Self-Guided Tour Through the California Probate Process: Can you handle a probate on your own?

Posted by Keith A. Davidson on May 10, 2012

The probate process is probably one of the most archaic procedures we still have in our legal system.  Probate simply means to prove-up a Will—it’s the process where a Will is determined to be valid by the Court, it is then “admitted” to probate (as we say), an Executor is appointed and the administration of the decedent’s assets begins.

Probate also applies where there is no Will, then the Court determines that no valid Will exists, an Administrator is appointed, and the administration of the decedent’s assets begins.

Sounds pretty straightforward, until you run face-first into the procedural wall of probate.  There have been many times when I have been asked by non-lawyers “can I do the probate myself?”  My response is: yes.  This is America, anyone can represent themselves in Court—for the most part.  There are a few exceptions to that rule, but a simple, uncontested probate can be handled by the Executor.  All you need to do is know all the rules, procedures, and arcane terms of probate…well maybe its not so simple after all.

In fact, there are plenty of lawyers who have a hard time navigating the probate process.  The rules that have been established over many centuries (yes, some of our probate laws/rules are that old) are not intuitive to understand.  And if you don’t comply with the process, then your probate dies a slow death in Probate Court.

But still, it’s not impossible.  It just takes a good amount of homework and an extra large dose of patience.  And every probate can be broken down in three main parts (1) Starting the probate process, (2) administering the estate, and (3) closing the estate.

1.         Starting probate.  To start a California probate you have to file a petition with the Court.  A petition is just a way of asking the Court to do something—in this case it’s to open a probate.  There are other forms that go along with the petition too.  Once you prepare the petition, you file it with the Court and the Court will give you an initial hearing date for sometime in the future.  Once you have that date, you have to serve Notice of Hearing on all persons named in the Will AND all heirs at law.  You also have to publish notice of the probate in the newspaper before the hearing date. 

If all goes well and your papers are in order, then the Court will grant the petition, sign the Order opening probate, and issue Letters (either Letters Testamentary for an estate with a Will, or Letter of Administration for intestate estates (that’s estate’s with no Will)). 

See my video on how to prepare a Petition for Probate.  We also have a post with links to all necessary (well most necessary anyway) probate forms.   

2.         Administering the estate.  Once the California probate estate is opened all estate assets must be gathered and inventoried and appraised.  All cash can be appraised by the Executor, but any other assets, such as stocks, bonds, real estate, etc. must be appraised by the Court appointed probate referee.

Creditor’s of the decedent must be noticed, property sold or positioned for distribution, and any estate bills paid.  If someone claims to be a creditor, but the Executor believes the claim to be invalid, then there may be a lawsuit to determine which claims are appropriate to be paid.

Once all creditor’s are paid and assets are either sold or positioned for distribution, its time to close the estate.

3.         Closing the estate.  The final petition that must be filed in a California probate is a report by the Personal Representative, which usually includes an accounting of the estate assets and a request to distribute the estate assets to the appropriate heirs.

The estate accounting is the trickiest part of this equation because it must be prepared in a manner that complies with Probate Code Section 1060 et seq.  And an estate accounting is unlike any other type of accounting.  So you have to find someone who knows how to properly prepare this type of accounting.

The final petition also asks for compensation to be paid to the Executor and the estate’s attorney.  Both the Executor and the attorney are entitled to the same fee, which is a sliding scale percentage of the estate’s value.  The fee equals:

4% of the first $100,000 of value               $4,000

3% of the next $100,000 of value              $3,000

2% of the next $800,000 of value              $16,000

1% of all amounts up to $5 million             $50,000

Most probate estates are not $5 million in value.  However, a typical estate worth $500,000 would result in a fee to the Executor of $13,000.  The estate’s attorney would receive the same amount, $13,000.

Navigating your way through the California probate process is not impossible, its just time-consuming and, at times, frustrating.  But take a deep breath and see what you can do.  If all else fails, you can always hire an attorney to take the probate to the finish line.

What is A California Trust and Will Litigation Lawyer?

Posted by Keith A. Davidson on May 09, 2012

         

It takes knowledge and experience in two district areas, trust and wills and litigation/trial, to make a California trust and will litigation lawyer complete.

Deadline to Sue: a discussion of the statutes of limitation in California Trust and Will cases.

Posted by Keith A. Davidson on May 09, 2012

         

Like nearly every legal claim or cause of action, Trust and Will lawsuits carry various limitation periods within which to file suit. The complexity lies in how the various limitations work, when they apply, and how they overlap in this area.

What You Need to Know When an Estate Plan Goes Awry: The complex road of successfully bringing a lawsuit for attorney malpractice in California Trust and Will cases

Posted by Stewart R. Albertson on April 30, 2012

There are times when people try to implement an estate plan, but things go awry.  And that can happen when an attorney makes a mistake in drafting a California Trust or Will resulting in legal malpractice.

Bringing and prosecuting a legal malpractice case against an attorney who improperly drafted a California Living Trust or Will is complex, to say the least. It is particularly difficult because knowledge of three distinct areas of law is required for a hopefully successful outcome. First, you need to understand the law as it applies to estate planning (i.e. Living Trusts, Wills, etc.); you also need to understand the rules of civil litigation; and finally, you need to understand the rules and laws as they apply to insurance and bad faith insurance litigation.

Estate Planning: It takes years of experience to become a good estate planning attorney. Over the years, Trusts and Wills have become more complex due to multiple asset classes owned by individuals, married couples with children from previous marriages, and ever changing Trust, Will and Tax laws. Competition between attorneys that provide estate planning services is intense. What used to be only available from large and well-known law firms is now readily available across the spectrum of service providers--now large, medium, small, and solo law firms offer estate planning services. Even nonlawyers provide “assistance” in drafting estate plans. The costs for these estate plans range into the thousands of dollars to as low as $50 through several web-based providers. Unfortunately, with the intense competition between these providers, mistakes are made when attempting to convey the intent of the Trustors (the persons creating the Trust or Will) in the Living Trust or Will. This leads to beneficiaries being harmed if they do not receive the inheritance the Settlors intended. In all events, to successfully bring a successful malpractice claim in this area, one must have a good understanding of California estate plans, including Trusts and Wills.

