California Trust, Estate & Probate Litigation

Our lates video post describes the concept of Lack of Capacity in California Trust and Will creation.  For those viewing this blog by email subscription, you can click on the title for a link to the video.

How does your trust help you while you’re alive?  Many people think of trusts as death planning instruments--the type of thing that only operates upon your death.

But trusts have a critically important role to play while you are alive in the event you lose capacity.  People are living longer and the likelihood of being physically able, but mentally unfit is growing.

Without a trust plan in place, a person and his money cannot be easily cared for. In fact, a court supervised conservatorship is required to manage the person and estate of people who lose mental capacity, but have no other safeguards in place for the management of their money and personal care. 

Unfortunately, conservatorships are costly, time consuming and expose everything (and I mean everything) to ongoing court supervision.  In other words, your life becomes an open book and the court decides who will make decisions for you and then tries to oversee those decisions as best it can....yikes!

Since a conservatorship takes place in court, it provides a ready forum for lawsuits.  It's not uncommon for a person's children to fight over who should be named as the conservator.  And those types of lawsuits can be nasty business.

But a well planned trust can avoid all of that because under the trust terms, you appoint a successor to manage your money if you ever become incapacitated.  You should also have a Health Care Directive in place so that you can name someone to make your medical decisions.  With these two documents properly prepared, your personal care and your assets can be quietly and easily managed until you return to full mental capacity.

So the next time someone tells you that a trust isn't necessary because it only takes effect after you're dead and gone, think again.  That trust may save you a lot of time, money and public scrutiny while you’re still alive.

Trust and Will litigation is a bit of a shell game.  You remember the shell game, where a pea is placed under one of three shells and then the shells are re-sorted as quickly as possible so as to lose track of which shell has the pea.  The observer is then asked to pick the shell with the pea—it’s a 1 in 3 shot of getting it right.

The reason Trust and Will litigation is like a shell game is because so much depends on how assets are titled at death (see our earlier blog post on this issue).  The Trusts and Wills are the shells and the assets are the peas. 

For example, a decedent may die with a Trust, but if nothing is titled in the name of the Trust, then there may be nothing to contest regarding the Trust.

And a Will only controls what is in the estate, which means only those assets titled in the decedent’s name alone (this excludes property titled in joint tenancy, by beneficiary designation, or in the name of a trust).  However, in most cases, people have “pour-over” Wills that pass all assets from their estate to their Trust.  Thus, a Trust may not have any assets to begin with, but can obtain assets from a pour-over Will.

Sound confusing?  It is.  So where do you start when you want to contest a Trust and a Will (or is it a Trust or a Will, or just a Trust, or maybe just the Will…)?

Step One.  You have to determine where the assets are located.  Often, they are scattered all over the place, with some in a Trust, some in the decedent’s own name (so those are in the probate estate), and some passing by joint tenancy with right of survivorship (which pass outside the Will and the Trust). 

Step Two.  Once you have identified where the assets are located, you need to know what documents you are working with.  Is there a Trust, what does it say, and when was it last amended?  Is there a Will, what does it say?  What about joint tenancy property?

Step Three.  You have to decide what to attack first.  Typically that would be the vehicle that has the assets.  So if the assets are in the Trust, contest the Trust.  If the assets are in the probate estate, contest the Will.  (You'll have to open probate to contest a Will, if probate is not already opened.)  If the assets are in joint tenancy, you have to file that lawsuit in the probate estate (see Probate Code Section 5302), but it will take clear and convincing evidence to dislodge the joint tenancy.  Sometimes, you will want to attack all three at the same time if there is a chance that assets may pass from one vehicle to another (such as from a pour-over Will to a Trust).  Other times, you will attack just one and save the other contests for later if the need arises. 

The mistake you want to avoid is attacking a vehicle that has no assets and never will have any assets.  So if an asset is passing by joint tenancy (which passes outside a Will and a Trust) and you want to attack that transfer (i.e. the joint tenancy transfer, such as a jointly held bank account), then you have to file a lawsuit in the probate estate and request that the joint tenancy asset be returned to the estate.  If you are successful, then (and only then) the asset would pass by Will, if the Decedent had a Will, or by intestate succession if there is no Will.  You most likely do NOT want to contest the Decedent’s Trust in this scenario because the Trust does not own the joint tenancy asset.  In fact, the Trust has nothing to do with joint tenancy assets in most cases.

The bottom line is to map out the location of the assets and the documents you are contesting.  Of course, there has to be a reasonable legal basis for the contest and you have to watch out for any no-contest clauses (see our earlier posts on no-contest clauses).  But once the facts are mapped out, you can then plan your attack on the document that holds the asset(s). 

