November 26, 2014

Donative Transfers in California - Jenkins v. Teegarden

A familiar refrain goes "you get what you pay for." For people unwilling to hire an attorney for estate planning matters, the results can be disastrous, expensive and essentially irreversible. The following is an example of such. 

Jenkins v. Teegarden, (2014) ___ CA4th ___   

The defendant was the caregiver and friend of the decedent, a widower. In 2007, the decedent executed a quitclaim deed which transferred a home to the defendant. The defendant herself prepared the quitclaim deed by using a preprinted form she had purchased from Staples. Although she failed to properly identify the grantor, she used the decedent's individual name instead of his name as trustee of his revocable trust (the actual owner of the property). 

In her deposition, the defendant stated that the "only consideration that she gave for the quitclaim consisted of one dollar and her friendship." Yet during the trial, she testified that "pursuant to an oral agreement with Perry, she also gave (1) $100,000, which went into improvements to the house, (2) her $45,000 equity in a different house, and (3) her services (Author's comment: obviously changing your story is not the best maneuver).

The most relevant fact of the case was that the defendant was the drafter of the quitclaim deed. This indisputably created a conflict of interest. As the drafter, she had a direct interest in seeing that the decedent sign the quitclaim deed because she would benefit from it. Similarly, a sure-fire method for professional discipline is for an attorney to write themselves into a trust or will they draft for a client under normal circumstances (see the story of former California attorney James D. Gunderson and Leisure World). 

Had the defendant acted prudently, she would have told the decedent to retain an attorney to facilitate the transfer. By engaging in do-it-yourself lawyering, the defendant exposed herself to litigation at the trial and appellate court level (and maybe the CA Supreme Court). This case surely cost her tens of thousands of dollars in attorney fees and countless hours litigating it.  

A prudent attorney would have spotted the issues associated with the case and told the defendant that a "certificate of independent review" is advisable for this type of transfer. If such was obtained, the conveyance to the defendant from the decedent might have been valid. In turn, years of litigation might have been avoided. Unfortunately, the defendant opted for the inexpensive and expedient route, and suffered the calamitous consequences.