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.

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

Hi, this is Keith Davidson at Albertson & Davidson.  And in this video, I want to discuss step-parents.  And I don’t mean to disparage step-parents, there’s a lot of very good step-parent and step-child relationships out there.  But, there’s also some bad ones.  And a lot of times we’re asked, “Can my step-mom or step-dad, can they change the estate plan after my parent dies?”  So, typically, in this scenario, maybe you have a father who married somebody new and that’s your step-mom.  And then your father passes away and you always thought you had a good relationship with your step-mom, but after your dad passes, things start to get a little strained and awkward and you start to wonder can she actually change the estate?

In some cases, it might actually get downright hostile and maybe the step-mom actually tells you, “I’m changing the estate and I’m leaving it all to my kids and I’m not going to leave your father’s share to you after all.”  And you wonder, can she do that?  And the answer is maybe.  And that’s a typical lawyer answer, right?  But it depends; it depends on what your father did when he planned out his estate.  Or, if he didn’t have any planning at all, that could be a real problem.

So the best case scenario would be if your father had created a trust prior to his death, he has the right to leave assets to step-mom and that’s fine.  But, typically, what you’d want to see is that he left money to step-mom in a trust.  So she can use that money for her care and support during her lifetime, but she can’t change the ultimate distribution of it.  Whatever’s leftover after step-mom passes, has to go to you.  But that only works if your dad created a trust and if he had a trust created that had those type of terms in it that allowed the step-mom to use the assets but not control them.  That required that the assets go to you after death.

If your father didn’t do that, then you probably are not going to be entitled to his share of the estate.  And so what happens a lot of times is, either your father leaves everything to the step-mom, in which case she can do whatever she wants after your father dies, and she can cut you out.  Or, he just doesn’t plan at all and things just pass to the step-mom because it’s in joint tenancy or she’s the beneficiary on life insurance, or whatever the case may be.

So when these things are not planned out and if the assets actually pass to step-mom after your father passes away, then you’re really in trouble, because the step-mom can do whatever she likes.  She becomes the owner of those assets and she can do whatever she wants with them as the owner.

The fact that your father may have had a family home that you grew up in and lived in and has been in the family for decades, the law doesn’t care about that – if your father didn’t plan it out property.  And so that’s really the big question.

So anytime somebody approaches us and says, “Can step-mom change the estate after my father passes away?”  The first question we’re going to have is, “Well, what did your dad have in place?  Did he have a trust?  Did he have a will?  Did he have something that we can look at to see if you, as a child, have any rights to any of those assets?” And if you were to tell us that no, he didn’t have any of those things, then chances are, you’re out of luck.  And that’s a little something about the downfalls of step-parent and step-children relationships when it comes to passing assets.

 

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

This is Stewart Albertson with Albertson and Davidson, and I want to talk to you about an issue that we do see from time to time called advances on inheritance. Advances on inheritance are essentially a loan that mom or dad makes to one child. They don’t want to be unfair in giving that loan to one of their children when they have several other children. So they basically tell the person they made the loan to, well that is an advance on your inheritance so that when I die, you’re going to have to take that into account based upon whatever your share of my estate is.

There’s a real problem with advances on inheritance though because the probate code has some technical requirements that must be met to qualify as an advance on inheritance. Otherwise, that payment of money from a parent to a child will be looked at as a gift.  If it’s a gift that makes a big difference because when the estate is distributed after mom and dad have passed away it’ll be distributed equally between all of the children without taking into account the “loan” that was made to one of the children during lifetime.

So how can you tell the difference between an advance on inheritance and a gift? The advance on inheritance can be proven in three primary ways. There’s actually a fourth way, but that gets a little complicated. If you really want to look into this, you can go to Probate Code section 21135, and you can read how you establish an advance on inheritance there.

