NEWS AND COMMENTARY

Published on: December 5, 2013

First or Second Wife? How Divorce and Remarriage Can Affect Estate Planning

Divorce complicates estate planning, especially when one or both former spouses decide to re-marry. If questions over community property linger from the first marriage, they can spill over into probate court should either party die. A recent case from the California Court of Appeal, discussed here for informational purposes only, shows just how complicated remarriage can be with respect to probate and estate planning.

Burwell v. Burwell

Gary Burwell purchased a term life insurance policy in 1996 on his own life, naming his then-wife, Becky Burwell, as the beneficiary. In 2004, Becky Burwell sued her husband for divorce. In serving her husband, a number of restraining orders took effect, including one preventing Gary Burwell from changing his life insurance policy or disposing of any property via will or trust. These orders were meant to conserve the Burwells’ community property until their divorce became final.

Published on: November 26, 2013

How a Joint Tenancy Can Affect Your Estate

by Scott C. Soady

Joint tenancy is a form of property ownership that often factors into estate planning. If two people own a piece of real estate, for example, they can either be joint tenants or tenants in common. Under the latter, a tenancy in common, each person separately owns his or her share of the property. Thus, when one co-owner dies, his share passes through his estate like any other property. But under a joint tenancy, when a co-owner dies, his or her share simply ceases to exist; the surviving co-owner (or co-owners) acquire full title immediately upon the deceased co-owner’s death. Nothing passes through a will, trust or probate process.

A joint tenancy requires four conditions, known as the “four unities”: (1) the co-owners acquire the property at the same time; (2) the co-owners share identical same title to the property; (3) each co-owner has an identical share of the property; and (4) the co-owners have an equal right to possess the property. If any of these conditions are not met, or cease to exist, there is no longer a joint tenancy, but a tenancy in common.

Recently, the California Court of Appeals addressed a dispute over a joint tenancy that was dissolved shortly before one of the co-tenants died. The surviving co-tenant argued the joint tenancy remained in force. The probate court and the Court of Appeals disagreed. The case is discussed here for informational purposes only.

Published on: November 22, 2013

NFL Patriarch’s Death Highlights Importance of Estate Tax Planning

by Scott C. Soady

K.S. “Bud” Adams, Jr., built his fortune in the Texas oil business during the 1950s. In 1959, Adams tried twice to get a National Football League team for his hometown of Houston. When those efforts failed, Adams and fellow Texas oilman Lamar Hunt joined forces to create the American Football League. Adams ran the new Houston Oilers franchise. The AFL and NFL fiercely competed for players and fans during the 1960s, only to merge in 1970, with Hunt’s Oilers entering the new NFL.

By the 1990s, Adams had become dissatisfied with his team’s stadium, the Houston Astrodome. When Houston officials refused to fund a new venue, Adams moved the team to Nashville, Tennessee, where state and city leaders were all too happy to provide a state-of-the-art facility. Now known as the Tennessee Titans, Adams turned his original investment of $25,000 back in 1959 into a franchise valued at over $1 billion.

A Costly Move from Texas to Tennessee Adams died on October 21 at the age of 90. He was survived by two children and seven grandchildren. According to David Klimer of The Tennesseean, “Adams had the foresight – and wealth – to establish a succession plan that keeps the NFL team in the family.” Klimer said Adams set aside sufficient funds to pay what will likely be an enormous federal and Tennessee estate tax bill on the appraised value of the Titans franchise.

Published on: November 15, 2013

Providing for a Disabled Child Through a Special Needs Trust

by Scott C. Soady

Special needs trusts are an estate planning device that allows a person to leave part of his or her estate to a disabled beneficiary without affecting that beneficiary’s government benefits. For example, let’s say you have an adult child who is permanently disabled and receives Social Security and California Medicaid (Medi-Cal) benefits. Leaving that child a large inheritance might disqualify them from continuing to receive those benefits. And if the child’s disability renders them unable to handle their own finances, any inheritance you leave them may simply be squandered.

A special needs trust addresses this situation by distributing assets from your probate estate (or existing living trust) to a trustee, who could then make payments for the benefit of the disabled child-but not to the child directly, as that would constitute income for Social Security and Medi-Cal purposes. The special needs trust would continue for the duration of the child’s lifetime. Like most trusts created as part of an estate plan, the special needs trust would become irrevocable upon your death, meaning your child or the successor trustee could not unilaterally modify or revoke it.

A special needs trust is usually the best way to provide for a disabled child in your estate plan. If you think a more informal arrangement might suffice, consider a recent decision from the California Court of Appeals. In this case, which is described here for informational purposes only, a father decided to leave his entire estate to one daughter with only an oral promise she would provide for her disabled sister after his death.

Published on: November 8, 2013

Making a Federal Case Out of Your Estate

by Scott C. Soady

Estate planning is intended to prevent disputes from arising after your death. Of course, good intentions aren’t always enough. Even the most carefully planned estate may be subject to fighting among aggrieved relatives or other would-be heirs. In some cases, these fights can tie up the courts (and your estate) for many years.

