Trusts & Estates Law Blog

The Split Roll Initiative on the November 2020 Ballot

Posted in News

In 1978 California voters approved Proposition 13, a landmark measure that set—and has kept—property taxes at a low rate. This November’s ballot includes a proposition known as the “split roll” initiative that would make significant changes to Proposition 13.

Currently, California treats commercial and residential properties almost identically when it comes to property taxes. A homeowner and a business owner pay taxes on the value of the property based on its fair market value when it was acquired, with increases in property taxes limited to a maximum of 2% per year. This keeps property taxes low for both homeowners and businesses, especially for those who bought property a long time ago in now-pricey regions like the Bay Area. The Split Roll initiative proposes that California treat commercial property differently than residential properties. Under the proposal, businesses would have their properties reassessed to market values every three years.  Nothing would change for residential properties and the ballot measure preserves fundamental Prop 13 protections for homeowners and residential rental properties.

For many cities, the distinctions between residential and commercial can become blurred, especially with mixed-use properties such as buildings that have retail on the first floor and residential units on other floors.  For these blended properties, the Split Roll initiative ensures that only the portion of the property that is used for commercial and industrial purposes would be subject to reassessment.  The measure even provides an exclusion from reassessment for the commercial share of mixed-use property provided seventy-five percent (75%) or more of the property, by square footage or value, is residential.

Backers of the initiative, led by a coalition of civil rights groups and community organizations, argue that if the Split Roll initiative passes, the state will have more funding for cities, counties, special districts, schools, and community colleges. Those who oppose the Split Roll initiative argue that the measure would have indirect effects on the state’s economy by increasing taxes paid by many businesses, thereby increasing their costs of operating in California relative to other states. This would influence some businesses’ decisions about whether to expand in or move out of California. The initiative is included on the November 2020 ballot.

 

Estate Planning 101: Back to Basics

Posted in Estate and Trust Planning

The COVID-19 pandemic has focused us all on necessities and on trying to prepare for an uncertain future. This article outlines why an estate plan is one of those necessities.

I Don’t Have an Estate Plan; What Would Happen if I Died?

It’s important to have an estate plan for several reasons.  During your life, you want to ensure that you control your assets and that if you are ever incapacitated, your estate is controlled by a trustee that you have selected. When you pass away, you want to be sure that your assets are distributed to your beneficiaries in accordance with your wishes. This is especially important if you have charitable bequests, young children, or want to distribute specific assets to certain beneficiaries or in specific ways such as by age or in trust. Continue Reading

The Tale of Choupette the Cat and Other Common Issues in Trust and Estate Litigation

Posted in Estate and Trust Planning

When Karl Lagerfeld passed away in February of 2019 in France, many speculated that his cat, Choupette, was well provided for as part of his estimated $150 million estate. This pampered feline was much loved by Mr. Lagerfeld during his life, and appeared in photoshoots and featured in many high-end fashion magazines. However, over a year after Mr. Lagerfeld’s death, certain media outlets have reported that the administrator of Mr. Lagerfeld’s estate has “disappeared.” Based on these reports, many question whether Choupette will ever be able to dig her claws into her alleged inheritance. Continue Reading

With Right of Survivorship – or Perhaps Not?

Posted in Conservatorship

In advising clients regarding the rights afforded to joint tenants on a bank account, most practitioners would say that the agreement with the financial institution generally would control, with the surviving joint tenant succeeding to the funds remaining in the account on the death of the other joint tenant. California’s Multiple-Party Accounts Law (Prob. Code, §§ 5100, et seq.) governs ownership of accounts with multiple parties and the disposition of those accounts upon the death of one of the parties to the account. Probate Code section 5302, subdivision (a) provides, in pertinent part, that, “Sums remaining on deposit at the death of a party to a joint account belong to the surviving party or parties as against the estate of the decedent unless there is clear and convincing evidence of a different intent. (Prob. Code, § 5302(a).) Subdivision (c) further provides that, “A right of survivorship arising from the express terms of the account or under this section, a beneficiary designation in a Totten trust account, or a P.O.D. payee designation, cannot be changed by will.” (Prob. Code, § 5302(c).)