Civil Litigation: Litigation is the process of filing a lawsuit, preparing for trial, and going to trial. The entire litigation process in California generally takes two to five years to complete. The majority of time in litigation is spent on discovery, which includes depositions, interrogatories, requests of admission, and demands to produce documents. Once discovery is completed the trial court will set a trial date. At trial a jury or a judge hears the case. The lawyers make opening statements, present evidence during direct and cross examination, and make a closing argument making their case why their client should prevail. The litigation process comes to a close with the jury or judge making a decision in favor of the plaintiff or defendant. One must not only understand the law as it relates to estate planning, but also civil litigation, to successfully prosecute a legal malpractice claim pertaining to California Trusts and Wills.

Insurance and Insurance Bad Faith Litigation: Most drafting attorneys have professional malpractice insurance, which covers the attorney up to a set amount for any lawsuit filed against them for legal malpractice. For example, if an attorney has an insurance policy of $1,000,000, then the insurance company who issued that insurance policy to the attorney will pay up to $1,000,000 for a successful litigation claim made against the attorney for legal malpractice. This is where an attorney bringing the legal malpractice lawsuit can do a lot for their beneficiary clients.

The goal is to force the insurance company to settle the lawsuit early on for the policy limits. If the goal is reached, the beneficiary obtains monetary damages for the loss they sustained by the drafting attorney’s malpractice without having to undergo the entire litigation process, which is time-consuming and extremely stressful. To implement the goal the attorney for the beneficiary simply needs to make a “reasonable” settlement offer (usually just inside policy limits) to the drafting attorney and the drafting attorney’s insurance company. If the insurance company refuses to pay the policy limit, it’s very likely the insurance company will be responsible for any judgment amount over the policy limit. This generally causes (and motivates) the insurance company to settle for policy limits.  Or if the company still refuses to settle, then it sets the stage for a bad-faith action against the insurance company down the road.  Either way, it’s a benefit to the beneficiary-plaintiff. Insurance and Insurance Bad Faith Litigation are perhaps the most misunderstood aspects of successfully bringing a legal malpractice lawsuit. You must know this area of the law.

Each of these three areas can be complex in their own right.  And in attorney malpractice cases in the California Trust and Will arena, you’ll need to combine knowledge of all three areas to be successful.

Feel free to call me if you have any questions about initiating and prosecuting a legal malpractice lawsuit against a drafting attorney. Also, if you would like the letter our firm sends to insurance companies for these types of cases, let me know.

The Empty Will: Why a California Will or Trust May Not Control Your Assets after Death.

Posted by Keith A. Davidson on April 06, 2012

You may think that a California Will or Trust controls the distribution of all your assets after your death.  You may be surprised to learn just how meaningless a Will or Trust can be depending on how your assets are titled.

When a person is alive, his assets are viewed as belonging to him.  When that same person dies, however, his assets suddenly become separated into distinct legal entities that may have nothing to do with one another.  And each legal entity has its own set of rules and procedures governing its distribution.

For example, let’s say you have one living parent (we’ll call her Mom), she has three children and she owns the following assets:

  • House—A home titled in the name of her revocable Trust, which lists all three children as equal beneficiaries,
  • Bank Accounts—A checking and savings account at Citibank titled jointly in her name and her oldest son’s name (we’ll call him Adam),
  • Brokerage Account—A brokerage account titled jointly with her youngest son’s name (we’ll call him Bob),
  • Retirement Accounts—An IRA and 401(k) with all three of her children designated as equal beneficiaries, and
  • Life Insurance—that names her only daughter as the sole beneficiary (we’ll call her Cindy).

While Mom is alive she can do whatever she likes with her assets.  She can open and close accounts, she can move money into or out of her revocable Trust, she can even name different beneficiaries for her life insurance policies.  It’s all just one big pot.

But when Mom dies, things change.  All of the various assets become essentially locked into whatever state they were in prior to Mom’s death.  And each entity has its own, independent distribution scheme.

That means, for example, that the assets will pass in different ways:

  • House—passes to the three kids equally under the terms of Mom’s revocable Trust,
  • Bank Accounts—pass to Adam ONLY, because he is the surviving joint tenant (neither the revocable trust nor any Will control this asset after Mom’s death),
  • Brokerage Accounts—passes to Bob ONLY as the surviving joint tenant,
  • Retirement Accounts—pass under the beneficiary designations to the three children equally, and
  • Life Insurance—passes to Cindy ONLY as the sole named beneficiary. 

Even if Mom had a Will, the Will would not control any of these assets because none of the assets are passing under Mom’s estate.  They all bypass the estate because the assets are held in so many different probate-avoidance vehicles.  In fact, even the revocable trust controls very little of this estate—the House only.  Since the other assets were not titled in the name of the Trust, none of them pass in accordance with the Trust terms.

Mom may have thought that ALL of her assets would be divided equally among her children because that’s what her revocable Trust stated.  But Mom couldn’t be more wrong.  When setting up accounts in a certain form—such as joint tenancy or assets with designated beneficiaries (like life insurance and 401(k) accounts)—those forms control the assets after death.  In other words, the title to an asset has significant legal meaning after death.  Yet so many people create things like joint tenancy accounts without fully appreciating the consequences of their actions.

Further, if you are going to contest how an asset passes, then you better know which legal entity you need to go after.  If you sue the Trust based on an asset that does not belong to the Trust, then you’re going to waste a lot of time and money going down a deadend road.  

