Influence or Undue Influence?

One method to invalidate a revocable transfer on death deed (TOD) is by proving undue influence. Obviously the beneficiary of a TOD will have some influence over the drafter of the TOD. For example, in the case of a child and parent, the child may converse with the parent, care for the parent, buy groceries for the parent, pay bills for the parent, take the dog out for a walk, etc. These interactions between the child and parent certainly give the child influence with the parent. Still, the threshold question is whether the influence is undue or not. If undue influence, the free will of the parent is overcome by the influence of the child. 

A recent unpublished appellate decision articulated the difference between "influence" and "undue influence."

"I find that Ms. Vosburgh influenced Ms. Fries, gave her information regarding, perhaps, Mr. Gribbon's misdeeds from the past; gave Ms. Fries information about the check writing that, again, and I'm not taking this for the truth, but this is information that Ms. Fries received, whether she believed it or not or whether it is true or not, that is not for me to determine, but this is the information she had.      

And I do believe that Ms. Vosburgh informed Ms. Fries of the check writing, that it was Mr. Gribbon who wrote himself checks; that it was Mr. Gribbon who — I'm trying to choose my words regarding the bird. I know there was some argument whether it was stolen, sold, boarded, all of those things, but taken away from Ms. Fries, and she was not happy about that. She did not consent to that.      

And, also, regarding her apartment being emptied when she came home, again, I'm not accepting those as, necessarily, the truth, but . . . that [information] was otherwise provided to Ms. Fries.      

And based on [that] information, and I even thought about this, essentially, whether they be true, whether they be disinformation, misinformation, it was information that she had, and the question is, having [that] information, whether it be true or not, whether it be mis-, dis-, or lies, when she had [the] information, was she of her free mind, her own volition? Did she voluntarily, knowingly, intelligently make a decision to, nonetheless, give both properties to Ms. Vosburgh? And based on the evidence that I have, that Ms. Fries was actually upset with Mr. Gribbon, whether it be the bird, whether it be because of the checks, the emptied out apartment, that she was upset with Mr. Gribbon, she did not want to communicate with Mr. Gribbon, she did not want to — I think one of the . . . statements that was given was she did not want anything to do with Mr. Gribbon, again, whether that be based on truth, misinformation, that's how she felt.      

And based on the feeling, based on the belief, then she did execute a transfer of that deed on her own free will, voluntarily, intelligently, informed, or without duress or coercion, and I do believe that it was. So based on those, I do feel that the Petitioner, Mr. Gribbon, has failed to meet his burden to show that Ms. Fries otherwise executed the [TODs] September 2nd, 2019, that she was under undue influence.      

I believe she was influenced, but whether it was "undue," I do not find that it was."

Gribbon v. Vosburgh, Riverside County Superior Court case no. PRRI2100639; PRRI2200180 

Enforcing a Court Order Through an Elisor

The vast majority of lawsuits are settled. I have read that 95% of lawsuits do not end up being decided by a judge or jury but rather through settlement.  Still, just because you have a settlement agreement, this does not necessarily mean that your matter is over. Yes your case continues.........

Settlement agreements are not self-executing. Each party to a settlement agreement is required to perform certain conditions by certain times. For example, this could entail signing a document by the end of the month, paying a debt on the 1st of the month, turning over an item to a specific party immediately or filing documents within 6 months. The potential list of conditions that could be included in a settlement agreement are ostensibly limitless. The practical limitations are one's creativity and the willingness to agree to certain terms. 

Unfortunately one party to a settlement agreement may balk at performing their side of the deal (for meritorious or idiotic reasons). In such a case, the non-breaching party can ask the court to appoint an "elisor." See Blueberry Properties, LLC v. Chow (2014) 230 Cal.App.4th 1017, 1020-1021. If a party "will not or cannot execute a document necessary to carry out a court order, the clerk of the court, or his or her authorized representative or designee may be appointed as an elisor to sign the document." (Super. Ct. San Diego County, Local Rules, rule 2.5.11.)