Generally, the way you prove an advance on inheritance is:

  1. The trust or will terms themselves have in there saying, I’m giving $100,000 loan to my son Johnny, and when I die, this counts as part of his inheritance at the time he receives his ultimate distribution. That’s the first way that an advance on inheritance can be included and be supported by the evidence.
  2. The next way you can establish an advance on inheritance is did your mom or dad have a writing outside the trust or will that simply says: I hereby am making a loan to Johnny and after I die, that should be considered as part of his inheritance for distribution purposes. That would be the second way that you can establish an advance on inheritance.
  3. The third way is you have Johnny acknowledged in a writing that he’s already receiving some of his inheritance by way of a loan prior to mom and dad passing.

If you have any of those three, chances are you can establish an advance on inheritance.

As you can see, this is not always easy to do. If there is money that is given to one child, a lot of money, say several hundreds of thousands of dollars to one child and not to the other, and there’s nothing to establish an advance on inheritance, what is the argument the child makes who received the money during the parents’ lifetime? And that is, it was a gift. If it’s a gift, it won’t be chargeable against their share of the estate. It won’t be an advance on inheritance.

 

Overturning a Will or Trust based on undue influence is not always easy.  But if you know the type of evidence you need to support your case, then you have a much better chance of proving it in Court.  In this video, Stewart Albertson discusses the way in which to prove undue influence in California Trust and Will contest cases.

 

 

For our email subscribers: click on the title to view this video on our website.

Last week the San Bernardino County Sherriff’s office announced that they have arrested a caretaker for alleged forgery and identity theft of a family’s living trust.  This is big deal because wrongdoers are so rarely arrested and charged for their criminal actions in Trust and Will cases. 

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According to the San Bernardino County Sherriff’s office, Stephanie Danna was arrested and charged with perjury, forgery and identify theft for allegedly forging a decedent’s signature on a Trust and falsifying notary signatures and fingerprints.  The decedent was Ernest Vilmos, who died in 2011.  After his death, Mr. Vilmos’ daughters, Julie Denges and Cheri Romano, filed a Trust contest action in San Bernardino Superior Court seeking to set aside the false documents.  That action is still pending. 

After nearly two years of civil litigation, the Sherriff’s office conducted a criminal investigation, executed search warrants, and put together a criminal case against Stephanie Danna.

“Julie and Cheri knew in their hearts that their father’s purported Trust was forged,” says Attorney Damian Garcia, of Banks, Garcia and Janis in Rancho Cucamonga, California—he represents Julie and Cheri.  “Very rarely do I see criminal action taken on a Trust matter like this because law enforcement usually views these as ‘civil cases’ even when they involve criminal financial activity,” said Garcia.

I agree with Mr. Garcia.  What Ms. Danna is accused of doing in this case is not uncommon.  Bad caretakers can be found in a surprising number of cases, and some have become sophisticated in siphoning off assets of a dependent elder.  But the criminal investigation and prosecution of these crimes is rare.  In my experience, I have seen wrongdoers steal in excess of $1 million and still not be investigated or prosecuted criminally.  Clients of mine have reported wrongdoers to law enforcement many times with no action being taken in most cases.

“The real difference maker here seems to be the forged signature and forged thumb print in the notary journal.  It seems to have peaked the interest of law enforcement and was most likely the deciding factor in their decision to conduct a criminal investigation,” said Damian Garcia. 

Hopefully, this case can be an example of how law enforcement can target and prosecute criminal wrongdoers in the Trust and Will field.  Those wrongdoers are out there and their actions wreak havoc in many estates. 

A Trustee’s duty to manage Trust assets is very different from how you are allowed to manage your own individual assets.  This is America, you can manage your own finances any way you please.  You can be risky and invest big, you can be conservative and invest small, or you can hide your money in your mattress if you like.Losing Money.jpg

But Trustee’s don’t have this freedom of investing.  In California, Trustees are required by law to follow the Prudent Investor Rule, which puts a whole host of rules on investing Trust assets.  For example, Probate Code Section 16047(a) specifically requires a Trustee to invest and manage Trust assets “as a prudent investor would, by considering the purposes, terms, distribution requirements, and other circumstances of the trust.”  The Trustee must use reasonable skill, care, and caution in making these decisions.  Skill, care and caution (especially caution) are attributes rarely exhibited by individual Trustees.