The Rule of Revocation: How to Revoke a California Will or Trust

Posted by Keith A. Davidson on February 08, 2012

We spend a great deal of our time as Trust and Will lawyers pleading with people to create a Will or a Trust as part of their estate plan.  But we rarely discuss how to get rid of those documents if the need ever arises.  The process, called “revocation,” can be a bit more difficult than you might think.

Revoking a California Will

Will revocation is an area of the law unto itself.  In California, there are two options to revoke a Will: (1) create a new Will that specifically revokes the old one, or (2) destroy the original Will by a physical act.  The options for revoking a Will can be found at California Probate Code Section 6120. 

Revocation by a New Will

The first option is the easier and most used of the two.  Whenever you create a Will you typically will find language at the beginning of the documents that says something to the effect of “I hereby revoke all prior Wills.”  This simple sentence is enough to revoke a prior Will; PROVIDED THAT, the new Will is signed with all the proper formalities required of a valid California Will.  In other words, a new, valid Will can revoke a prior Will.

This is true even if the above sentence is not included in the new Will, if the new Will makes provisions that are different and conflicting with the first Will.  So if you give your diamond ring to your daughter in Will one, but then create a new Will leaving the same ring to your son, then the new Will controls and effectively revokes the gifts in the prior Will.  Of course, you never want to rely on an inconsistency—it’s far better to clearly state what you want to have happen to the first Will.

Revocation by Physical Act

A writing is not the only way to revoke a California Will.  You can also do so by a physical act, such as burning, tearing, canceling, obliterating or destroying the Will.  The catch is (1) the physical act must be done by the Testator (that’s the person who created the Will), or at least in the Testator’s presence and at his or her direction.  Once the physical act takes place, the Will is revoked.

Revoking a California Trust

Revocation of a Trust is a bit different from a Will.  And Trust revocation always starts with the Trust document itself because most Trust documents state the method of revocation.

For example, a very common provision in a Trust allows revocation using the following language: “I reserve the right to amend this Trust by a signed writing delivered to the Trustee.”  That sentence, simple as it is, provides the basis for an amendment.  If the Trust is silent as to amendment, then the probate code provides the method to revoke at Section 15401(a)(2), which is a writing (other than a Will) signed by the settlor and delivered to the trustee—a very simple requirement.  Notice that the writing does not have to be notarized or witnessed, it just has to be a writing, signed by the Settlor and delivered to the Trustee.

Of course, a Trust can also be revoked as to a particular piece of property by the Settlor’s act of taking the property out of the Trust.  For example, if I create a Trust and transfer my house into the Trust name, I can revoke the Trust as to that asset by filing a new deed transferring my house out of the Trust.  The Trust then ceases to act over that asset.  That doesn’t necessarily mean that it won’t get put back into the Trust at some point, but once transferred out of the Trust, the Trust no longer controls that assets.

The bottom line: revoking a California Will or Trust is not difficult, but there are a few hoops to jump through if your going to do a proper revocation.

The Lives Behind the Words: How California Trust and Will Lawsuits Affect our lives.

Posted by Keith A. Davidson on December 05, 2011

We should never forget when reading a written decision by any Court that there are people—real, live, breathing people—behind the words laid down in the Court’s opinion.  I was recently reminded of this fact when I received a call from Tom Giraldin, son of William A. Giraldin, whose estate I discussed in an earlier blog post.

The Estate of William A. Giraldin has been the source of many year’s worth of litigation over various Trust issues (discuss in more detail in my previous article).  And in that previous article, I said that a son of William Giraldin, specifically Tim, was sued by “his siblings.”  Well I had that slightly wrong.  Tim was not sued by all of his siblings, but actually sued by four (namely, Patricia Gray, Christine Giraldin, Mike Giraldin and Philip Giraldin) of the Giraldin’s seven older children—my mistake.

But that’s not the interesting part.  The more interesting part is talking to Tom Giraldin and getting an inside look into the people and family relationships that underlie the Appellate Court’s opinion in Estate of Giraldin.  What type of person was William A. Giraldin (a strong business man), how did the facts come about (years of living), and did the Appellate Court get it right (yes, so says Tom)?

If you think about it, a lot of actions have to occur before a California Trust or Will case is heard and decided by the Appellate Court.  People have to live their lives, things have to happen in those lives, someone dies, people get upset and sue, the lawsuit takes over five (5) years to wind its way through the Courts, a party loses, decides to appeal, and then we get the Appellate Court opinion—coming at the end of what may be over a decade (or more) of actions in the making (both inside and outside of Court).  Whew!  Makes me tired just thinking about it.

But the lives lived and the things that occur during those lives are the substance of these cases.  And while the Appellate Court may provide us with a pretty cut-and-dry rendition of the facts, life is never so cut and dry.  And the way in which each party, each child, sees those facts is also very different—which is why the lawsuit is filed in the first place.

So the next time you read about the facts of a case in the Courts, in the newpaper, on the web, or in someone’s blog; its interesting to keep in mind that these are people we are reading about and they may have plenty of other facts behind the case that never come to light.

Sofia's Gift: A lesson in turning a family dispute into a generous gift for others.

Posted by Keith A. Davidson on September 01, 2011

Trust and Will litigation tears families apart.  It may be that family relationships aren't too good to begin with if litigation arises, but taking matters to Court doesn't help.  And as lawyers we have little to no ability to repair family relationships.

In one case, out of the many hundreds I have handled over my career, a client of mine chose to make a bold statement after a family dispute arose.

Her name is Sofia.  Sofia—who didn't have a lot of money—worked as a registered nurse.  While her mother was alive, Sofia helped her with her care.  While Sofia’s father was alive, Sofia sold her home and gave the proceeds of the sale to her parents because they were in need of money at that time.  Her parents, in turn, put Sofia on the deed to their home so that she could be repaid after their deaths.  Over 15 years later, both parents passed away and the house passed to Sofia.