Probate Code section 5303 goes on to set forth how the form of the account can be changed once it is established: “(a) The provisions of Section 5302 as to rights of survivorship are determined by the form of the account at the death of a party. (b) Once established, the terms of a multiple-party account can be changed only by any of the following methods:

(1) Closing the account and reopening it under different terms.

(2) Presenting to the financial institution a modification agreement that is signed by all parties with a present right of withdrawal. If the financial institution has a form for this purpose, it may require use of the form.

(3) If the provisions of the terms of the account or deposit agreement provide a method of modification of the terms of the account, complying with those provisions.

(4) As provided in subdivision (c) of Section 5405 (which relates to payment as discharging the financial institution based on specific written instructions). Continue Reading

Guess What? The Laws HAVE Changed – Avoiding a Conduit Trust Catastrophe after the SECURE Act

Posted in Estate and Trust Planning

Like most estate planners, we always remind clients that tax and estate planning laws are subject to change and frequently do. As busy practitioners, it is impossible for us to reach out to every client when a change might affect him or her, so we remind all clients to come back to see us if they have questions or are concerned about how recent developments affect their plans (and in any event, at least every three to five years).

January 1, 2020 saw one such key change in the law—the implementation of the SECURE Act. The “Setting Every Community Up for Retirement Enhancement” Act made a number of changes to federal retirement program regulations, such as repealing the maximum age at which one can contribute to a traditional IRA and raising the required minimum distribution age from 70 ½ to 72. From an estate planning perspective, however, the biggest change was the partial elimination of what is often called “stretch” treatment for IRAs. Continue Reading

This Time, It’s Personal: Beware The Misleading Use of “Personal Property” In Your Estate Planning Documents

Posted in Estate and Trust Planning

It is generally accepted that “personal property” refers to all property aside from real property. But in California, that isn’t always the case when it comes to making gifts of your property in a will or a trust.  California courts actually look to the language used in a document making a gift of “personal property” or “personal belongings,” and sometimes to other evidence, to interpret the scope of property intended when using such a term in an estate planning document.

There is no statutory definition of “personal property” in the Probate Code, nor is there one clear definition in case law.  Of course, if a document is clearly drafted, it would include a definition of what is intended.  But if that is not the case, then courts consider the facts specific to each case when interpreting terms like “personal property.”  The court first considers the language used in the document, and sometimes admits other evidence, in order to determine the testator’s intent.  There is a long history of courts concluding that terms like “personal property” or “personal belongings” can mean anything from small items of nominal value to, in one case, everything that a testator owns, real property included.  A few common factors the court considers are below: Continue Reading

Dead Men Tell No Tales and Other Issues with Contracts to Make a Will

Posted in Estate and Trust Planning, Trust

First, what is a contract to make a will?

A contract to make a will is exactly as it sounds.  It is an agreement to provide for a person as part of a decedent’s will.  The terms of the agreement could be as simple as a promise to provide services in exchange for a specific cash gift as part of a decedent’s will.  For example, Elizabeth may promise to provide caregiving and household services to William in exchange for William’s promise to provide her with $250,000 upon his death.  When William dies, hopefully his will has a provision leaving a specific cash gift of $250,000 to Elizabeth.  If not, then there has been a breach of the agreement.  The agreement can become substantially more complex, particularly when real property is the subject of the agreement.  Instead of agreeing to pay Elizabeth $250,000 in exchange for her services, William may promise to leave his house to Elizabeth.  Again, when William dies there may be a breach of the agreement if William’s will contains no provision instructing that his house be given to Elizabeth.

