Jackson signed an interspousal transfer
grant deed, granting the property to decedent as his sole and separate
property."
The couple did not seek legal counsel about the title change and
Jackson states the "reverse mortgage company did not provide guidance on
this issue." All funds from the reverse mortgage were deposited to the
couple's joint bank account, and all expenses related to maintaining the
property, including property taxes, were paid from the same account.
In 2016, decedent died intestate. He was survived by Jackson and
three adult children. Jackson petitioned the trial court to have the
property distributed entirely to her as the surviving spouse. After
continuing the hearing twice and accepting supplemental briefing and
evidence from Jackson regarding her interest in the property, the trial
court determined the property was decedent's sole and separate property.
The trial court ordered one-third interest in the property to Jackson
as the surviving spouse."
Solano County, Superior Court No. FPR047868
One of the many steps during the probate process is to inventory and appraise the decedent's estate. Every person will pass away with something to their name, whether millions of dollars in assets or the clothes on their back. Probate only applies though when the decedent's "probate" assets exceed $150,000. Probate is a quoted term in the following sentence because not every asset a person has when they pass away is subject to the $150,000 threshold. For example, assets held in joint tenancy, held in trust or have a beneficiary designation do not count towards that $150,000 figure.
Many clients initially believe that inventorying and appraising the estate is a simple endeavor. They assume they can ask the bank for a date of death balance, look up stock prices on Google Finance, appraise a car using Kelly Blue Book and appraise residential real estate using Zillow. If life were only that easy................
Generally speaking, the only assets that the client can appraise are cash assets. For example, this would include a bank account, a certificate of deposit and money paid to a decedent's estate for a life insurance policy.
The probate referee will appraise all other items in the estate. This would include real estate, stocks, bonds, cars, etc.
The appraisal will need to reflect the asset's value on the date of the decedent's death. For example, assume Danny Decedent purchased a Campbell, CA home on October 8, 1980 for $20,000. Danny passes away without a will on February 1, 2018. The probate referee will appraise the house as of its value on February 1, 2018. Assume the probate referee appraises the house for $1,500,000. Danny's heirs decide to sell the home during probate. Danny's heirs will use the cost basis of $1,500,000 when determining capital gains tax. The cost basis of $20,000 would not be used.
A probate referee is not always necessarily needed. One case I had involved simply a bank account with no beneficiary. In that case, a probate referee was not needed as the client could appraise the asset. However, the vast majority of probate cases require a probate referee. In Santa Clara County the process to obtain a probate referee is quite easy. The attorney just needs to ask the clerk to appoint one. There are currently 6 probate referees in Santa Clara County and appointment to a probate case is sequential. That is, probate referee 1 is appointed to a case, then 2, then 3, etc. Thus the probate referee is selected for you in Santa Clara County.
http://www.scscourt.org/self_help/probate/property/probate_referees.shtml
If a trust has suffered an injury, the correct party to bring suit is the trustee. However, there is an exception to this rule.
"[W]here a trustee cannot or will not enforce a valid cause of action
that the trustee ought to bring against a third person, a trust
beneficiary may seek judicial compulsion against the trustee. In order
to prevent loss of or prejudice to a claim, the beneficiary may bring an
action in equity joining the third person and the trustee." Saks v. Damon Raike & Co. (1992) 7 Cal.App.4th 419, 427-428.
The following illustration is how the above rule can happen in real life.
Father, as settlor and trustee, creates a trust and funds it with his home. Later in life, father encumbers the property with a reverse mortgage. Father then passes away in October 2014 and an acquaintance becomes the successor trustee. The beneficiary of the trust after father is son.
Following father's death, the lender informs the successor trustee that they intend to initiate foreclosure proceedings unless the loan can be paid off or the property sold. In turn, the successor trustee hires a real estate agent to market the property.
The lender records a notice of foreclosure sale in June 2015 with a sale date scheduled for July 2015. The property is ultimately sold at the July 2015 foreclosure sale. However, the lender does not property notice the successor trustee or their real estate agent of the foreclosure sale. In October 2015, the successor trustee informs the lender that they have accepted an offer to purchase the property.
Son and the successor trustee ultimately sue the lender for various causes of action, principally stemming from the lack of notice of the foreclosure sale. Son's complaint is dismissed by the trial court because he sued in his capacity as a beneficiary. On appeal, the California Court of Appeal gives him another chance with his lawsuit:
"Although plaintiff did not expressly assert a claim against Mack as
trustee of the Menefield trust in the operative complaint, he does argue
on appeal that he can allege Mack "failed or refused to hire a lawyer
to maintain the action to recover the trust property, even after the
court held that a wrongful foreclosure cause of action had been stated."
This offer is sufficient to allow plaintiff the opportunity to join
Mack in the wrongful foreclosure lawsuit against MTC. If plaintiff
amends the complaint accordingly, he would appear to have standing to
sue for wrongful foreclosure."
The above excerpt is from the unpublished case, Menefield v. MTC Financial Inc., Los Angeles County Superior Court case # BC610391.
Due to the passage of the Tax Cuts and Jobs Act of 2017, the estate tax exemption amount for 2018 has been changed as reflected below.
Year Amount Excluded Maximum Tax Rate
2001 $675,000 55%
2002 $1M 50%
2003 $1M 49%
2004 $1M 48%
2005 $1M 47%
2006 $2M 46%
2007 $2M 45%
2008 $2M 45%
2009 $3.5M 45%
2010 Repealed 0%
2011 $5M 35%
2012 $5.12M 35%
2013 $5.25M 40%
2014 $5.34M 40%
2015 $5.43M 40%
2016 $5.45M 40%
2017 $5.49M 40%
2018 $11.2M 40%
Below is an overview of the
federal estate tax exclusion amount since 2001 and includes the recently
announced exclusion amount for 2018:
Year Amount Excluded Maximum Tax Rate
2001 $675,000 55%
2002 $1M 50%
2003 $1M 49%
2004 $1M 48%
2005 $1M 47%
2006 $2M 46%
2007 $2M 45%
2008 $2M 45%
2009 $3.5M 45%
2010 Repealed 0%
2011 $5M 35%
2012 $5.12M 35%
2013 $5.25M 40%
2014 $5.34M 40%
2015 $5.43M 40%
2016 $5.45M 40%
2017 $5.49M 40%
2018 $5.6M 40%
The estate tax is pegged to inflation. One can see how the estate tax has incrementally increased since 2011.
What looms over all of this is pending legislation that affects the estate tax. The House of Representatives' tax bill would increase the exemption and eventually phase out the estate tax. The Senate's tax bill would increase the exemption but not phase it out. What the future holds for the estate tax will likely be decided in the next couple of weeks.
To be clear, the above represents the federal estate tax. A state is free to impose or not impose it owns estate tax
regime. For example, the State of New York has a separate estate tax
whereas the State of California does not.
