ESTATE PLANNING

Published on: August 13, 2015

What Happens If a Spouse Gives Away Community Property Without the Other Spouse’s Consent?

California is a community property state. This means that unless a married couple specifies otherwise, property acquired during their marriage belongs to both spouses. (There are some exceptions, such as property inherited by one spouse from someone else.) Accordingly, when one spouse dies, his or her estate owns one-half of any community property belonging to the couple, while the surviving spouse retains ownership of the other half.

Married couples should discuss how to dispose of their community property as part of the estate planning process. It is important for one spouse not to unilaterally dispose of such property, especially when both spouses are still alive. In fact, California law expressly prohibits a spouse from giving away community property “for less than fair and reasonable value” without the written consent of the other spouse.

Failure to follow this rule can lead to complicated litigation after a spouse’s death. Here is a recent example which is discussed for informational purposes only and should not be considered an accurate statement of the law. This case arises from the aftermath of a tragic 2009 incident. A woman murdered her daughter and grandchildren before killing herself. The daughter was estranged from her husband at the time of her death. We previously discussed a California court decision from last August dealing with the daughter’s estate.

Published on: August 7, 2015

What Happens to My Business When I Die?

by Scott C. Soady

People often look at their estate plan in terms of purely personal assets-their house, bank accounts, etc. But your estate also includes any businesses you own or co-own. So what happens to these assets after you die? The answer to this question largely depends on how you choose to organize your business.

Sole Proprietorship

If you run a one-person business out of your house, it is likely a sole proprietorship. This means the business has no legal existence separate and apart from you. If you have a will, this means your sole proprietorship becomes the responsibility of your personal representative (executor), who may keep the business going for up to six months under California law. A probate judge may subsequently order the personal representative to continue the business for a longer period of time or wind it down.

Published on: August 5, 2015

What Happens When Your Spouse Undermines Your Estate Plan?

by Scott C. Soady

Even the best laid estate plan does not execute itself. It is essential that your chosen fiduciaries carry out your wishes. If they depart from your plan, even inadvertently, it can have repercussions that last years, and in some cases decades.

Failing to Follow the Will as Written

Here is a recent example. Actually, “recent” is misleading given the decedent in this case died over 25 years ago. The decedent was a married man with three children. He signed his first will shortly after his marriage in 1942. Forty years later, in 1982, he signed a new will, which he amended once in 1987.

Published on: August 4, 2015

California Supreme Court Says Judges May Consider Outside Evidence to Correct “Mistakes” in Wills

by Scott C. Soady

A last will and testament is supposed to express your wishes regarding the disposition of your estate. But sometimes a will is not clear about a testator’s wishes. If there is ambiguity in the language of a will, a California probate court may look to “extrinsic” evidence-facts or information outside the text of the will itself-in determining what the testator really meant.

That said, a court should not rewrite a person’s will to mean something it doesn’t actually say. For that reason, the California Supreme Court held in 1965 probate judges may not consider extrinsic evidence when interpreting an unambiguous will. In that case, Estate of Barnes, the testator’s will provided for the distribution of her estate to her husband, but he predeceased her. The will made no provision for such a scenario, and the Supreme Court said the probate court could not consider extrinsic evidence to ascertain the testator’s intent.

The Supreme Court Alters Course

Published on: June 26, 2015

Is a Promise to Leave Your Estate to Someone Legally Enforceable?

by Scott C. Soady

A probate court in New York recently addressed an unusual will contest. An 82-year-old Roman Catholic nun died in 2012, leaving a surprisingly large estate worth over $2 million, the product of a 1982 personal injury settlement. The sister signed a will in 1994 dividing her estate among her siblings, her congregation and various other Catholic charities.

The congregation actually contested the will. When the sister entered the congregation back in 1959, she signed a declaration agreeing to abide by the order’s requirements, which included a “vow of poverty.” To that end, the sister signed a will in 1979 leaving her entire estate to the congregation. This will, of course, predated the 1982 personal injury settlement and the subsequent 1994 will which, if valid, revoked the 1979 document.

