Property Ownership

When a person inherits a piece of property, a question that naturally arises is "when does that person's interest in the property vest?" Or in other words, "when did that person become the property's owner?"

This is an important legal question because ownership gives the owner a bundle of legal rights. For example, ownership gives a property owner the ability to occupy, modify, improve, buy, sell, lease and exclude others from such property. 

The California Probate Code says this on the following subject:

"Subject to Section 7001, title to a decedent’s property passes on the decedent’s death to the person to whom it is devised in the decedent’s last will or, in the absence of such a devise, to the decedent’s heirs as prescribed in the laws governing intestate succession." Prob C § 7000.

You might then wonder, what does Prob C § 7001 entail? It reads as follows:

"The decedent’s property is subject to administration under this code, except as otherwise provided by law, and is subject to the rights of beneficiaries, creditors, and other persons as provided by law. Prob C § 7001." 

A common scenario where property ownership is important is when a relative has been staying with the decedent at their home. The following illustration encapsulates a scenario I have heard numerous times over the years.

Randy is a mooch and asks his Aunt Bee if he can stay with her at her country estate in Portola Valley. Aunt Bee is a widow without any chidren and longs for company at her huge home and pities Randy so she decides to take her nephew in. Aunt Bee then writes a will which bequeaths the entire home to her nephew Rufus, a modest man who lives with a spendthrift wife and sells women's shoes at the local mall. Rufus is Randy's brother. Aunt Bee does not believe that Randy should inherit anything because he is a scrounger and Rufus is a tireless worker. One day Aunt Bee passes away in a horrible canoe accident. Rufus retrieves the will from Aunt Bee's safe deposit box and reads that the country estate was bequeathed to him. Rufus retains counsel and his attorney informs him that he technically became owner of the home the moment Aunt Bee died, citing Prob C § 7000.

Rufus believes that Randy exploited Aunt Bee's kindness and demands that Randy leave the home immediately. Randy objects and says that he has squatter's rights and moreover, Rufus must complete probate before title will transfer to him. Rufus then asks his attorney to speak to Randy. His attorney informs Randy that title passed to Rufus on Aunt Bee's death and thereby he was he owner of the property and could make tenancy determinations. Consequently, Rufus was of the belief that Randy's tenancy was over and asked him to leave or face eviction. The attorney also explained that squatter's rights are the stuff of legal fiction. Randy then left the country estate in hopes of finding another sympathetic relative so he could freeload at their home.       

Precatory Language

I dream that the beneficiary will............

People like to be given clear instructions. It can be very frustrating for the recipient if given ambiguous directions because invariably he or she will perform unproductively. Providing clear instructions is not only useful but required when writing a trust. 

California law states this requirement as follows "a trust is created only if the settlor properly manifests an intention to create a trust." Prob C § 15201. The logical question to this is, what constitutes an intent to create a trust?

California law does not require particular "magic" words to manifest an intent to create a trust. Rather, a combination of phrases or terms suffices if an intent to create a trust can be deduced from the writing.

Just about any trust, whether attorney-drafted or plucked from the Internet (yeah, bad idea to use one), will have an introductory clause that states that the settlor holds in trust for the benefit of others, certain assets that are listed at the end of the trust, typically referred to as Exhibit A or a Schedule of Assets. This satisfies the requirement of an intent to make a trust.     

What becomes problematic is if the person writing the trust does not use definitive or clear language but rather wishful or aspirational language. Hopeful verbiage such as this is known as precatory langauge. This type of language is legally unenforceable. An example of the consequences of using precatory language is the case of Chris Collias. Estate of Collias (1951) 37 C2d 587.

Collias' will read in pertinent part: 

"All the rest and residue of my estate, of every kind and description, and wherever situated, I give, devise and bequeath unto my nephew Argirios Collias a resident of Long Beach, California at the time this instrument is signed. It is my desire and wish that my nephew Argirios Collias will give half of my estate to my nearest relative heir in Greece instructing him or her to distribute said half of my estate in equal shares to all my close relatives in Greece." 

The problem with Collias' will was that he used the terms "desire" and "wish" in asking Argirios to distribute half of his inheritance to his relatives in Greece. Naturally Collias' relatives asserted that "one half the estate is left to [Argirios] Collias in trust for the use and benefit of the nearest or close relatives of the decedent in Greece." Argirios balked at this assertion and litigation ensured. The California Supreme Court held that Collias' will did not create a testamentary trust because he used precatory language, i.e. he used the terms "desire" and "wish." Thus, Argirios was free to use the inheritance as he wanted and did not have to hold half in trust for his Greek relatives. 