A recent unpublished appellate opinion highlighted how an elisor was used to execute a settlement agreement.

Bajan et al. v. Mikos et al., San Diego County Superior Court Case # 37-2008-00094754-CU-FR-CTL

A dispute arose over the ownership of a property. Eventually, after years of litigation, the parties came to a settlement agreement. One of the conditions of the settlement was that the defendants would sign deeds in conformity with the settlement agreement. Simple enough you could say.

However the defendants refused to sign the deeds. The plaintiffs then asked the court to appoint an elisor to sign the deeds in place of the defendants. The court obliged and appointed the San Diego County Superior Court Clerk to sign the deeds, who did so.

The basis of the appeal was unrelated to the appointment of the elisor. 

Proposed Recording Fee Increase to Support Affordable Housing

A bill is currently being debated in the California Senate that would significantly increase the cost to record a real estate document.

Basically any document related to real estate must be recorded with the applicable county recorder's office. For example, a deed of trust involving a home in Gilroy would need to be recorded with the Santa Clara County Recorder's Office. Since thousands of documents are recorded each day in California, California is a large state geographically and very populated, the revenue that can be generated by a recording fee increase is immense. In particular, analysis by the California Senate Transportation and Housing Committee stated that between $300M and $750M could be generated each year if the bill passes. The range is due to the fact that in some years more documents are recorded than in others. 

SB-391 (Saulnier) would add a $75 fee to every recordable real estate instrument. These funds would be allocated to principally support affordable housing programs for modest income individuals. The fee would apply to the following instruments: deed, grant deed, trustee’s deed, deed of trust, reconveyance, quit claim deed, fictitious deed of trust, assignment of deed of trust, request for notice of default, abstract of judgment, subordination agreement, declaration of homestead, abandonment of homestead, notice of default, release or discharge, easement, notice of trustee sale, notice of completion, UCC financing statement, mechanic’s lien, maps, and covenants, conditions, and restriction.

The typical cost to record a 1-page document is between $10-25. The reason for the variance is that each county sets its own recording fee. Santa Clara County charges $25 for the first page to record a document whereas Modoc County charges $10. Yes Modoc County is a California county. This bill would significantly increase the cost to record a document. For example, if SB-391 passes, to record a 1-page affidavit of death of a joint tenant in Santa Clara County would cost $100 instead of $25.  

Still, the bill does exempt the $75 fee from documents where the documentary transfer tax is in effect. For example, if a person purchases a home, the $75 fee would not apply.   

The bill's author previously attempted to pass a similar bill in 2012 but fell 2 votes shy on the Senate floor. Since the bill amounts to a tax increase, at least a 2/3 vote is required in both chambers of the California legislature. 

To be clear, this is just proposed bill. It is not California law unless it passes both chambers of the California legislature, Senate and Assembly, and signed by Gov. Brown. 

I express no approval or disapproval of the proposed bill whatsoever. This a legal blog, not a political blog.

Acknowledgment vs. Jurat

In the context of estate planning, the services of a notary are often required. For example, a client might create a trust and need to transfer ownership of their home into the trust. This requires a trust transfer deed, which may be in the form of a grant or quit-claim deed. Since the deed has to be recorded to give proper notice to third-parties, notarization of the signature is required.

The two most common types of notarial acts are an acknowledgment and jurat. 

Acknowledgment 

An acknowledgment is a formal declaration made in the presence of an authorized officer, such as a notary public by someone who signs a document and confirms that the signature is authentic. Black's Law Dictionary (8th ed. 2004).

Technically, California law does not require that the actual signer appear before the notary. This is in contrast to a jurat which does require personal appearance before the notary. Through a complicated process, witnesses can vouch for the signature's authenticity provided they appear before the notary. Still, you will save the notary plenty of befuddlement if you personally appear before the notary and sign the document, since many notaries do not know the exact procedure for this and would have to look it up.