A contract to make a will in California can be oral or in writing.  The cases litigated often relate to oral agreements which are difficult to prove.  Further, the terms of the oral agreement may be so uncertain and indefinite that the agreement is incapable of being enforced.  In the above examples, the agreement between William and Elizabeth is potentially vague.  What are the specific terms of the agreement? What is the duration of the agreement? Does Elizabeth have to provide services for William’s lifetime?  What happens if Elizabeth ceases providing services or dies first? Would this simple agreement be enforceable if there were no writing?  These questions make litigation of these matters a near certainty.

The many issues relating to promises to make a will

How do you prove the existence of an oral agreement?

The ability to enter into an oral contract to make a will leads to many problems as the courts attempt to enforce valid agreements, while still trying to effectively dispose of fraudulent agreements.  It can be challenging to prove the existence of an oral agreement under any circumstance.  The ability to bring an oral contract to make a will claim may lead to parties performing legal contortionism in order to adequately plead the existence of an agreement which may be enforceable in a court of equity.  In the context of a contract to make a will claim, it is even more challenging to prove or disprove the existence of an agreement as generally one of the parties to the contract is deceased.  Thus, at least one material witness cannot testify, and, if the agreement is oral, there is no writing to substantiate the alleged agreement.

The statute of frauds requires most agreements to be in writing to prevent people from concocting agreements which do not exist. (See Cal. Civ. Code § 1624.)  When an agreement involves real property, a writing becomes even more important due to the presumption that the owner of legal title to the property is the owner of the full beneficial title. (See Cal. Evid. Code § 662.)  If your name is on the deed, there is a legal presumption that you own the property.  The statute of frauds is important for a reason.  The formality of a writing requirement dramatically reduces the likelihood that a person could simply invent a fake agreement and enforce such an agreement to his or her benefit.

California Probate Code section 21700 sets forth the criteria for when a contract to make a will can be enforced.  Absent the existence of a writing, a contract to make a will can be established by clear and convincing evidence of an agreement that is enforceable in equity.  This is the highest evidentiary standard in civil litigation.  The idea is that if there are enough indicia of an agreement, then even an oral agreement will be enforced.  However, claimants with little to no evidence (likely because the agreements are imaginary or completely contrived) may be able to get out the starting gates with a scintilla of evidence of an agreement, which may or may not be enforceable in equity.  Depending on the evidence and the unique facts surrounding the purported agreement, an evidentiary hearing may be warranted.  On the other hand, persons with completely legitimate agreements which were never memorialized in writing may be protected from an unfair or inequitable result due to his or her failure to comply with the statute of frauds.  This is particularly true when, for all intents and purposes, the parties acted as though there was an agreement.

How do you know when there is a breach of the agreement?

You will often not be able to tell whether the decedent lived up to his or her side of the deal until the decedent has died and the decedent’s estate plan (or lack of estate plan) is revealed.  If you were supposed to be in the decedent’s estate plan, but were not included, and are also not an heir of the decedent, you may never even receive notice of any proceeding regarding the decedent’s estate or any administration of the decedent’s trust.

Essentially, the decedent’s promise is akin to Popeye’s friend Wimpy’s promise that “[he’ll] gladly pay you Tuesday for a hamburger today”.  You will often not be able to tell whether the decedent lived up to his or her side of the deal until some future time.  With respect to Wimpy, the telling time period is when Tuesday comes and goes without any payment by Wimpy for the hamburger.  With respect to a decedent’s promise to provide for another upon his or her death, it is normally only when the decedent has died that one can determine whether the agreement was honored by the decedent.  At that point, the decedent has likely already received something of value (just like Wimpy with the hamburger) and may not be particularly inclined to honor his or her promise in the future.  Like in the cartoons, Wimpy may promise to pay for his hamburger on Tuesday, but he simply will not be around on Tuesday when the debt should be collected.  This makes enforcement of the debt challenging.

