THE FOLLOWING IS A TRANSCRIPT OF THIS VIDEO. FOR MORE INFORMATION, CLICK HERE

Hi, this is Stewart Albertson with Albertson & Davidson and I want to talk to you about one of more difficult set of cases we come across and I call these the “Difficult Don’t Miss Undue Influence Cases”.  Let me say that one more time – the Difficult Don’t Miss Undue Influence Case.

What is the difficult don’t miss undue influence case?  That’s where someone has exercised undue influence over your mom or dad while they are still living and mom and dad have not passed away.  And so the question is, what can we do to invalidate the trust or the will that the wrongdoer got created using – exercising undue influence over mom and dad?

These are very difficult cases and the reason they are is because it comes down to California law and capacity and where mom and dad fits in that capacity determination.  So, you can file what we call a conservatorship proceeding where you ask the court to put someone else in charge of mom or dad’s estate.  But, as you can probably imagine, if mom or dad has any capacity whatsoever, they don’t like being told that they don’t have capacity and they certainly aren’t going to like that you’re the one who is asking the court to find that they are not capacitated.  So mom and dad can become upset by this.

The person who’s the wrongdoer who is already unduly influencing your mom or dad, they’re going to take advantage of this situation and they’re going to point out to your mom or dad, that look, your son not only doesn’t love you and doesn’t like you, your son wants to take your capacity away.  You son’s trying to get access to your estate before you’re even gone.  This son of yours is a greedy heir and we see this again time and time in these cases where mom and dad are still living and somebody is exercising undue influence over them.

So what are you to do in these type of difficult cases?  Do you file for conservatorship and that’s why we call these the Difficult Don’t Miss Undue Influence Cases.  Because if you’re going to file for conservatorship, you have to win it.  If you don’t win it and mom and dad is capacitated – are still capacitated and a court finds that they’re capacitated.  Chances are if you were in their trust or will, you’re certainly not going to be in it now by way of an amendment or a codicil to the will.  And then you’re going to have a much higher hill to climb after your mom and dad die when you do bring a trust contest or a will contest.

So, what is a better option, perhaps?  And it’s hard, because, sometimes you have to sit back and do nothing while mom and dad are living.  And what we suggest to many clients is just focus on mom or dad in their sunset years of their live, give them comfort, give them care, give them compassion, spend time with them.  Don’t talk to them about their trust or their will.  Don’t talk to them about their assets – as difficult as that may be.  Because the person who is exercising undue influence over them will turn that against you and make it seem like YOU’RE the one that’s trying to get their assets.  YOU’RE the one that’s the greedy heir.  YOU’RE THE problem, not them.

So if you can, stay disciplined.  Focus on your parents.  Care for them in the sunset years, however many months or years they have left.  Then, once they pass away, there are remedies available to you, such as a trust contest, a hill contest, and financial elder abuse that you can file to remedy the undue influence that took place against your parents during their lifetime.

These are very difficult cases.  It’s very difficult to determine the best route to take.  Our advice is generally to err on the side of caution and that is wait till your mom or dad pass and then you can address the undue influence.

THE FOLLOWING IS A TRANSCRIPT OF THIS VIDEO. FOR MORE INFORMATION, CLICK HERE

Hi, this is Stewart Albertson with Albertson & Davidson and I want to talk to you about undue influence cases.  What makes a good undue influence case and what makes a not-so-good undue influence case?  And let me just set this out as we meet with lots of people that come into our office saying, “Hey, I want to contest my mom or dad’s trust or their will because I know that my brother Bob exercised undue influence over my parents and I’ve been written out of the will or the trust and I will receive no inheritance and I’ve got the best evidence you’ve ever seen Mr. Albertson, or Mr. Davidson, and we’re going to come in here and we’re just, this is going to be a slam-dunk.  You’re going to have no problem winning this case!”

The type of evidence you need to have a good undue influence case, it’s a high bar.  The burden of proof that’s required for you is high.  It’s not easy to invalidate a trust or a will.  So that begs the question, “OK, well then what makes a good undue influence cases versus a not-so-good undue influence case?”