An acknowledgment is most freqeuntly used with a deed execution.

The following is how an acknowledgment should be worded:

ACKNOWLEDGMENT

State of California
County of _____________________________)

          On _________________________ before me, __________ (insert name and title of the officer) personally appeared _______, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature ______________________________ 

Jurat 

A jurat is a certification added to an affidavit or deposition stating when and before what authority the affidavit was made. Black's Law Dictionary (8th ed. 2004).

The jurat certifies that the signer personally appeared before the notary when they signed the document. Govt C § 8202. That is, the signer was physically present when they signed it. Also, the notary is required to administer an oath or affirmation to the signer which requires that the signer attest to the document's truthfulness. Govt C § 8202.

An example of where a jurat is used is when there is the death of a trustee. Whereby an "Affidavit of Death of Trustee" is required and such is recorded with the appropriate County Recorder's Office.

The following is how a jurat should be worded:

State of California
County of _______________

          Subscribed and sworn to (or affirmed) before me on this ____ day of _______, 20__, by ________________, proved to me on the basis of satisfactory evidence to be the person(s) who appeared before me.

Real Property in California

650 Rosewood Court Los Altos, CA 94024

When couples purchase real property they have a number of methods in which they can hold title to such. The following are some of the more common methods for couples to own real estate collectively. Although couples can own real property through a business entity, such as a corporation or LLC, I omitted that section because the vast majority of couples do not purchase real property through a business entity. 
  

	Tenants in Common	Joint Tenancy	Community Property	Community Property with Right of Survivorship
Ownership Restriction	No	No	Must be spouses or domestic partners	Must be spouses or domestic partners
How title may be held (this is how the grantee's name might  be stated on the deed)	John Doe and Jane Doe, as tenants in common	John Doe and Jane, husband and wife, as joint tenants	John Doe and Jane Doe, husband and wife, as their community property	John Doe and Jane Doe, husband and wife, as their community property with right of survivorship
May ownership interests be different	Yes	No, must be  50/50	No, must be 50/50	No, must be 50/50
How title is transferred on death	Probate	Affidavit of death of a joint tenant	Spousal probate petition	Same as joint tenancy
Notable advantage	Interests need not be equal	Avoids probate	Entire property subject to stepped-up basis	Avoids probate
Notable disadvantage	Subject to probate	Lack of testamentary control	Spousal probate petition	Lack of testamentary control

Estate Planning Checklist

People often ask me what is estate planning and what does the process entail? Since the former question is a little bit too broad to explain in a blog post, I will attempt to answer the latter question. The following is the process I have used for the past couple of years. 

1. Meet with Clients 

At the initial meeting, I meet with clients to go over the truths, half-truths and outright myths that are associated with estate planning. For example, I am repeatedly told by potential clients that they do not want the government to inherit their estate, which rarely happens, or that a client has heard that a self-settled living trust will shield assets from lawsuits, a complete myth.

We usually go over what is included in the typical estate plan: a trust, a will, a power of attorney and an advance health care directive. Typically a client will insist that they need to write a trust because they saw a flyer for an estate planning seminar that exaggerated the benefits of a living trust. Yet a will, rather than a trust, is perfectly suitable for somebody with a modest estate with no children or a home because of non-probate transfers.

We also go over how long the process will take. I tell clients that I can go as fast as they want me to go. If they provide me with the necessary information I can draft the documents in a morning or an afternoon. For example, one client insisted that I complete everything in 1 week because he was leaving the country for an indefinite period of time. 1 week after coming into my office for that initial consultation, he signed the necessary documents in the morning and boarded a plane in the afternoon, never to be heard from again. No, not really. He was vacationing in the Middle East. 

2. Review Documents 

Once I receive all the necessary information, I am then able to draft all the documents. Of note, most people take on average a month or two to complete my estate planning questionnaire.

