Jim Birnberg's Annual Updates

By John T. Anderson, Chairman
Certified Specialist in Estate Planning, Trust
and Probate Law by the State Bar of California,
Board of Legal Specialization

Jim Birnberg’s Annual Updates

Jim Birnberg gave us his annual updates on California Legislation affecting Probate, Estates, Trusts, Guardianships and Conservatorships for 2011. These take effect January 1, 2012.

There wasn’t as much this year as a result of all the time spent on the State Budget. Still, there are a number of things to be aware of.

An item from last year to be clear on is the Certificate of Independent Review. What is clear is that if you are the Testator/Settlor’s attorney and not the caregiver’s attorney, you may, now, if the facts support it, execute the Certificate as the independent attorney.

What is also clear, but we would like to see changed, is that all Certificates of Independent Review that were not done under the new law probably need to be re-done due to the language of the new law, since P.C. § 21392 (a) says the law applies to all instruments that become irrevocable on or after January 1, 2011 or, if revocable or amendable but the person is incapacitated on or after January 1, 2011. See P.C. § 21370, § 21380, § 21384.  

As to new legislation:

Jim had a 17 page handout. I am going to highlight just a few matters from that:

1.    SB 507 (DeSauinier) has to do with filing requirements with the Assessor’s office. It extends the 45 day date for filing without penalty to 90 days for PCOR and BOE 100-b forms (entities). Increases the cap on penalties for non-willful failures to file to $5,000 (if the property is eligible for the homeowner’s property tax exemption or a $20,000 cap for all other property).

2.    SB 599 (Kehoe) requires a clear explanation and prominent disclosure of payment of insurance benefits. So you have a choice and don’t just receive a checkbook to write from on life insurance benefits.

3.    SB 495 (Fuller) requires that the State Controller’s office hold on to property with no apparent commercial value for not less than seven years (up from 18 months).

4.    AB 1305 (Huber) increases the aggregate amount of assets otherwise subject to probate which can be obtained under Affidavit (P.C. 13100) from $100,00 to $150,000, regardless of the date of death. The value of real property under 13200 is increased from $20,000 to $50,000.

5.    SB 78, among, other things, relieves counties from complying with the requirement of laws enacted the past couple of years related to investigations in Conservatorships and Guardianships, until monetary appropriations are made to pay for them.

6.    AB 458 (Atkins) affects Guardianships and prohibits the appointment of a minor’s parent as guardian in certain situations. More particularly, it prohibits forum shopping in multi-jurisdictional matters. Judge Paul has experience in these matters with his background in Family Law. It came in handy recently with a man in his court insisting Judge Paul grant his Guardianship petition and give him immediate custody of a minor who was out-of-state in a youth facility. At least Nebraska and Kansas (if my memory is correct) had contact with the case. Judge Paul knew to contact the other judges. Between them, more of the facts were available to all of them than would have been available to any one of them, and they could agree on who/where jurisdiction was (it was not in California).

7.    SB 647 (Committee on Judiciary) adds to the list of persons who have the right to contest disposition of the remains of a decedent.

8.    AB 354 (Silva) restricts the right of an elder abuser to share in a portion of recovery of assets involved in the abuse.

9.    AB 1082 (Gatto) makes some changes to the law pertaining to Powers of Attorney including sections pertaining to the modification, revocation or termination of a Trust in whole or in part, only as provided in the Trust document; as well as to reject, disclaim, etc. a share in an estate, trust or other fund.

This is just a summary of a greater list of changes. See the complete list and better yet, read the California Legislative Analyst’s review; and, best yet, read the code.


                _________________________________
                John T. Anderson, Section Chair
                Certified Specialist in Probate, Trust and  Estate Planning
                By the California State Bar Board of Legal Specialization

Copyright © 2011 by John T. Anderson
All articles by John T. Anderson may be copied for personal use, only. All articles or outlines from others may be used only with their personal authorization. Any approval is for personal use, only, and for non-commercial purposes.
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The Ethics of Pro Bono

The Ethics of Pro Bono
Toby Rothschild, General Counsel
Legal Aid Foundation, LA

Direct delivery of legal services without expectation of compensation.  Indigent/non-profit.  Increase of services to indigent.  Serving the poor or agencies which serve the poor.