Of course, there are always exceptions, but it can be difficult to determine when such a promise is breached.  Certainly, if Wimpy did not pay up on Monday, he would likely not be in breach of the agreement.  However, if Wimpy stated on Monday that he was moving across the country, had no intention of ever paying for his hamburger, and had in general taken steps in contravention of his promise to pay for the hamburger, it may be possible to enforce the agreement prior to waiting until Tuesday.  Likewise, a decedent can typically create or revise a will up until his or her death, and is not generally in breach of his or her agreement until the decedent’s death.  However, if the decedent promised to give a house to a person under the decedent’s will, and then actively tried to sell it prior to the decedent’s death in contravention of the agreement, it may be possible to enforce this promise prior to the decedent’s death.  Clearly, breach of such a claim is largely fact specific.

Should you try to enforce the agreement?

Many wills and trusts contain express language in which the decedent states that he or she has not entered into any contracts to make a will.  Thus, enforcement of the agreement may very clearly be in contravention of the decedent’s existing estate plan.  As such, a party trying to enforce a contract to make a will should be mindful that enforcement of such a claim may be a creditor’s claim, i.e. a claim for liability of the decedent.  If the claimant already inherits under the decedent’s estate plan, the claimant should evaluate whether such a claim would trigger enforcement of the instrument’s no-contest clause.  In addition to incurring expenses of litigation, it may not make sense to enforce such a claim if there is a risk of losing one’s inheritance if the no-contest clause is triggered.  It is important to timely evaluate and bring such a claim as various statute of limitations or other time bars may be in effect to prevent a person from bring a contract to make a will claim.

How do you enforce the agreement? 

Remedies can include money damages or quasi-specific performance.  If the decedent promised to leave a specific sum of money, then money damages would be appropriate.  If the decedent promised real property or something otherwise unique, then quasi-specific performance may be the preferred remedy, so that the person can obtain exactly what was promised, i.e. the real property or other unique asset.  However, if money damages will adequately compensate for the breach, then enforcement of the promise in equity is unlikely.

Takeaway

Contracts to make a will can be difficult claims to prove and enforce. While this litigation can be frustrating when it appears that an agreement has been fabricated and the decedent is no longer around to testify to contradict the fraudulent claim, with the help of experienced trusts and estates litigators these claims can be successfully defeated.  Further, in the event that there is simply no writing memorializing a valid agreement, experienced trusts and estates litigators can aid in bringing such a claim so as to hopefully circumvent the statute of frauds.

When Do You NOT have the Right to Remain Silent? Conservatorship Proceedings and Equal Protection Clause Claims

Posted in Conservatorship, Estate and Trust Planning

Thanks to Law and Order, we’re all familiar with the beginning of a person’s Miranda Warning: “You have the right to remain silent.  Anything you say can and will be used against you in a court of law.”  What many may not know, however, is that this is a right only afforded to those involved in criminal proceedings.  In civil cases, there is no constitutional right to refuse to testify.  Historically, this has been intended to ensure that our criminal justice system—which can deprive a person of their freedom, property, and even their life—remains accusatorial, not inquisitorial.  A civil matter, on the other hand, is meant to resolve disputes between individuals and does not threaten the same consequences, so public policy favors bringing forth the information that a person’s testimony offers , even if it is against his or her self-interest.

A recent case, however, raised the somewhat murkier question of what standard should apply in conservatorship proceedings.  Under the Lanterman-Petris-Short Act (the “LPS Act”), if a person is found to be gravely disabled as the result of a mental disorder and unable to provide for his or her own food, clothing, and shelter, he or she may be committed to an involuntary conservatorship.  In this situation, a conservator makes all decisions regarding the person’s living situation, finances, and medical care, and in some cases the conservatee may be confined to an institutional care setting.  In the Conservatorship of the Person and Estate of Bryan S. [Citation] (Conservatorship of Bryan S.), the proposed conservatee, Bryan, argued that he should not have been forced to testify at his conservatorship trial.  Bryan claimed that he was similarly situated to those found not guilty by reason of insanity and those subject to sexually violent predator and mentally disordered offender proceedings, all three of which classes have been found to have the right not to testify.  Under the equal protection clause of the Constitution, Bryan argued, he should be entitled to the same rights.

