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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A recent unpublished appellate opinion addressed this issue: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.
A typical financial arrangement between an elderly parent and a child is for parent and child to be joint bank account holders. This allows the child to pay various bills for their parent. When the parent passes away, an inevitable legal issue arises. That is, (1) did the parent create the joint account with the intent that it pass to the child upon their death or (2) did the parent simply create the joint account with the intent that it be accessible as a matter of convenience for the child to pay the parent's expenses. If (1), the child receives the bank account as the surviving joint account holder. If (2), the parent's estate receives the bank account and it is distributed via their will or intestate succession.
The applicable law says "Sums remaining on deposit at the death of a party to a joint account
belong to the surviving party or parties as against the estate of the
decedent unless there is clear and convincing evidence of a different
intent." Probate Code
§
5302(a).
For reference, clear and convincing is a higher evidentiary standard than preponderance of the evidence but less than proof beyond a reasonable double. Most people have heard of proof beyond a reasonable double because that is the standard used in criminal cases. Preponderance of the evidence is the normal standard in civil cases.
The following is an example of how this scenario can hypothetically play out. Widowed mother and daughter venture to the local credit union to open a joint bank account. Mother's mobility is limited and she would have peace of mind if daughter could pay her household bills. Son lives in another state so he is unable to be of assistance. Prior to her passing, mother writes a will that devises her entire estate equally to her daughter and son. Mother then passes away.
In order for the bank account to be an estate asset, son would need to provide clear and convincing evidence that mother intended for the joint bank account to pass via her will instead of to daughter as the surviving joint account holder.
It is common to find cases where the testamentary document and the joint account arrangement conflict. The reason being is that estate planning is not always the sole impetus for titling one's financial accounts.
This issue was recently litigated in a recent California Court of Appeal case, In Re Estate of O'Connor (2017) ___ C4th___.
