October 20, 2016

Probate Law v. Criminal Law

When a widow or widower passes away intestate (without a will) and they are the sole titleholder to real estate, the property passes first to their children, if any, in equal shares. Probate Code §§ 6400, 6402. Assuming their are children, they have a legal interest in the property as an heir. For example, if there are 5 surviving kids, each would have a 20% ownership interest in the property. They would still need to undergo formal probate to transfer ownership. Still, their ownership in the property vested the moment their parent passed away. Probate Code § 7000. However, a recent unpublished appellate opinion emphasized the difference between probate law and criminal law for burglary purposes.

People v. Perkins, Case # MCR045896, Madera County Superior Court.

The defendant had been convicted of burglary and other crimes, which resulted in an 11-year prison term. One issue on appeal was whether the "defendant had a possessory interest in his deceased mother's house, entitling him to enter when he did."

Since the defendant's mother had passed away intestate, the defendant, as a child, had a legal interest in the property. However, the appellate opinion stressed that the defendant did not have a possessory interest in his late mother's home. That is, the defendant did not live at the residence. According to the opinion, the mother did not allow the defendant in the house except to make an occasional phone call. She only permitted the defendant to keep two garbage bags filled with personal possessions on the back porch. Lastly, the defendant broke into the home through a window (a good sign that you don't live there as most people would opt for the standard door route). Therefore, even though he had a legal interest in the property, as an heir to his mother's estate, he did not have a possessory interest in the property. Since a burglary conviction stems from a lack of a possessory interest, which the defendant did not have, his conviction was upheld on appeal.

This case cited People v. Smith (2006) 142 Cal.App.4th 923 for the proposition that having legal ownership is not the same as having a possessory interest. In that case, a husband was convicted of burglarizing a home which he and his estranged wife owned jointly. (suffice to say a rather messy divorce).     

October 5, 2016

Severance of a Joint Tenancy

One of the main reasons why real property held in joint tenancy is not preferable is due to its inflexible nature. If one joint tenant dies, the surviving joint tenant(s) automatically receive the interest of the deceased joint tenant. This is true even if the joint tenant wrote a will and devised their interest in the property to somebody other than the surviving joint tenant. 

In order to avoid the automatic transfer upon a joint tenant's death, severance has to occur. Civil Code § 683.2 provides various methods in which a joint tenancy can be severed:

September 23, 2016

The Future of the Federal Estate Tax

Yesterday Democratic presidential candidate Hillary Clinton proposed two changes to the federal estate tax regime. Depending upon who you ask, the federal estate tax is also known as the inheritance tax or death tax.

First, she would increase the maximum tax rate to 65% (the current top rate is 45%).  This rate would be levied on the excess of estates that exceed a certain monetary threshold. In 2016 the amount is $5.45M. For instance, if an estate was worth $2M in 2016, no federal estate tax would be due, but an estate worth $20M in 2016 would incur federal estate tax liability.

Second, Ms. Clinton would eliminate the step-up basis rule that allows beneficiaries to receive inherited property with a new tax basis. For example, assume widow Lila purchases a home in San Jose, CA for $100,000 in 1990. She passes away intestate in 2016. Her sole heir is her only child, son Lucky. The value of the home is now $1M as determined by a probate referee. Lucky sells the home during probate for $1M in 2016. Since Lucky's basis is $1M, due to it being stepped-up, Lucky would not pay capital gains tax. Under Secretary Clinton's proposal, Lucky would not receive a stepped-up basis for the property. Previously President Obama suggested elimination of the same tax structure, which he phrased the "trust fund loophole." There has been no movement on this bill though.

Conversely Republican presidential candidate Donald Trump has proposed repealing the federal estate tax. That is, there would be no tax on a person's estate when they pass away, regardless of the size.    

Obviously each candidate views the federal estate tax markedly different.

What should be mentioned about either proposal is the necessity of an act of Congress for implementation. The Office of the President, the executive branch, can enforce laws but cannot pass laws. Whereas Congress, the legislative branch, can pass laws. So while Ms. Clinton or Mr. Trump can propose whatever law they want, ultimately both branches of Congress, the Senate and the House of Representatives, need to agree on a bill to amend the federal estate tax.


This blog offers no opinion on the strengths and/or weaknesses of either proposal. This post is strictly for informational purposes. Please do not contact me with your political viewpoints on the matter or which candidate you will be voting for in the upcoming presidential election. I am not affiliated with either campaign or any presidential campaign for that matter. Thank you. 

September 7, 2016

Trustee Removal

When a beneficiary files a petition it concludes with requests for various forms of relief, e.g. compelling the trustee to submit an accounting, instructing the trustee, determining the validity of a trust provision, determining questions of construction of a trust instrument, approving the modification or termination of the trust, authorizing or directing transfer of a trust or trust property to or from another jurisdiction, etc. Prob C § 17200.

Generally speaking, a court can only grant what the moving party has requested in the petition. For instance, if the petition asks to instruct the trustee to rent a commercial property that has been kept intentionally vacant for years, the order would presumably relate to that subject matter as opposed to something else. In simplistic terminology, "you get what you asked for." 