Another common example of precatory language is the term "hope." That is, "I hope my beneficiary uses his inheritance for educational purposes rather than a buy-in for a Texas Hold'em tournament in Las Vegas."

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. 

Filing a Will

Humboldt Superior Court

When a person passes away and has written a will, certain duties arise. For example, the custodian of the original will must lodge it with the probate court within 30 days of learning of the testator's death. 
Prob C §8200(a). If the custodian fails to do so, he or she is liable "for all damages sustained by any person injured by the failure." Prob C §8200(b).

The custodian is the person in possession of the will. This person may or may not be the will's executor.

The will is to be delivered to "the clerk of the superior court of the county in which the estate of the decedent may be administered." Prob C § 8200(a)(1). For instance, if the decedent resided in Los Altos, CA (my hometown), his or her will would be lodged with the clerk of the Santa Clara County Superior Court. Prob C §8200(a). The exact courthouse is located in San Jose at 191 N 1st Street. Some counties only have 1 courthouse, such as Modoc, whereas larger counties, such as Santa Clara, have multiple courthouses. A quick check of the county's website will reveal the location of the courthouse where the will should be filed.

Furthermore, the custodian is to "mail a copy of the will to the person named in the will as executor, if the person’s whereabouts is known to the custodian, or if not, to a person named in the will as a beneficiary, if the person’s whereabouts is known to the custodian." Prob C § 8200(a)(2).

In the past, no filing fee attached to the lodging of the will. That is, the will could be lodged free of charge. On a couple of occasions I lodged the will of a deceased testator as a favor for the family of the former client because I occasionally go to the local superior court. However, effective June 27, 2012, a filing fee attached to the lodging of the will. The relevant law reads, "the fee for delivering a will to the clerk of the superior court in which the estate of a decedent may be administered, as required by Section 8200 of the Probate Code, is fifty dollars ($50)." Govt C §70626(d).

Once filed, the will becomes public record. Thus, the general public is free to inspect the will if they so desire. A copy of the will may also be obtained for a fee. Some wills may be read online through the website of the Alameda County Superior Court. 

Heggstad Petition - Is an Attorney Required?

A very common trust administration procedure is a Heggstad petition. See Probate Code § 850. Many unrepresented people who write a trust often forget to transfer the home they own to the trust. When the person passes away and the trustee seeks to sell the home, they encounter the fact that the home is still in the settlor's name and not in the trust's name. Herein the Heggstad petition comes into play.

A Heggstad petition seeks to obtain a court-order that finds that the home is a trust asset. The best piece of evidence to include in a Heggstad petition is a declaration of trust stating that the home is a trust asset. This is customarily found at the end of the trust document, i.e. Schedule A or Exhibit A. As mentioned, if the petition is granted, the home becomes part of the trust and the trustee may dispense of the property as the trust dictates. If the petition is not granted, the home will likely have to be probated which is a costly and lengthy legal process in California.

A person is free to act as his own lawyer. Famous court cases have involved litigants who acted as their attorney, e.g. Gideon v. Wainwright, 372 U.S. 335 (1963) involved an indigent prisoner successfully appealing his criminal conviction to the United States Supreme Court.  Although there is the old adage that goes "a self-represented attorney has a fool for a client."

However, a person is not free to act as a lawyer for somebody else. A California court held that a trustee, who was not an attorney, could not represent the trust in regards to a lawsuit involving the sale of a mobile home to the trust. Ziegler v. Nickel (1998) 64 CA4th 545. The court found that the trustee would be representing the interests of other parties, i.e. the beneficiaries.  Since representing others constituted the practice of law, he was required to have a law license. Bus & P C § 6125. Whereas the trustee did not have a law license, the lawsuit was dismissed.

In regards to a Heggstad petition, since the trustee would be representing the interests of others, rather than themselves, arguably they are required to have a law license to file the petition.

Estate, Inheritance or Death tax?

The estate, tax and death merge as one just as the Ohio and Kanawha Rivers

When a U.S. citizen or permanent resident passes away, the federal and state government may impose a tax, when applicable, on the estate of the deceased person. The correct legal term for this is the "estate tax." Depending on when the person passed away and the size of their estate, will dictate if the estate tax is imposed.

