June 26, 2015
When an attorney is representing a client in court, certain items are sometime best left unspoken.
Katzenstein v. Chabad of Poway (2015), ___ Cal.App.4th ___
In this case, the decedent had originally named his trust as the beneficiary of two life insurance policies. The successor trustee was the plaintiff in this matter. Later on, the decedent allegedly provided the defendant with an "irrevocable pledge" of those same two life insurance policies. In exchange, the defendant would rename the senior center after him and operate it from the life insurance proceeds.
When the decedent passed away, a dispute ensued over who was the beneficiary of the life insurance policy, the plaintiff or defendant. Naturally each side believed they were the rightful beneficiary and litigation ensued.
What captured my attention from this case though is this portion of it, as recited in the appellate opinion:
"The court entertained oral argument, during which most of the exchange concerned the tentative striking of Chabad's Objection and Counterclaim. In part, the court described to Chabad's counsel (who stated that he was representing Chabad on a pro bono basis) some of the differences between the procedures in the Code of Civil Procedure and the Probate Code, explaining that claims in probate need to be presented properly." Italics added.
In reading the opinion, the defendant's counsel seemed more accustomed to civil actions as opposed to probate actions. For example, counsel mistakenly believed that they could file a counterclaim to the plaintiff's petition when the proper procedure was to oppose the plaintiff's petition and file their own separate petition.
Arguably the defendant's counsel offered this admission in hopes that the court would offer him sympathy. Clearly this was not the case. Moreover, the fact that the appellate opinion decided to highlight this admission emphasizes this apparent mistake. Although the appellate opinion did not specifically give the attorney's name in mitigation.
Personally I doubt I would ever disclose such a fact in front of a judge. While performing pro bono work is laudable, disclosing such an arrangement during litigation seems imprudent. A pro bono attorney has to abide by the same rules and procedures as a compensated attorney. There are no special rules for pro bono attorneys when representing a client in court.
Unfortunately the cruel adage holds true, no good deed goes unpunished.
June 18, 2015
Occasionally a party will represent themselves in a probate matter. "Pro per" is the term used to describe a self-represented party. For example, an heir could challenge the validity of a will by arguing that the testator lacked capacity to execute a will.
A self-represented party is required to identify themselves that way on court papers. If you ever look at a probate petition filed on pleading paper, the petition will list in the upper left-hand corner of the 1st page the attorney's name and their bar number, e.g. 258625 (my bar number). For a self-represented party, they will write "pro per" or something similar to that near their name.
Self-representation is permissible because a third-party is not involved. Attorney licensing is required, so the theory goes, to protect clients from unlicensed attorneys who might cause them irreparable harm through incompetent representation. However, there is nothing that prevents a party from representing themselves in an action. Attorney licensure requirements do not protect a party from themselves.
An associated issue that comes up with self-represented parties is whether they are entitled to attorney fees. Normally attorney fees are not awarded to even the prevailing party, much less the losing side. Each side bears their own cost of litigation. The exceptions for this rule, in the probate context, involve certain causes of action. For instance, attorney fees are recoverable under the common fund theory for a beneficiary. See Copley v Copley (1981) 126 CA3d 248, 292. Still, attorney fees are not recoverable for a self-represented party, even if the party is an attorney. See Musaelian v. Adams (2009) 45 Cal.4th 512, 520. So even if a self-represented party prevails in a probate matter and spent 50 hours working on the case, they will not be compensated for the time they spent on the matter.
Logically it makes sense to bar a self-represented party from recovering attorney fees, even if they are an attorney. The prohibition recognizes that attorney fees are for a third-party, not the party themselves. Allowing attorney fees for a self-represented party would create the impression that the self-represented party is somehow two people, the client and the attorney. That would be a neat trick, but such obviously defies reality.
Moreover, since nearly all self-represented parties are not attorneys, the prohibition ensures that there is no attorney licensure loophole. One would expect that attorney fees are reserved for attorneys. If you are not an attorney, you do not receive them.
