July 27, 2021

Court Proceedings

When a party files a petition in probate court seeking redress of injury, e.g. breach of trust, the clerk will schedule a time for the initial hearing. For instance, if the petition is filed on July 27, 2021, the clerk might hypothetically assign a hearing date of February 14, 2022 (the current lead time in Santa Clara County is around 6 months for trust petitions).

A common misperception is that a judge will grant or deny the petition at this initial hearing. That is, the judge will resolve the case at the first hearing. Instead, the judge will typically ask the attorneys, if both sides are represented, if they've met and conferred on discovery issues. Discovery is the process in which evidence related to the case is exchanged between the parties. This initial hearing is typically brief, usually around 5 minutes or less. At the conclusion of the hearing, the judge will continue the matter to a future date to check-in on the discovery status. This will usually range from 30-120 days.

Another misperception regarding this initial hearing is that the court will hear live testimony from relevant witnesses. I've seen countless probate hearings where a large number of family members attended the initial hearing expecting to be heard by the judge. The judge will often let them testify, albeit briefly. I always tell my clients that attendance at a court hearing is an imprudent use of time. In particular, a client of mine has only been ordered to attend a court hearing one time. The reason for his mandatory attendance was because of a settlement conference that would take place at the courthouse, Marin County Superior Court. 

I should mention that a client's attendance at a trial is basically mandatory (or they risk losing the trial by default). This distinction between a routine court hearing and a trial is unfortunately not expressed clearly enough to the general public. For reasons unknown, parties come to court with the expectation that they "will have their day in court." While this statement is facially true, it is misleading. If a party so desires to have their day in court, they will, but not at the initial hearing. 

A prior case of mine can provide context to the foregoing. A wife passed away in 2018. The wife was survived by her husband. The sole probate asset was a home purchase by wife and husband while they were married. A daughter alleged that her mother wrote a will devising her mother's estate to the daughter and her siblings. The daughter repeated this allegation at multiple hearings and in multiple court filings while her mother's estate was being administered. Ultimately a trial was needed to determine whether or not wife passed away without a will. At the trial, the daughter was able to testify herself and provided witnesses to support her allegation. However, prior to the trial, the daughter's live testimony was not heard by the judge. The judge ultimately ruled that the wife passed away intestate as no valid will could be produced.

June 15, 2021

Attorney Fees in a Conservatorship

A conservatorship involves the appointment of a conservator by a court to manage the affairs of an incapacitated person, the conservatee. For example, a child, the conservator, can file a petition for conservatorship regarding their incapacitated parent, the conservatee.

A conservatorship can take the form of a conservatorship of the person.

"A conservator of the person may be appointed for a person who is unable to provide properly for his or her personal needs for physical health, food, clothing, or shelter." Probate Code §1801(a).

A conservatorship can also take the form of a conservatorship of the estate.

"A conservator of the estate may be appointed for a person who is substantially unable to manage his or her own financial resources or resist fraud or undue influence." Probate Code §1801(b).

A recent appellate decision adjudicated the recovery of attorney fees in a conservatorship case.

Conservatorship of Brokken (2021) 61 Cal.App.5th 944

"Respondents are the adult children of appellant Doris Mae Brokken. Over their mother's vigorous objection, respondents petitioned to establish a conservatorship. They alleged that appellant suffered from ongoing mental health issues and that her behavior had become increasingly erratic. After two years of litigation and negotiation, the parties settled the matter without the need for a conservatorship. Appellant voluntarily agreed to engage in professional mental health services and the petition was dismissed.

Respondents sought to recover their attorney fees as part of the settlement. Appellant did not believe they are legally entitled to fees, but to facilitate settlement, she agreed to let the probate court decide whether respondents are entitled to fees and, if so, the amount of such fees."

Respondents cited Probate Code § 2640.1(a) as statutory authority for this request. It reads in pertinent part:

"If a person has petitioned for the appointment of a particular conservator and another conservator was appointed while the petition was pending, but not before the expiration of 90 days from the issuance of letters, the person who petitioned for the appointment of a conservator but was not appointed and that person’s attorney may petition the court for an order fixing and allowing compensation and reimbursement of costs, provided that the court determines that the petition was filed in the best interests of the conservatee."

Respondents' further cited Conservatorship of Cornelius (2011) 200 Cal.App.4th 1198 as case law that permitted the recovery of attorney fees. In Cornelius, a child had successfully petitioned for a 6-month conservatorship regarding her mother. Ultimately a permanent conservatorship was not established. The Cornelius Court held that a "temporary conservator is entitled to reimbursement of legal fees and other expenses properly incurred for the conservatee's benefit during the term of that temporary appointment regardless of whether a permanent conservator is ever appointed." Id. at 1204.  