B&P Code §6068: Duties of Attorney.

Some duties, we know, such as (e) Maintain confidence; but do you know (h) Never to reject, for any consideration personal to himself or herself, the cause of the defenseless or the oppressed.

The Board of Governors for the State Bar of California 06/22/2002 urged at least 50 hours per year of Pro Bono by each lawyer with no expectation of compensation.

16.1% of the state is below the poverty level (less than $22,113 per year for a family of 4).  30% or more of children are below the poverty level.

Rule 6.1 (07/24/2010 and 09/22/2010) is still awaiting Supreme Court approval.

Ways to serve:

Through organized Pro Bono programs:
1.    They screen clients
2.    They can provide information/support.
3.    They may have malpractice insurance.
4.    Limited scope/unbundling.  You may be able to take a portion of the case without handling the entire case.

SoCalProBono.org provides a broad outline of programs.

Rules of Professional Conduce are the same.  You cannot put paying clients first.  Make sure to avoid conflicts of interest.

Rule 1-650 carves-out an exception regarding a conflict of interest when assisting clinics.  The conflict doesn’t exist unless you are personally aware of it when advising in a short-term matter while serving a qualified entity.

A normal Attorney/Client Agreement may not be enough.  Identify the Scope of Representation.  Cover the outcome (what is possible) and duration.  No limit on liability is permitted.  Clearly spell-out any limitation on the scope or duration of the representation.  There are forms in Court Rules and you must advise the court and opposing counsel of any limit on representation.

Nichols v. Keller.  Keller advised Nichols on a Workers Compensation case.  It later came-up that there may have been a third party liability case.  As a lawyer, this case said, you have better knowledge and should have known and advised the client even if you wouldn’t handle that aspect of the case and, in fact had a contract limiting your services to Worker’s Comp.  You can expressly exclude handling any other issues, but you must advise the client of the other issues or claims.  Nichols sued and recovered against Keller.

You must be able to communicate.  A friend, family member, or child is often not acceptable.  A person competent in the language the client speaks from your office is better and possibly required.

Get alternate contacts so you can reach the client.

Withdrawing from a Pro Bono case is the same as in any case.  Your name is on pleadings or papers.  If you received the case from an organization, contact them; but that does not terminate the case for you.  The rules are the same as any other case.

                _________________________________
                John T. Anderson, Section Chair
                Certified Specialist in Probate, Trust and  Estate Planning
                By the California State Bar Board of Legal Specialization

Copyright © 2011 by John T. Anderson

All articles by John T. Anderson may be copied for personal use, only. All articles or outlines from others may be used only with their personal authorization. Any approval is for personal use, only, and for non-commercial purposes.

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Release of Trustee Liability

July 15, 2011

Release of Trustee Liability

Donald G. Bellows (“Donald”) appealed from a trial court’s denial of his motion to compel further accounting of his deceased mother’s trust by his brother (“Frederick”) who was Trustee.  Bellows v. Bellows (06/09/2011) A128875.  Initially, Donald filed a Petition in Probate Court under Probate Code §17200 seeking an accounting.  The court ordered an accounting and distribution of ½ of the Trust assets to Donald within 10 days.  A check was sent, which Donald’s attorney rejected because part of the itemized deductions was $13,000 in fees to Frederick’s attorney and a claim that $12,000 was not accounted for.

Frederick’s attorney responded with a new check which included approximately half of the fees, a denial that any other funds existed, and a provision that this was “provided there is no petition forthcoming . . . .”  The check noted that he is “authorized to negotiate the check when he has signed and returned the enclosed receipt of final distribution.

Donald cashed the check, but did not sign approving the accounting; and later filed a motion to compel compliance with the court’s earlier order and for a complete accounting and documentation.  The Trial Court found that by negotiating the check there was an “Accord and Satisfaction.”  Donald, in essence, had agreed to the terms on the check.

