Promise of an Inheritance

Probate Code §366.3 provides that a party has one year to file a claim to enforce a promise or agreement made by a decedent regarding a distribution from an estate or trust. A recent unpublished appellate opinion involved the applicability of Probate Code §366.3 to the case's particular facts.

"Between the 1960s and the 1980s, decedent Junichi Frisco Yamasaki made repeated oral promises to leave his entire estate to his two sons, petitioners Daniel and Gene Yamasaki, in exchange for their financial support. In the 2000s, after a falling out with his sons, Junichi executed a will and a revocable living trust, through which he completely disinherited his children. In 2012, Junichi amended his trust, naming his long-time girlfriend and new wife, Reiko Nakazawa, as the trust's trustee and the primary beneficiary of his entire estate."

"Around late January 2013, Junichi was hospitalized, and later moved to a nursing facility, after his health deteriorated.

In April 2013, Gene drafted a new lease agreement for the Whittier Laundromat (Amended Lease). The Amended Lease named Junichi as the landlord and Gene as the tenant, and it provided that Gene would pay Junichi $500 per month for a 10-year term. The Amended Lease included two options, allowing Gene to extend the term of the lease for an additional 10 years. The Amended Lease also included an option allowing Gene to purchase the Whittier Laundromat for $5,000 at any time during the initial 10-year lease term or the extended terms. On April 15, 2013, Junichi signed the Amended Lease. Nakazawa signed the agreement as a witness to Junichi's signature.

Nakazawa later testified that she did not review the Lease and the Amended Lease, or otherwise understand what they were, before she signed them."

"In April 2013, Nakazawa filed a petition to be appointed as Junichi's conservator. Nakazawa alleged Junichi had been diagnosed with dementia, a heart condition, and macular degeneration and, as a result, was incapable of caring for himself, including his financial affairs. Nakazawa also alleged that Junichi never read or understood the Lease and the Amended Lease before he signed them. In December 2013, the trial court granted Nakazawa's petition.

In August 2014, Gene filed a petition to confirm the Lease and the Amended Lease under Probate Code section 850, subdivision (a)(3)(A) (Lease Petition).

In July 2015, Junichi died.

In September 2016, the court denied the Lease Petition, finding the Lease and the Amended Lease were unenforceable because Junichi suffered from dementia when he signed them and, therefore, lacked the capacity to enter into the agreements.

In December 2016, over a year after Junichi died, Daniel and Gene filed another petition under Probate Code section 850, subdivision (a)(3)(A), which sought to enforce Junichi's oral promises to leave them his estate when he died."

"In July 2021, the court issued a 23-page statement of decision. As a preliminary matter, the court found the brothers' claim to enforce Junichi's oral promises was barred by Section 366.3's one-year statute of limitations because they filed their petition more than one year after Junichi died."

The California Court of Appeal affirmed the trial court's decision.

Yamasaki et al. v. Nakazawa, Los Angeles County Superior Court case no. BP148064  

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.   

Oral Agreements

If given the opportunity to come to an agreement, whether orally or in writing, the easy solution is to make an oral agreement whereas the better solution is to come to a written agreement. First, an oral agreement is inherently difficult to prove. One party will naturally insist that an agreement was reached, while the other party will be inclined to deny the existence of such an agreement. This ultimately distills into the classic “he said, she said” conundrum. Legally speaking, oral agreements or directions in terms of estate planning can run the gamut of consequences. Depending upon the context, an oral agreement or direction may be unenforceable, enforceable or ambiguous. Although in almost all cases the result will be disastrous. The following are some situations in which oral statements come into play in regards to estate planning.

A transaction that attempts to sell real property or an interest therein is void unless in writing. CC §1624(a)(3). For example, if Jack Tripper wishes to gift to Marcy Darcy his interest in Greenacres, this transaction will need to be memorialized in writing, namely a deed. This elementary rule, known as the statute of frauds, is something that every law student learns during their first year. Moreover, it is bar exam season in California, the bar is offered at the end of every July, so I am sure that thousands of potential California attorneys have memorized this law as well. I know I did when I took the bar.

