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.

From time to time we have clients come to our office upset that the attorney who drafted their parents’ California estate plan (i.e., living trust, will, and durable powers of attorney) got it wrong or perhaps failed to properly implement the parents’ estate plan.

In a recent case we handled an attorney drafted an amendment to a Trust for a mother. The mother intended the amendment to change the distribution scheme between her children. The original trust called for an equal division amongst the children, and now the amendment called for a different division. The mother signed the amendment, and believed that the distribution changes under the amendment would be followed after she died.

After the mother’s death, it was found that the drafting attorney did not properly draft the amendment. Due to the drafting attorney’s mistake, several of the children were significantly damaged; these children would not receive what their mother intended under the amendment because it was invalidly created.

That unfortunately led to a malpractice lawsuit being filed against the drafting attorney. The balance of this blog article outlines how we communicated with the attorney’s malpractice insurance carrier to settle the lawsuit prior to going to trial.

We want to make it clear that insurance companies do not settle lawsuits for fair value—if they settle at all. The insurance industry has taken the position that they will vigorously litigate all lawsuits even if meritorious allegations are made and liability and damages are clear. In response to this position, we needed a strategy for getting the drafting attorney’s insurance company to agree to settle for policy limits—before going all the way to trial.

To implement our strategy, we needed to know what the damages were to our clients—the children harmed by the drafting attorney’s mistake. We determined the damages were in excess of $1,000,000. Next, we needed to know how much insurance coverage the drafting attorney had for legal malpractice coverage. Through discovery we found out that the policy limit for this case was $500,000. That means that the insurance company was only required to pay the first $500,000 of any judgment for legal malpractice against the drafting attorney.

Once we determined damages and potential insurance coverage, we sent out the balance of our written discovery and took the depositions we needed to establish all the elements for legal malpractice. We were now in a position to force the insurance company to settle for $500,000 or risk being on the hook for the entire $1,000,000 in damages.

We spent a lot of time on a settlement demand letter to the opposing attorney, which we copied on the insurance adjuster. The letter set out the facts, the clear liability, and the clear damages. We gave the insurance company 30 days to think about whether they would accept or reject the offer. In this case, the insurance company ultimately accepted the settlement demand. If they had not, then we would have gone after them for bad faith for refusing to settle for a reasonable amount. In this case the $500,000 settlement amount was reasonable, because the total liability was easily in excess of $1,000,000.

As you can see, when you carefully plan your strategy in a case, you can obtain good outcomes for clients without exposing them to several years of litigation, which is exactly what the insurance company wants to do. But our proactive actions put the insurance company in a difficult position—either settle for a reasonable amount now, or likely end up paying a much larger amount for the damages sustained by the mother’s children. We (and our clients) were okay with the insurance company choosing either option.

If you would like a copy of the redacted letter I sent to the insurance company, please let me know.

One of the hardest things to understand for people who do not have experience with our judicial system is the amount of time it takes to resolve most matters in court.  Why the wait?  In part, it’s due to the backlog of cases in most courtrooms and the lack of funding these days to hire the necessary amount of judges and other court staff to process these cases.

But there is also a built-in delay in California Trust, Will, Probate and Estate cases, a concept known as due process.  “Due process of law” is the term for how we must administer cases in our system of justice.  Due process requires a certain procedure to take place before a court makes a binding decision in your case.  In other words, the court cannot simply look at the documents that are initially filed by each side and make a snap decision.  This is true even where the facts seem pretty clear-cut and the law directs a certain action based on those facts; or even where the opposing party’s objections are baseless or frivolous.

Before any binding decision is made by the court, the court must first conduct a trial where each side is given a fair chance to bring whatever relevant evidence they have to substantiate their case.  Once the evidence (both documents and testimony) is presented at trial, then the court can weigh the evidence and make a decision.  Note that in California, nearly all Trust, Will, Probate and Estate cases are decided by a judge alone, as opposed to a jury as used in all other type of civil cases and all criminal cases.

A typical life-cycle of a Trust and Will case begins with the filing of an initial petition (Trust and Will matters usually use “petitions” as opposed to “complaints,” but they are the same in that each is an initial document that kick-starts the lawsuit).  Once that petition is filed, it is set for an initial hearing.  The initial hearing IS NOT a trial.  It is simply the first chance the court has to review the petition and determine if everything is ready to proceed—we call this “being at issue.”  If notice of the petition is not properly served or the petition is defective in some other respect, then the petition is not “at issue” and the initial hearing will be continued to give the petitioning party time to correct the defects. 

Each petition filed with the Court in California Trust and Will matters is reviewed by a probate examiner (which is either a lawyer or paralegal employed by the Court) to determine if the petition is properly prepared from a procedural standpoint.  They don’t test the validity or weight of the facts that are stated in the petition, they just make sure all the technical requirements are met for a properly filed petition.

Once the Petition is “at issue,” the opposing party has the right to show-up at the hearing and make a verbal objection to the petition (see California Probate Code Section 1043(b)).  Once made, the opposing party is given a certain amount of time in which to file written objections.  Once all objections have been filed, then the Court will determine how much time is required by the parties to conduct discovery—which includes issuing subpoenas, requesting documents and questions from opposing parties, and conducting depositions.  There may be disputes regarding discovery along the way, which must be sorted out with various motions to the Court.  Once the parties have completed discovery (or are close to it), then the Court will finally set a trial date. 

