March 26, 2020

When is a "Spouse" really a Spouse?

California law is very clear as to when 2 people enter into a valid marriage. 

Family Code § 350(a) states "Before entering a marriage, or declaring a marriage pursuant to Section 425, the parties shall first obtain a marriage license from a county clerk."

I was recently reading an unpublished appellate opinion that dealt with this issue. The facts are rather uncomplicated:

"On a Saturday in October 1996, Chandre' D. Shelton (Shelton) and Kennedy Mitchell (Mitchell) exchanged vows before friends and family at a ceremony held at the First Baptist Church of Beverly Hills in West Hollywood, California. Shelton and Mitchell had not gone to the Los Angeles County Clerk's Office to obtain a marriage license. They had not paid the chapel for any services relating to a marriage license. And the county has no record — public or confidential — that they ever obtained a marriage license.

In 2003, Shelton filed paperwork to adopt a child who was in the midst of juvenile dependency proceedings, and she was informed by the Department of Children and Family Services that there was no record of any marriage license. When Shelton asked the pastor who had officiated the 1996 ceremony about this, he replied simply that "God was the witness." Shelton took no further action at that time to obtain a marriage license, and adopted the child on her own.

In 2008, Shelton sued Mitchell for child support regarding the child she and she alone had adopted. Her claim was rejected, and she was again informed that there was no record of any marriage license. Again, Shelton took no further action regarding the marriage's legal validity.
On January 9, 2017, Mitchell died without a will."

If Ms. Shelton was Mr. Mitchell's spouse, she would have various rights regarding Mr. Mitchell's estate by virtue of being the surviving spouse. For example, she would have a claim to all of Mr. Mitchell's share of the community property and at the very least a portion of his separate property. Furthermore, Ms. Shelton would have the highest priority for being appointed the estate's administrator.

One curious argument offered by Ms. Shelton was "the possibility that the license got lost in the mail." The appellate court was unpersuaded. "Shelton's argument about losing the license in the mail misapprehends the process for creating a legally valid marriage because whether a license is lost in the mail after the ceremony has no bearing on whether a license was obtained in the first place."    

Ultimately, the Court of Appeal affirmed the trial court's decision that Ms. Shelton was not Mr. Mitchell's spouse because no marriage license was issued by Los Angeles County.

Of note, Ms. Shelton did not raise the issue of a putative spouse in the trial court so she could not raise that issue on appeal. 

In the Matter of Chandre' D. Shelton And Kennedy M. Mitchell, Los Angeles County Superior Court, case # 17STPB00425.

February 14, 2020

Standing to Challenge a Trust

Standing is the ability of a party to file a lawsuit. It acts as a limitation on the class of litigants that can bring forth claims.
For example, a child has standing to contest a parent's will or a parent has standing to pursue a wrongful death action involving a deceased child. 

Standing is procedural in nature. That is, the substantive merits of a case are inapplicable to determining whether or not a person has standing. 

In terms of a trust, assume that a child was named a beneficiary of their parent's trust in an earlier version. Then in a later version, the child is disinherited. Following the parent's death, the child brings a petition to invalidate the trust amendment which disinherited them pursuant to Probate Code § 17200.

The applicable section reads "Except as provided in Section 15800, a trustee or beneficiary of a trust may petition the court under this chapter concerning the internal affairs of the trust or to determine the existence of the trust." Probate Code § 17200(a).

In a prior post, a California Court of Appeal decision was discussed, Barefoot v. Jennings, (2018) 27 Cal. App. 5th 1.

In that case a California trial court determined, which was upheld by the California Court of Appeal, that a disinherited child could not bring such a petition because they lacked standing. 

The California Supreme Court granted review for the case and overturned the ruling of the appellate court.

It held that the "Probate Code grants standing in probate court to individuals who claim that trust amendments eliminating their beneficiary status arose from incompetence, undue influence, or fraud." 

Barefoot v. Jennings (2020) ___ Cal.5th ___ 

January 28, 2020

Advancement or Gift

Parents commonly gift money to their children. This can take the form of an allowance when they are young, a graduation gift when a teenager or a wedding gift when an adult.

A question that arises occasionally in this context is whether the gift is really a gift or is the "gift" an advancement of the child's inheritance. A recent published appellate decision touched upon this issue.

Sachs v. Sachs (2020) ___ Cal.App.5th ___

"David L. Sachs had two children, Benita and Avram. David established a trust in 1980 when Benita was 20 years old and Avram was 12. The trust provided for small distributions to other beneficiaries, but most of the trust corpus would be distributed to Benita and Avram equally on David's death. David was the original trustee. 

In 1989 David began to keep track of money distributed to his children on papers he referred to as the "Permanent Record." When a child asked for money, David would tell the child that the distribution would be reflected on the Permanent Record. 

In June 2013 David began to experience cognitive problems due to a stroke. He hired Ronda Landrum as his bookkeeper to help manage his finances. At David's instruction Landrum continued to make distributions to Avram and Benita. Landrum said David was adamant that she keep a record of the distributions. After a distribution was made David would often confirm that the distribution was on the list. Landrum kept a list for each child in the form of an electronic spreadsheet. David told Landrum on more than one occasion that keeping the list was important so that payments made to his children could be deducted from their respective inheritances. 

In October 2013 David resigned as trustee and Benita became the successor trustee. Following her appointment, she found the Permanent Record among her father's papers. The record consists of a separate file for each child. The entries were made entirely in David's handwriting. The papers list the dates and the amounts distributed beginning when each child attained age 30. The entries were not all made with the same pen, and the papers were of different types and ages."