The creation of a joint tenancy in real property requires a written instrument. CC §683(a). Assume that John Tenant purchased a home before marriage. Later on, John married Joy Tenant. John wished that Joy would inherit the property should he predecease her. In order to do this, John would need to execute a written instrument conveying his interest to himself and Joy as joint tenants through a deed. Of note, there would be no property tax implications for this transfer. Rev & T C §62(f).

An oral bequest is void because a will must be in writing. Prob C § 6110. I have heard countless stories of alleged beneficiaries who thought they were cheated out of an inheritance because there was no record of a written will. Instead, the alleged beneficiary had been told by the person, while they were living, that they would inherit a piece of jewelry, furniture or a car when the person died. Disputes involving oral bequests usually pertain to items of sentiment value, such as a family heirloom as opposed to a substantial asset. Nonetheless, people are apt to fight over these objectively inexpensive items because of their emotional attachment to them.

A durable power of attorney must be in writing. Prob C §§4022, 4124. It is important to note the distinction between a durable power of attorney and a regular power of attorney. A durable power of attorney grants an agent the power to act on the principal’s behalf despite the principal’s incapacity. Whereas, a regular power of attorney will become ineffective on the account of the principal’s incapacity. For instance, if Peter executed a durable power of attorney and appointed Albert as his agent, Albert could act on Peter’s behalf if Peter ever lost the capacity to enter into contracts. Conversely, if Peter executed simply a power of attorney, then on Peter’s incapacity, Albert would lose his ability to contract on Peter’s behalf.

The following are examples where oral statements are enforceable in the context of estate planning.

Oral trusts are permitted in California. Estate of Heggstad (1993) 16 CA4th 943. By no means should a person ever consider creating a trust this way. The reason being is that oral trusts are prone to abuse, litigation, fraud and ambiguity.

A person may orally provide individual health care instructions. Prob C § 4670. This is quite peculiar on the surface because one would think that oral health care decisions would be ripe for manipulation or ignorance by sinister individuals. However, the intent behind this law is to provide isolated seniors with the opportunity to plan for future medical emergencies. However, I would be very surprised to see a health care facility make life-altering decisions based upon a patient’s oral directions. Instead, the health care facility most often relies on a written advance health care directive.

Even though one may not orally create a will, a person is permitted to enter into a contract to make a will. Prob C § 21700. In every will that I have written, I included a clause which states that the testator (the author of the will), has not entered into a will contract. The reason being is that the beneficiary of the will contract may sue the testator’s estate if the testator did not comply with the terms of the contract. Yes, even if death, somebody can theoretically hold you accountable for an agreement you entered into, albeit while you were alive. Although an oral will contract seems obscure, it does exist as illustrated by the following case. Stewart v Seward (2007) 148 CA4th 1513.

In early December 1990 a terminally ill Gowisea Koontz entered into an oral agreement with her spouse, Wilmer Koontz, on her death bed. Gowisea agreed that she would not execute a will disposing of her property and would not convert title of their home from joint tenancy to tenancy in common provided that Wilmer agree to execute a will leaving a ½ interest in the family home to Caroline Stewart, Gowisea's daughter and Wilmer's stepdaughter, and the other ½ interest to two grandchildren. This exchange, namely the oral agreement to make a will, was witnessed by several people. Gowisea later passed away on December 12, 1990, intestate. Following Gowisea's death, Wilmer executed a will leaving the entire home to the two grandchildren, leaving nothing to Caroline. Wilmer died on October 26, 2004.

Caroline eventually sued Wilmer’s estate for the inheritance she believed she was owed. Although her claim was denied on appeal due to a timing issue, this case illustrates the consequences of an oral will contract, namely the cost and the time involved. This case was appealed to the California Court of Appeal. To appeal a case from the trial level costs tens of thousands of dollars at a minimum according to attorney colleagues I know. Furthermore, litigation had not concluded until the breaching party, Wilmer, had been dead for 2 ½ years. In short, never make an oral will contract.