March 29, 2021

Holographic Will

A recent unpublished appellate opinion addressed the validity of a holographic will that was executed roughly 45 days before the testator passed away. The testator executed a holographic will on November 8, 2017 and passed away on December 25, 2018. So in 2021, this was case still ongoing..........

Interestingly the testator, a California attorney, had written two prior holographic wills. 

"Edward, a lawyer, drafted three holographic wills, each on a single piece of paper from a legal pad. The first two, drafted in July 2014 and December 2016, were written neatly, with few spelling and grammatical errors. They left either $40,000 (July 2014 will) or $75,000 (December 2016 will) to Barbara, with the remainder of Edward's estate going to his sister Marcia. Both wills also provided contingencies for what would occur should either Barbara or Marcia predecease Edward. The December 2016 will additionally revoked Edward's previous will, and named an executor (Marcia, or Randi Sue Berger (Marcia's daughter) should Marcia predecease Edward).

The Contested Will, drafted on November 8, 2017, read:      

"My Last Will and Testiment [sic]      

"I Edward M Sherman, hereby giives [sic] to Barbara Garrison my home at 15743 Hesby Strreet [sic], Encino, California 91436 and all my other money and possesions [sic].      

"Nov. 8, 2017      

"This is my last Will and Testiment this [sic].  

"Edward Martin Sherman"  

It is uncommon in a will contest to have two prior holographic wills. Still, this circumstance was quite elucidating when determining whether the contested will was valid or not. That is, the litigants and their experts reviewed the prior two holographic wills to see how the contested will was analogous or distinguishable.

For example, an expert witness in this case, a medical doctor, opined "that the misspellings in the Contested Will, along with the way the writing did not stay within the lines, raised concerns about the writer's cognitive abilities. He had no concerns regarding the July 2014 and December 2016 wills, noting they were more thorough, in-depth, and legible, compared to the Contested Will."

Ultimately, the appellate court affirmed the trial court's ruling that the testator lacked sufficient testamentary capacity to write and execute a holographic will. 

Estate of Edward Martin Sherman, Los Angeles County Superior Court case # 18STPB03628.

February 19, 2021

Gift, Loan or Advancement

One common issue I have seen arise in estate administration matters is whether a pre-death payment by a parent to a child was a gift, a loan or an advancement. 

In the case of a gift, the child would clearly not have to pay back the parent for the gift or have their potential inheritance reduced.

In the case of a loan, the child would need to repay the principal to their parent plus some amount of interest. A loan might or might not affect a child's inheritance.

In the case of an advancement, the parent's trust or will should specify that this pre-death payment is a credit against the child's future inheritance.  

Invariably, the recipient of the pre-death payment will argue that it was a gift.

Conversely, the non-recipients of the pre-death payment, i.e. almost always the other children, will argue that it was a loan, or at worse an advancement.

A recent unpublished appellate decision focused on this issue, i.e. was a pre-death payment from a parent to a child a gift or a loan.

"Patricia passed away in February 2016, leaving a will. Eight years before her death, Patricia transferred $600,000 to Dana. Plaintiffs sought a ruling that Patricia lent the money to Dana and that she was required to pay it back to the estate. Dana asserted the money was a gift."

"The court filed its SOD on June 6, 2019. It included a description of the transaction and the evidence on which it relied about the nature of the transaction and Patricia's intent. The court confirmed its oral pronouncement at the May 10 hearing that Patricia gifted the $600,000 when she transferred it to Dana in 2008. The court in its SOD considered each of the six factors necessary for a gift and found each was proven by clear and convincing evidence. In so doing, the court noted there was conflicting evidence on the issue of whether the $600,000 transfer was a gift or a loan. The court nonetheless found Patricia's intent in 2008 at the time of transfer was to make a gift to Dana. The court denied the petition and awarded costs to Dana."

The trial court's ruling was upheld by the appellate court. It found, based upon the evidence, that the parent intended to make a gift of $600,000 to her daughter in 2008.

Estate of Walsh, San Diego County Superior Court case # 37-2017-00016491-PR-PW-CT.

January 29, 2021

Oral Agreement or Written Agreement

A "hand-shake agreement" or oral contract is rarely advised.
While the law does enforce an oral contract, it is hardly ever a prudent decision. Countless probate lawsuits have arisen from situations when an agreement could have been memorialized but instead was agreed to orally. A recent partially published appellate decision involved an oral contract to transfer a cabin's ownership. In particular, the case involved a deceased married couple's interest in a cabin on leased federal land.  
Capra v. Capra, (2020) ____ CA4th _____. 
"In 1992, Frank Jr. and Thomas attempted to transfer the Forest Service permit to themselves and Lucille as trustees of the trust, but the Forest Service would not allow three names to be on the permit. The Forest Service would allow only an individual or a married couple to be named on the permit.

The three siblings decided it made sense for Thomas to be the trustee listed on the permit because Lucille was not living in California. Plaintiffs allege that Lucille and Frank Jr. "agreed to forego their rights to act as the representative on the Permit and allowed Thomas to be the representative Trustee named on the Permit." In October 1992, the Forest Service placed Thomas's name on the permit. The permit was renewed in 2008 in Thomas's name."

The sharing of the cabin unfortunately did not end well.

"In September 2015, Thomas declared that he owned the cabin and the permit exclusively, and that the plaintiffs had no right or interest in either. He asserted the right to deny anyone access to the cabin. He closed the Bank of America account and withdrew all its money, claiming it belonged to him. He changed the door locks and asserted exclusive control over all personal property at the cabin. He has not provided access to the cabin to plaintiffs, and in some instances, he has banned others from the property."