I then go over these documents with the clients. I am happy to review each document page-by-page but most clients find reading a will or trust to be quite tedious. For example, upon initial examination, most clients discover that a will or trust is a lengthy and complex document. To date, there has only been one client who has insisted that we go over everything in detail. His occupation was an engineer for reference. I should mention that lacking the desire to read a lengthy document written in legalese is an activity frowned upon by even prominent members of the legal community. Richard Posner, Chief Judge of the 7th Circuit Court of Appeals, a pre-eminent authority on contract law, said that when he received his 100-page home equity loan contract he surprisingly signed it without reading it because he had a life.

Also during this second meeting, I often highlight the distribution clauses in the trusts and wills because that is what concerns people the most typically, namely who will inherit their estate and who is in charge of the distribution. 

3. Sign Documents 

The final stage in the 3-step process is to formally execute the documents. This is by far the shortest meeting of the 3. The entire process takes about 15 minutes. If needed, I arrange for my notary to come to my office or the client’s home so that we have the appropriate parties present. There is no California law which mandates that a trust or certificate of trust be notarized rather it is notarized out of custom. However, a deed transferring the client’s home requires notarization.

Once the signing is complete, I provide the clients with all the executed documents for safekeeping. It is not my policy to safe keep the estate planning documents, instead I tell the clients to keep the items in a secure place such as a safe deposit box. The only document I do retain is the deed to the home. If the home is located in Santa Clara County, I personally record the document because it is a short drive from my office to the County office building. If the home is located outside Santa Clara County, I mail the document to that recorder. Approximately 4-6 weeks later, the recorded deed will be delivered to the client’s home.

Change of ownership - Prop 13

The process for transferring legal title to real property in California is actually quite simple. 

It merely requires the filing of two documents, a deed and a preliminary change in ownership (“PCOR”), with the appropriate County Recorder’s and County Assessor’s Office. 

The deed needs to be recorded in the county in which the property sits. For instance, if the property is in Davis, CA the deed would need to be filed with the Yolo County Recorder’s Office, or if the property was located in Scotts Valley, CA the deed would need to be filed with the Santa Cruz County Recorder’s Office. My personal experience with the Santa Cruz County Recorder’s Office has been quite pleasant. The clerks there have been very helpful. As for the PCOR, this is filed simultaneously with the deed. The County Recorder will forward the PCOR to the County Assessor.

The following information must be included on the deed:

1. The name of the grantor (the seller essentially). CC §1096,
2. The name of grantee (the buyer essentially). CC § 685.
3. A legal description of the property.
4. The signature of the grantor. CC § 1091.
5. The name of the person requesting recordation. Govt C §27361.6.
6. The name and address to which further tax statements may be mailed. Govt C §27321.5.
7. The amount of the documentary transfer tax due. Rev & T C §11932.

Thought not statutorily required, the assessor’s parcel number should be included on the deed nonetheless. In light of these requirements, deeds are typically only a few pages long.

The other part of the equation is the completion of a preliminary change in ownership (“PCOR”). 

California law says that a PCOR must be filed whenever there is a change in ownership of real property. Rev & T C §480(a). The reason for the PCOR is to inform the county assessor whether a change of ownership has occurred that will trigger property tax reassessment (See Prop 13). The PCOR is a 2 page form that asks questions pertaining to the identity of the new owners, the location of the property, the sale cost, etc. Each county may have its own PCOR form but the general format is modeled after a template drafted by the State Board of Equalization.

A key distinction between these two documents is the fact that a deed is subject to public inspection whereas the PCOR is not. For example, if I wanted to know who owned the home across the street from me, I could ask my real estate agent to pull the title for that home. However, I could not ask them to obtain the filed PCOR for that property.

For illustrative purposes, assume that Samantha Seller sold her Malibu dream home to Brooke Buyer for $100, 000. In order for Samantha to transfer ownership of the home to Brooke she would need to execute a deed, and in turn, Brooke would need to file a PCOR with the Los Angeles County Recorder’s Office so as to inform them that the house should be re-assessed for property tax purposes. 