The Appellate Court discussed Commercial Code §3311 regarding an accord and satisfaction and then reviewed Probate Code §16004.5(a) which prohibits the trustee from requiring “a beneficiary to relieve the trustee of liabilities as a condition of making distribution of payment . . . if the distribution of payment is required by the trust instrument.”

Important to note, however, is that Subdivision (b) adds that “this section may not be construed as affecting the trustee’s right to: . . . (2) Seek a voluntary release or discharge of a trustee’s liability from the beneficiary. . . . (4)Withhold any portion of an otherwise required distribution that is reasonably in dispute. (5) Seek court or beneficiary approval of an accounting of trust activities.

The Appellate Court held that accord and satisfaction did not apply because it was not “for a sum to settle an unliquidated claim.”  The fees may have been questioned, but the distribution amount was based upon Frederick’s own accounting.

The Appellate Court found that (b)(2) and (b)(5) of 16004.5 did not apply because they allow for a voluntary release or discharge.  A release or discharge as a condition for a payment the beneficiary is entitled to “is in no sense voluntary” and “would render subdivision (a) entirely meaningless.”

So, you cannot require a release of liability before distribution of undisputed distributions; but, you can seek (a) voluntary approval of an accounting or (b) court approval of an accounting.

_________________________________
John T. Anderson, Section Chair
Certified Specialist in Probate, Trust and Estate Planning
By the California State Bar Board of Legal Specialization

Copyright © 2011 by John T. Anderson

All articles by John T. Anderson may be copied for personal use, only. All articles or outlines from others may be used only with their personal authorization. Any approval is for personal use, only, and for non-commercial purposes.

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Determining Testamentary Capacity

June 17, 2011

Determining Testamentary Capacity

The June 14, 2011 decision in the Los Angeles case of Stephen Andersen v. Pauline Hunt, B221077, certified in part for publication, clarifies the standard for determining testamentary capacity regarding establishment of Living Trusts and amendments.

Wayne and his wife established a Living Trust.  Wife died, Wayne amended the Trust several times, and established several joint accounts.  The amendments made friend Pauline the Successor Trustee after Wayne and a substantial beneficiary along with Wayne and wife’s two children, and a grandchild.  The joint accounts were between Wayne and Pauline.  Wayne had two substantial strokes during the period of time when the amendments were done. All the amendments were done by the drafter of the original Trust.

There were numerous issues that warrant a reading of the 44 page decision.  The certified portion pertains to Wayne’s capacity to execute the Trust amendments and whether the standard of Contractual Capacity contained in Probate Code Sections 810 to 812 applied or the Testamentary Capacity set forth in Probate Code Section 6100.5.  There was a great deal of mental health expert testimony.  A summary of much of it is quoted or summarized in the appellate decision.

In its Oral Statement of Decision the Trial Court appeared to support a finding that the lower Testamentary Capacity standard applied and the four amendments were valid.  In its later Tentative Statement of Decision and Judgment the Trial Court reversed direction and found that Wayne lacked the requisite capacity to execute the amendments.  Finding that execution of a Trust or Trust amendment is “more akin to entering into a contract” and thus Probate Code Sections 810 to 812 apply regarding capacity to make a variety of decisions including execution of a Trust or amendment.

There is a great deal of discussion in the decision regarding the level of capacity each of the sections requires. Numerous cases are cited.  The court refers to the “48 trial exhibits relating to Wayne Andersen’s diminished capacity due to dementia and/or alcoholism.”  The appellate court agrees these exhibits demonstrate Wayne’s diminished capacity.  They just don’t agree it shows a lack of testamentary capacity at the relevant times.

Section 810 creates a rebuttable presumption of capacity to make decisions.  This presumption affects the burden of proof.  A physical or mental disorder may not render the person incapable.  One or more mental deficits so substantial that the person would “be deemed to lack the legal capacity to perform a specific act....” as opposed to diagnosis of a particular mental or physical disorder.

But 6100.5 “provides that a person is not mentally competent to make a Will if at the time of making the Will, either of the following is true...”