Sofia's brothers and sisters were not too happy about the arrangement and a nasty dispute arose over the property.  But in the end Sofia won out because she had given a large sum to her parents and in return, they gave her their home when they were done with it.

The whole ugly affair did not sit well with Sofia.  So she decided to make a bold statement with the house she received from her parents, she gave the entire thing-100%-to charity.  This was a substantial gift for anyone, as it was for Sofia.  The house was worth around $350,000 and had no mortgage.  That is a large amount of money for a single working woman, something to tuck away for retirement and future care. 

Instead, Sofia gifted the entire home to the Ronald McDonald House charities, which provides housing free of charge to parents who have very sick children in the hospital.  Ronald McDonald House was planning on building a new home in Long Beach, California, and Sofia’s gift kicked-off their fund raising for the new Ronald McDonald house with an entirely unexpected gift.  The home was sold by the charity and now is being used for their charitable purpose.

Sofia's one requirement in making the gift was that it be dedicated to the memory of her parents, David and Teodora Pacheco, and their grandchildren, because they loved their many grandchildren unconditionally.  The kitchen of the new Ronald McDonald house charity will be dedicated to Sofia’s parents, primarily because her mother loved cooking and it was a central part of any family gathering.  A plaque will read “David and Teodora Pacheco Kitchen in honor of their grandchildren.”

Sofia had no obligation to make this gift.  The house was hers and she should have used it to provide for her retirement.  But for the first time in my 11 year career as a California Trust lawyer, Sofia demonstrated the power of personal sacrifice.  She did not have money to spare and could not afford such a generous gift, but she made the gift anyway.  It was important to her to turn a family dispute, one that she alone could not repair, into a lasting tribute to her parents.

Love Thy Lawyer: How to Find the Right Fit in the Lawyer-Client Relationship

Posted by Keith A. Davidson on August 23, 2011

As a client, you want help. As a lawyer, I want to help you.  So why doesn't every lawyer-client relationship result in a perfect fit?  As with any human relationship, there are a few things that can stand in the way of a good match.  For lawyer-client relationships, I consider the following topics of primary importance:

Expectations:  Lawyers have a certain expectation as to how the client should act, and clients have their expectations on how lawyers should behave.  As with any relationship, having appropriate expectations is key for all concerned. 

Have you ever been involved in a lawsuit before?  Many people are shocked and surprised at how our legal system actually operates.  It is slightly less efficient than Congress.  A lawsuit is like the old roach motel commercial, your suit can go in, but it can't get out.  Well, eventually it can, but not in any reasonable amount of time.

So lawyers need to help clients have proper expectations about their case.  As my partner, Stewart Albertson likes to say: “A lawsuit is a marathon, not a sprint.”  Get ready to run for a long while.  But lawyers aren't always good at setting expectations. We are familiar with the slow legal system so a case that takes two to three years to resolve is normal to us; whereas an uninitiated client may find that amount of time outrageous.

And clients, in turn, need to face up to the reality that the wheels of justice turn slowly.  Your case is no exception.  While the advent of email, smart phones, and Facebook may let you operate in many ways at light speed, our judicial system doesn't work that way. 

The bottom line: be a wary traveler.  Know what you’re getting yourself into before going down the lawsuit path.  Not every lawsuit can be avoided, but believing that a lawsuit will be resolved quickly is an unreasonable expectation—no matter how outstanding your lawyer is.

Personality:  Not every lawyer is right for every client (and vice versa).  You need to feel that your lawyer has your best interest at heart and will take your cause on as his or her own.  Different people have different ways of showing their dedication to your cause.  And different people have different ways to give and receive information. 

For example, a client who is reserved and logical may not appreciate a lawyer who is loud and energetic.  Or a gregarious, creative client may not have patience with a quiet, deliberate attorney.  Some personality types fit together better than others.  This doesn't mean that the lawyer or client is bad, it's just a personality fit, it either works or it doesn't.

The bottom line: Finding the right personality fit, someone you are comfortable with is vitally important.  You’re stuck with your case for the long haul, so you should be comfortable with your lawyer.

Follow-through:  Lawyers don't have the best reputations when it comes to consistent follow-through on cases.  Most lawyers have more than one case in their office, so it can be difficult to give individual attention to each case, especially since multiple cases can flare up at the same time.  But it is the lawyer’s job to manage his or her case load so that each client receives appropriate attention at the appropriate time.

Clients should know that cases ebb and flow (they have busy times and slow times).  Most cases don’t need constant action every day or even every week.

Every person, however, has different expectations as to the amount of attention they or their case should receive, and every lawyer has a different capacity to be attentive. 

The bottom line: Discuss the amount of follow-through you expect from your lawyer and have him or her explain how he works to keep clients informed on their case.

Results:  Wouldn’t it be great if you could hire a lawyer for a guaranteed win in your case?  That would be one expensive lawyer (even more expensive than the typical lawyer).  The truth is you can never hire an attorney to guarantee a win on your case.  And any lawyer who says he or she never lost a case (especially never lost a trial) hasn’t tried very many cases—if any at all. 

You hire a lawyer to provide strong, experienced counsel on your case and many times, that leads to a win.  But that's out of your control and out of the lawyers control as well. Judges and juries make decisions.  The lawyer’s job is to fight hard, write well, and argue persuasively for your cause.  If you receive this type of representation, then you have a good result. 

The bottom line: You don't pay for results, you pay for thorough preparation, a good fight and hard work.  We all hope that equals a good result and oftentimes it does.

The better fit you have with your lawyer, the better chance you have to be successful in your case because you and your lawyer’s definition of success will be aligned.

Death Can Be Fatal: How the Death of a Defendant Can be Fatal to a Lawsuit Too

Posted by Keith A. Davidson on July 26, 2011

Death is final. And when a person who is a party to a lawsuit dies, death can be final for the opposing party too unless they take action quickly.

