Showing posts with label Intestacy. Show all posts
Showing posts with label Intestacy. Show all posts

January 24, 2014

Change to Intestate Succession Law


California Legislature - Sacramento, CA
If a person does not write a will, they die intestate and his or her estate is distributed to their heir(s). This is known as intestate succession. Of note, the term "heir" is essentially next of kin. For example, the heirs of a widow would be her children, if she had any.

One reason why it is prudent to write a will, is to prevent the application of intestate succession. Adherence to the laws of intestate succession are rather strict. If the heir was loved or loathed by the decedent, this person will inherit their estate. Still, California law was recently amended to prevent the ostensible unfairness of intestate succession in one instance. AB-490 modified the law of intestate succession in case of an absent parent. See Prob C § 6452. This law went into effect on January 1, 2014. What spawned this law was the following case and its unfortunate result.

Estate of Shellenbarger (2008) 169 CA4th 894    

Lesley Shellenbarger was the son of Clifford Shellenbarger and Laura Barnes. Lesley was conceived while Clifford and Laura were married but during Lesley's pregnancy, Clifford left Laura. Lesley died intestate in April 2005. Probate proceedings commenced in Ventura County thereafter.

Since Lesley passed away without a spouse, child, etc., Laura was appointed administrator of Lesley's estate. During the probate proceeding, Lesley filed a petition to determine entitlement to Lesley's estate, arguing that since Clifford had abandoned his son, Clifford should be barred from inheriting from Lesley's estate as an intestate heir. See Prob C § 11700. 

The trial court and later the court of appeal ruled that Clifford's abandonment was not fatal to his claim. Since Clifford was married to Laura at the time of Lesley's birth, Clifford was the natural parent of Lesley. Furthermore, since Clifford's parental rights were not terminated during Lesley's minority, he remained the natural parent and therefore, per the old version of Prob C § 6452, qualified as an intestate heir. This allowed Clifford to receive a portion of Lesley's estate. This despite the fact that Clifford had neither fully paid child support nor seen his son during his 42 years of life.

Still, as consistently stated in various court opinions "the Legislature remains free to reconsider the matter and may choose to change the rules of succession at any time." Estate of Griswold 108 Cal.Rptr.2d 165, 191 (2001). The California Legislature subsequently did take it upon themselves to alter an intestate succession law. Prob C § 6452 was modified such that a parent that basically abandons their child is barred from inheriting from the child as an intestate heir. This modification to Prob C § 6452 would have reversed the outcome in Estate of Shellenbarger because Clifford had abandoned his son Lesley. Thus in a hypothetical world that adhered to the modified version of Prob C § 6452, solely Laura, instead of Laura and Clifford, would inherit from Lesley's estate. 

January 15, 2014

Personal Representative - Executor, Administrator or Administrator with Will Annexed


Using the appropriate term is important in law. While certain terms are inter-changeable, e.g. president and chief executive, other legal terms are not so flexible. For instance, in the probate context, the person entrusted with administering a decedent's estate, the personal representative, can have multiple labels but each label derives from a particular circumstance.

The term "personal representative" means "executor, administrator, administrator with the will annexed, special administrator, successor personal representative, public administrator acting pursuant to Section 7660, or a person who performs substantially the same function under the law of another jurisdiction governing the person’s status."Prob C § 58(a).

Three common labels in terms of describing a personal representative are (1) executor, (2) administrator and 
(3) administrator with the will annexed. As mentioned, each of these terms relate to a specific situation that allows the person to serve as the personal representative albeit from different routes.

Executor

The executor is the person named in the will to administer the estate.

When appointed, the executor is provided letters testamentary.

Still, the executor must be appointed by the court in order to serve as the executor. It is not automatic that the executor will be appointed. For example, the proposed executor may have predeceased the decedent, is unable to be located or lacks the competency to handle the rigors of probate.

This is probably the term the general public has the most familiarity with out of the three terms. Furthermore, many people erroneously conflate the term "executor" and "trustee"  though the former relates to a will and the latter relates to a trust. While the roles entail similar duties they are nonetheless mutually exclusive terms.  

Administrator

The administrator is the person who administers the estate when the decedent died intestate, i.e. without a will. 

When appointed, the administrator is provided with letters of administration.

Typically the administrator is the child of the decedent because they are an heir and therefore have priority to be named administrator. From personal experience, a probate case I had last year involved an intestate decedent who was survived by her children. Whereas the daughter was the only child interested in handling her mother's probate, she was appointed administrator.    

Administrator with the Will Annexed

The administrator with the will annexed is the person who administers the estate because no executor was named in the will or the proposed executor(s) decline to act.

When appointed, the administrator is provided with letters of administration with will annexed.

This can be seen as a hybrid of the first two because a will has been written but nobody, for whatever reason, can serve as the executor. Hence, the administrator is selected by who has priority via intestate succession, i.e. next of kin, as in the case of an administrator.  Prob C §§8441, 8461.  
  
Clients

The use of the correct term when describing the personal representative is important because when a client calls with a question about probate, their title can provide quick insight into their situation. For example, if a client says they are the executor, then I immediately know that there is a will. 

December 12, 2013

Abatement


A person's estate cannot distribute more than what one owns at death. This is the rough testamentary equivalent of the phrase "don't write a check that you cannot cash." If a person's will devises too much, a process known as abatement occurs.  In short, abatement is "the reduction of testamentary gifts." Black's Law Dictionary 8th ed. (West Group, 2004). 

For example, assume that in 1999 Thomas wrote a will which devised (a) a gift of $50,000 to his brother Bernardo, (b) $75,000 to his friend Fred and (c) the rest, known as the residue, to his neighbor Ned. When Thomas wrote his will, his estate consisted of $300,000 in a bank account and an unencumbered home in Los Altos, CA. However, economic difficulty soon confronted Thomas. He repeatedly invested in many failed start-ups in Silicon Valley. By the time Thomas passed away in 2013, his estate consisted of only a $60,000 bank account which lacked a pay-on-death beneficiary. His Los Altos home had been earlier foreclosed on. Thus, Thomas's estate clearly lacked the necessary liquidity to fullly satisfy the gifts he made in his will.