Documentary Transfer Tax

 
In a California home purchase, there is the inclusion of a fee in the transaction known as the documentary transfer tax. Rev & T C §11911. 

The deed, the document which denotes the identity of the seller and buyer, must show the amount of the documentary transfer tax due. Rev & T C §11932. The tax rate is $0.55 per $500 of value (0.11 percent) sold. Rev & T C §11911. 

For example, if a house was sold for $500,000, then the documentary transfer tax would be $550. Hence, the documentary transfer tax is not prohibitively expensive. Although in some locations where the city documentary transfer tax is quite high, such as Berkeley and Oakland, the tax can be burdensome.

Each county or city, or both, may impose a documentary transfer tax. Rev & T C §11911. For example, the County of San Mateo imposes a documentary transfer tax as does the City of San Mateo. This means that a home sale in the City of San Mateo would result in both a city and county documentary transfer tax.

In terms of payment of the tax, the seller and buyer are responsible for the tax. Rev & T C §11912. However, it is customary for the seller to pay the tax.

The reason why the documentary transfer tax is relevant for estate planning purposes is because it is common for an estate to include a home. Since the transfer of a home requires the execution of a deed, the documentary transfer tax becomes an issue, albeit only superficially. 

For instance, if a person creates a trust they would need to execute a deed transferring ownership of the home from themself into the trust. However, California law states that a transfer of a home to a living trust is exempt from the fee imposed by the documentary transfer tax. Rev & T C §11930. Similarly, California law states that if a daughter inherits a home from her mother through probate, the deed transferring ownership of the home from mother to daughter would not require a documentary transfer tax payment because the transfer was the result of inheritance not a sale. Rev & T C §11930. 

Grant Deed

 
Whenever a home is transferred whether by inheritance, probate sale, trustee sale, short sale, eminent domain, etc. a deed is involved. 

A deed is defined as a “written instrument by which land is conveyed.” Black's Law Dictionary 8th ed. (West Group, 2004). 

For example, if buyer purchases Green Acre from seller, buyer will transfer ownership of Green Acre to seller by giving seller a deed to Green Acre. In the context of a modern real estate transaction, the escrow/title officer at closing will have the seller sit down and sign the deed transferring ownership of the home to buyer.

There are three types of deeds used in real property transactions: grant, warranty and quit-claim. However, due to the advent of title insurance, only grant and quitclaim deeds are used in California. A grant deed is a conveyance that includes all the implied warranties and covenants of title. CC § 1113. In non-legal speak, this means that if seller did not own the property when they transferred it to buyer, for instance seller sold the home to somebody else a few months beforehand, then buyer could turn around and sue seller for breach of covenant of title. A quitclaim deed only transfers the interest seller had at the time of the transfer. Klamath Land & Cattle Co. v Roemer (1970) 12 CA3d 613. Thus, if seller did not own the land that they transferred to buyer and buyer later learns of this, buyer would have no recourse against seller.

The reason why deeds are relevant for estate planning purposes is because a home will need to be transferred into the trust in order for the trust to own the home. Thus, the estate planning attorney will typically prepare a deed transferring the family home into the trust the attorney just created for their clients.

Most stationary stores or a county law library site have quality fill-in forms. The problem is that most people do not understand what they are filling out. For example, a deed could create gift tax, potential property tax re-assessment, the imposition of the documentary transfer or the possibility of judgment attachment, etc. Consequently, I have seen a few cases where families decided to engage in do-it-yourself estate planning by executing deeds in which ownership is transferred amongst family members. Typically the results have been disastrous because of the adverse tax consequences that followed.

Executing or interpreting a deed is not an overly complicated task for an attorney. An attorney should be able to resolve most deed problems within an hour or so. This means the attorney fee should not be the cost of your monthly mortgage payment.  

Trust Funding

In order for a trust to be valid in California, the trust must own property.