It goes on to set forth that the person must have capacity to understand the testamentary acts; understand and recollect the nature and situation of his/her property; and, remember and understand his/her relation to living descendants, spouse, parents, and those affected by the Will.

Also, that the person not be suffering from a mental disorder, delusions, or hallucinations except for which they would not devise their property as they did.

The appellate court cites numerous cases which restrict findings of lack of testamentary intent.  “It has been held over and over in this state that old age, feebleness, forgetfulness, filthy personal habits, personal eccentricities, failure to recognize friends or relatives, physical disability, absent mindedness and mental confusion do not furnish grounds for holding a Testator lacked testamentary capacity.  Estate of Self, (1948) 84 Cal App 2d 46.

So, you think the court is going to clarify by ruling that Sections 810 et seq. or 6100.5 apply.  But it doesn’t quite do that.

The Court says “More complicated decisions and transactions thus would appear to require greater mental function; less complicated decisions and transactions would appear to require less mental function.”

“When determining whether a Trustor had capacity to execute a Trust amendment that, in its content and complexity, closely resembles a Will or Codicil, we believe it is appropriate to look to Section 6100.5 to determine when a person’s mental deficits are sufficient to allow a court to conclude that the person lacks the ability ‘to understand and appreciate the consequences of his or her actions with regard to the type of act or decision in question.’” (§811, sub d (b)).  So, 6100.5 doesn’t directly apply but is made applicable through 811 “to Trusts or Trust amendments that are analogous to Wills or Codicils.”

In the instance case the Appellate Court ruled that the Trust amendments were “indistinguishable” from Wills or Codicils and thus 6100.5 would apply and the amendments were valid.  The trial court, it said, erred in using the “different, higher standard of mental functioning.”

So, it would appear that in a contest of a Trust or amendments, (and, maybe with a complex Will - such as one with a Testamentary Trust) where the issue is capacity of the Testator or Settlor/Trustor, one hurdle will be to convince the court of the basic nature of the document being simple like a Will or complex like a sophisticated Trust, depending on your client’s position.  That determination will dictate which level of capacity will apply.

_________________________________

John T. Anderson, Section Chair

Certified Specialist in Probate, Trust and Estate Planning

By the California State Bar Board of Legal Specialization

Copyright © 2011 by John T. Anderson

All articles by John T. Anderson may be copied for personal use, only. All articles or outlines from others may be used only with their personal authorization. Any approval is for personal use, only, and for non-commercial purposes.

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“BEWARE HOW TITLE IS TAKEN . . .”

June 01, 2011

“BEWARE HOW TITLE IS TAKEN . . .”

. . . a quote from Roy Paul, Superior Court Judge after reading In re Marriage of Frankie and Randy Valli 5/18/11, B222435 (hereafter “Valli”).  How many times would you have to say that for people to get the point?  We have had numerous cases the past 5 years regarding the importance of making clear the intent to transmute the character of an asset if the intent of the parties is to change the character from community property to separate property or from separate property to community property.  Something more than just the blanket statement of how the asset was to vest was necessary to make the change clearly intentional and thus enforceable.

In Valli, Frankie (“Husband”) is having some heart problems and determines to purchase life insurance for the agreed purpose of making certain that Randy (“Wife”) and three children are taken care of in the event of husband’s death.  Husband and his manager informed Wife of the plan to purchase the $3.75 million policy on husband’s life with Wife as owner and beneficiary.  That was the testimony at trial.

At the time of the divorce, the policy had a cash surrender value of $365,032.  The trial court found that the policy was purchased during the marriage and the premiums were paid during the marriage.  Family Code §770 (a) defines separate property, §760 defines community property and gives the general presumption of community property.

Evidence Code §662 provides that “[t]he owner of the legal title to property is presumed to be the owner of the full beneficial title.  This presumption may be rebutted only by clear and convincing proof.”  This title presumption is pursuant to a public policy favoring stability of titles to property (In re Marriage of Fossum (2011) 192 Cal.App.4th 3336).  The specific presumption of Evidence Code §662 trumps the general presumption of Family Code §760.