While the history and nuance of the equal protection clause is extremely complex, at its most basic, it is meant to ensure that the state applies its laws equally to all.  The threshold question of whether equal protection principles apply is whether the state has adopted a classification that affects two or more similarly situated groups in an unequal manner.  In regards to potential conservatees under the LPS Act, the California Court of Appeals clarified in the Conservatorship of Bryan S. that such individuals are not similarly situated to individuals facing commitment as a result of criminal acts related to a mental health condition.  Therefore, LPS Act conservatees are not similarly situated and not entitled to refuse to testify at their conservatorship trials.

As the court explained, the LPS Act was designed to provide prompt evaluation and treatment for individuals with mental health disorders and to provide them with individualized treatment, supervision, and placement options, including being placed in non-institutional settings with family or friends, if appropriate.  The LPS Act is meant to protect public safety, but also to protect people with mental health disorders from criminal acts.

While Conservatorship of Bryan S. clarifies that a LPS Act conservatee cannot refuse to testify at his or her trial, it also confirms that, consistent with prior case law, a prospective conservatee will not be compelled to answer questions that may incriminate him or her in a criminal matter.   So while the right to remain silent does not apply in all settings, it is absolute in its protection against self-incrimination, at least for criminal acts.

Casebriefs – How Recent Decisions Could Impact You

Posted in Estate and Trust Planning

In our monthly department meetings, the trusts and estates group at Weintraub keeps current by reviewing recent cases and discussing how they could affect our practice. See below for some highlights from the past few months:

Pena v. Dey – When is Self-Help Enforceable?

(Filed August 30, 2019)

The gist:

James Robert Anderson established a living trust in 2004, which he amended in 2008. He was diagnosed with abdominal cancer and brain cancer in 2011. After his diagnoses, Anderson became closer with an existing friend, Grey Dey, who eventually moved in with Anderson and provided care to him until Anderson’s death in May 2014.

In February 2014, Anderson contacted a new attorney, requesting changes to his trust. Anderson sent the attorney a marked up copy of a section of the first amendment that created fifteen separate trust shares of varying percentages to be distributed to different beneficiaries. Anderson altered eleven of those gifts, adding notes in margins, and attached a separate list of beneficiaries to divide the largest share. Anderson wrote a note to his attorney on a Post-it note that read, “Hi Scott, Here they are. First one is 2004. Second is 2008. Enjoy! Best, Rob.” Continue Reading

There’s No Place Like Home – Heightened Evidentiary Standard for Moving Conservatees from Their Personal Residence

Posted in Conservatorship

Frequently when a conservatorship proceeding is commenced, the proposed conservatee is residing in his or her personal residence. Having a conservatorship established can be a distressing experience for a conservatee who has awareness of the effect of such a proceeding. One primary concern may be whether there is going to be a change to living arrangements with which the conservatee has been familiar, sometimes for decades. Naturally, it is commonplace for a conservatee to express that they “don’t want to go to a care home.” In recognition of the need to affirmatively preserve the right of conservatees to remain in their own personal residence, the California Legislature passed an amendment to existing law which applies a higher evidentiary standard before a conservator may move a conservatee from his or her personal residence.

Living in the Personal Residence. Under existing law, it is presumed that the personal residence of the conservatee at the time of the commencement of the conservatorship is the least restrictive appropriate residence for the conservatee. That presumption may be overcome by a preponderance of the evidence. As of January 1, 2020, the presumption that the personal residence of the conservatee at the time of the commencement of the conservatorship is the least restrictive appropriate residence for the conservatee may be overcome only on a showing of clear and convincing evidence, which is a higher standard. Continue Reading