California Form Interrogatory 15.1 (an “interrogatory” is just a question) is the most important interrogatory to serve on your opposing party in a lawsuit. And the law requires they answer it fully and completely. Yet, so many attorneys refuse to answer the question properly.

A typical use of 15.1 follows:

You file a Trust Contest or a Will Contest (or any other type of lawsuit) alleging three causes of action: (1) Undue Influence, (2) Lack of Capacity, and (3) Financial Elder Abuse. The opposing party files an answer to the Trust Contest or Will Contest denying most, or all, of your allegations, and on top of that includes 15 affirmative defenses (an affirmative defense, if proven by the opposing party, operates to defeat your claims even if the facts supporting the claim are true).

The opposing party’s denials and affirmative defenses must ultimately be tried, which can make for a long, costly and confusing trial.  But what if the denials and affirmative defenses could be trimmed down before trial?  That’s the purpose of 15.1—you can narrow the issues, and force the opposing party to show their cards—factual cards—before trial. Once you narrow the issues in a case, you are able to clearly and forcefully present the true facts of the case at trial, which generally equals a win for you.

How does 15.1 do this? 15.1 requires the opposing party to provide all facts, all persons, and all documents that support (1) their denials, and (2) their affirmative defenses. In other words, for each denial of a material allegation in your lawsuit (i.e., Trust Contest or Will Contest) the opposing party must (1) identify all facts supporting each denial, (2) identify all witnesses (including their names, addresses, and phone numbers) who can testify about facts supporting each denial, and (3) identify all documents (or things) (including the name, address and phone number of the person who has each document) supporting each denial. Likewise, the opposing party must identify all facts, witnesses, and documents that support each and every affirmative defense (all 15 of them in the case presented above—that’s a lot of work).

To date, I have never received a proper response from an opposing party to 15.1. I generally follow up the opposing party’s response with a required “meet and confer” letter articulating how they must respond to 15.1. If the opposing party refuses to supplement their improper response I generally file a motion with the court requiring that they properly respond to 15.1. Any time I have filed a motion with the Court on 15.1, the Court has granted my motion and ordered the other side to respond. I have even received monetary sanctions against the opposing parties. So beware, when 15.1 comes your way, especially from my firm, it must be answered.

If you have questions, or would like to receive a form copy of my motion to compel for 15.1, please contact me.  

In order for a person to create a valid Will or Trust they must have “sound mind.” The term “sound mind” is short hand for a rather complicated set of rules for determining mental capacity. If a person lacks proper mental capacity, then any document they sign is deemed invalid under California law. A person may lack proper mental capacity if they exhibit memory loss, or have been diagnosed with dementia or Alzheimer’s.

Surprisingly, there is more than one set of rules for testing mental capacity under California law—one for Wills and a different one for Trusts. The capacity required to make a Will (referred to as “Testamentary Capacity”) requires a person creating a Will to

• understand he or she is creating a Will,
• understand what property he or she owns, and
• understand his or her relations to the persons who have claim to their assets (usually his or her children) and whose interests are affected by the terms of the Will.

Will capacity is considered the lowest form of mental capacity. In fact, a person can be deemed to lack the capacity to make a Trust, yet still have sufficient capacity to make a Will.

The mental capacity required to create a Trust is a higher capacity standard (referred as “Contractual Capacity”). In order to create a valid Trust, a person must be able to understand and appreciate the following:

• The rights, duties and responsibilities created by, or affected by the decision,
• The probable consequences for the decision maker and, where appropriate, the persons affected by the decision, and
• The significant risks, benefits, and reasonable alternative involved in the decision.

The Trust capacity standard is much more stringent than the Will capacity standard requiring, among other things, a person to understand and appreciate the consequences of the decision being made. This is not a requirement under Will capacity. A person can create a Will without knowing, understanding or appreciating the consequences that Will may have on himself or others.

These two different levels of capacity are significant when creating Wills and Trusts for persons who are older or may be in the beginning stages of dementia, Alzheimer’s or memory loss. It is likely a person with the beginning stages of dementia has the capacity to create a Will, but may not have the capacity to create (or perhaps revoke) a Trust.

Best practices require that an older person, or any person, showing signs of memory loss or dementia should be evaluated by their primary care physician for a determination of the required capacity to create a Will, and further to create a Trust, before doing so. A primary care physician’s letter stating that an older person with memory loss or dementia has the capacity to create a Will (Testamentary Capacity) and further, has the capacity to create a Trust (Contractual Capacity) will be very difficult to overcome by a beneficiary or family member contesting the terms of the Will or Living Trust after the Will or Trust creator’s death.