On a daily basis I check Google Analytics to see how Internet users found my blog. One of my particular interests is to look at the keywords used to find my blog. What I find particularly interesting is that people often search the term "California inheritance tax", "is there is an inheritance tax in California" or "does California have a death tax."

The point of this post is to make clear that the following terms: (1) estate tax, (2) inheritance tax and (3) death tax, all have the same meaning. These three terms all relate to the tax imposed on a decedent's estate by the federal or applicable state government. I have never heard of a municipality, i.e. a city, imposing a tax on a decedent's estate. 

Many people ask me about the estate tax, although they use the term "inheritance tax" typically. I explain what it is and then they ask if the estate tax is different from the inheritance tax. As mentioned, there is no difference between the terms. So if you invoke the inheritance tax, you are also alluding to the estate tax as well. One could say that all roads lead to Rome when the phrase (1) estate tax, (2) inheritance tax or (3) death tax is mentioned.

Similarly, many people have heard of the term "living trusts." This is another informal legal term that has supplanted the formal legal term. If a trust is created during a person's lifetime, this is known as an "inter vivos" trust (Latin for among the living). Since the term "living trust" is more easily comprehensible than "inter vivos trust," (trust me on this one) the former is used instead of the latter. For reference, if a trust is created at death, this is known as a testamentary trust. A trust is created at death commonly through a will. For example, the 1951 will of newspaper tycoon William Randolph Hearst created a massive trust than is expected to sustain until 2040. Hearst v. Ganzi (2006) 145 CA4th 1195.

Transfer iTunes on Death?

The advent of digital media has made it much easier to amass an enormous collection of music, movies, television shows, etc.. My cousin Bob told me that he has more than 10,000 songs on his iTunes playlist a few years ago. The need to store and catalog compact discs, cassettes and records (for those of you old enough ) is ostensibly an antiquated practice. The smart phone and laptop have replaced them. 

In terms of estate planning and digital media, a common question raised is whether or not you can transfer said digital media, e.g. iTunes, to a beneficiary when you pass away. The short answer is no. According to the terms and conditions  of iTunes: 

a person "may not rent, lease, lend, sell, transfer redistribute, or sublicense the Licensed Application and, if you sell your Mac Computer or iOS Device to a third party, you must remove the Licensed Application from the Mac Computer or iOS Device before doing so. You may not copy (except as expressly permitted by this license and the Usage Rules), decompile, reverse-engineer, disassemble, attempt to derive the source code of, modify, or create derivative works of the Licensed Application, any updates, or any part thereof (except as and only to the extent that any foregoing restriction is prohibited by applicable law or to the extent as may be permitted by the licensing terms governing use of any open-sourced components included with the Licensed Application)." 

The above legalese means that only the original licensee is allowed to use it, not your friends, neighbors, family members, will beneficiaries or trust beneficiaries. So your entire collection of music, The Beatles, Metallica (personal favorite), Michael Jackson, Elvis, Abba, Pink Floyd, etc., is for your ears only you could say.

For reference, a license is a permit to own or do something subject to certain restrictions. Many people erroneously believe that when they purchase a song through iTunes, they own the song outright. As mentioned, this is simply not true as the terms and conditions specify that "The Mac App Store Products and App Store Products (collectively, “App Store Product(s)”) made available through the Mac App Store Service and App Store Service (collectively, “App Store Service(s)”) are licensed, not sold, to you." 

The legal term "license" is applicable to the daily lives of many Californians, though you probably never think about it. For example, a California driver's license is roughly analogous to the license granted by iTunes to a song purchaser. Provided you meet the requirements, the state of California will issue you a license to operate a motor vehicle. If you cannot abide by the rules, i.e. incur excessive speeding tickets or DUI convictions, the state may rescind your license. The same holds true for an iTunes song, use it in the correct manner, namely follow the terms and conditions, or else you will lose your right to use it.

Ultimately, I am sure some people will find a way around the license agreement but my point here is that iTunes does not legally permit it, since you merely have a license and thus do not own your iTunes catalog.

Foreign Inheritance Tax?

PD-1923

The United States, as famously stated, is a nation of immigrants. Naturally then, many U.S. persons have close relatives that reside abroad. For example, I have many close relatives living in Iran, namely Tehran and Shahmirzad, from my father's side of the family. Invariably, relatives residing abroad will unfortunately reach a demise at some point in time. It might then be possible for a U.S. person to be the beneficiary of that foreign relative's estate. A common question that is raised when a person inherits money from a foreign estate is, "do I have to pay taxes for inherited assets from a foreign source?"