Well, let’s talk about some of the elements that you need to meet to prove that undue influence did, in fact, take place.  One of the first things we have to show is we have to show that the decedent, your parent in this case, was a vulnerable individual.  We can show that several ways.  The most easy way to show that is that they’re over the age of 65 or they’re a dependent adult.  So if they’re over 65, chances are, you could show that they have some vulnerable to them.  The State of California has addressed financial elder abuse and said, “Look, we see a lot of financial elder abuse happening in our state, so we want to stop that.  And so what we’ve done is we’ve set out some criteria for people to look at.  This, these are the elements that we look to to prove an undue influence claim.”

The other way you can look to see if a person is vulnerable is what if they have some type of a medical issue?  What if they have some diagnosis for dementia or Alzheimer’s or anything of the like that affects their mental cognition?  That is something that also will support the element of the decedent being vulnerable.

We also want to look to other elements.  What about the actions or the tactics of the wrongdoer?  The wrongdoer is the person that exercised undue influence over the decedent.  And a lot of times this is not something that you see that’s nefarious or evil or somebody yelling or screaming at the decedent, it’s actually done in a very nice manner.  And it happens like this:  The wrongdoer comes to the decedent while they’re still living and says, “How come your son, Johnny, doesn’t come visit you anymore?  Oh, you know, I don’t think Johnny cares about you.  It’s too bad that Johnny’s not here to take care of you like I’m taking care of you.”  And it’s just done over time.  And, of course, this person already – the decedent already is vulnerable, because they’re older, over 65 or older, they may have a health issue, and so now you have this person who is doing deceitful actions and tactics to influence the elder that their son Johnny really doesn’t care about them and we see this element time and again in a good undue influence case.

We also want to look to another element and that is what type of authority did the wrongdoer have over the decedent?  And authority can come in many forms.  Authority can be that this is the person’s agent, under their durable power of attorney, or maybe they’re already the trustee of the trust.  They can also be somebody that the decedent relies on for their necessaries of live, such as daily medication.  Somebody to drive them to doctor’s offices.  Somebody to help change their diaper in bed.  Somebody that makes sure that hospice is taking care of them.  Here we see the decedent, the elder, is being very reliable on this person who has this apparent authority over them.

The last element that you want to flush out in a good undue influence case is there is an inequitable result.  This is most easily shown in cases where the decedent had a preexisting estate plan that gave everything equally to all of their children.  And we see this time and again.  And then just before they die, they make a change to that trust that did give everything equally to all their children, and they give everything to one person, either one of their children or the wrongdoer who has come into their life and has now exercised undue influence over them.

So in order to have a good undue influence case, where you can meet the burden of proof which is a high bar in the State of California, you’re going to have to show that the victim was vulnerable, that the wrongdoer used actions or tactics that were deceitful, that the wrongdoer had apparent authority over the decedent, and the results that the wrongdoer got was inequitable.  If you can pull all of those elements together through a totality of the circumstances and showing the evidence, you probably have a good undue influence case.

Selecting the proper Trustee for your California Trust is critical is you want your estate to stay out of the Court system.  Over half of the Trust litigation we work on everyday invokes a bad Trustee doing bad things.  In this video partner Keith A. Davidson discusses some considerations you should keep in mind in selecting your Trustee:

For our email subscribers, please click on the title link to watch this video on our website.

Did you know that amending a California Trust is not the only way to “amend” a Trust?  Sounds like a riddle, but it’s actually a concept known as a “power of appointment.”

Mystery Box.jpg

A Trust amendment is a simple way to change a California revocable Trust.  And an amendment can change any part of the Trust provisions, from the distribution section, to Trustees, to Trustee powers—anything can be changed on a revocable Trust.  Amendments are done by the Trust settlors (the people who created the  Trust in the first place).

But the Trust distribution provisions can also be changed using a device known as a power of appointment. The power allows a named person to appoint the assets among certain beneficiaries.  Sometimes the power is given to one of the Trust settlors and sometimes it is given to a third party (usually one of the beneficiaries).  It’s like giving a gift using someone else’s money.

Here’s how they work:

1.         Creation of a Power of Appointment.  A power of appointment is created by reference to it in the Trust document.  The power is created by language that goes something like this:

“Upon the death of the Surviving Settlor, the Trustee shall distribute the remaining balance of the Trust estate to such person or persons as the Surviving Settlor shall appoint and direct in any writing delivered to the Trustee, other than a Will”

This is just one example.  Powers of appointment can vary widely, and can be limited or general in how they are applied.