Conversely, Respondents in Brokken neither established a temporary conservatorship nor a permanent conservatorship for their mother. The Brokken Court held that since Probate Code § 2640.1(a) requires some form of a conservatorship to be established and none was, Respondents were not entitled to recovery of their attorney fees.  

May 26, 2021

Dismissal of a Case

The typical pattern in a contested probate case is for a petitioner to file a petition and the responding party to file an objection to the petition. Thereafter the parties likely will engage in discovery. Once discovery has been completed, mediation may be attempted. If mediation is unsuccessful, the case can be tried to verdict before a judge. A probate petition is tried before a judge, a bench trial, as opposed to a jury trial.

Following the initial hearing after the written objection has been filed, the parties will typically have a status conference hearing in which the litigants will inform the judge of developments. Each party can file a case management statement prior to this hearing.

In a recent published appellate opinion, a trial court's decision to dismiss a case at the status conference hearing was the subject of an appeal.

Dunlap v. Mayer, (2021) ____ CA4th _____. 

"The court held an initial case management conference in October 2019, and set another case management conference in January 2020, to give the Estate time to conduct discovery into the Marital Trust assets. The Estate sent discovery requests to Maria, but the responses were not received before the January conference. The Estate filed a progress report in advance of the hearing attaching documents showing that in 1996 the court approved a creditor claim for more than one million dollars to be transferred to FMI, and Maria signed a partnership agreement for P&R, as trustee of the Marital Trust, agreeing that the trust would provide a capital contribution of more than three million dollars to P&R."

"At the case management conference on January 13, 2020, the court dismissed the petition without prejudice pursuant to Probate Code[2] sections 17202 and 17206. The Estate timely appealed."

The appellate court found that this dismissal was improper.

"The probate court erred in dismissing the petition at a case management conference, without an evidentiary hearing or completion of discovery and without giving the Estate notice that the conference could result in dismissal of the petition.

When matters within the purview of the Probate Code are contested, "[t]he court shall hear and determine any matter at issue and any response or objection presented, consider evidence presented, and make appropriate orders." (§ 1046.) There was no hearing here, and no evidence was presented. The court relied on Maria's objection to the petition, which stated that Maria did not know if the Marital Trust was ever funded, she never took title to or controlled any of the assets of the Marital Trust, and two businesses that were to fund the trust were defunct. The latter two statements were "to the best of her knowledge" and "upon information and belief," respectively. The Estate contested these statements and produced documents showing that in 1996 money was transferred to the two entities that were the assets of the Marital Trust."

April 29, 2021

Renting the Residence

In a typical estate administration case, whether a trust or probate, real property is involved. If the real property is vacant, the question then becomes  whether to rent the residence or not until the property is sold or distributed to the beneficiaries.

A recent unpublished appellate decision touched upon the co-trustees' unwillingness to rent the decedent's residence given the circumstances.

"When Loucks died in 2006, Trust assets were valued at nearly $9 million. Among the Trust's properties was Loucks's Camarillo residence. The residence was built in the 1950s, and was virtually unchanged over the next six decades: The carpet was worn, the walls were "dripping with . . . nicotine" from cigarette smoke, the septic tank was unusable, and the plumbing and electrical systems needed to be replaced. There was no hot water, no heat, and no air conditioning.

The exterior of the residence was similarly dilapidated. There was fungus and dry rot around the eaves. Shrubs and trees were overgrown. Rodent holes riddled the backyard. The pool—which was just inches from the residence—had begun to sink."

Following the property's sale, a beneficiary sued the trustees for essentially lost profits since they opted not to rent the residence from 2007-2014. 

The beneficiary's "expert witness testified that the Trust could have earned more than $330,000 from renting out the residence from 2007 through 2014."

However, the trial court disagreed and held that the co-trustees' decision to not rent the residence was reasonable under the circumstances. This decision was upheld by the appellate court. 

"Substantial evidence supports the probate court's determination that the co-trustees acted reasonably and in good faith when they declined to rent out the residence between 2007 and 2014. The evidence admitted at trial showed that the residence was uninhabitable and in need of more than $80,000 in repairs. Those repairs would have had to be completed before the residence could be rented. And once completed, there remained safety and liability concerns due to the unsecured pool at the residence."

One common theme when I've represented trustees is a beneficiary's tendency to emphasize the benefits but not adequately account for the burdens. This is natural because the beneficiary is not the responsible party, rather the trustee shoulders the liabilities. Hence the mindset of the trustee will invariably differ from that of the beneficiary.

In this case the beneficiary was adamant, as evidenced by them litigating this issue, that renting the residence was reasonable. However, the beneficiary was not responsible for renovating the property to make it habitable. Rather, the trustee was responsible for the renovations. Since the cost of renovations was significant, $80,000, the co-trustees acted prudently when they opted to forego renovation and renting the residence.     

Walstad v. Maloney, case # 56-2016-00479026-PR-TR-OXN, Ventura County Superior Court

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.