Still, a probate court is one of general equity. Getty v. Getty (1988) 205 Cal.App.3d 134, 141-142. Thus it can fashion remedies that it sees fit in certain situations, i.e. order something in the interests of "fairness." One example where the probate court can acts on its own motion (known as sua sponte) is removal of the trustee. Prob C § 15642(a). Although  invariably the trustee's conduct will be the primary instigator of this. Hence, it is not as if the probate court would issue orders capriciously.

For example, assume a disgruntled beneficiary petitions for an accounting by the trustee, but not for the removal of the trustee. The trustee has never provided an accounting to the beneficiary and the settlor passed away years ago. The clear language of the trust directs the trustee to provide an annual accounting to the trustee. Furthermore, the beneficiary made repeated attempts to contact the trustee prior to filing the petition but to no avail. Thus, the beneficiary has a credible argument as to why an accounting should be provided.

First, the trustee asks for, and receives, numerous continuances to file the accounting. Second, the accounting the trustee ultimately files is replete with inaccuracies and misleading statements. Third, the accounting also fails to conform to court standards. Prob C § § 1060 - 1064. Cumulatively, the trustee has failed to fulfill their fiduciary duties.

At that point, a trial court is perfectly able to remove a trustee on its own motion. However, in practice, a trustee is typically suspended and then later permanently removed.   

August 25, 2016

Probate Orders

Probate participants naturally appreciate consistency. If a judge rules one way in a case in 2016, then presumably that ruling will apply in 2017 as well even if the case is before a different judge. "For one superior court judge, no matter how well intended, even if correct as a matter of law, to nullify a duly made, erroneous ruling of another superior court judge places the second judge in the role of a one-judge appellate court." In re Alberto (2002) 102 Cal.App.4th 421, 427. Hence, it is error for a judge to modify a prior ruling unless there are highly persuasive reasons to do so.
People v. Riva (2003) 112 Cal.App.4th 981, 992.

Here in Santa Clara Co., we have had 3 probate judges the past couple of years, Judge Cain, Judge Persky and Judge Kuhnle. Thus it is not a given that the same judge will hear your matter for the duration of your case. Personally speaking, I've had a couple of probate matters in which the judicial assignment changed during the case.

For illustrative purposes, assume a disgruntled beneficiary petitions the court to order that the trustee provide an accounting. The judge orders the trustee to provide an accounting to the court in 4 months. Furthermore, if the accounting is acceptable, the trustee will be released from having to provide an annual accounting to the court. The beneficiary does not object to any portion of the order. Hence, the accounting would be a one-off matter. The judge who signs this order then retires and a new judge takes over the case.

Months later, the trustee files an accounting with the court. The judge is satisfied with the accounting and approves it. However, the disgruntled beneficiary vigorously argues that the trustee should be subject to ongoing court supervision on the day of the hearing. The beneficiary provides only oral testimony that the trustee "can't be trusted" because the trustee once made a bet against the Harlem Globetrotters as he believed the Washington Generals were "due." Despite the previous order that barred ongoing court supervision, the new judge agrees with the disgruntled beneficiary and orders that the trustee provide an annual accounting to the court. The trustee is well within his or her rights to appeal the order in that it directly contradicts the prior order. 

August 11, 2016

Enforcing a Court Order Through an Elisor

The vast majority of lawsuits are settled. I have read that 95% of lawsuits do not end up being decided by a judge or jury but rather through settlement.  Still, just because you have a settlement agreement, this does not necessarily mean that your matter is over. Yes your case continues.........

Settlement agreements are not self-executing. Each party to a settlement agreement is required to perform certain conditions by certain times. For example, this could entail signing a document by the end of the month, paying a debt on the 1st of the month, turning over an item to a specific party immediately or filing documents within 6 months. The potential list of conditions that could be included in a settlement agreement are ostensibly limitless. The practical limitations are one's creativity and the willingness to agree to certain terms. 

Unfortunately one party to a settlement agreement may balk at performing their side of the deal (for meritorious or idiotic reasons). In such a case, the non-breaching party can ask the court to appoint an "elisor." See Blueberry Properties, LLC v. Chow (2014) 230 Cal.App.4th 1017, 1020-1021. If a party "will not or cannot execute a document necessary to carry out a court order, the clerk of the court, or his or her authorized representative or designee may be appointed as an elisor to sign the document." (Super. Ct. San Diego County, Local Rules, rule 2.5.11.)

A recent unpublished appellate opinion highlighted how an elisor was used to execute a settlement agreement.

Bajan et al. v. Mikos et al., San Diego County Superior Court Case # 37-2008-00094754-CU-FR-CTL

A dispute arose over the ownership of a property. Eventually, after years of litigation, the parties came to a settlement agreement. One of the conditions of the settlement was that the defendants would sign deeds in conformity with the settlement agreement. Simple enough you could say.

However the defendants refused to sign the deeds. The plaintiffs then asked the court to appoint an elisor to sign the deeds in place of the defendants. The court obliged and appointed the San Diego County Superior Court Clerk to sign the deeds, who did so.

The basis of the appeal was unrelated to the appointment of the elisor.