2.         Exercise of a Power of Appointment.  Once a power of appointment is created in a Trust, it must be exercised.  “Exercised” means that the named person who has the power to change the distribution of Trust assets puts his or her intent in writing. 

The general rule is that a power of appointment must be exercised as specified in the Trust that creates the power.  Typically, the Trust language requires the power to be exercised by a writing, other than a Will, signed by the power holder and delivered to the Trustee.  Why “other than a Will?”  Because exercising a power of appointment in a Will can be problematic.  A Will is not officially deemed a valid Will until it is approved by the Court and entered into Probate.  And we use Trust’s in California to avoid probate, so you rarely want to have a procedure to exercise a power of appointment that forces you to use something (i.e., Probate) you are trying to avoid.  But if a Trust specifically states that it is acceptable to exercise a power of appointment by Will, then a Will is sufficient.

 Once a power of appointment is exercised in writing, it governs the distribution of the Trust assets and it supercedes the distribution section in the Trust.

3.         Failure to Exercise Power of Appointment.  If the person given the power to exercise a power of appointment fails to do so, then the power is ignored and the Trust distribution section goes into effect as it is last written in the Trust after any amendments by the Trust settlors.

A power of appointment is an effective and flexible way to give a named person the power to vary the Trust distribution terms—a way to amend a Trust without doing an amendment.  

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.

Children are a big part of Trust planning, and a big part of Trust litigation (lawsuits) when the planning falls apart (or is not done properly to begin with).  There are many factors that affect planning for children, including age, marital status, health, legal or creditor issues, and level of responsibility (or rather perceived level of responsibility by the parent).

Age Issues:

Age is easy to plan for in that a child’s trust can be created to hold assets until a certain age.  Choosing the “certain age” is a highly personal question to answer.  As a starting point, a child must be a legal adult to receive assets, which is at age 18 in California.  And most people agree that ages 19, 20, and even 21 are too young for a child to receive anything substantial.  In fact, research has shown that the Prefrontal Cortex-the part of the brain that controls reasoning and impulses-does not fully mature until age 25.  So a scientific argument can be made that age 25 is a good minimum age to work with, but does it apply to every case?  Sure, why not.  If nothing else, age 25 is a good starting point.  What about an age other than 25, like 30, 35, or 40?  That’s where personal preference comes into the mix.  Of course, it’s not an all or nothing proposition because a Trust could allow a portion of the assets to be distributed at age 25 (say ½ or 1/3), and then use other ages for the remaining distributions.  You can be as creative as you like in setting the “certain age” for distributions.

Marital and Creditor Protection Issues:

Age is only one part of the equation because keeping assets in trust for a child also impacts marital property issues and creditor protection.  By placing a child’s assets in trust it can (i) protect those assets from creditors, and (ii) help the assets retain their character as the child’s separate property (this applies in California, which is a community property state, but inherited assets are, by definition, separate property).  So as long as the assets are in trust, they have some protection in case of creditors or divorce.  This may be helpful if the child is in a high-risk profession, such as a doctor, lawyer, stuntman, dare devil, motor cross, etc.  But the protection only lasts for as long as the Trust is in existence.  If the trust provides for distribution at a certain age, such as 25, then the creditor protection ends at age 25.  The trust could continue for the child’s entire lifetime if this is a concern.  But you have to balance the inconveniences of the trust with the protection being provided. 

Health Issues:

Children with health issues can face substantial costs for medical care in the future.  A child’s trust can be created so that the child will qualify for government assistance, but have trust assets available for extraordinary expenses that add to the child’s comfort.  Known as “protective”, “Medicaid”, or “Special Needs” trusts, these devices can be helpful for children in need.  In this case, the trust would remain in existence for the child’s lifetime, so the age question is no longer a concern.

Level of responsibility:

This is the real issue parents grapple with in determining a proper age for distribution.  How responsible are your children?  Perhaps the more important question is: how do you perceive your child’s level of responsibility? 

Before I had children I had a hard time understanding why continuing trusts for children were such a big deal—let the children have their cake, I thought.  Not anymore.  As the father of two boys I now understand just how perplexing the question of responsibility can be.  I also know that every child is different and my perception of each of my children may vary from their actual level of responsibility.  And it is my perception of responsibility that matters because that is what will drive my decisions in planning for my children.