June 14, 2013

Disqualified Donee


When a person writes a will and/or trust, there are certain individuals who are generally barred from being a beneficiary of said testamentary instrument. One class of individuals is the drafter of the testamentary instrument. For example, an attorney would generally be barred from writing themselves into a client's will.

This law is designed to protect the client from an unscrupulous lawyer or other malevolent individual.
However, if the drafter is related to the client, then the transfer is permissible.

A recent Court of Appeal decision addressed when the drafter has to be related to the client, at the time of execution or at the time of death.

Estate of Lira (2012) 212 CA4th 1368

Oligario Lira married Mary Terrones in 1968. At the time of their marriage, Oligiario had 3 children from a prior marriage and Mary had 6 children from a prior marriage. One of Oligiario's children is Mary Ratcliff. Given the size of this large blended family, the Terrones-Lira family was the inspiration for the television show "The Brady Bunch." No, not really, it was just too easy to not pass up.

Ms. Terrones filed for divorce in Santa Barbara County on February 21, 2008. This divorce was not finalized until February 21, 2010. During this gap in time, Oligiario executed a will and trust on January 6, 2009. Oligario named his three children and three of his stepchildren as the primary beneficiaries of his will and trust. Oligario named his son Robert Terrones to be the successor trustee and personal representative of his estate. The drafter of his estate plan was Glenn Terrones, a California attorney and son of Robert. Oligiario later died on July 20, 2010.

Mary then petitioned for probate on August 6, 2010 and stated in her filing that Oligiario died intestate. Robert countered by filing his own petition for probate and attached a copy of the will. Mary objected to Robert's petition because Robert was related to the drafter of Oligiario's estate plan, Robert was Glenn's father, but at the time of Oligiario's death, Glenn was not related to Oligiario because of the divorce. 

The issue on appeal was at what time does the statute apply, when the client executes the document or when the client dies. If the former, then Robert's petition would be granted because Oligiario was still married to Ms. Terrones at the time the will and trust was executed. Namely, on January 6, 2009 Oligiario was still legally married to Ms. Terrones. If the latter, then Mary's petition would be granted because Oligiario was not married at his death to Ms. Terrones and thus Glenn had no familial relationship to Oligiario. Oligiario's divorce was finalized on February 21, 2010 and died on July 20, 2010.

The Court of Appeal held that the applicable time is when the client signs the document, not when the client dies. Hence, since Oligiario was still married at the time he executed his will and trust, the transfers to his stepchildren were valid because on January 6, 2009 he had a familial relationship to Glenn and thereby Robert. 

May 8, 2013

Adverse Possession


Rarely in life can you take someone else's property without legal consequence. Adverse possession is an exception to this rule.

While recently listening to the radio in the Bay Area, a local news station mentioned the story of a West Oakland man attempting this. This individual was attempting to gain legal ownership of an ostenisbly abandoned home in West Oakland through adverse possession. The article was misleading in its description of adverse possession as it said:

"Adverse possession is an old law, with roots in California dating back to the Gold Rush, where someone can obtain title to a property without paying for it."

This is a misleading statement. There is no such thing as a free lunch in life.

As described below, the requirements of adverse possession require monetary expense on behalf of the adverse possessor, namely payment of property taxes. If the individual wishes to acquire title to this West Oakland home, they will only do so by paying the property taxes for it for 5 years. Hence, it is a stretch to assert that the individual can obtain title without paying for it.     

The following five elements of adverse possession are:

"(1) Possession must be by actual occupation under such circumstances as to constitute reasonable notice to the owner. 
(2) It must be hostile to the owner's title. 
(3) The holder must claim the property as his own, under either color of title or claim of right. 
(4) Possession must be continuous and uninterrupted for five years.
(5) The holder must pay all the taxes levied and assessed upon the property during the period."

Dimmick v. Dimmick (1962) 58 C2d 417.

In context of wills and trusts, adverse possession can possibly be an issue if real estate is involved.

For instance, assume Danny Decedent owned a farm in Alturas, CA, a remote region in northeast California. Danny was estranged from his entire family who lived mainly in San Francisco. Danny passed away in a tragic hot air balloon accident in 2003. Danny died intestate and did not write a trust. 

Danny's neighbor, Sam Squatter, who was aware of adverse possession, began to occupy the farm immediately thereafter in 2003. Sam knew there was no mortgage on the property, after reviewing real property records, so he thought it was worth the gamble. Whereas if the farm was mortgaged, the bank could possibly accelerate the loan upon Danny's death. Yet since there was no mortgage and loan acceleration was not an issue, Sam thought it was worth a shot. Sam completed the steps necessary to assert an adverse possession claim and then instituted a quiet title action. 

Danny's heirs eventually realized that Danny passed away after doing a Google search. When they realized that Danny passed away and owned real estate, they rushed to claim his estate through intestate succession. However, at that point, it was too late as Sam's quiet title action had concluded and he was awarded ownership of the property.  

April 17, 2013

Out-of-state will in California


(c) The execution of the will complies with the law of the place where at the time of execution or at the time of death the testator is domiciled, has a place of abode, or is a national."

Clearly California has a very broad rule for recognizing the validity of an out-of-state will. For instance, Thomas Walcott was a resident of Brookings, Oregon. Thomas worked for the CA Dept. of Corrections at Pelican Bay State Prison, a short car ride away from his home. Since Thomas did not want to have to pay sales tax or pump his own gas, he lived in Oregon instead of California.