Furthermore, the investment decisions must have risk and return objectives reasonably suited to the trust—not the Trustee individually, but the Trust as a whole.  Some of the circumstances that the Trustee must consider include (See Probate Code Section 16047(c)):

  • General economic conditions,
  • The possible effect of inflation and deflation
  • The expected tax consequences of investment decisions or strategies
  • The role that each investment or course of action plays within the overall trust portfolio
  • The expected total return from income and the appreciation of capital
  • Other resources of the beneficiaries known to the Trustee as determined from information provided by the beneficiaries
  • Needs for liquidity, regularity of income, and preservation or appreciation of capital

If you really think about this list of circumstances you will find that most of the criteria is geared towards the needs of the beneficiaries.  Trying to make money is fine, but it cannot outweigh other important factors, such as the need to preserve capital, generate income, and provide liquidity for upcoming Trust requirements—like distributions.  Notice the difference between this list of Trustee investing versus your own personal investments?  As an individual you can focus on just one goal if you like—such as capital appreciation—and you can ignore the other factors.  If you don’t want to focus on income, or capital preservation, you don’t have to.  But Trustee’s don’t have that luxury, they MUST consider all of the factors all of the time.

There are times when I hear people compare Trusts to businesses.  That is a dangerous (and very misapplied) analogy.  Businesses are allowed to risk capital for profit.  If a business risks capital and looses it, then we say “that’s business.”  Businesses operate under the “business judgment rule,” which is a very liberal standard that allows a business to take all sorts of risk without being held liable for those decisions. 

Trusts on the other hand have no such luxury.  Trustees are not allowed to risk capital for profit—in fact that is specifically precluded.  Instead, a Trustee’s investments must be much more calculated and planned out.  Trustee’s must look at the needs of the beneficiaries, the overall purposes of the Trust, and weigh any investment risk against the need to produce income and preserve capital.  In fact, capital preservation is the single biggest differences between Trusts and businesses—businesses can risk capital, Trusts must preserve capital whenever possible. 

If you are an individual Trustee and you think you can invest however you like, or you think you can invest as your parents did when they were alive, you are flat wrong.  This is the biggest single mistake individual Trustees make, and it can be a very costly mistake.  As a Trustee, you have many duties when it comes to investing.  You would be well advised to (1) learn those duties, and (2) follow them as much as possible. 

If you are a beneficiary dealing with an individual Trustee who does not know the Prudent Investor Rule, watch out!  Your Trust fund may be at serious risk of loss.  The Prudent Investor Rule is there to protect you, but it does no good if the Trustee does not know and follow the mandates of the Rule.

The tangled web of litigation can cause some pretty funny alliances at times.  Emily Green of the Daily Journal reported on February 28, 2013 that the estate of Mark R. Hughes, founder of Hebalife, Ltd., who died in 2000, is still being litigated in the appellate court.  The latest turn of events comes from a claim for $3 million in attorneys’ fees made by the law firm of Mitchell Silberberg & Knupp LLP and attorney Hillel Chodos (Mitchell Silberberg & Knupp LLP and Hillel Chodos vs. Suzan Hughes, et. al., A130802).

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The $3 million fee is for services provided to the guardian (Suzan Hughes) of Mr. Hughes’ minor son, Alex.  At the time of the litigation, Alex was a minor and Suzan Hughes was fighting to remove the Trustees of Mr. Hughes’ Trust, which had an estimated value of $300 million.  The Guardian’s attorneys (Mr. Chodos and company) were allegedly paid $3 million for their services, but they had outstanding fees due of another $3 million.  Apparently, the lawsuit to remove the Trustees was unsuccessful.

Once the $3 million bill was asserted, both the guardian (Suzan Hughes) and the Trustees objected to payment of the fees—bringing these former enemies into alliance.  At the trial court level, the $3 million fee was denied because the Judge reasoned that the litigation was unsuccessful and was carried out primarily for the personal gratification of the guardian and NOT for the benefit of the minor.  Mr. Chodos and company disagreed, saying that during their representation they were following the instructions of the guardian and fighting a lawsuit that they honestly believed was in the best interests of the minor.

The First District Court of Appeal in San Francisco heard arguments and is expected to rule later this year.