“. . . the mere fact that property was acquired during marriage does not . . . rebut the form of title presumption; to the contrary, the act of taking title to property in the name of one spouse during marriage with the consent of the other spouse effectively removes that property from the general community property presumption.  In that situation, the property is presumably the separate property of the spouse in whose name title is taken.”  (In re Marriage of Brooks & Robinson (2008) 169 Cal.App.4th 176).

The court distinguished the “transmutation” cases as applying to situations where the vesting of an asset is changed (Husband and Wife own an asset and put it into just one of their names) from the situations, as in the instant case, where community property funds were used to acquire a new asset, in Wife’s name and Evidence Code §662 will apply absent clear and convincing evidence to the contrary.

Bottom line, in years past it was good estate planning to “cross-own” life insurance.  Wife owned the policy on Husband and paid premiums from her account; and Husband owned the policy of Wife’s life and paid the premiums from his account.  So people did this intentionally for estate planning and estate tax purposed.  YOU CANNOT INTEND SOMETHING FOR ONE PURPOSE AND THEN DENY IT FOR ANOTHER.  If you do something for estate planning, you cannot avoid it in a divorce.

Frankie is hung by his own petard.  As Judge Paul advised, “Beware of how title is taken.”

_________________________________

John T. Anderson, Section Chair

Certified Specialist in Probate, Trust and Estate Planning

By the California State Bar Board of Legal Specialization

Copyright © 2011 by John T. Anderson

All articles by John T. Anderson may be copied for personal use, only. All articles or outlines from others may be used only with their personal authorization. Any approval is for personal use, only, and for non-commercial purposes.

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Shapiro v. USA: Cohabitant Rights

May 31, 2011

Shapiro v. USA: Cohabitant Rights

The Federal Court has, once again, gotten into the area of State Family Law and Estates when the U. S. Court of Appeals for the 9^th District ruled on the application of “Marvin-type” facts (Marvin v. Marvin, 557 P.2d 106) that facts on cohabitation could support a deduction on decedent’s estate tax return.

In Estate of Bernard Shapiro et al v. USA, No. 08-17491 DC No 2:06-cv-01149-RCJ-LRL, the couple had set-up housekeeping without the benefit of marriage approximately one year after they started dating.  Twenty years later, girlfriend discovered boyfriend had another woman friend and sued him in Nevada State Court for all the Marvin causes of action.  While the matter was pending in State Court, boyfriend died.  Ultimately, the estate settled with girlfriend.

In filing the estate tax return for boyfriend, estate took a deduction excess of the ultimate settlement, for the amount the claim exposed them to.  IRS rejected the deduction.  The Tax Court agreed with IRS that, looking at Nevada State Law (which is similar to California’s), girlfriend’s contributions of “22 years of cooking, cleaning, and other homemaking services did not constitute sufficient consideration to allow the estate to deduct her claim against it.”

The Federal Court of Appeals reversed the decision, finding widespread “acceptance of non-marital cohabitation” and an “expansion of co-habitant’s legal rights.”  Implied contracts “manifested by conduct” are enforceable.

The “type of consideration necessary to support a contractual agreement between co-habitants” is not the only element to look at.  The parties conduct determines “whether their actions support the conclusion that they intend to share their property as though married.”

Although the Nevada Supreme Court has not addressed the sufficiency of homemaking services as adequate consideration for a contract, California has found it to be sufficient [Chiba v. Greenwall (2007) 67 Cal.Rptr.3d 86].  So, the palimony claim was valid under Nevada law. The value of the claim is subject to factual determination.                          

_________________________________

John T. Anderson, Section Chair

Certified Specialist in Probate, Trust and Estate Planning

By the California State Bar Board of Legal Specialization

Copyright © 2011 by John T. Anderson

All articles by John T. Anderson may be copied for personal use, only. All articles or outlines from others may be used only with their personal authorization. Any approval is for personal use, only, and for non-commercial purposes.

File Location: C:\Users\John's LT\Documents\Work\Website\Articles for Website\Word Version of Articles From Lisa\2011.05.31  Shapiro v. USA cohabitant rights.docx