June 5, 2015
Clients commonly ask, "why should I write a trust and a will?" Their rationale is that both are testamentary instruments which dispose of their property when they pass away. So if one is written, this eliminates the need to write the other and vice-versa. While technically true, such a statement does not grasp the practicalities of estate planning.
The common route is to write both because the California probate code permits the trust and will to work in harmony because of a specific law, the Uniform Testamentary Additions to Trusts Act, or UTATA. See Probate Code § 6300. The law reads:
"A devise, the validity of which is determinable by the law of this state, may be made by a will to the trustee of a trust established or to be established by the testator or by the testator and some other person or by some other person (including a funded or unfunded life insurance trust, although the settlor has reserved any or all rights of ownership of the insurance contracts) if the trust is identified in the testator’s will and its terms are set forth in a written instrument (other than a will) executed before or concurrently with the execution of the testator’s will or in the valid last will of a person who has predeceased the testator (regardless of the existence, size, or character of the trust property). The devise is not invalid because the trust is amendable or revocable, or both, or because the trust was amended after the execution of the will or after the death of the testator. Unless the testator’s will provides otherwise, the property so devised (1) is not deemed to be held under a testamentary trust of the testator but becomes a part of the trust to which it is given and (2) shall be administered and disposed of in accordance with the provisions of the instrument or will setting forth the terms of the trust, including any amendments thereto made before or after the death of the testator (regardless of whether made before or after the execution of the testator’s will). Unless otherwise provided in the will, a revocation or termination of the trust before the death of the testator causes the devise to lapse."
The law's importance is that it closes the estate funding gap.
When a trust is created, it becomes effective immediately. This is why the term "living trust" is used. The person will fund the trust with various property, e.g. house, bank account, brokerage account, etc. However, it is virtually impossible to ensure that every asset is titled in the name of the trust at one's death. There are a couple of reasons for this. First, the person may simply forgot to title the asset in the trust's name. Second, the asset cannot effectively be titled in the trust's name, e.g. a fancy rug.
When the person passes away, the will they wrote becomes effective. Simply stated, wills only become effective at death. UTATA allows a person's will to name their trust as the exclusive beneficiary of their estate. This bookends the person's estate as the trust can handle the bulk of the estate when the person writes it and the will can capture anything that was not titled in the trust's name at the person's death. This reduces the chances that an asset will fall through the cracks and not be part of the trust.
The type of will described above is known as a "pour-over will."
May 29, 2015
|6th Circuit Court of Appeal of California|
First, the appellant has the substantive hurdle of overcoming the presumption that the trial court ruled correctly. Denham v. Superior Court (1970) 2 Cal.3d 557, 564. This is not to say that a trial court is infallible. A trial court can commit reversible error through various means. Still, the appellant begins the appeal process with the knowledge of an uphill battle. They have to prove that the trial court ruled incorrectly. Thus, the burden of proof is on them.
Second, the appellant is confronted with the issue of financing the appeal. The cost of an appellate attorney will typically exceed $25,000 and can easily reach $100,000+. Also, there are costs involved with obtaining copies of the court transcripts and other documents. Furthermore, though improper, parties occasionally engage in scorched-earth tactics that drive up the cost of attorneys to the detriment of the lesser party. When the trial court renders an opinion, one party may not be able to afford an appeal given that they exhausted all of their resources at the trial court level. This is usually found in David v. Goliath cases. Most people do not have a limitless source of money or have access to a tree that grows money.
Third, the appellant encounters the issue of time. A common complaint with the legal system is the length of time it takes to process a claim. It is common for a case to take years to complete and then take another 18 months to funnel through the appellate process. Everybody has a certain threshold of patience and enduring an appeal definitely will test the patience of any litigant. From personal experience, a trust beneficiary contacted me originally in June 2013 to inquire about his mother's trust. Due to a highly questionable trust amendment, litigation ensued. While the case ultimately settled, this did not occur until May 2015. Obviously being in limbo for 2 years is not a fun place to be.