In light of Thomas's very risky occupation, Pelican Bay houses the most violent inmates of California's prison population, he decided to write a will. Since Thomas was not an expert in probate law, Thomas hired an attorney he found on Yelp. The Oregon attorney crafted the will in conformity with Oregon law. The will named his long-time neighbor Nelly Nedson the sole beneficiary of Thomas' estate. Years later, Thomas retired and moved to Thousand Oaks, CA to be closer to his relative

When Thomas eventually passed away, his family located Thomas' will. Upon seeing that the will was written in Oregon, his relatives initally became hopeful because they erroneously thought that the will was invalid and that they would inherit Thomas' estate through intestate succession. However, when they took the will a California attorney, the attorney informed them of Prob C § 6113 and said the will might nonetheless be valid. 

The attorney then found the Oregon attorney who helped draft the will and the Oregon attorney provided a declaration attesting to the will's conformity with Oregon law. The California attorney then petitioned for probate with Thomas's Oregon will in Ventura County Superior Court. Eventually, Nelly was contacted and he inherited Thomas' estate at probate's conclusion.  

February 6, 2013

Execution of a Witnessed Will

 
When a person executes a witnessed will, certain formalities must be adhered to during the process. The following is a brief overview of the process.

First, the will must be signed by one of the following individuals. Prob C § 6110(b)(1)-(3).
  1. By the testator.
  2. In the testator’s name by some other person in the testator’s presence and by the testator’s direction.
  3. By a conservator pursuant to a court order to make a will under Section 2580.
For reference, the testator is the person who wrote the will and a conservator is somebody who has been court-appointed to oversee the testator because the testator lacks mental capacity. 

Second, the will must be witnessed by at least 2 other witnesses. Prob C § 6110(c). The requirements to be a witness involved a low threshold, "any person generally competent to be a witness may act as a witness to a will." Prob C § 6112(a). 

Frequently the drafting-attorney and an employee will serve as the witnesses. It is highly recommended that the witnesses be disinterested. The reason for this is because of Prob C § 6112(c), which reads in pertinent part "unless there are at least two other subscribing witnesses to the will who are disinterested witnesses, the fact that the will makes a devise to a subscribing witness creates a presumption that the witness procured the devise by duress, menace, fraud, or undue influence." 

For example, if Wilbur was a beneficiary under Theo's will and witnessed it, a rebuttable presumption would arise that Wilbur wrongfully procured this devise. Hence, if Wilbur was to inherit Theo's car, Wilbur would have to prove that there was no wrongdoing on his part for inheriting Theo's car. If Wilbur cannot rebut this presumption, he is entitled to take "such proportion of the devise made to the witness in the will as does not exceed the share of the estate which would be distributed to the witness if the will were not established." Prob C § 6112(d). In other words, Wilbur would be entitled to his share of Theo's estate as an intestate heir, if he qualified.

These 2 witnesses must countersign after witnessing the testator sign or acknowledge their signature in front of them. The relevant statute reads "the will shall be witnessed by being signed, during the testator’s lifetime, by at least two persons each of whom (A) being present at the same time, witnessed either the signing of the will or the testator’s acknowledgment of the signature or of the will and (B) understand that the instrument they sign is the testator’s will." Prob C § 6110(c)(1).

For instance, Thomas types a will one Sunday afternoon and invites his neighbors William and Wendy to serve as witnesses that evening in his kitchen. Thomas just tells them that he needs them to witness a legal document but does not mention that it is a will. Just prior to coming over, Williams decides to make a phone call because he is addicted to his smart phone. Wendy leaves without him and enters Thomas' home to find him in the kitchen. Thinking everything is alright, Thomas signs the will and Wendy signs as a witness. After finishing his phone call, William comes to the kitchen for the first time and signs the will as the second witness. Since William was neither present when Thomas signed his will nor did Thomas acknowledge his signature or will to William upon entering the home, Thomas' will does not comply with the requirements of Prob C § 6110(c) and is arguably invalid.

However, Thomas' will may be found to be valid if "proponent(s) of the will establish by clear and convincing evidence that, at the time the testator signed the will, the testator intended the will to constitute the testator’s will." Prob C § 6110(d). Granted, this is not the ideal method to prove a will but it does provide an avenue for relief should the technical attestation requirements not be met.  

Furthermore, a notary should not notarize the will. While studying to become a notary, my training manual actually said it was okay to notarize a will under certain circumstances. The training manual was and remains wrong on this issue. No competent California attorney will tell a client to have a notary notarize a will because 
(1) it is not required and (2) it is so peculiar such that it will arose suspicion that something dishonest is at play. 
   
Also, California law does not require the initialing of each page for a will. The purpose of this is to prove that the testator has presumably read and approved each page. I have seen some wills have initials on each page. Again, this is not required and personally I find this to be overkill. 

January 25, 2013

Slayer Statutes


The topic of morality is often brought up in how it interacts with the law. Issues such as same-sex marriage, abortion, capital punishment and even taxation all have some hint of morality embedded in them. All these hot-button issues typically invoke a visceral response from most people. Still there are some issues which are almost universally regarded as immoral.  For example, I would assume, if not expect, all would agree with the sentiments of California Civil Code § 3517, which states "No one can take advantage of his own wrong."

The Probate Code has a similar statute, in that it punishes those who commit an immoral act, namely the feloniously killing of another human being. This is known as California's slayer statute. It should be noted that the killing of another must be considered a felonious act. In other words, if you kill somebody in self-defense, justifiable homicide, this would not be considered a felonious killing. Conversely, if you murdered somebody, this would be considered a felonious killing. 

Prob C § 250 

(a) A person who feloniously and intentionally kills the decedent is not entitled to any of the following:


October 26, 2012

Domestic Partnership


In law, much like life, close enough is sometimes not good enough. As the saying goes, close enough is only good in horse shoes or hand grenades. Although having played bocce ball and shuffleboard a few times, close enough does apply to those activities as well. Regardless, a recent California Court of Appeal decision held that close enough was not good enough for the beneficiary of a pension.

Burnham v Public Employees' Retirement Sys. (2012) 208 CA4th 1576

John Burnham had a pension through the California Public Employees' Retirement System (Cal PERS). In 2006, Mr. Burnham developed bone-metastasized prostate cancer. In that same year, he listed the beneficiary of his pension as the "Estate of James E. Burnham." Shortly thereafter in July 2006, Mr. Burnham retired. 