Dead people cannot be sued by law.  Therefore, any claims against a decedent (including those already in progress by way of an existing lawsuit) must be brought in the decedent's estate.  By estate, I am referring to a probate estate.  This is true even where a decedent died with everything he owns held in a Trust.  Why the probate estate?  Because that is where all claims against a decedent must start. 

And there are two very important deadlines you must remember when trying to preserve a claim against a decedent.  First, is the overall one-year statute of limitations under CCP 366.2.  This harsh rule states that any claims against a decedent must be brought within a year of the decedent's death or they are forever barred.  This is true even though the statute of limitations would have been longer had the person survived.  For example, the statute of limitations for breach of a written contract is 4 years, but if the breaching party dies, then the statute is cut down to a one year limit.  And this rule applies regardless of whether you knew the person died or not!

Second, if a decedent dies and his heirs/beneficiaries open a probate estate, then any creditor has only 4 months from the date an executor is officially appointed to file a claim in probate.

The lifecycle of a claim

When there is a claim against a decedent, or an ongoing lawsuit against a deceased defendant, the first step any creditor must take is to file a "Creditor's Claim" in the decedent's probate estate.

If a probate estate is not opened (and this happens often where the decedent died with a trust because no probate is necessary to transfer his assets), then the creditor must file to open a probate (creditors have the right to do this as interested parties of the decedent's estate).  Once the estate is opened, then the claim is filed with the estate.

The estate representative (i.e., the Executor of Administrator) then has to either accept the claim, and thereby agree to pay it, or reject the claim.  After 30 days the creditor can deem the claim rejected.  Once a claim is rejected, the creditor must then file a lawsuit against the estate to force the estate to pay the claim.  If a lawsuit is already pending against a dead defendant, then once the claim is rejected by his estate the estate representative must be substituted in as the party to the lawsuit.  The lawsuit can then continue. 

If a judgment is achieved as part of the lawsuit, then that judgment can be enforced against the estate.  If there are no assets in the estate, then the creditor can go after the decedent’s trust.

Sound confusing?  It is, and the procedural requirements are strictly enforced so any mistake along the way can be fatal to the creditor in attempting to collect a debt.  So beware, any death of a party to a lawsuit, or any death of a debtor, can be fatal to your claim too.

Family "Squabbles" Can Cost You

Posted by Keith A. Davidson on July 22, 2011

Conservatorship litigation is nasty business, primarily because at the center of every conservatorship dispute is a helpless conservatee (usually an elder adult) who is caught in the middle of the family fight. 

And that family fight may just cost the parties a good deal of money from their own pocket.  As reported by Marc Alexander and William M. Hensley on their California Attorney’s Fees blog, the California Appellate Court (in Conservatorship of Alcaraz) just made a very harsh example of two conservatorship litigants who thought they deserved reimbursement from the conservatorship estate for their attorneys' fees.  One party (the winning party) requested over $80,000 in attorney’s fees, and the losing party requested over $40,000. 

The trial court cut the fees request substantially, awarding the winning party $20,000 and the losing party a mere $8,000.  Primarily because the conservatorship estate only had $180,000 in assets and the fee requests would have taken 70 percent of the conservatorship estate.

The winning party appealed the fee ruling, but the appellate court agreed with the trial court.  The bottom line is that the trial court can award what it sees fit, and only amounts that the court feels were spent for the benefit of the conservatee directly are allowable.  Any amounts spent by family members due to a family “spat” is on their dime, not the conservatorship estate.

The costs of litigating conservatorship matters is already higher than other forms for trust and will litigation because the filing fees are excessive, and the parties have to pay in advance for the court investigator to interview the proposed conservatee.  All told, a conservatorship filing can cost as much as $1,750 just in filing fees to the court, not to mention the attorneys fees spent to draft and file the conservatorship pleadings.  And if another family member files a competing petition, and long litigation ensues, that lawsuit may be paid from your own pocket.  A tough result for a family in a tough position.

Influencing the Court to Find for Undue Influence in California

Posted by Stewart R. Albertson on July 20, 2011

I’ve blogged before about using the concept of undue influence to overturn a California Will or Trust.  But knowing the definition of undue influence is only the first step.  To make the concept of undue influence useful, you have to know how to prove the existence of undue influence in a Court of law.  That can be trickier than it sounds.  Let’s walk though the primary options for proving undue influence in California: 

Under California law, undue influence consists of:

An Example of Undue Influence: 

It is usually easy to spot undue influence. For example, Jane has three children, namely, John, Jerry, and Jack. Jane is living with John at the end of her life, and relies on John for her daily living needs. John does not like his brothers Jerry and Jack. Six weeks before Jane dies, John drives his mother to an attorney to change her California Will or Trust, which disinherits Jerry and Jack. Now John goes from getting one-third of his mother’s Will or Trust to getting 100 percent. The question: Did John exercise undue influence over Jane? Most likely, yes. But how do you prove undue influence under California law? 

How to Prove Undue Influence under California Law: 

There are two primary ways to prove undue influence under California law—by either (i) shifting the burden of proof to John, in the example above, so he then has to prove an absence of undue influence, or (ii) by Jerry or Jack proving directly that John exercised undue influence over their mother. If at all possible, it is best to shift the burden to John to prove he did not exercise undue influence over Jane because it can be very difficult to prove the absence of something. If you don’t have facts that shift the burden of proof to John, then Jerry and Jack will have the burden of proving the existence of undue influence directly.

 How to Shift the Burden of Proof in an Undue Influence Case:

How do you shift the burden of proof to John so that he carries the burden to prove he did not exercise undue influence over Jane? Under California law there is a presumption of undue influence that arises if you can establish three facts:

  • Confidential Relationship: Jerry and Jack must prove that John had a “confidential relationship” with Jane, which can consist of John being Jane’s trustee, or agent under a power of attorney, or conservator, or perhaps, simply being Jane’s son.
  • Active Participation: John must have “actively participated” in the preparation or execution of the Will or Trust.
  • Undue Benefit: John must receive an “undue benefit” by way of the new Will or Trust.  