The appellate court held that

"Probate Code section 21135 provides that transfers of property to a person during the transferor's lifetime will be treated as an at death transfer to the person under certain conditions. All of these conditions require a writing. Here we decide that the transferor's record of amounts he periodically distributed to his children is a writing that satisfies the requirements of section 21135."

December 19, 2019

Joint Account and Will

A recent published appellate opinion addressed the sufficiency of a will to negate a right of survivorship for a joint brokerage account.

Placencia v. Strazicich (2019) _______ CA4th _______

"In 1985, Ralph opened what the parties refer to as the Franklin Fund account with an initial deposit of $140,000. Lisa was listed as a co-owner. Lisa's counsel states the paperwork submitted to open the account specifies that it is a joint account with right of survivorship, though the copy in the record is almost entirely illegible. Regardless, Stephanie stipulated that the account was opened as a joint tenancy with right of survivorship. Moreover, an account statement from 2009 addressed to Ralph and Lisa bore the acronym "JT WROS," which appears to stand for joint tenants with right of survivorship.
Lisa, who was 23 years old at the time, had no involvement in opening the fund. Ralph told Lisa that he put her on the Franklin Fund, but never had any other discussion with her about it. Lisa never deposited money into the account, all of which, to Lisa's knowledge, came from Ralph. Lisa never withdrew money from the account during Ralph's lifetime. The account paid dividends, which Ralph took during his lifetime.

Ralph passed away in December 2009. In the months leading up to his death, Ralph had a number of conversations with Henry Rivera, his brother-in-law, which resulted in Henry assisting Ralph to prepare a will and trust, which Ralph executed approximately 11 days before his death. His will left specific directions as to the Franklin Fund account: "Remove Lisa Strazicich as sole beneficiary of my Franklin Fund. I want the beneficiaries to be Lisa Strazicich, Stephanie A. Placencia and Tina R. Placencia, my three daughters. I want the Franklin Fund to be placed into my trust fund and then be used to pay off the mortgage of my home in Huntington Beach, CA." Henry confirmed that Ralph specifically made these requests in their conversations."

The general rule is that "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). Moreover, "a right of survivorship arising from the express terms of the account or under this section, a beneficiary designation in a Totten trust account, or a P.O.D. payee designation, cannot be changed by will."  

Ultimately the Court of Appeal ruled that Ralph's will negated the right of survivorship and the account should be part of his probate estate, as opposed to being distributed to his daughter, the surviving joint account holder.

November 25, 2019

Estate Tax in 2020

Since the estate tax exemption amount is currently pegged to inflation, the IRS recently announced the exemption amount for 2020 as detailed 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                   $11.18M                      40% 

2019                   $11.4M                        40% 

2020                   $11.58M                      40%

October 29, 2019

Filing a Timely Creditor's Claim

All people pass away owing some kind of debt. Some estates have large debts while others have small debts. If an estate is probated, the probate process provides an opportunity to file a claim against the decedent's estate. Each creditor is tasked with filing their claim in a timely manner. Otherwise their claim can be time-barred even if their claim is valid.

A recent published appellate opinion addressed the issue of when a creditor's claim is timely filed.

Estate of Holdaway (2019) _______ CA4th _______

"The decedent died on June 13, 2013. On June 11, 2014, Everett filed a petition for probate and creditor's claim seeking $90,875. The claim was based on (1) four loans to the decedent, totaling $25,200; (2) unspecified "in-home services" she provided to the decedent, valued at $24,000; (3) unspecified "in-home expenses" of $17,675 she incurred on the decedent's behalf; and (4) "certain property" owned by Everett in the possession of the decedent at the time of his death, valued at $24,000.

After five continuances requested by Everett's counsel, in March 2015 the trial court issued an order to show cause why the petition should not be dismissed for failure to prosecute. On May 7, 2015, the trial court ordered the case "dismissed without prejudice as to [the] entire action" for failure to prosecute.

In December 2015, Everett filed another petition for probate with the trial court under the same case number as her previous petition. In May 2016, Holdaway, who is the decedent's son, filed a competing petition for probate. The competing petition stated that the decedent had died testate, and attached an attested and subscribed will that left all the property to a family trust he had established. The will nominated the decedent's wife or, in the alternative, Holdaway, as executor. In October 2016, the trial court granted Holdaway's competing petition, dismissed Everett's petition, appointed Holdaway as the personal representative of decedent's estate, and admitted the will. There were no objections to these rulings, and the court noted that the dismissal of Everett's petition was "by agreement" of the parties.

On March 10, 2017, Holdaway formally rejected Everett's creditor's claim against the estate. On May 19, 2017, Everett filed her complaint challenging the rejection, seeking damages in the amount of the claim, $90,875.

Holdaway demurred to the complaint, arguing among other things that it was time barred under Code of Civil Procedure section 366.2, and that in any case it was barred by other statutes of limitations. The trial court sustained Holdaway's demurrer without leave to amend."

On appeal, the appellate court reversed the trial court holding that only the estate's personal representative had the power to reject Ms. Everett's creditor claim. Since the personal representative did not reject the claim until March 10, 2017, Ms. Everett had 90 days thereafter to file her lawsuit against the estate.

The fact that Ms. Everett initiated her lawsuit years after the decedent's death was immaterial. Normally a claim must be filed against a decedent's estate within 1 year of death. Code of Civil Procedure section 366.2. In this case though, since Ms. Everett had filed her creditor's claim within 1 year of the decedent's death, the statute of limitations was tolled until it was rejected by the personal representative on March 10, 2017. Following the personal representative's rejection, Ms. Everett had 90 days to commence a lawsuit. She timely did so by filing her complaint on May 19, 2017.