The answer to this question is no, a U.S. person does not have tax liability in regards to assets inherited from a foreign estate. However, there are reporting requirements when certain thresholds are met. 

For example, assume John Quimby is a U.S. citizen residing in Los Altos, CA, my hometown. John has a wealthy aunt that lives in Australia and maintains citizenship there. The aunt does not have a green card or any association with the U.S. The aunt pens a will and names John the sole beneficiary of her estate, which consists solely of $101,000 in a bank account. John's aunt later passes away when she is ambushed by an angry flock of seagulls at Bell's Beach. The aunt's executor eventually wires to John the $101,000 when the estate is closed. John will not have to pay the U.S. government taxes for this inherited amount. However, John will have to file with the IRS Form 3520 because the amount received from the foreign estate exceeds $100,000.

One rationale for imposing no tax on inherited assets is that the decedent presumably already paid taxes on their estate. If the U.S. government imposed a tax on a foreign inheritance, this would arguably constitute double taxation which some find objectionable.

Another rationale for imposing no tax is that this policy facilitates the in-flow of capital to the U.S. By not imposing a tax, this encourages foreigners to name a U.S. person the beneficiary of their estate because the foreigner knows that a portion of the inheritance will not end up in the government's coffers but rather will entirely end up in the beneficiary's hands.

What is important to remember is that Form 3520 relates to an inheritance. If a U.S. person receives money as a result of investment or services, this would not be considered a gift. Rather it would be considered foreign taxable income. Regardless, it should not be difficult to distinguish between inheritance and income.

There is no California equivalent to IRS Form 3520. Thus, all that is required of a foreign estate beneficiary is to file with the IRS.

Finally, if you receive an email from a supposed Nigerian prince informing you that you are the beneficiary of an astronomical amount of money, it might just be a scam. Call me crazy.

Safe Deposit Box

Many people utilize a safe deposit box to store valuable items. A person might keep a prized piece of jewelry, an antique watch or their passport in it. What is also commonly found in a safe deposit box is an original copy of a person's will and trust. A will and trust are one of the few legal documents where an original is generally required. I always tell clients to store their will and trust in a safe deposit box, assuming they have one, because it is a secure location.

Frequently, a person will own a safe deposit box in his or her name alone.  Since the asset is held in their name alone, there is the initial concern that access will be prohibited once they pass away. However, the probate code has been amended to allow access to the safe deposit box for specified reasons for certain people. The following explains how a person can gain access to the safe deposit box and what they may remove.

First, the person seeking access must have a key to the box. Prob C § 331(a). It is not enough if the person is a relative or friend of the decedent, he or she needs a key to gain access. Next, this person must showing the bank both of the following (Prob C § 331(b):   
 

(1) Proof of the decedent’s death. Proof shall be provided by a certified copy of the decedent’s death certificate or by a written statement of death from the coroner, treating physician, or hospital or institution where the decedent died.

(2) Reasonable proof of the identity of the person seeking access. Reasonable proof of identity is provided for the purpose of this paragraph if the requirements of Section 13104 are satisfied.

In short, the person needs to show a death certificate and a driver's license to the bank.

Upon satisfaction of Prob C § 331(b), the bank is required to do the following:

(1) Keep a record of the identity of the person.

(2) Permit the person to open the safe deposit box under the supervision of an officer or employee of the financial institution, and to make an inventory of its contents.

(3) Make a photocopy of all wills and trust instruments removed from the safe deposit box, and keep the photocopy in the safe deposit box until the contents of the box are removed by the personal representative of the estate or other legally authorized person. The financial institution may charge the person given access a reasonable fee for photocopying.

(4) Permit the person given access to remove instructions for the disposition of the decedent’s remains, and, after a photocopy is made, to remove the wills and trust instruments.

In short, the person can remove the decedent's will and trust from the safe deposit box but must make a copy of each. 

Then, the person is to deliver all wills found in the safe deposit box to the clerk of the superior court and mail or deliver a copy to the person named in the will as executor or beneficiary as provided in Section 8200. Prob C § 331(e).

However, this person is not given carte blanche in regards to removing items. The last part of Prob C § 331 states:

(f) Except as provided in subdivision (d), the person given access shall not remove any of the contents of the decedent’s safe deposit box.