It is only at trial that the Court receives evidence and then weighs the evidence to make a binding decision in the case. 

As you can see the process, from start to finish, can easily take anywhere from 1 to 5 years depending on the issues encountered, the number of discovery and other fights along the way, and the amount of evidence that must be collected.  All in the name of “due process.” 

Lack of capacity is probably the most used concept in trying to overturn a California Will or Trust.  And while nearly ever Trust or Will contest lawsuit contains an undue influence allegation, undue influence is usually minimized or even ignored altogether at trial.  In this vide, Keith A. Davidson discusses how both concepts can be used to overturn a California Will or Trust.  For those viewing this blog by email subscription, you can click on the title for a link to the video.

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.

California Trust and Will beneficiaries are subject to abuse in some cases at the hands of a rogue Trustee.  This video explains our view of an abused beneficiary.  It is important to acknowledge these cases and we fight hard to help beneficiaies who are abused.  For those viewing this blog by email subscription, you can click on the title for a link to the video.

Keith A. Davidson describes in this video the basic requirements for creating a California Will and Trust. He refers to the basic creation elements as “formalities” and “intentionalities”, terms he uses in teaching California Will and Trust creation at Chapman Law School (which he borrowed from his own Trust and Will professor, Father O’brien (thank you Father O’Brien!), who taught at Loyola Law School in Los Angeles).  For those viewing this blog by email subscription, you can click on the title for a link to the video. 

Most of us are not capable of giving billions to charity, like Warren Buffet and Bill Gates  But charities, to be successful, don’t need billions (they’d love to have billions, I’m sure, but most operate on far less than that).

Most people make modest charitable gifts to their favorite charity, university or church during their lifetime.  But the amount of gifts each of us is able and willing to make during our lifetime is somewhat limited by our resources.  For example, you can’t give your house to charity while you’re alive because you need it to live in; giving it away would be absurd.

What if I told you that you could make a very large charitable gift (large being relative to your own individual resources) to your favorite charity, university or church and never feel the pain of losing your hard-earned assets?  It can be done as part of your California Trust or Will  planning by leaving a charitable gift upon your death.

Think of the power you have.  Making a gift to charity at death is often referred to as “planned giving” or charitable estate planning.  Charitable planning can take many forms, and can get pretty fancy if you want, but it can also be extraordinarily simple by just naming a charitable beneficiary in your Trust or Will.

Now I am not suggesting that you leave all you have to charity (unless you want to), and cut out your children or other heirs entirely.  But I am suggesting that by making a little room in your California Will or Trust for a charitable cause, you can give a gift far bigger than you are able to give during your lifetime and still have plenty left over for your children.

For example, let’s say you have a home, a rental house and some money in the bank.  During your lifetime, you live in your home–you don’t want to give that up.  And you rely on rental income from your rental, while the money in the bank acts as a safety net in case you need more care and assistance as you grow older.  So there is not much room in your finances for a large charitable gift while you are alive.

But upon your death, if you gave let’s say a quarter of your rental property to charity, that could be a significant gift.  Even if the rental home is only worth say $200,000, one-fourth of that would be $50,000!  Could you imagine giving $50,000 to charity during your lifetime?  No.  But as part of your estate plan, a generous gift can be made to the charity of your choosing and your children still receive the remainder of your assets.

Do you think $50,000 is too much?  Make it $10,000, that’s still a larger gift than you can make while alive.

There are many good causes out there that would be overjoyed to receive a gift of $10,000.  And they often remember your gift by any number of recognitions. Also, your children can participate in the charitable gifts, including having them make decisions on how the money is spent and the programs that are sponsored by your gift. 

The point is, giving “till it hurts” is much easier to take when you are not here to feel the “hurt.”  And making some room for charity in your Trust and Will is a great way to leave a legacy that will be long remembered by those in need, without hurting those you love.

Love and marriage may go together (like a horse and carriage…), but marriage and estate planning may be another story.

If a person creates a Will or a Trust in California and then subsequently marries, that person’s new spouse automatically becomes a beneficiary of the Will and Trust by operation of law.  Many times people mistakenly believe that if their spouse is not mentioned in their existing estate plan, s/he will not receive anything after death.  And this may be exactly what the parties intended.  Especially with second marriages where each spouse may already have their own assets and they would rather leave those assets to their children rather than to their spouse at death.

But California law says otherwise.  The law is referred to as “omitted spouse” and it assumes that if a Trust or Will is made before marriage, and never changed to reflect the new marriage, then the new spouse gets his or her share of the estate.

This result can easily be avoided, however, by simply updating your estate plan to reflect the new marriage.  If the Trust and Will documents reflect an intent to disinherit the new spouse, then that overrides the law of omitted spouse. 

If avoiding the omitted spouse law is so easy, then why are attorneys called upon to litigate so many omitted spouse cases?  Primarily it’s because the law of omitted spouse is not widely known or even understood.  In fact, it’s usually a huge surprise to the children after a parent dies.  The children believe that since the spouse is not mentioned in the estate plan, he or she should receive nothing from the estate.  The children are outright stunned when they find out how omitted spouse automatically opens the door for the new spouse into the estate as a beneficiary.

The lesson is to remember that marriage raises many issues and rules that can have a significant effect on a person’s property rights (especially in California because we are a community property State).  Taking the time to review and update an estate plan either shortly before, or immediately after, marriage can help avoid future litigation.