In October 2007, Mr. Burnham became extremely ill and the couple decided that they should register as domestic partners so that Ms. Honeyman would be entitled to take time off of work to care for Mr. Burnham. 

"Burnham and Honeyman signed the declaration of domestic partnership in their house at approximately 9:00 a.m. on Saturday, October 27, 2007, in front of a notary. At 4:30 p.m. Burnham died. He was 67 years old. The following Monday, October 29, 2007, Honeyman hand delivered the declaration of domestic partnership to the Secretary of State's Office in Fresno. The clerk filed it and the Secretary of State issued Burnham and Honeyman a certificate of registered domestic partnership dated October 29, 2007."

Ms. Honeyman then applied for Burnham's state pension survivor benefits. Following a number of decisions by Cal PERS and an administrative law judge, Cal PERS ultimately decided to award Ms. Burnham the pension benefits. The children of Mr. Burnham appealed this decision to Sacramento Superior Court, where the judge ruled in favor of the children. Ms. Honeyman then appealed the trial court's decision to the 3rd District Court of Appeal.

The children became involved because they would inherit the pension benefits if Ms. Honeyman was found not to have been Mr. Burnham's domestic partner. The reason being is that the children were Mr. Burnham's heirs if no domestic partnership existed. Naturally then, the children had an incentive to contest Ms. Honeyman's domestic partnership claim. 

One of Ms. Honeyman's arguments on appeal was that she was the domestic partner of Mr. Burnham. The fact that the declaration was filed after Mr. Burnham was irrelevant in her opinion because it was only a ministerial act. She believed that simply signing the declaration was sufficient to establish a domestic partnership. The filing aspect was merely a trivial formality.

In regards to her domestic partnership claim (she presented additional arguments as to why she should be awarded the pension), the Court of Appeal held that the plain language of the statute required that both parties appear when filing the declaration. In particular, Fam C § 297(b) states "a domestic partnership shall be established in California when both persons file a Declaration of Domestic Partnership with the Secretary of State pursuant to this division." Since it was impossible for the couple to file the declaration together, one of them was dead, they could not comply with the statute. Therefore, the couple was not considered a domestic partnership. The result was that the children were deemed the heirs of Mr. Burnham's estate (the Court of Appeal disagreed with Ms. Honeyman's other arguments).

The facts of this case are quite amazing. If Mr. Burnham had lived a few more days, the couple could have been able to file the declaration jointly, a domestic partnership would have been established and Ms. Honeyman would in all likelihood inherit Mr. Burnham's $100,000 pension benefits. Yet in reality, Mr. Burnham died almost immediately after signing the declaration, rendering it ostensibly useless. Unfortunately for Ms. Honeyman, close enough was not good enough and she was out $100,000 plus presumably thousands of dollars in attorney fees to litigate the matter at the trial court level and then appeal.

June 6, 2012

Statute of Limitations


Timing is everything.

The law is no different.

A person's ability to enforce a legal claim is restricted by timing as well. Even if the litigant has a colorable claim, they must file their claim in a timely manner. This is known as the statute of limitations. The following illustration highlights the importance of the statute of limitations.

Danny Decedent mistakenly signed the wrong trust. His neighbor John Brown had taken an incorrect trust from Danny's file cabinet and gave it to him prior to Danny having the trust notarized at his bank. Danny had drafted many versions of his trust but unfortunately kept them in the same stack of papers. The incorrect trust stated that the sole beneficiary was San Diego State University and the trustee was John Brown. The correct trust stated that the sole beneficiary was Danny's brother Abraham, his next of kin, and John was again the trustee. A short time later, Danny passed away in a tragic hot air balloon accident.

Per Danny's executed trust, John was instructed to sell the home and donate the proceeds to SDSU. He asked Abraham to assist him in cleaning Danny's home because he thought Abraham might want to take some family photos that Danny possessed. The two agreed to meet at Danny's home one weekend morning. 

During the cleaning, Abraham found Danny's revised trust and notes in his file cabinet, stating that this trust was the one to be signed. Abraham took these documents to a local attorney who explained to him that mistake was grounds to set aside a trust.  Walton v Bank of Cal. (1963) 218 CA2d 527, 542. 

Since Abraham was Danny's next of kin, he would inherit Danny's estate if the trust was invalidated, namely through intestate succession. Thereby he definitely had an incentive to contest the trust's validity. Furthermore, and most importantly for this article, the attorney explained to Abraham that the statute of limitations for an action challenging the validity of a trust based on mistake was 5 years, since real property was involved. CCP § 318. Thus, Abraham had a 5-year time window to file an action to invalidate the trust. If Abraham waited too long, e.g. 7 years, his claim would be time-barred and SDSU could file for a dismissal on the grounds that the statute of limitations had expired. This dismissal would be granted even though Abraham had a compelling legal case.

The statute of limitations for various probate and trust claims vary. For example, within 120 days of being admitted to probate, a will contest must be filed (Prob C § 8270); within 4 years a trust contest involving an incompetent settlor must be filed (CCP § 337) and within 3 years a trust contest involving mistake or fraud that deals with personal property must be filed (CCP § 338(d).  

June 2, 2012

Astrue v. Capato - Posthumously Born-Children


A recent Supreme Court Case addressed the eligibility of posthumously born-children in regards to social security survivors benefits. Of note, a posthumous child is one who is born after the death of the parent. Yes, it applies to both men and women.

In 1999, Robert Capato was diagnosed with esophageal cancer. Concerned that his cancer treatment would cause him to become sterile, Robert donated his sperm to a sperm bank as a preventative measure. Still, following his initial treatment, Robert remained fertile and he and his wife, Karen, conceived a son. Unfortunately, Robert's condition worsened and he succumbed to cancer in 2002 while residing in Florida. 18 months later, Karen gave birth to twins as Robert's deposited sperm had been used to impregnate Karen. In vitro fertilization was used because the Capatos wanted their son to have a brother or sister.