So take a good look at your individual situation and ask yourself, what do you think is best for your family?  There are many variables and options to choose from to help your children.  But your opinion is the only one that counts when creating your own trust. 

You work hard to create your Trust and your estate plan and you want the terms of your Trust carried out the way they were drafted.  But how can you be sure your named Trustee will perform as instructed after your death or upon incapacity?  Sure you may have chosen a trusted person to act as Trustee, but how will they actually perform?  And how will their performance be viewed by the Trust beneficiaries (i.e., usually your children and other family members)?

There are times when a Successor Trustee either violates their duties (whether it be intentional or unintentional–by not taking the proper actions), or the beneficiaries have the belief that a Trustee is not acting fairly (especially if the Trustee is also a beneficiary as when a single sibling acts as Trustee for his brothers and sisters). It does not much matter whether a breach of trust is actual or perceived because litigation (lawsuits) can result from either situation.

In comes the Trust Protector. A Trust protector is simply a special Trustee.  Someone appointed in the Trust document for a very limited and specific purpose. For example, the Protector could have the final say in when to make distributions from the Trust and how much should be distributed. This provides the appearance (and actuality) of a neutral third party making an important decision rather than a self-interested Trustee.

But the Trust Protector can be used for more than that. The Trust Protector can:

  1. Make or consult on investment decisions,
  2. Have veto power over certain (or all) decisions of the Trustee,
  3. Have veto power over distributions to the Trustee,
  4. Be a tie-breaker vote between two Co-Trustees,
  5. Set compensation levels and advise on hiring professionals, and
  6. Manage certain Trust assets.

In other words, the Trust Protector can be used however you like, the sky is the limit. In fact, each time I incorporate a Trust Protector into a Trust I am amazed at how versatile the concept is and how many different ways it can be used. It is a very personal device that can provide peace of mind, along with actual peace between the beneficiaries, when the time arrives.

So get creative and find ways to help protect your Trust for the benefit of your family and beneficiaries.

Listen to Keith A. Davidson summarize his blog post on the difference in contesting a California Trust and a California Will.

Which is better—A Trust or Will if a fight takes place for your assets after your death?   One of the primary reasons people create Living Trusts (also called Revocable Trusts and Revocable Living Trusts) is to avoid probate. And Trusts can also help in reducing or, in some cases, eliminating estate taxes. But can a Trust also help discourage a contest over an individual’s intended disposition of his or her assets at death?  The answer is a resounding “maybe.”  Let me explain.

Some people believe Trusts better protect against a contest because Trusts are not administered with court supervision. Once the person who created the Trust (referred to as the Settlor) dies, the Successor Trustee begins administering the assets, gathering them up and preparing these assets for distribution to the Trust’s beneficiaries (usually family members), without any need for court supervision. On the other hand, a California Will can only be administered in probate, which requires court supervision. In fact, an Executor is not even appointed to act under a Will until a Petition for Probate is filed with the court and the court appoints the person as executor. Once in court, anyone who wishes to challenge the Will has a ready forum in which to do so. In other words, a contestant normally does not need to open the court process pertaining to a Will—they merely need to show up and file an objection in the probate court.

In contrast, contesting (or challenging) the terms of a Trust is not quite so easy. Trusts can be challenged in court and trustees’ actions can be challenged in court, but the person wishing to contest a trust, or its trustee, must take the initiative and bring the matter to court by filing an appropriate petition.  Thus, it is the contestant who has to take the initiative to start the court process when it comes to trusts—they can’t just show up and object as in the probate of a California Will.

So back to the “which is better” question—is is a Trust better than a Will in warding off attacks by angry beneficiaries? It depends.  If an heir or beneficiary is set on contesting the document and if the heir has means to hire an attorney, then a Trust is just as vulnerable to attack as a Will—the fact that the heir or beneficiary must start the process will usually not prevent an attack. If, however, an heir or beneficiary does not have the means to hire an attorney and does not know how to bring a trust contest to the Court’s attention, then the trust may be better at preventing attack. A California Will, after all, is already filed in court, which allows a beneficiary to object to it much easier, sometimes without the help of a lawyer.