Just goes to show that fee issues are a universal truth, the only difference being the amounts.  Most people don’t have to argue over $3 million in fees because not everyone has a Trust worth $300 million.  While the amounts may be large, the underlying arguments are no different.  Fiduciaries of all types, be they Trustees, guardians, executors, or agents under a power of attorney, owe a duty to act reasonably and only take action that is in the best interest of their beneficiaries and wards.  Violate that universal truth, and fees may be denied—not just attorney’s fees, but Trustees’ fees too (and executor fees, guardian fees, agent fees, etc).

Notice I said “may” be denied.  Why not “must” be denied?  Because so much is left to the discretion of the trial court.  If you can convince a Judge that your actions were reasonable, even if unsuccessful, then you have a chance of getting those fees approved.  Not so black and white after all. 

 

Another year is in the books, and on the web for us thanks to our blog.  We wrote quite a few articles again this year, but there are a few stand-outs among them. The following list represents our twelve most popular articles (and our personal favorites too):

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1. Form Interrogatory 15.1: Show Me your Facts.  Decsribed as a “procedural 2 x 4”, form interrogatory 15.1 gets broken down into an understandable form by partner Stewart R. Albertson.  A very popular video on an underappreciated interrogatory.

2.  The Best (Private) Trustee in the World!  We spend a good deal of time discussing what Trustees do wrong in administering a Trust estate.  But it’s nice to stop and pay tribute to those Trustees who do right.  I have the pleasure of represnting one very good private Trustee–in fact he’s the best private Trustee in the world–I guarantee it!

3. The Empty Will: Why a California Will or Trust May Not Control Your Assets After Death.   Not much passes under a California Will these days, yet we spend so much time talking about Wills.  This article helps decipher what passes under a California Will and what does not.

4. 5 Tips for Aspiring and Accomplished Lawyers.  This is one of my personal favorites, a guest post from our friend and colleague, Mike Hackard, with Hackard Law in Sacramento, CA.  Mike is an experienced attorney with over 35 years of experience and he shared some great tips with us for aspiring and accomplished lawyers.  Thank you Mike!

5. Video Series.  We did more videos this year, and we have more in the works for 2013.  All of our videos seem to be very popular.  Stewart and I assume it’s becuase of our good looks, but our staff seems to think it’s the good information we provide in the videos.  Well whatever the reason, our videos made the top 12 list for 2012.

6. AeroFlow Windscreen for my BMW R1200GS.  What do BMW motocycles and the law have in common?  Nothing at all.  But Stewart’s post on his BMW motorcycle was interesting and a popular source of conversation. 

7. When to Fight for your Right to Privacy: A Three Part Series.  It should be no secret that you have a right to privacy–even in our digital world.  California’s Constitutional Right to Privacy gets some discussion in our three-part series on the subject.  You have to know your rights, know when to fight for them, and know when not to fight for them.

8. When a Beneficiary “Can’t Get No Satisfaction”: How to Remove a California Trustee in 3 “Easy” Steps…  “Easy” is a relative term, of course.  But it never hurts to think positively and discuss how to go about removing a Trustee, if that needs to occur, as if it were easy.  

9. 5 Essential Elements for a Slam Dunk Case.  A personal favorite of mine, the notion of a “slam dunk” case.  Everyone has a slam dunk case, or so they think.  But until the stars align, and you have the 5 essential elements on your side, your case may not be such a sure thing after all.

10. What You Need to Know When an Estate Plan Goes Awry.  Attorneys never make mistakes, right?  Wrong.  Sometimes even attorneys can make mistakes, and when those mistakes damage an otherwise well intentioned estate plan there may be some legal recourse to pursue.  This post discusses some of the strategies to successfully navigate an attorney malpactice case.

11. When is a Trust like a Will?  Appellate Court Confuses Capacity Rules for California Trust Amendments.  The California Courts of Appeal don’t often make new law in the area of Trusts and Wills.  But when they do, we often wished they hadn’t.  Case in point, Anderson vs. Hunt where the Appeallate Court took an already confusing area of the law and made it more confusinger (yes “confusinger” a new term coined for the first time right here).  