Thus, if the safe deposit box had a large sum of cash, an Omega watch or the keys to a Ferrari in it, the person would be prohibited from taking these items. The personal representative would be the appropriate party to remove these items from the safe deposit box. A person is appointed the personal representative of a decedent's estate only after filing various documents with the probate court.

Locating a Trust

A common question I see asked by people is,  "where can I find a copy of a living trust?" For example, a person heard that a relative died recently and remembered that he or she, the decedent in legal terminology, might have written a trust a few years ago but is not totally sure.

Many people erroneously believe that a government agency or superior court stores copies of living trusts. The simple answer is no. There is no government agency or superior court that stores copies of living trusts. Living trusts, unlike wills, are not required to be lodged with a government agency or superior court. See Prob C § 8200.

A logical follow-up question is, "where then can I find for a copy of a living trust?"

The easiest method is to rummage through the decedent's belongings. Most people keep a copy of the trust at home in a secure place, unless they have a safe deposit box. Although for a safe deposit box, access would likely be an issue because of bank privacy considerations.

A creative way for determining the existence of a living trust is to check the real property records pertaining to the decedent. If the decedent did in fact write a trust and owned real property, he or she should have transferred the property into the trust via a deed. If that is the case, the deed should show the name of the trust, the trustee and the date it was signed. Furthermore, it is common for attorneys to write the trust transfer deed for clients, also known as a grant or quit-claim deed, so the attorney's name might be listed on the deed under "Recording Requested By" in the upper left-hand corner. Many attorneys are also notaries, so it would be prudent to check the notary's name on the deed as well.  The State Bar of California's website has an online search where you can look up the name of every practicing attorney in California. Yes, every single one of them and yes I am on there. Consequently, some attorneys keep copies of trusts they have written in the past.

However, if the decedent did not own real property, it is very challenging to know if a person wrote a living trust because public records will not reveal anything. In that case, you are looking for the proverbial needle in a haystack.

Living Trusts Taxation

The following is an excerpt from a recent California Court of Appeal decision:

"Before Beckwith presented the will to MacGinnis, he called Dahl to tell her about the will and e-mailed her a copy. Later that night, Dahl responded to Beckwith's e-mail stating: `"I really think we should look into a Trust for [MacGinnis ]. There are far less regulations and it does not go through probate. The house and all property would be in our names and if something should happen to [MacGinnis] we could make decisions without it going to probate and the taxes are less on a trust rather than the normal inheritance tax."

Beckwith v. Dahl (2012) ___ CA4th ___

The phrase in italics is a common fallacy held by many people. A revocable trust is a tax neutral document, i.e. it will neither increase nor decrease taxes.  Dahl was acting under this erroneous belief when she emailed Beckwith above. Regardless if the decedent wrote a will or revocable trust, the taxation of their estate would be unaffected by the drafting of either instrument. The principal reason for this is because reducing or eliminating the estate tax, "inheritance tax" is a colloquialism, is determined by the recipient of the property, e.g. a spouse or a charity, as opposed to what instrument is used.

However, it should be noted that other types of trusts are created to avoid or reduce taxes. For example, a disclaimer, A/B and charitable trusts are all examples of trust specifically designed for such. Still, each of these trusts utilize beneficiaries that are considered allowable deductions for estate tax purposes. For example, if a person passes away with a $100M estate, they can devise it entirely to charity and their estate will not have any estate tax liability.

Certificate of Trust

Once a person has written a trust, they are left with a rather long document. Trusts can range from a few pages to  forty pages or more. Given the burden of lugging around a burdensome document, California law allows for a person to create a certificate of trust to provide third-parties in lieu of providing the trust document itself.  

A certificate of trust may contain the following information per Prob C § 18100.5(b)

(1) The existence of the trust and date of execution of the trust instrument.

(2) The identity of the settlor or settlors and the currently acting trustee or trustees of the trust.

(3) The powers of the trustee.

(4) The revocability or irrevocability of the trust and the identity of any person holding any power to revoke the trust.

(5) When there are multiple trustees, the signature authority of the trustees, indicating whether all, or less than all, of the currently acting trustees are required to sign in order to exercise various powers of the trustee.

(6) The trust identification number, whether a social security number or an employer identification number.

(7) The manner in which title to trust assets should be taken.

(8) The legal description of any interest in real property held in the trust.