Thereafter, Karen applied for social security survivors insurance benefits on behalf of the twins. The claim was rejected by the Social Security Administration because Florida law stated that a child could inherit through intestate succession only if conceived during the decedent's lifetime. Of note, the SSA utilizes state intestacy law when determining eligibility for social security survivors insurance benefits. Since Robert was domiciled in Florida when he died, that jurisdiction's law applied to the SSA's determination. Since the twins were born after Robert passed away, posthumous that is, they were ineligible to receive social security survivors benefits.

The Supreme Court held that the SSA ruled correctly, i.e. it correctly relied on Florida law in making the determination, and denied the Capato twins social security survivors insurance benefits. I will spare you the boring explanation of statutory construction, which is what this case represented. Yes, not all Supreme Court cases involve the federal constitutionality of a statute, ordinance, initiative, etc. 

For comparative purposes, California has a more expansive view of posthumous children.  The Golden State allows for the establishment of a parent-child relationship if certain conditions are met. To name a few of the requirements, the deceased parent must state in writing that their genetic material can be used for posthumous conception, a person must be designated by the deceased parent to control the use of the genetic material and the child must be in vitro within 2 years following issuance of a certificate of a decedent's death. Prob C § 249.5.

May 11, 2012

Intentional Interference with an Expected Inheritance

Intentional interference with an expected lunch

A recent California Court of Appeal decision held that California now recognizes the tort of intentional interference with an expected inheritance ("IIEI"). While this term definitely constitutes legal jargon, it is conceptually easy to grasp. The facts of the following case illustrate this.
  
Beckwith v. Dahl (2012) 205 CA4th 1309

Brent Beckwith was the long-time cohabitating partner of  Marc Christian MacGinnis. However, they were not married nor were they registered domestic partners. Marc's next of kin was his sister as his parents had predeceased him and he had no children.


In May 2009, Marc was admitted to the hospital due to ailing health. While in the hospital, Marc told Brent that he had written a will years ago that he had stored on his computer and instructed Brent to locate the will on the computer, print it and return it to Marc so he could properly execute it. Brent went to try to find the will on Marc's computer but could not. Marc then instructed Brent to create a new will and bring it back to the hospital. Brent found a will online and downloaded it. The will dictated that Marc's estate would be divided evenly between Brent and Marc's sister Susan Dahl, his sole heir, if both of them survived Marc. Yet before he went to the hospital to have Marc sign the will, Brent called Susan and told her about the will and emailed her a copy. Susan responded by saying that Marc should draft a trust so as to avoid probate (which is legally accurate) and that inheritance taxes would be less through a will than a trust (which is legally inaccurate). Consequently, Brent never presented the will to Marc for execution and Susan never presented Marc with a trust to sign as well.

Naturally, Marc passed away due to surgery complications and he died intestate. Due to California law, Susan was the sole heir of Marc's estate as next of kin. The reason Brent was entitled to nothing initially was because he was not considered a relative of Marc.

Susan filed for probate as administrator and did a poor job in communicating the proceedings to Brent. In particular, she was not exactly forthright with how probate would play out. Eventually Brent realized that he would inherit nothing from Marc's estate and sued Susan for, inter alia, intentional interference with an expected inheritance.

The Court held that California now recognizes IIEI and that to prove a colorable claim a plaintiff needs to show that they (1) had an expectancy of an inheritance, (2) the plaintiff would have received the inheritance but for the defendant's wrongdoing, (3) there was intent on the defendant's part, (4) the conduct in question  must be wrong for some reason other than the fact of the interference and (5) the defendant caused the plaintiff damages.

The Court ultimately held that Dahl's conduct did give rise to this tort. It stated that "[h]ere, Beckwith alleged he had an expectancy in MacGinnis's estate that would have been realized but for Dahl's intentional interference. However, Beckwith did not allege Dahl directed any independently tortious conduct at MacGinnis. The only wrongful conduct alleged in Beckwith's complaint was Dahl's false promise to him." Thus, Brent would need to show wrongful conduct by Dahl directed at Marc in order to prove his claim. The Court granted Brent the opportunity to amend his complaint.

How the tort of IIEI is applied in future cases here in California obviously remains to be seen. Still, the fact that it is now recognized in California provides beneficiaries with another avenue to seek legal redress against those who commit probate malfeasance.

March 28, 2012

Estate Planning Myths

Hansel and Gretel

Urban legends, myths and fairy tales are frequent topics of discussion. Whether you believe that Kevin from the television show "The Wonder Years" (a childhood favorite of mine) later turned into Marilyn Manson, in the Loch Ness Monster, or that Walt Disney was cryogenically frozen, are proof of the abudance of such. In terms of estate planning, old wive's tales exist in this field as well. The following are 3 examples that qualify are urban legends or substantially more fantasy than fact.

1. Public reading of a person's will

A couple years ago I saw an advertisement for Directv where the decedent's attorney was reading the will's contents to his beneficiaries. Each beneficiary waited with baited breath for the attorney to name them as the beneficiary for some desirable item such as the private jet, the family business, and in the case of one beneficiary, the decedent's Directv subscription. 

The notion that a will is read by an attorney to various individuals, who might or might not be the beneficiaries of the decedent's estate, is pure fiction or Hollywood magic. A will is never read aloud by an attorney in California. Instead the will is lodged with the probate court. Thereafter, the personal representative seeks to prove the will's authenticity whereby its distribution specifications will be honored by the probate court. If a will is uncontested, no evidence needs to be given by one of the attesting witnesses, provided the attesting witness signed in the will a declaration under penalty of perjury. CCP §2015.5.

2. Conducting a probate in private

I have been asked on a few occasions if a person can withhold a will from a beneficiary on the ground that the executor despises the beneficiary. Presumably the executor could withhold the will from the beneficiary although this subjects them to liability. Prob C § 8200(b). More importantly though, in order to prove the will, the executor must go through probate in order to complete the process. Since probate is a judicially-supervised process, anybody, whether they are a beneficiary or the peculiar people who hang out by the courthouse (there are plenty, trust me), each can inspect the documents relating to the decedent's probate. Thus, anybody could request a copy of the will or any other document filled during the process. 