12. Trustee: Do Not Pass Go, Do Not Collect $200.  Another appellate court case, Thorne vs. Reed, where a Trustee is told his pay is zero–one of few areas where you can have legal servitude.  If a Trust says Trustee compensation is zero, then that’s what it is.  Seems fair enough, unless you’re the Trustee!   

There you have it, the top 12 post for 2012.  We hope you enjoy these posts along with all our other articles.  We look forward to bringing you more useful and interesting Trust and Estate information for 2013.

Happy New Year!    

If you’re going to do battle in Probate Court do you need to know more about Trusts and Wills or more about litigation?  The obvious answer is you need to know about both.  And while knowing about Trusts and Wills is critical, knowing a thing or two about civil litigation is also a must.

For example, under California Probate Code section 1000, the rules of civil procedure apply to actions filed in probate court (meaning all Trust, Will, and estate lawsuits).  This includes general civil procedure, civil discovery and the rules of evidence.

That sounds important, but what does it mean?  Let’s break it down into three general categories:

  • Civil procedure—things like motions and demurrers
  • Civil discovery—written discovery, depositions, and expert designations
  • Rules of evidence—including foundation, hearsay, relevance, etc.

In this post, we’ll discuss the first category—civil procedure.  The next two posts will explore the use of civil discovery and the rules of evidence in probate court matters.

Civil Procedure.

While it’s true that the rules of civil procedure apply to probate court matters, there is an exception where a different rule is stated in the Probate Code.  For example, in a civil lawsuit the defendant has 30 days after being personally served with a complaint and summons to file an answer with the Court.  In Trust and Will matters, however, an interested party has the right to appear and object for the first time at the first hearing (see Probate Code section 1043).  And in civil lawsuits a complaint does not need to be “verified” (which means signed under penalty of perjury); whereas in probate court verification is required (see Probate Code section 1021).

Demurrers and Motions.

While some of the rules are different under the Probate Code, other rules are not. For example, demurrers.  A demurrer is a funny word to describe what essentially is a motion to determine if the Plaintiff (or “Petitioner” in the probate world) has stated enough in the initial petition to make a legal claim against the defendant (or “Respondent” in probate court).  Every lawsuit has some basic information that must be stated in order to continue with the suit.  When a suit fails to state the basics, the opposing party can ask the court to dismiss the suit.  The Court, if it agrees, will usually dismiss the suit with “leave to amend” meaning the lawsuit can be re-filed with the correct information stated.

A demurrer does not test the truthfulness of the claims made in the petition, it merely determines if the factual allegations are enough to form the basis of a claim.  Demurrers aren’t always that useful in litigation, but they serve a purpose in some cases and can be used in probate court where appropriate.

The same applies to other procedures such as Motions to Strike, Motions for Summary Judgment and Motions for Judgment on the Pleadings.  All are fair game in probate court matters, although their usefulness may or may not apply in probate. 

Motions for Summary Judgment.

Take motions for summary judgment (“MSJ”), they tend to be used a lot in civil actions.  An MSJ is designed to allow the Court to decide an issue, or sometimes an entire lawsuit, where there are no factual issues in dispute.  Most of the time, MSJ’s are not granted by the Court because there’s always at least some factual issue that must be decided in a lawsuit, which can only be resolved at trial before a judge or jury.  If two people are fighting over the existence of a contract, then the facts of whether a contract was created or not can only be decided at trial.  Whereas, if the contract creation is not in dispute (everyone agrees a contract exists), then interpretation of the contract terms may only involve legal issues—not factual determinations—allowing the Court to rule on a properly filed MSJ.

In most probate court actions, however, almost everything is a factual dispute.  For example, if a Trustee is being accused of mismanaging the Trust assets, that’s a factual dispute.  The Court must hold a trial and hear evidence to determine whether or not the Trustee acted appropriately.  For this reason, most of the time MSJ’s are not useful in probate court.  But they are available and can be used in the right situation.

The bottom line is that if you are going to battle in Probate Court you must arm yourself with knowledge of civil procedure if you hope to be victorious.