For the most part, when lawsuits do arise over a trust or estate, things are handled at the state level. In California, the superior courts act as probate courts to resolve matters like will contests or petitions to remove a trustee. The decisions from these courts may then be appealed to the California Court of Appeals, and, in rare instances, to the California Supreme Court.

Federal courts generally stay away from probate matters. As far back as 1789, when Congress created the federal courts, the probate of estates was considered a purely state affair. But this probate exception to federal jurisdiction is not without limits. In 2006, the U.S. Supreme Court said federal courts could hear cases that touched upon probate matters if the underlying dispute involved a subject (such as tort law) that was normally subject to federal jurisdiction.

Published on: October 23, 2013

When Does an Advance Directive for Healthcare Take Effect?

by Scott C. Soady

An advance directive provides your physician and other healthcare providers with instructions regarding your care in the event you are no longer able to make your wishes known. An advance directive also enables you to appoint an agent to make healthcare decisions on your behalf. It’s important you provide clear instructions to your agent so that he or she does not act in a manner contrary to your wishes.

Even healthcare providers can misunderstand the scope of an advance directive. A recent California Court of Appeals decision addressed such a case. Please note, this case is discussed here for informational purposes only.

Goldman v. Sunbridge Healthcare, LLC

Published on: October 4, 2013

“She’s Just Like a Daughter to Me!” But Is That How a Probate Court Will See It?

by Scott C. Soady

Under California probate law, adopted children are treated no differently than biological children. So, for example, if a person dies without a will, his adopted and natural children are afforded the same status as heirs under California’s intestacy law. But that presumes the adopted children are, in fact, adopted in accordance with the law of California or another jurisdiction. What about children who are informally-i.e., not legally-adopted?

Many common law jurisdictions recognize “equitable adoption.” This means that if a person fulfills the role of a child, and the “parent” reciprocates, the courts may recognize a contractual relationship exists for the purposes of establishing intestate succession. As recognized by California courts, equitable adoption establishes the child’s right to receive property from the parent if he or she dies without a will.

It’s important to note that equitable adoption has no affect on estates where there is a valid will. Nor does it affect trusts. The only application of equitable adoption is to estates subject to intestacy law.

Published on: October 3, 2013

Changes to a Living Trust Leads to Breach of Contract Claims

by Scott C. Soady

Estate planning is supposed to prevent arguments among family members after you pass away. But even the best-laid plans are subject to changes in family relationships. One recent California appeals court decision highlights what can go wrong when a deteriorating marriage intersects with inheritance.

Please note this case is described here for informational purposes only and should not be construed as legal advice. The subject of this case is a home in Alameda County owned by the late Henry Rodriguez. In the late 1990s, Rodriguez asked his niece, Mirian Duncan, and her husband Edward to move into his home. Rodriguez had recently underwent heart surgery. He wanted the Duncans to help care for him and his home. In exchange, he promised to give them the house after he died this is known as a care contract.

To that end, Rodriguez executed a revocable living trust in 1998. Rodriguez transferred his house into the trust and directed that upon his death, the property would go to the Duncans “equally, as their joint and/or marital property.” The Duncans held up their part of the deal, moving into the home and caring for Rodriguez until his death in 2007.

Published on: September 30, 2013

California Appeals Court Upholds Ex-Partner’s Right to Property Under Trust

by Scott C. Soady

Estate planning for unmarried couples in a long-term relationship presents a unique set of legal challenges. California does not recognize “common law” marriages, but in 1976, the state’s Supreme Court held that unmarried couples could enter into binding legal contracts (either express or implied) allowing them to “pool their earnings and to hold all property acquired during the relationship in accord with the law governing community property.” These so-called Marvin agreements-named for actor Lee Marvin, the defendant in the 1976 case-allow courts to look at the overall nature of a non-marital relationship and grant equitable relief in certain cases.

Marvin agreements can also affect California estate planning. Recently, the California Court of Appeal opined for a second time in a dispute between a former unmarried couple over the fate of a living trust they established to hold their common home. The case is discussed here for illustrative purposes only and should not be construed as a binding statement of California law.

An Ex-Partner Still Owes a Fiduciary Duty

Published on: September 27, 2013

Unsolved Murder Prompts Litigation Over Life Insurance Proceeds

by Scott C. Soady

A four-year-old unsolved murder in the Harbor Gateway neighborhood of Los Angeles created a legal headache for the victim’s life insurance company. The victim’s husband was the only named beneficiary of her life insurance policy, but he was also an active suspect in her murder. Since the victim left no will or other instructions regarding her affairs, the insurance company was forced to ask the courts to intervene.

Frank and Rosamaria Rees each held life insurance policies for $150,000 from Farmers New World Life Insurance Company. Rosamaria Rees’ policy insured her life and named her husband as sole primary beneficiary. She did not name any contingent beneficiaries. If Frank Rees predeceased his wife, then her life insurance proceeds would be payable to her estate.

On September 18, 2009, Rosamaria Rees was walking to her car parked on the street outside of her home. According to the Los Angeles Police Department, “an unknown suspect or suspects approached on foot and shot her,” killing her instantly. The LAPD has never made an arrest in the case.