Ultimately though, it is not the attorney's job to direct the client to appeal or not. Rather it is the attorney's job to advise the client of their options and the consequences of taking any of those options. Clients should be aware of this.
May 21, 2015
When a person executes a subsequent testamentary document, it is prudent to clearly revoke the old document or ensure that the old one is destroyed. This applies to either a trust or will. Although the cases I've seen typically involve a will. Otherwise a legal quagmire can arise later on that is both very costly (attorneys are not cheap) and very time-consuming (the legal process is not a sprint). The following is an example of such a legal quandary. Sanchez v. Darnell, Los Angeles County Superior Court Case # KP013821. According to the unpublished appellate opinion involving this case:
"At Decedent's residence, five of the sisters went through documents Decedent left in a safe, and discovered a holographic will dated June 15, 1998, and a statutory will dated June 16, 1998. Both wills named Sanchez as the executor and her children as the contingent executors. The holographic will did not dispose of Decedent's property, but the statutory will devised Decedent's entire estate to Sanchez. Sanchez petitioned to probate the 1998 wills.
One of the sisters also discovered a January 2009 holographic will at Decedent's residence. Chacon read the 2009 will aloud to the sisters, who also examined it. The will was later viewed by one of Decedent's nephews and his wife. Although the 2009 will also named Sanchez as executor, its terms were markedly different than the 1998 wills. The 2009 will instructed that the estate be divided equally among all of the siblings. Subsequently, the 2009 will could not be found. Darnell petitioned for the 2009 will to be admitted to probate. Contrary to the assertions of her siblings at trial, Sanchez denied the existence of the 2009 holographic will and testified that the document they examined was a jewelry list and not a will."
Obviously it was not the best result to have 3 wills floating around when the decedent passed away. In particular, when an old and new will materially conflict, this provides a huge incentive for a beneficiary to litigate the matter. That is, the beneficiary has a financial motivation to seek admission of the will that benefits them the most. Shocking, I know. Here, the child who was the sole beneficiary of the old will naturally wanted to see that will admitted to probate. Simultaneously, such beneficiary also naturally wanted to see the new will, which significantly reduced her inheritance, not be admitted to probate. Conversely, the other children had the exact opposite intent.
Given these polar opposites, it should come as no surprise that the case has dragged on for so long. The decedent passed away in 2009 and this matter remains unresolved as of May 2015.
May 8, 2015
One obvious reason for res judicata is that it provides finality to a matter. If a person could re-litigate the same matter over and over again, the parties could never move forward. They would be in a perpetual state of limbo. Clearly society works better when matters are resolved and the parties can move forward with their lives.
As mentioned, an approved trustee's accounting is entitled to res judicata for the matters it addresses. The following is an example of how res judicata plays out in a hypothetical situation.
A trustee files a petition to settle an account and approve their compensation under Probate Code § 17200(b)(5),(b)(9). In the petition, the trustee asks for $6,000 as trustee compensation. The trustee, a lay person, states that they expended 300 hours administering the trust and appends hand-written time sheets to the petition. Their billing rate is the reasonable sum of $20 an hour.
The trustee provides notice to all beneficiaries of the hearing on the accounting petition. No beneficiary however attends the hearing and the judge approves the accounting, which permits the trustee to pay themselves $6,000 from the trust.
Months later, a beneficiary files a petition to instruct the trustee to pay back the $5,000 to the trust per Probate Code § 17200(b)(6). The beneficiary believes that the trustee exaggerated the amount of hours they worked on the trust. The beneficiary cannot believe that it took 300 hours to administer the trust. The beneficiary believes that 50 hours is an acceptable amount of time.
The beneficiary's petition will be denied because they failed to object prior to or at the hearing on the trustee's accounting. If the beneficiary can re-litigate the issue of trustee compensation, they would get two bites at the apple. First, the petition that the trustee filed under under Probate Code § 17200(b)(5),(b)(9). Second, the petition the beneficiary filed under under Probate Code § 17200(b)(6). Since res judicata says that a litigant only gets one bite at the apple, the beneficiary's petition will be denied. Cue fog horn.