Therefore, a Trust may have some benefit over a California Will in preventing a contest by an angry heir or beneficiary, but the benefit is relatively small if the heir is ready, willing and able to take action to bring the matter to court.

Here’s a situation we see often: Sally dutifully creates a California Trust, and at the same time signs a “general property assignment” to the Trust, which states in effect, “I, Sally, hereby assign, transfer and convey to myself as trustee of my trust, all my right, title and interest in all property owned by me, both real and personal and wherever located.” (Notice Sally did not particularly identify any of the assets she assigned to her trust).

Several years later Sally dies. Tom is the successor trustee of Sally’s trust. Tom finds out that Sally failed to formally transfer title to several stocks worth $200,000 to her trust before her death.

The question arises—is the “general property assignment” sufficient to confirm the stocks are owned by Sally’s Trust? Or do the stocks need to be probated? Until recently the answer was usually “no”, the general assignment is not enough to confirm the stocks are owned by Sally’s trust, requiring Tom to file an expensive and time-consuming “Petition for Probate” to have Sally’s stocks “poured over” into her Trust.

But now, as of January 26, 2011, it is likely that Sally’s “general property assignment” is sufficient to confirm the stocks are indeed owned by Sally’s Trust—alleviating the need of filing an expensive and time-consuming “Petition for Probate”.

Justice Kenneth R. Yegan, writing for the California Court of Appeal, confirmed—that in a case like Sallys—a “general property assignment” is effective to transfer ones stock to his or her trust, even though the “general property assignment” does not particularly identify the stock. (Presumably, the general assignment would work for all non-real property assets, i.e., bank accounts, brokerage accounts, retirement accounts, life insurance, etc.)  

This is good news for the family members of those who forget, or by some other kind of oversight, fail to properly fund non-real property assets into their trust before they die. Now, under California law, all non-real property assets in excess of $100,000 in value may likely be confirmed to be trust assets by way of a general property assignment (e.g., “I …, hereby assign all of my property to my trust”). 

Unfortunately, as Justice Yegan points out, real property (houses, etc.) cannot be confirmed as trust assets by way of a “general assignment”, because real property must be either formally transferred to a trust by way of a deed, or particularly identified in an attached schedule to a trust. In cases where real property is not sufficiently identified as a trust asset, a petition for probate will most likely be required.  

Usually the best course of action is to have the “deed” to ones real property titled in the name of the trust. Or, at a minimum, have a schedule attached to the trust that particularly identifies the real property (i.e., “That certain real property commonly known as 3750 Santa Fe Ave., Riverside, CA 92507”).

It doesn’t happen often, but the existence of fraud can cause a Will to be invalid. Fraud is simply a lie (called a misstatement of a material fact in legal parlance).  Thus, if someone lies to a person creating a Will (called the testator) and that lie causes a different disposition under the Will than otherwise would have been made, then the Will is invalid for fraud.

Let’s put this legal-talk to an actual example.  A testator had two sons, Adam and Brian; Adam was an alcoholic, but rehabilitated himself and no longer drinks.  The testator had previously disinherited Adam when he was an alcoholic, but then created a new Will giving Adam an equal share once he was rehabilitated. However, the testator warns Adam that “if I ever see you drink again, you’re out of my Will for good!”

A few weeks later, the testator and his other son Brian are walking down the street and they see someone exiting a bar with a drink in his hand that looks like Adam, but the testator isn’t sure if it’s Adam.  He asks Brian if that is his brother exiting the bar, and Brian says “that’s my brother Adam all right” even though Brian can clearly tell that the man exiting the bar is not Adam.  The testator then changes his Will and disinherits his son Adam based on that lie. 

Since the Will in this example was created based on a lie, and the Will was changed in a way that would not have occurred absent the lie, the Will could, and very likely should, be overturned.

The problem, of course, is that these statements made to the testator must be established by credible evidence in court.  And if no one else heard the lying statement by Brian and no one else knew exactly why the testator changed his Will, then there won’t be any evidence to present in court—Brian certainly is not going to admit to the lie in open Court.

So fraud is a ground, albeit a difficult ground, that can be used to overturn a California Will or Trust (this same discussion applies to the creation or amendment to a Will or Trust  too).