Whereas probate is a public process so to speak, in that the court records are open to inspection, trust administration is generally not a public process. In a trust administration case, the distribution clauses found in the trust will generally not be subject to inspection because it is not lodged with any court. An instance where a copy would be subject to public inspection is where the beneficiaries litigate a matter relating to the trust and a copy is admitted into evidence. For example, the beneficiaries could petition a probate court to determine the validity of a trust provision. Prob C § 17200(b)(3).

Two recent celebrity deaths highlight the stark contrast between probate and trust administration. Whitney Houston's estate is governed by a will she signed a few years ago. The entire proceedings of her estate, including what she owned, the value of her assets and the identity of her beneficiaries, is subject to public inspection. Her estate is currently being probated in Atlanta, George. For those keeping track, Ms. Houston left everything to her daughter Bobbi Kristina Brown through a testamentary trust, a trust created by her will, and named her mother Cissy Houston the executor. The value of Ms. Houston's estate is pegged at $20M, which would make her estate subject to the estate tax.

Conversely, Steve Jobs wrote several trusts prior to his death. County records indicate that Mr. Jobs and his wife transferred three properties in 2009 to their trusts. Since Mr. Jobs and his wife were clearly capable of hiring highly-skilled attorneys, it is likely that the exact details of his estate will not be known unless a beneficiary initiates a court proceeding. Thus, the exact nature of Jobs' estate may be cloistered forever.

3. The government will inherit everything I own  

This is a particular favorite of mine because I have been asked this question repeatedly during in-person consultations. First the client will say that they do not want the government to inherit anything from them and then they invariably say that they do not want to pay the government anything upon their death, the estate tax.

I must say the notion of government inheritance is not necessarily a fantasy. The government could theoretically inherit your property, known as escheat, if you were to die without any living relatives and having failed to write a will or trust. The crux is that it is nearly impossible to die without living relatives.

For example, I could reasonably estimate that I have around 75 relatives living in California and maybe a 100 more scattered throughout the world. In order for my estate to escheat, all of these relatives would have to predecease me and I would have failed to write a will or trust. Suffice to say, the odds are slim to none and none left town.

Nonetheless, I have heard cases of escheat occurring. Still the cases involved instances where the decedent moved away to a remote area and cut off contact with their relatives. By moving away, the relatives were unable to notify the local probate court that they were the rightful heirs as next of kin because they did not know about the relative's death.

February 22, 2012

Writing a Will


The following are some common reasons why a person decides to write a will and/or trust.

Avoid probate

This is probably the most common reason why a person writes a trust. Probate is the court-supervised transfer of assets from a decedent to a beneficiary or beneficiaries. The three main components are (1) the collection of the decedent's assets, (2) the satisfaction of the decedent's debts and (3) the distribution of the remaining assets to the beneficiary or beneficiaries. For example, if the decedent was a resident of Alturas, CA, their estate would be probated, if applicable, in the Modoc County courthouse as shown above. 

Of note, a will does not avoid probate as all wills are ultimately probated. Although, if the estate is not large enough, the will does not go through the formal probate process. Instead the will is merely lodged with the probate court. Prob C § 8200. This is the case when a person writes a "pourover will" in which the person's trust essentially owns almost the entire estate whereby no formal probate is needed. I have done this a few times for deceased clients. 

The two main reasons why a person would want to avoid probate is simply time and money. First, probate takes a minimum of approximately 6 months to complete, though the normal completion time is 9-12 months. The added completion time is dependent upon the court's docket. The less-clogged the probate calendar, the faster probate can be completed. Second, probate fees are particularly high. The fee is determined by taking a percentage from the estate's value. The fee is progressive such that the higher the estate's value, the larger the probate fee for the personal representative and attorney.  The personal representative is always free to waive compensation, though the attorney is probably not as likely to do so. 

Avoid estate taxes

The most commonly read post on my blog is the one devoted to the estate tax. Since I wrote the article on December 27, 2010, it has been uniquely viewed 11,966 times according to Google Analytics. The average time on the page for a visitor is 3 minutes 53 seconds.  For whatever reason, many people believe that the tax man, also known as the IRS, will come knocking on their door once the grim reaper has blown through. This is largely fantasy thinking. The estate tax affects a few small number of individuals. For example, the estate tax threshold in 2012 is $5,120,000. This means that if your estate is under that amount, your estate will owe no federal estate taxes. In case you were wondering, California does not have an estate tax for 2012. Individuals with estates that large are few and far between. Still, I am aware that the estate tax limit is set to revert back to the $1M threshold for 2013 if no legislative action is taken. In which case, thousands of individuals would be affected that were previously exempt from the estate tax. Regardless, millions of people will remain unaffected by the estate tax if it is lowered to a $1M threshold. 

Nonetheless, various trusts can be set up to avoid or delay the application of the estate tax. For instance, an A/B trust, Disclaimer trust, charitable remainder trust and a QDOT trust are all examples of trusts specifically designed to accomplish such.

Provide for the smooth transition of assets from decedent to beneficiary

If a person writes a will and/or trust they are removing the legal system's distribution scheme from the equation, known as intestate succession. In California, the probate code specifically spells out how assets are distributed to heirs. For example, if a single person passes away who does not have children or grandchildren, their assets would be distributed to their parent(s), and if no parent is living, then the assets would be distributed to their brothers and sisters. If you ever want to see what the breakdown is for your heirs, just look at a table of consanguinity (Google it). A common problem that arises when distribution is left to intestate succession is the fact that the personal representative must track down the heirs, wherever they may be. Another problem with intestate succession is that only your relatives can inherit your estate, friends are not included. Thus, if a person was estranged from their family but had a number of close friends, upon that person's death his estate would be distributed to his family unless he wrote a will, trust or designated beneficiaries through non-probate means. Moreover, a surviving boyfriend or girlfriend would not be entitled to anything under the laws of intestate succession. 