Two benefits of writing a certificate of trust is that it is (1) much easier to carry around to due its shorter length than a trust and more importantly (2) the certificate of trust maintains the trust's privacy as to distribution specifics, the most confidential part of the trust. One reason why people choose to write trusts is because of the privacy aspect. Generally speaking, a trust document will not become a public record as opposed to a will. A certificate of trust ensures that the trust's privacy remains intact. In particular, the relevant part of the statute reads "The certification of trust shall not be required to contain the dispositive provisions of the trust which set forth the distribution of the trust estate." Prob C § 18100.5(d). 

It is standard practice for an attorney to write a certificate of trust for the client along with the trust. This is not particularly difficult for the attorney because the trust contains the required contents of the certificate of trust. 

A certificate of trust is commonly used when a settlor, the person who wrote the trust, wishes to transfer their bank account into the trust. When I meet with clients when all estate planning documents are signed, I explain to them the importance of transferring title to their bank account from themselves to the trust by using the certificate of trust. The bank will often copy the certificate of trust for future reference. Still it is appropriate to not assume that the bank will always have a copy on file. Hence, it is prudent to keep the certificate of trust in a safe place.   

Testamentary Trust

The colloquial phrase "living trust" is used commonly by attorneys and non-attorneys. The correct legal terminology for a living trust is an "inter vivos trust." Inter vivos is Latin for among the living. Now you can express your friends at the next cocktail party when somebody asks about your knowledge of Latin. Trust me, it will happen.

Since death is the natural consequence of life, one might ask if they can create a trust at their death. The answer is yes. A trust created at death is called a "testamentary trust." Since the trust is created at death, a will is the instrument used to create a testamentary trust.

To create a testamentary trust, the following five elements must be present:

1. The intention to create a trust
2. Trust property 
3. A trust beneficiary 
4. A trust purpose neither illegal nor against public policy  and
5. A trust purpose that is ascertainable with reasonable certainty

The main reason why testamentary trusts are not as popular as living trusts is because all wills must be probated. Since a principal advantage of a trust is that it exempts trust assets from being probated, a testamentary trust negates this advantage because a will needs to be probated in order for the testamentary trust to come into existence. Hence, testamentary trusts are generally disfavored by most people. 

The following language is excerpted from the will of Joseph Clementi, Jr. that created a type of testamentary trust, a charitable trust. The California Court of Appeal held that the following did in fact create a charitable trust despite the ostensibly incomplete language. Clementi's heirs tried to invalidate the will on the premise that there was no intent to create a trust. The ruling emphasized that charitable trusts are generally favored and courts are reluctant to strike them down, so its validity was upheld on appeal.

Estate of Clementi (2008) 166 CA4th 375

"3. I give the balance of my assets to a charitable foundation or trust in my name to be run by Richard Weisz. If Richard Weisz is not alive when I die, then I appoint his son, Frank Weisz[,] to run my charitable foundation or trust."

Codicils

Codicil of Christopher Columbus (No I cannot read it)

It is common for a person who writes a will to later change their mind as to its contents. As time goes by, a person's attitude and circumstance changes invariably and reflectively they might wish to change their will. For example, the testator might want to amend beneficiary designations, the choice of executor or specific bequests. The legal term used for this testamentary instrument is a "codicil." 

A codicil can supplement, amend, qualify or republish a prior testamentary document. Estate of Benson (1944) 62 CA2d 866. The codicil and will coalesce in probate whereby both are read as one document. In a sense, a will and codicil are like chapters in a book. Each chapter needs to be read in order to fully understand the book, and the same holds true for a will and codicil.

What is particularly important when writing a codicil is to ensure a clear intention. The following case illustrates the problems an inarticulate intention, i.e. ambiguities, can create.

Estate of Lund (1973) 34 CA3d 668

Grace Lund's will devised $10,000 to Margarita Varga. Then in a codicil to her will, Ms. Lund stated that Ms. Varga was to receive $20,000 and a mink coat. Naturally, Ms. Varga argued that the codicil supplemented the will such that she would receive $30,000. Conversely, the executor argued that the codicil was substitutional whereby Ms. Varga should only receive $20,000. The Court held that the codicil was not substitutional because it found no evidence of intent to substitute the $20,000 for the $10,000. Rather it found that the codicil supplemented the will and affirmed the $30,000 award to Ms. Varga. This case illustrates the danger of haphazardly executing a codicil. The $10,000 difference in 1973 is today worth anywhere 4x and 10x times that amount. Be clear!