Among other arguments, the congregation maintained admitting the 1994 will constituted a breach of contract, as it violated the sister’s 1959 vow of poverty. In June 2015, a New York probate judge denied the congregation’s motion for summary judgment on this issue. Without addressing the underlying breach of contract claim, the judge held under New York law, the purported 1959 contract did not affect the admissibility of the 1994 will.

Published on: June 25, 2015

Dealing With Break Ups in Your Estate Plan

by Scott C. Soady

Estate planning is often a snapshot of your life at a particular moment. The beneficiaries or agents named in your will and other estate planning documents reflects your relationships at that point in time. And as those relationships change, so should your estate planning.

Say you draft a will and name your best friend as executor. If you later have a falling out with her, it is probably a good idea to revise your will and name a new executor. Or suppose you leave a relative a large inheritance in your will. If you later learn that relative is irresponsible with money, you might decide it prudent to revoke your gift.

How Divorce Affects A Previously Signed Will

Published on: June 17, 2015

Distinguishing Marital and Separate Assets in Estate Planning

by Scott C. Soady

In making an estate plan, it is important to make a complete list of all assets you own. This is especially helpful to your future executor or trustee, who will be responsible for marshaling your assets after your death and distributing them as you direct. Confusion over the ownership of assets can lead to litigation, as this recent California case illustrates.

Estate of Quon

A married couple had three children. In 1968, the father purchased a 5% interest in a company whose sole asset is an apartment complex in Glendale, California. The company’s majority owner previously worked as the couple’s accountant. In 1972, the majority owner issued formal stock certificates to the husband alone, who made all the financial decisions for the couple.

Published on: June 15, 2015

Should I Write My Own Will?

by Scott C. Soady

A will is a formal document. California law requires a will be typewritten and signed by two competent witnesses. There are exceptions to this rule, but it is generally a bad idea to try and take advantage of them. A recent case from Arizona illustrates the potential pitfalls of trying to prepare your own will without the help of a qualified estate planning attorney.

Court Case in California

An Arizona woman died in 2012. The previous year, she began drafting a last will and testament on her computer. One of the beneficiaries named in the draft will was the woman’s natural granddaughter. The use of “natural” here is significant, because the granddaughter was actually adopted after her birth mother-the woman’s daughter-passed away. Grandmother and granddaughter later met and formed a close relationship.

Published on: June 12, 2015

Can One Estate Inherit from Another Estate?

by Scott C. Soady

One thing to consider when making a will or other estate planning arrangements is how your actions (or inactions) may affect other people’s estates. Consider a recent story from North Dakota. A Fargo dentist died after another man brutally attacked him with a hammer. It turned out the dentist’s father-in-law hired the killer. Both men were convicted of murder and sentenced to life in prison.

Local prosecutors said the father-in-law wanted to obtain custody of his three-year-old granddaughter. Several months before the murder, the dentist’s wife passed away. The dentist himself did not leave a will. Like California, in cases of intestacy North Dakota law requires dividing the deceased’s estate equally among his three surviving children. Yet nearly six years after his death, the estate remained open before a North Dakota probate court.

Why the unusually long delay? According to a local newspaper, the executor of the estate was still waiting to receive an inheritance from another estate, that of the deceased dentist’s father, who died before his son. The father’s estate remained pending before a probate court in Louisiana. The news reports did not elaborate on the reasons for the delay in the administration of the Louisiana estate.

Published on: April 10, 2015

“Undue Influence” Can Undo Your Estate Planning Intentions

by Scott C. Soady

Your deathbed is not the right place to make a will or begin the estate planning process. Individuals who are hospitalized or dying are often subject to the undue influence of others. California courts may invalidate a will or other estate planning document if there is substantial evidence of such undue influence.

In Re Estate of Slocum

Here is a recent example of undue influence from a California Court of Appeal decision. This case is discussed for informational purposes only and should not be treated as legal advice.