The legal term for trust property is "res" if you want to impress your dinner party guests with Latin. The trust must identify some piece of property that is owned by the trust whether it is intangible personal property, a patent, personal property, a piece of jewelry, or real property, a house. 

The way in which you transfer ownership of property to a trust is to name the trustee of the trust as the owner of the property. The reason for this is because the trustee of a trust is considered the legal owner of the property. For example, if I transferred a condo I own into a trust but named Thomas Thucydides as the trustee of the trust, then if somebody was checking ownership records of that condo they would discover that Thomas Thucydides, not Shahram Miri, was the legal owner of the property.

It is relatively easy for a client to transfer many types of property to their trust. If a client has a bank account they would go to the bank and ask the bank that the account holder's name be changed from, for example, John Smith to John Smith, trustee of the Smith 2010 revocable trust. If a client owns stock, the stock transfer agent will have forms available in order to effect a transfer of ownership. 

However, the one piece of property that is most likely too difficult for the lay person to transfer into their trust is their home.

Transferring one's home into a trust is especially important because a home will generally wind up in probate if it is not held in trust. The reason why transferring a home into a trust is cumbersome for clients is because deeds require that certain information be included on it such as names of seller/transferor, buyer/transferee, the cost of documentary transfer tax, the legal description of the property, etc. Since lay people infrequently write their own legal documents, often times people will pass along the burden of writing and recording a deed to an attorney.  Otherwise, the consequences of not  transferring one's home into a trust are steep due to the likelihood of probate with its associated cost and time.

Prop 13

When somebody inherits a home via a will, trust, intestacy or by gift, it is not necessarily true that the value of the home will be re-assessed for property tax purposes. 

This can be especially important to a beneficiary who inherited a home from his parents or grandparents since they probably had a low base year value of their home. For example, if Bobby Beneficiary inherited a home, currently valued at $1 million dollars, from his late parents who had purchased the home for $50,000 decades ago, he would not be liable to pay property taxes on the assessed value of $1 million dollars but rather on $50,000, plus annual adjustments. (See Example 4).

Of note, Proposition 13 caps the levying rate for property taxes in California at 1%. Cal Const art XIIIA, §1.

The following are examples of situations in which the transfer will not result in a “change in ownership” and thereby avoid the dreaded re-assessment for property tax purposes. 

1. Transfers in which proportional ownership interests remain the same before and after transfer 

For example, Husband and Wife own a rental home in joint tenancy (50/50 split) and transfer it to a limited liability company in which they have same membership interest (50/50 split). Rev & T C §62(a). 

2. Transfers to revocable trusts 

For example, Husband and Wife execute a revocable (living) trust and transfer the home they live in into the trust by transferring title from themselves to the trust by naming the trustee of their revocable trust as owner. Rev & T C §62(d). 

3. Interspousal transfers 

For example, Husband and Wife own their home in joint tenancy, Husband dies and Wife inherits the other half of the house. Rev & T C §63. 

4. Parent-child (or grandparent-grandchild) transfer 

For example, in the case of a Parent-Child transfer, Husband and Wife own a home and have one child, Son. Husband and Wife pass away and Son inherits the home. Furthermore, in the case of a Grandparent-Grandchild transfer, Grandparent is only survived by a Grandchild, that is no child of the Grandparent outlives the Grandparent. Rev & T C §62. 

5. Persons over age 55 or who are severely and permanently disabled may transfer the base-year value of a residence to a replacement dwelling in the same county, or in another county if the board of supervisors of that county adopts an ordinance granting base-year-value relief to replacement dwellings when the original dwelling was located in another county 

As of this writing, seven counties (Alameda, Los Angeles, Orange, San Diego, San Mateo, Santa Clara, and Ventura) have ordinances granting base-year-value relief to replacement dwellings when the original dwelling was located in another county per Rev & T C §§ 68-69.5. For example, Person purchases a home in San Jose (Santa Clara County) and upon reaching the age of 55 sells their home in San Jose in order to purchase a home in Redwood City (San Mateo County) so they can be closer to their family.