An additional benefit for writing a will and/or trust is the fact that a person can stipulate the terms of the inheritance. A few clients have expressed a concern that their children were not as responsible as they desired. The fear was that the child would inherit the money and immediately engage in frivolous spending given their spendthrift mentality. For example, a guardianship of the estate for a minor automatically terminates at age 18, the age of majority in California. Prob C § 1600(a). Thus, the spendthrift child's inheritance, if in a guardianship, would have no spending limitations placed on it post-18. The child would then be free to spend as they see fit.  In light of this, a trust established for a child's benefit can specify its purpose. Many trusts often state that the trust will be used for health, education, maintenance and support. The key is that the trustee, rather than the child, will ultimately make the determination as to trust distributions and allocations. Yes, this scenario does create a "trust fund baby" situation, although I would prefer that to a situation where the child spends the money on frivolous items. 

December 15, 2011

Pet Trust

My sister's cat "Snickers"

The California Probate Code allows a person to select a host of beneficiaries. 

A person may select an individual, corporation, charity, or a governmental unit as a beneficiary. Prob C § 6102. However, a pet or companion animal is ineligible to receive an outright inheritance. Instead, a pet may "inherit" property, at least in California, through the medium of a pet trust. Prob C § 15212.

The following are some famous examples of pet owners who decided to leave a gift to their feline or canine friend.

The late Leona Helmsley was a very wealthy person. In her will, she bequeathed $12M to her Maltese dog "Trouble." Later a New York court ruled that Ms. Helmsley was mentally unfit when she executed her will and reduced the dog's inheritance to a mere $2M. According to an affidavit submitted to the court by the dog's caretaker, Carl Lekic, $2M would be sufficient to pay  for the dog's care at the optimum level for more than 10 years. He stated that annual costs for full-time security would be $100,000, $8,000 for grooming and $1,200 for food costs. Additionally Mr. Lekic would receive an annual guardian fee of $60,000. Sadly Mr. Lekic's compensation was reduced in light of Trouble's decreased inheritance.

Similar to Ms. Helmsley, Maria Assunta passed away a very rich woman in Italy. Her late husband had amassed a huge fortune through property holdings. Upon Ms. Assunta's passing, she was survived by no heirs so she made the decision to leave $13M to a nurse to care for her beloved cat "Tommaso."

Thelma Russell, a resident of San Diego County, apparently deeply cared for Chester H. Quinn and Roxy Russell. Her holographic will, in its entirety, stated "I leave everything I own Real & Personal to Chester H. Quinn & Roxy Russell signed Thelma L. Russell." Estate of Russell (1968) 69 C2d 200. The good news for Mr. Quinn was that he received 1/2 of Ms. Russell's estate. The bad news for Mr. Quinn was that he could not claim the other 1/2 of Ms. Russell's estate to manage for the benefit of Roxy Russell, her dog, since a pet is not an eligible beneficiary in a will. The worst news for Mr. Quinn was that because the bequest to Roxy Russell failed, 1/2 of Ms. Russell's estate fell into intestacy and was transferred to Ms. Russell's heir rather than Mr. Quinn. 

December 1, 2011

Probate Terms


Probate law has certain terms that have specific legal meanings to them. The following are some of those terms.

Abatement 

Definition: The reduction of testamentary gifts. Black's Law Dictionary 8th ed. (West Group, 2004).

Example: John Negligent decides to leave $50,000 in his will to his friend Larry Appleton with the balance, known as the residuary, to his other friend Homer Thompson. When John wrote his will, his estate was worth $500,000 in liquid assets. However, when John passed away, due to his profligate spending, his estate was only worth $30,000. California laws on abatement say that Larry is entitled to the remaining $30,000, not Homer. Prob C § 214029(a). However, the default rules of abatement can be altered in a will. Prob C § 21400. 

Ademption 

Definition:  Property that was listed in the person's will that is not in his or her estate at the time of their death. Black's Law Dictionary 8th ed. (West Group, 2004).

Example: John Negligent states in his will that his friend James Rodgers is to receive his prized red Ferrari 308 GTS, which was featured in the movie National Lampoon's Vacation. (I have watched that movie about a thousand times now). John then sells his Ferrari to pay off his credit debt and passes away in a tragic hot air balloon accident shortly thereafter. John's gift of the Ferrari to James is therefore adeemed. James will then need to prove, in order to inherit replacement property from John's estate, that there is no sufficient proof to conclude that John intended for the gift to fail. Estate of Austin (1980) 113 CA3d 167. For example, James will argue that John sold the car because he intended to pay off his credit card rather than avoid having James inherit his Ferrari.

Beneficiary

Definition: "A person to whom a donative transfer of property is made or that person's successor in interest." Prob C § 24.

Example: John Negligent leaves, in trust, a beach home in Santa Cruz for his nephew Bobby Smithson.

Class gift

Definition: A gift to all individuals matching the description of the class. Black's Law Dictionary 8th ed. (West Group, 2004).

Example: John Negligent writes a will and leaves his entire estate to his "nieces." When John write his will, he has 4 nieces but at the time of his death he has only 1 niece. Since the devise was to a class of members, rather than individuals, the remaining niece is entitled to inherit the entire estate rather than split the estate with the heirs of the predeceased nieces.

In contrast, a gift made by Katherine Moore in her will to "Carrie D. Griffin and her sister, Anna M. Davis, equally divided" was found not be a class gift.  Estate of Moore (1955) 135 CA2d 122. Thus, Anna could not inherit the entire gift even though Carrie had predeceased Katherine.

Creditor

Definition: "One to whom a debt is owed." Black's Law Dictionary 8th ed. (West Group, 2004)

Example: John Negligent runs over a defenseless old lady in the Santa Cruz mountains on a dark and stormy night. The old lady's family sues sues John for wrongful death and wins. While on appeal, John passes away due to an unforeseen traffic accident. The victim's family is a creditor of John's estate and may assert a creditor's claims during John's probate.

