PROBATE

Published on: September 17, 2015

Why Is It Important to Make Your Estate Plan As Soon as Possible?

It is never advisable to wait until you are on your deathbed to finish (or start) your estate planning. This is especially true if there are potential complications with your estate, such as a pending bankruptcy, divorce or other issues that might affect the distribution of your property. By waiting until the last minute, your estate plan may lead to confusion-and litigation-among your heirs.

Bankruptcy, Last Minute Estate Planning Leads to Litigation

Here is a recent example from here in California. This case involves a man who suffered a stroke in July 2011 and died in the hospital a few weeks later. While hospitalized, the deceased signed a will and revocable trust, as well as a quitclaim deed purporting to transfer 22.5 acres of land to the trust, with his sister serving as trustee. The will, meanwhile, named the deceased’s daughter as executor. Complicating matters somewhat was the decedent’s Chapter 13 bankruptcy petition, which was still pending at the time of his death but later discharged at the daughter’s request.

Following the bankruptcy discharge, the decedent’s son recorded the quitclaim deed transferring the land to the trust. The daughter, acting as executor of the probate estate, asked the probate court to determine whether the deed was valid; if it was not, the land would pass to the estate and not the trust. She further argued the quitclaim deed did not accurately reflect her father’s wishes and conflicted with the terms of his bankruptcy discharge.

Published on: September 16, 2015

How Multiple Trusts May Complicate an Estate Plan

by Scott C. Soady

Although living trusts are a common estate planning tool, they can be quite complex. In fact, many estate plans include several trusts. Some of these trusts help with tax planning. Others keep a married couple’s individual and community property separate. It is therefore important when creating multiple trusts to understand what each one involves and the appropriate use of any assets contained therein.

Judge Cites Spouse for Mismanaging Community Property Trust

Here is a recent California case that illustrates the difficulties which can arise when administering multiple trusts as part of a single estate plan. The case revolves around a man who passed away in 2014. While married to his first wife, they executed an estate plan which included no fewer than five separate trusts. Things became more complicated after the wife died in 1999 and the husband remarried. This added two more trusts to the estate plan-one for the second wife’s separate property and another including the new couple’s community property.

By 2005, the husband was diagnosed with Alzheimer’s disease. The following year, the second wife told a California probate court her husband could no longer take care of himself or make financial decisions. At some point in 2007, the second wife took over as sole trustee of the couple’s community property trust. Wells Fargo assumed control of the husband’s other trusts.

Published on: August 17, 2015

Confusion Over Mother’s Estate Plan Leads to Siblings’ Court Battle

by Scott C. Soady

A mother of six adult children owned a home in San Luis Obispo County. She lived in the house with one of her sons and his wife. The couple, together with two of the other children, gave their mother money each month to help pay her mortgage.

In 2007, the mother signed a form will in the presence of an attorney. The will left the house to the son and daughter-in-law who lived with her. She simultaneously signed a deed transferring the house to the son while reserving a “life estate” for herself. This is a common estate planning device, but not usually favored given the problems that arise in this case. Basically, the mother became a “life tenant” of the house, and upon her death, the son would assume sole ownership.

Two years later, the relationship between the mother and her daughter-in-law deteriorated. The daughter-in-law told the mother she no longer owned the house and could be kicked out. At this point, three of the mother’s daughters arranged for her to meet with a new estate planning attorney. The daughters were aware of the 2007 will leaving the house to their brother, but not the deed conveying the property to him with a life estate for their mother. The mother told the new attorney she now wished to leave the house to one of her daughters. Accordingly, she signed a new will, together with a document giving her daughter power of attorney.