You can prove each of these facts where John (i) is the Executor or Trustee of Jane’s Will or Trust, (ii) arranged to have an attorney draft the new Will or Trust for Jane to sign, and (iii) where John’s interest in the Jane’s Will or Trust increases from one-third to a higher amount. 

Once these facts are proven, there is a presumption that John exercised undue influence over Jane causing her to create the new Will or Trust; and the burden of proof shifts to John to prove the absence of undue influence, which is not easy for John to do under this fact scenario. Essentially John has to prove a negative—i.e. that undue influence did not occur. 

 How to Prove Undue Influence Directly:

If you can’t prove facts shifting the burden of proof to John, you must prove undue influence directly. Circumstantial evidence is enough to prove undue influence. Here are the most likely facts you need to prove undue influence directly:

 Disinheriting a child: Provisions that are unnatural, cutting off from any substantial bequests the natural objections of the decedent’s bounty. When Jane disinherits Jerry and Jack, that is disinheriting her children, an unnatural act, which can indicate undue influence.

 Contradicting decedent’s former estate plan: Dispositions at variance with the decedent’s intentions, expressed before the document’s execution. If Jane had a previous Will or Trust that treated her children equally, but a new Will or Trust (or Amendment) contradicts the former Will or Trust (or Amendment), this can add to the conclusion that Jane was unduly influenced.

 Opportunity to control decedent: Relations existing between the chief beneficiaries and the decedent that afforded the former an opportunity to control the testamentary act. If Jane relied on John for her daily living needs, this can add to the conclusion that Jane was unduly influenced.

 Poor mental and physical condition: A testator whose mental and physical conditions are such as to permit a subversion of her freedom of will; and if there is evidence the testator had a weakened state of mind it is easier to demonstrate the pressure from another overcame the testator’s free will.

 Sudden negative shift in attitude: Under California law, courts may infer that Jane’s sudden negative shift in attitude toward Jerry and Jack was caused by John’s poisoning Jane’s mind because the court can find no other rational explanation.

 Decedent’s advanced age: A Will or Trust creator of advanced age at the time a document is signed adds to the conclusion the testator was unduly influenced.

 History of mental deficits: A Will or Trust creator with a history of mental deficits adds to the conclusion the testator was unduly influenced. California Probate code section 811 outlines the likely areas of mental deficits.

 History of Dementia or Alzheimer’s disease: A Will or Trust creator with a history of Dementia or Alzheimer’s Disease adds to the conclusion the testator was unduly influenced.

Testator under conservatorship: A Will or Trust creator that is under a court ordered conservatorship adds to the conclusion the testator was unduly influenced. 

The more of these facts you can establish, the easier it is to prove undue influence directly.

There you have it—a big picture view of how to prove undue influence cases under California law. In future blog posts, I will treat in further detail (i) the burden shift for undue influence cases, and (ii) proving undue influence directly.

No-Contest Clauses Do Not Apply to Challenging a Trustee's (or Executor's) Actions

Posted by Keith A. Davidson on July 15, 2011

The omnipresent no-contest clause (originally called in terrorum clauses--as in to terrify one's beneficiaries) is meant to prevent lawsuits. The idea being that if a beneficiary contests a California Will or Trust containing the clause, then that beneficiary is entirely disinherited and loses his gift under the document (see our previous blog post on how no contest clauses work and their practical application).

But does a no contest clause apply to a beneficiary's challenge of a Trustee's actions as Trustee (i.e., challenging the management of the Trust)?  The simple answer is no.  As a matter of public policy, California law specifically precludes the application of no contest clause to the actions of fiduciaries, including Trustees and Executors (or Administrators) of Wills. In fact, the law wants beneficiaries to have the right to question fiduciaries and to contest a fiduciary's actions in managing a Trust or administering a Will, provided the contest is not frivolous.

What does this mean for beneficiaries?  Question your Trustee or Executor all you want. Nothing in the Trust or Will can stop a California beneficiary from asking about the management, investment, distributions, bookkeeping, professional fees, etc., of a Trust or Will. 

Unfortunately, many fiduciaries, especially when they are individuals, do not understand that the no-contest clause does not apply to questioning their actions and they will threaten a beneficiary with the no contest clause as a way to prevent questioning.  But this is an empty threat.

What does this mean for fiduciaries?  You must be completely transparent in your actions as Trustee or Executor. Everything you do is subject to review and questioning. Worse yet, it is the Trustee's duty to prove they acted reasonably (see our prior blog post on trustees duty). 

Being a fiduciary can be a thankless job because the fiduciary has all the burdens and responsibilities and very few benefits.

Court Decision Causes Consternation for Arbitration Clauses in Trusts: Can a California Trust Beneficiary be Forced into Arbitration after Diaz?

Posted by Stewart R. Albertson on May 12, 2011

An interesting case, Diaz v. Bukey, was decided on May 10, 2011 by California’s Second Appellate District pertaining to the issue of whether a mandatory arbitration clause in a trust applies to a trust beneficiary. Justice Steven Z. Perren, writing for a unanimous Court, held that the beneficiary of a trust who did not agree to arbitrate disputes arising under the trust may not be compelled to do so. And this decision makes sense. Under California law, only parties to an arbitration contract may enforce it or be required to arbitrate.

The Case Facts. In Diaz, parents set up a trust, which included an arbitration provision that required all disputes arising in connection with the parents’ trust, including disputes between a trustee and a beneficiary, to be settled by arbitration. After the parents’ deaths, a trust beneficiary made a filing with the probate court demanding an accounting from the trustee of the Diaz Trust. In response, the trustee filed a demurrer (a request to have the beneficiary’s filing summarily thrown out of court without a trial) and a petition asking the probate court to order the trust beneficiary to arbitrate the dispute. The trust beneficiary opposed the demurrer and the petition to compel arbitration, basing his argument on the facts that he had not agreed to nor was he a signatory to the arbitration provision in the Diaz Trust. The probate court agreed with the trust beneficiary overruling the trustee’s demurrer and denying the trustee’s petition to force arbitration. The probate court reasoned that the beneficiary was not contractually bound to submit disputes with the trustee to arbitration. The Court of Appeal agreed with the probate court and affirmed its decision.  