Decedent

Definition: "A dead person." Black's Law Dictionary 8th ed. (West Group, 2004)

Example: Self-explanatory. I will avoid making a potshot at a recently deceased celebrity.

Disclaimer

Definition: "Any writing which declines, refuses, renounces, or disclaims any interest that would otherwise be taken by a beneficiary." Prob C § 265

Example: Homer Thompson is the first named beneficiary of John Negligent's large estate, his uncle. However, Homer has enormous credit card debt and multiple judgments against him. Rather than have his creditors inherit his uncle's estate, Homer disclaims his interest in John's estate so that it transfers to the second named beneficiary. For reference, this is legal. Prob C § 283.

Executor

Definition: An individual nominated in a will to be appointed by the probate court to administer the estate of the decedent's death. Black's Law Dictionary 8th ed. (West Group, 2004).

Example: John Negligent nominates in his will that Freddy Freebird to be the executor of his will. 

Fiduciary

Definition: A person who is required to act for the benefit of another person, on all matters within the scope of their relationship; one who owes to another the duties of good faith, confidence and candor. Black's Law Dictionary 8th ed. (West Group, 2004).

Example: An executor hires an attorney to handle a decedent's probate. The executor is a fiduciary for the decedent's estate and the attorney is a fiduciary for the executor.

Heir

Definition: Any person, including the surviving spouse, who is entitled to take property of the decedent by intestate succession under this code. Prob C § 44. 

Example: Harry is married to Wendy but the couple decides never to have kids. Harry passes away in a tragic rafting accident on the Colorado River in Arizona. At the time of his passing, Harry did not write his will. Wendy is considered Harry's heir. 

An heir is basically a person's next of kin.

Intestate

Definition: A person who has died without a valid will. Black's Law Dictionary 8th ed. (West Group, 2004). 

Example: Irwin decides to write a will but can only locate 1 witness, his neighbor, to sign his type-written will. On the way home from having his will countersigned by his neighbor, Irwin is run over by a pizza delivery guy. Irwin has died intestate because a type-written will requires 2 witnesses. Prob C §6110.

Issue

Definition: All his or her lineal descendants of all generations, with the relationship of parent and child at each generation being determined by the definitions of child and parent. Prob C § 50.

Example: Harry and Wendy, a married couple, have two children, Sonny and Denise. Denise then gets married and has a child, Gwynn. Harry then passes away in an unforeseen blender accident. Harry's issue would be considered Sonny, Denise and Gwynn. 

Lapse

Definition: A devise to a beneficiary that fails because the beneficiary has either predeceased the testator or has failed to live until a certain point in time. Black's Law Dictionary 8th ed. (West Group, 2004).

Example: Thomas devises to Bobby his home in Los Altos, CA free and clear, 650 Rosewood Court. Bobby unexpectedly passes away before Thomas succumbs to mortality. Bobby's inheritance is a nullity because he has failed to survive Thomas, namely the gift has "lapsed." 

Minor

Definition: An individual under 18 years of age. Fam C §6500.

Example: Self-explanatory   

No Contest Clause

Definition: A clause in a will or trust that disinherits a beneficiary should they contest a will or trust. Black's Law Dictionary 8th ed. (West Group, 2004).

Example: Thomas writes in his will that his son, his sole heir, shall only receive $10,000 of Thomas' $1,000,000 estate. The remainder of the estate will go to Thomas' drinking buddy Barney. The will also contains a no contest clause which states that Thomas will forfeit his $10,000 inheritance if he chooses to pursue litigation in hopes of overturning the will for whatever reason.

Pretermitted Child

Definition: A will, made by a parent, that fails to account for a child.  Black's Law Dictionary 8th ed. (West Group, 2004).  

Example: Harry writes his will in 2000. In 2002, Harry marries Wendy and they have a child named Doris in 2004. In 2011, Harry passes away after toppling a vending machine after he tried to grab the last Diet Mountain Dew from it. Doris is a pretermitted child because Harry's will does not account for her. In light of this, Doris may be able to claim an intestate share of Harry's estate.

The companion to a pretermitted child case is the pretermitted spouse, in which the husband fails to account for the wife in his will.

Residuary

Definition: A residuary gift is a transfer of property that remains after all specific and general gifts have been satisfied. Prob C §21117(f).

Example: Thomas pens a will with the following stipulations (1) $15,000 to my Uncle Buck (2) $20,000 to my neighbor Al Bundy (3) my Honda Accord to my friend Larry Appleton and (4) the residual to Pancho Villa. When he dies Thomas' estate has (1) $100,000 in cash (2) $300,000 in Exxon Mobil stock (3) a home in Beverly Hills, CA (4) a Honda Accord and (5) a Rolex Oyster Perpetual. 

Villa, as the residual beneficiary is entitled to $65,000 in cash, all the Exxon Mobil stock, Thomas' house and his watch. 

Rule Against Perpetuities 

Definition: A nonvested property interest is invalid unless one of the following conditions is satisfied: 

Testator
 
Definition: A person who has made a will.Black's Law Dictionary 8th ed. (West Group, 2004).
     
Example: Pretty sure an explanation is not needed here.

Trustee

Definition: One who, having legal title to property, holds it in trust for the benefit of another and owes a fiduciary duty to that beneficiary. Black's Law Dictionary 8th ed. (West Group, 2004). 

Example: Thomas writes a trust and leaves property to his son Samuel. However, since Samuel is a minor, Thomas entrusts the property to Theo to hold in trust until Samuel becomes an adult.

The list of duties a trustee owes a beneficiary are expansive and there is significant liability involved with this undertaking.

Trustor (or Settlor)

Definition: One who creates a trust. Black's Law Dictionary 8th ed. (West Group, 2004). 

Example: Every trust has three components, a trustor (or settlor), the person who creates the trust, the trustee, the legal owner of trust property and the beneficiary, the equitable owner of the property.