Published on: August 14, 2015

Late Actor’s Estate Prompts Litigation Between Sister, Biological Daughter

by Scott C. Soady

Many people avoid making a will because they assume they will die without leaving a probate estate. And while estate planning can help keep many assets out of probate, you should always prepare for unexpected claims that may arise after your death. For example, if your death is the result of medical malpractice or a defective product, a probate estate may be necessary to pursue civil litigation against the responsible parties. Recently a California appeals court addressed such a case involving the estate of a one-time Hollywood star whose death prompted an extended legal fight between his sister and a biological child he later acknowledged as his own.

In re Estate of Johnson

Troy Donahue was a well-known Hollywood actor during the 1950s and 1960s best remembered for co-starring in the 1959 film A Summer Place with Sandra Dee. Although married four times, Donahue died unmarried in 2001. In 1987, Donahue met a woman who claimed to be his biological daughter. She was adopted at birth in 1964. Donahue nevertheless accepted the daughter as his own and maintained a relationship with her and her children until his death.

Donahue, whose real name was Merle Johnson, died without a will. Donahue’s obituary reported the cause of death was a heart attack. But the daughter later received information suggesting the use of the prescription drug Vioxx caused her father’s death. In 2005, the daughter hired a lawyer to join a class action against Vioxx’s manufacturer. But this required opening a probate estate for her father in California.

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: 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 13, 2015

Can My Creditors Control My Estate?

by Scott C. Soady

Estate planning includes not just how to dispose of your assets, but also how to deal with any creditors you may still owe money to after your death. This includes lawsuits which may be pending or occur as a result of your death. In some cases, even if you leave no assets as part of your probate estate, an estate must still be opened in order to address such litigation.

Estate of DeMotto

Here is a recent example which is discussed only as an illustration and should not be taken as a correct statement of the law. A man died in 2013. The man was living with a woman-not his wife-at the time of his death. Their relationship began in 2001. Although the woman claimed he intended to provide for her in his estate planning, he did not name her as a beneficiary of his will or trust.

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: January 14, 2015

Dealing With People to Whom You Owe Money – After You Die

by Scott C. Soady

The administration of an estate includes not just distributing a person’s property, but collecting any debts owed to the deceased. This is why it is important to make a will naming an executor who can act in your name after you are gone. The executor stands in your place and can take any legal action to collect what is owed to you-and, by extension, the designated beneficiaries of your estate.

Here is an illustration from a recent California case of a situation where an executor must act to protect a deceased individual’s property interests. This case is discussed for information only and should not be taken as a statement of the law in California. The deceased in this case passed away in 2010. Sometime prior to his death, he and his wife divorced. In the course of divorce proceedings, the couple’s marital residence was sold. The husband’s share was deposited into a client trust account maintained by his divorce attorney. For some reason, the attorney never released the funds to his client.

After the man’s death, his executor sought payment of the funds, totaling more than $300,000. The executor obtained a court order directing the attorney to pay over the funds and provide a full accounting of his trust account. The attorney did not comply. Instead, he filed for bankruptcy.

Published on: December 14, 2014

Dealing With Real Property During Probate

by Scott C. Soady

It is common practice in estate planning for an individual to make specific gifts of property. Perhaps you wish to leave your house to your children or a particular family heirloom to a sibling. But what happens if the property described in your will is no longer part of your estate at the time of your death? In such cases, the gift is moot; your executor cannot distribute property that is not there.

A more complicated question may arise if your will specifies a distribution of property that conflicts with actions taken during your lifetime. A Connecticut court recently addressed such a situation. A woman left a piece of real estate in her will to a local church. However, shortly before her death, she entered into a contract to sell the property to another person. The woman’s executor wished to proceed with the sale. The church sued to enforce the gift made in the will.

A Connecticut appeals court ultimately ruled for the church. Although the woman signed a contract to sell the house, the terms of the agreement were not fulfilled by the time of her death. Specifically, the putative buyer failed to secure mortgage financing. This meant the woman still owned the property on the day of her death, and Connecticut law required it be distributed in accordance with the terms of her will. The executor could only sell the property with the consent of the church, which was the designated beneficiary.