The Parents’ Intent. After reading Diaz, I thought about the parents “intent” being defeated by legal rules they likely were not aware of when they created the trust. All the parents knew, at the time they created the trust, was that they wanted to require all disputes pertaining to the trust to be decided at a private arbitration, rather than in the probate court. The idea behind this is that generally arbitration costs less than a full blown trial in the probate court. In any event, the parents’ intent, as reflected in their trust, was to require less formal adjudication of all disputes pertaining to their trust. Clearly that did not happen in Diaz.

Possible Solutions. How should attorneys draft arbitration clauses in trusts after Diaz? I think arbitration provisions could still be used in trusts and made enforceable against non-signatory beneficiaries after Diaz. But how? By requiring the beneficiary to agree to arbitration as a condition of receiving their gift under the Trust.  For example, if one additional sentence had been added to the arbitration provision in Diaz, I believe the beneficiary would have agreed to the arbitration. That sentence is:

“If any beneficiary under this trust refuses to agree to arbitrate any and all disputes pertaining to the trust, then that beneficiary’s (or beneficiaries’) distribution shall not be made, and that beneficiary lose any and all interests in the trust estate and shall not share in any portion of the trust estate.”

Would a trust beneficiary, who did not sign the arbitration agreement in the trust, be willing to risk an inheritance by not agreeing to binding arbitration? Not likely.

California Petition for Probate How To--A quick walk through on the Petition for Probate

Posted by Keith A. Davidson on April 07, 2011

The Asset Puzzle - Why Your California Will May Not Matter.

Posted by Keith A. Davidson on April 01, 2011

The manner in which assets are titled govern how those assets pass at death.  And this can override a disposition contained in a Will or Trust. All the effort people take to prepare a Will or Trust can be wasted if assets are not titled properly.  This is what I call the asset puzzle.

The first part of the puzzle is knowing the possible pieces (i.e., the way in which assets can transfer at death).  There are differing ways in which assets pass at death and it can be downright confusing.

For exapmle, life insurance passes by beneficiary designation. Whoever is named as the beneficiary on the form in the files of the life insurance company takes at death. It does not matter what the decedent's Will or Trust state, the beneficiary designation controls. Therefore, even though a Will may be created that leaves assets equally to the decedent's children, if only one child is listed as a beneficiary of a life insurance policy, then that one child takes the life insurance proceeds and the other children get none.

Same applies to assets titled in joint tenancy. Bank accounts, brokerage accounts, real property and cars all have the ability to be held jointly with another person or persons. When one joint owner dies, the other joint owners receive the property automatically without the need for probate. But this also means that the assets pass without regard to a Will or Trust. All too often I see children unintentionally excluded because they are not included as a joint tenants on the assets.

For some reason people think that if they have a joint tenancy over their assets one of two things will occur. Either (1) the child who takes that asset will share with the other children (even though there is no legal obligation to do so), or (2) the Will or Trust will override the joint tenancy or beneficiary designation (which is false, the beneficiary or joint tenancy overrides the Will or Trust).

This is where planning comes into the picture. Planning is NOT the act of simply having a Will or Trust.  A Will or Trust is a required part of planning, but that is just the beginning. The most crucial part of planning is looking at all the assets in the estate and changing title to those assets to conform to the plan.  This means filing a new deed so the house is in the Trust, for example.  Changing the title on bank or brokerage accounts, ensuring any beneficiary designations go to either the Trust or the proper individuals.  In other words, looking at the entire, big picture and taking all necessary action.  That’s truly the definition of planning.

By the way, it's lack of planning that keeps lawyers fully employed because that is when litigation and probate ensue. And we lawyers make far more money on probate and litigation then we do on planning. So while people look at me skeptically when I plead with them to have an estate plan, I really should be pleading NOT to create a plan. So support your local lawyers, neglect your planning!

California Will Substitutes--A Private System of Succession

Posted by Stewart R. Albertson on February 15, 2011

Fifty years ago, most assets passed from an individual who died to his or her family by way of Probate (by Will or Intestacy both of which require Probate). Probate is a strict, expensive and time-consuming Court process that must be completed before assets can ultimately being transferred to family members.

But today, we own assets differently than we did fifty years ago. Most of us have bank accounts, retirement accounts, life insurance, and perhaps Living Trusts. These four types of assets (or financial vehicles) constitute the core of the so-called “Nonprobate Transfers” or “Will Substitutes”, meaning each of these assets pass outside Probate if properly designated.

California law expressly allows these Nonprobate Transfer assets to pass outside the probate process, even though these assets do not comply with the formal requirements for execution of a Will (read more about the Formalities and Intentionalities of Will creation.) Accordingly, individuals can rely on beneficiary designation forms that identify who gets his or her bank accounts, life insurance, and retirement accounts at his or her death without regard to what a Will states. As a result, with proper planning, an individual’s entire estate can pass at death to his or her family members outside of the Probate system. In fact, this is one of the primary reasons why estate planners created Revocable Trust—to avoid Probate altogether.

Let’s take an example, Stewart owns the following assets:

  • a home worth $400,000;
  • a rental property worth $350,000;
  • two bank accounts totaling $60,000;
  • a retirement account totaling $500,000; and
  • life insurance with a death benefit of $1 million.

Stewart’s total estate is worth $2,310,000. If Stewart’s estate passes by a Will or Intestacy, it must go through the Probate system. The attorney’s fees on this size of an estate would result in fees of approximately $40,000 (read more on how Probate fees are calculated.)

