Estate planning requires you to appoint one or more people to act as your agent or fiduciary under a number of conditions. A power of attorney designates an agent to act in your name while you’re still alive. If you create a revocable trust, a trustee manages those properties you choose to transfer into the trust. And after you’ve passed away, a personal representative or executor supervises your probate estate.
You may have cause to change the appointments and designations of these agents during your lifetime. When, as is often the case, your intended agents are family members, bad blood can lead to significant conflict that may be exasperated by your death. A recent California case illustrates this. Please note this example is provided purely for informational purposes and should not be construed as a binding statement of California law.
Sisters Fight Over Fate of Their Mother’s House
The case revolved around a house in Ventura County formerly owned by the late Mary Schwarz. Schwarz had two daughters, Paulette Kimball and Danita Christie. In 1991, Schwarz and her husband created a revocable living trust and signed a deed transferring their home into said trust. Schwarz and her husband served as trustees during their lifetimes, with their daughters as successor trustees.
Fourteen years later Scwarz, apparently a widow by this point, amended the 1991 trust to name Christie as sole successor trustee. Schwarz also signed a power of attorney authorizing Christie to manage her financial affairs. Christie also lived in the Ventura County home.
In 2007, Schwarz decided to live with her other daughter, Kimball, in Montana. Christie continued to act as Schwarz’s agent under the 2005 power of attorney and she remained successor trustee under the amended trust. But by mid-2007, Schwarz had decided to alter her estate planning. She revoked the power of attorney and signed a new document naming Kimball as her agent with Christie as the successor agent.
Schwarz told family members she was unhappy with the way Christie had managed her finances. Christie believed her sister and brother-in-law were exercising undue influence on her mother. Although her power of attorney had already been revoked, Christie nonetheless withdrew over $130,000 from her mother’s bank account.
Kimball then advised Schwarz to consult with a local estate planning attorney in Montana. The attorney met privately with Schwarz and, at her request, drafted a new will. The attorney also advised Schwarz to remove her Ventura County property from the trust. The attorney believed Schwarz would benefit from selling the property, which would make her eligible for Medicaid.
As the grantor trustee of a revocable trust, Schwarz had every right under California law to remove the property and re-title it in her name. She signed a deed to that effect in late 2007. Schwarz died in December 2008.
Challenging a Person’s Mental Capacity
Kimball filed a petition to probate her mother’s 2007 will in Ventura County probate court. Christie replied by challenging the deeds transferring her mother’s home out of her trust. She argued her mother lacked mental capacity when she signed the deeds and, as previously noted, she maintained Kimball and her husband exercised undue influence. Neither the trial court nor the California Court of Appeals found any merit to Kimball’s arguments.
As the Court of Appeals noted in an unpublished June 2013 opinion, California law presumes a person always has the capacity to make a will, deed or other estate planning document. It’s not enough to show a person is elderly or suffers from forgetfulness. Nor does it matter if a person’s condition deteriorates after signing the document in question. All the courts look to is the person’s capacity at the moment she signed the document.
Christie failed to present any convincing evidence to the trial court in this regard. Nor did she prove her sister and brother-in-law exercised undue influence. The court afforded significant weight to the fact Schwarz consulted with an estate planning attorney, who in turn testified her client appeared competent and possessed the capacity to sign a new will and deed.
And if there’s an overriding lesson from this case, it’s that you should always work with an experienced San Diego estate planning and probate attorney before making any changes to your estate plan. Acting alone or only in concert with family members may lead to significant problems later. If you have any questions, please contact the Law Office of Scott C. Soady in San Diego at 1-877-435-7411.