In an expected move, Thomas was sued by his siblings for taking the position that he owned the cabin exclusively. 

My reading of this case is that a written agreement should have been executed in 1992 which specified that even though only Thomas' name would appear on the lease, the cabin was effectively a tenants-in-common arrangement with each sibling owning a 1/3 interest. A written agreement would not have definitively prevented a lawsuit, but it would have definitely decreased the odds of one. An executed agreement would have (hopefully) specified the rights and obligations of each party. This would avoid the dreaded "he said, she said" scenario which invariably arises when a disagreement happens.   

December 16, 2020

Fiduciary Duties of a Trustee

A trustee is required to discharge a number of fiduciary duties for the benefit of the beneficiaries. The California Probate Code spells out these duties, e.g. the duty of loyalty, the duty of impartiality, etc. If a trustee breaches a fiduciary duty, the trustee becomes liable for damages which can take the form of many different remedies. Typically, money damages are the most common remedy awarded for a breach of a trust.

A recent unpublished appellate decision upheld a trial court's ruling that a trustee had breached her fiduciary duties. The factual summary is quite easy to follow.

"In January 2009, Eddie Copeland Neighbors (the Settlor) created the Trust for the benefit of her two daughters, Jackson and Marsha Josiah (Josiah), who were to share equally in her estate. The principal asset of the Trust was the Settlor's residential home in Sacramento (the home), which was transferred to the Trust. 

In July 2010, around the time that the Settlor was placed in a long-term care facility, Jackson and her husband began living in the home. 

In June 2015, the Settlor passed away and Jackson and Josiah became the successor cotrustees of the Trust. Shortly thereafter, in August 2015, Jackson recorded a grant deed transferring title of the home from the Trust to herself and her husband. 

In September 2017, Josiah filed a petition alleging that Jackson engaged in self-dealing and breached her fiduciary duties by transferring title to the home and by residing in it without paying rent to the Trust. Josiah sought, among other relief, an accounting of the Trust's assets, an order removing Jackson as a successor cotrustee, an order requiring that the home's title be returned to the Trust, an order requiring Jackson and her husband to pay rent for the period during which they resided in the home after the Settlor's death, and an order allowing Josiah to sell the home. Jackson opposed the petition."

Probate Code 16002(a) provides that a "trustee has a duty to administer the trust solely in the interest of the beneficiaries." This duty is breached if a trustee engages in "self-dealing." Self-dealing can be described as a trustee using trust property for their own personal benefit instead of for the beneficiary's benefit. From this case, the trustee engaged in self-dealing by conveying the settlor's home to herself instead of herself and her sister, which the trust required. That is, the trustee used trust property to benefit herself instead of the beneficiary.

Due to the trustee's misconduct, the trial court made a number of orders. "The court's order provides that (1) the home is an asset of the Trust; (2) Jackson owes $79,650 for the fair rental value of the home for the period from July 1, 2015, through March 31, 2019; (3) Jackson is entitled to a credit (offset) of $73,921.43 toward the fair rental value for mortgage payments, taxes, and other expenses she paid with her personal funds; and (4) as long as Jackson continues to occupy the home, fair market rent (less any offsetting credits) shall continue to accrue. The court ordered Jackson removed as a successor cotrustee, but denied Josiah's request to require Jackson to vacate the home so that it could be sold."

Josiah v. Jackson, Sacramento County Superior Court case # 34-2017-00219410.

November 5, 2020

Estate Tax in 2021

Since the estate tax exemption amount is currently pegged to inflation, the IRS recently announced the exemption amount for 2021 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% 

2021                   $11.7M                        40%

October 21, 2020

Intentional Interference with an Expected Inheritance

A California Court of Appeal decision in 2012 was the first to recognize in this state the tort of intentional interference with an expected inheritance ("IIEI"). Beckwith v. Dahl (2012) 205 CA4th 1309.  

The Court required a showing of the following five elements: (1) 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.

I remember reading this decision in 2012 and wondering what kind of fact-pattern would give rise to an IIEI claim. Well a recent appellate decision provided such an example.........

Gomez v. Smith, (2020) ____ CA4th _____.

"Frank Gomez and plaintiff Louise Gomez rekindled their love late in life, over 60 years after Frank broke off their first engagement because he was leaving to serve in the Korean War. Frank's children from a prior marriage, defendants Tammy Smith and Richard Gomez, did not approve of their marriage. After Frank fell ill, he attempted to establish a new living trust with the intent to provide for Louise during her life. Frank's illness unfortunately progressed quickly. Frank's attorney, Erik Aanestad, attempted to have Frank sign the new living trust documents the day after Frank was sent home under hospice care. Aanestad unfortunately never got the chance to speak with Frank because Tammy and Richard intervened and precluded Aanestad from entering Frank's home. Frank, who was bedridden, died early the following morning. 

Louise sued Tammy and Richard for intentional interference with expected inheritance, intentional infliction of emotional distress, and elder abuse. Tammy filed a cross-complaint against Louise for recovery of trust property. Following a court trial, the trial court issued a statement of decision finding in favor of Louise as to her intentional interference with expected inheritance cause of action and in favor of Tammy and Richard as to the remaining causes of action. The trial court also ruled against Tammy on her cross-complaint. Tammy appeals the judgment in favor of Louise; she does not appeal the trial court's ruling with regard to her cross-complaint. Richard did not file a notice of appeal."

In my career, I've been asked to do in-person visits (pre-Covid in case you are wondering). I can think of maybe two home visits over the years. Fortunately I was never confronted by a disgruntled relative at the doorstep who essentially blocked me from meeting with my clients.