On the other hand, Stewart’s entire estate could pass by way of Nonprobate Transfers (also known as Will Substitutes), as follows:

  • Stewart’s (i) home and (ii) rental property are owned by his Living Trust, which designates the beneficiaries of his home and rental property.
  • Stewart’s (i) bank accounts, (ii) retirement account, and (iii) life insurance have “beneficiary designation” cards filled out designating who gets these assets on Stewart’s death.

Now Stewart’s entire estate passes outside of the Probate Court process.

Ultimately, these types of Nonprobate Transfers (or Will Substitutes) function as a private system of transferring assets at death—usually requiring less time, fewer rules, and a lower cost than Probate requires.

Starting the California Probate Process

Posted by Keith A. Davidson on February 14, 2011

In an earlier post we described what probate is and that it only applies to assets titled in the name of the decedent at the time of her death.  Now we want to discuss how to start the probate process (it's just a court process after all).

Handling a California probate can be summed up in one word--procedure.  It is a procedural monster that requires strict compliance with the rules of probate.  Some of the rules are easy to find and others are not, but complying with the rules is the only way to successfully navigate a probate.

Probate starts with a “Petition for Probate”.  A Petition is just a document that starts the ball rolling by asking the court for relief.  Here, in California, the Petition for Probate (Form DE-111) is meant to ask the Court to accept the decedent's Will as being a good and valid Will and appoint an executor to act as the decedent's personal representative (if there is no Will then the personal representative is referred to as the Administrator rather than Executor). 

The good news is that the Petition for Probate is a form document. The bad news is that it's not as easy to prepare correctly as one might think when first looking it over. But it's not too difficult either once you understand the process a bit better.  The key to the initial petition is to read each section carefully and mark all sections that apply.

And you will need a few other forms as well: such as the Duties and Liability of the Personal Representative, Letters, Order, Notice of Petition to Administer Estate, and Confidential Supplement.  (See our prior post listing many probate forms.)  There may be a local form or two that each local court of a particular California county requires.  This varies by location and you should check with your local court for any filing instructions—or check the court’s website where they typically list local forms. 

DISCLAIMER: We are not intending to provide you with legal advice in this blog, we are only presenting general information relating to probate procedure.  Every case may vary based on the facts and circumstances of your particular case.  You should always discuss your case with a California lawyer before filing a probate in California.

California Probate--the Procedural Pickle of Passing Assets at Death

Posted by Keith A. Davidson on February 07, 2011

Probate is an antiquated term that simply means to prove-up a decedent’s Will.  It is a Court process where a decedent’s assets are gathered, creditors are paid, heirs are identified and located, and the assets distributed either according to the decedent's Will or by statute if a decedent died without a Will (referred to as “intestate” distribution).

The probate process is centuries old and requires compliance with a strict set of procedural rules in order to start the process, administer the process and, ultimately, close the process successfully  (see our list of California Probate Forms).  The irony is that there are so few, if any, procedural hurdles for assets that pass outside the probate process.

For instance, in California, probate only applies to assets titled in the name of the decedent alone at the time of her death.  Many assets pass outside of probate (we refer to these as "non-probate assets"), such as assets that are held in joint tenancy (with right of survivorship), assets passing by beneficiary designations (such as life insurance and bank accounts) and of course assets held in a Trust.

The problem arises when an asset held in joint tenancy, for example, passes differently from the assets passing under a decedent's California Will.  The Will may say all assets pass equally to the decedent's children, but if an asset is held in joint tenancy with just one child, then that one child takes the asset regardless of the Will.  In other words, the Will does not control, or in any way affect, assets passing outside of probate.  This is an important point and may be surprising news for some people.

Another common misconception is that if someone dies without a California Will or Trust their assets pass to the State of California.  Not true.  Under California law, there is a scheme set up by State law that provides for the distribution of a decedent's assets to their heirs at law if they die without a will.  Heirs at law include the decedent's spouse, children, parents, brothers and sisters and even nieces and nephews, at times.

If you find that a decedent has died and there are assets subject to probate, either under a Will or without a Will, then it’s time to start the probate process.  That's the subject of another blog post.

California Probate Forms

Posted by Keith A. Davidson on February 01, 2011

Every California probate requires a host of forms to start, administer, and complete successfully.  In lawyer talk, these forms are for "decedent's estates," which also means probate estates.  Anytime any assets pass through probate, these are some of the forms that are used to navigate the probate process (these are the most commonly used California probate forms, but not an exhaustive list...because that would be exhaustive to prepare). 

Petition for Probate     Form DE-111

Notice of Petition to Administer Estate    Form DE-121

Proof of Subscribing Witness    Form DE-131

Proof of Holographic Instrument     Form DE-135
(this is for handwritten Wills)

Order for Probate     Form DE-140

Duties and Liabilities of Personal Representatives     Form DE-147

Confidential Supplement to Duties and Liabilities    Form DE-147S

Letters (Testamentary or "of Administration")     Form DE-150

Request for Special Notice     Form DE-154

Notice to Creditors     Form DE-157

Inventory and Appraisal     Form DE-160
    Inventory and Appraisal Attachment     Form DE-161

Creditor's Claim     Form DE-172

Allowance or Rejection of Creditor's Claim     Form DE-174

Spousal Property Petition     Form DE-221

Spousal Property Order     Form DE-226

Report of Sale and Petition for Order Confirming Sale of Real Property     Form DE-260

Order Confirming Sale of Real Property     Form DE-265

Affidavit Re: Real Property of Small Value     Form DE-305

Petition to Determine Succession to Real Property (Estates of $100,000 or less)   Form DE-310

Order Determining Succession to Real Property     Form DE-315

These forms are provided for informational purposes only.  We are not intending to provide legal advice by posting them on our blog, but we hope you find them useful all the same.  Also consult with a California attorney with knoweldge of probate before filing any forms with the Court.