Thursday, May 8, 2014

Four Estate Planning Documents Everyone Should Have

Is "estate planning" only for the wealthy or for those who are leaving large inheritances or have tax shelters? No. the Wall Street Journal recently had an article on this very topic.  The WSJ article emphasized, as we estate and probate lawyers know, that this is not just about planning to avoid taxes, but is about what happens if you pass away or if you get very sick and live.  Here's are the four estate-planning documents everyone needs regardless of your wealth. Planning also helps prevent litigation and saves what money there is in the estate and helps preseve family relationships.
1.  Will.
Many people think they don't need a will. But sitting down with a lawyer and completing a will is the best way to ensure your wishes will be fulfilled—and to avoid leaving anything up to the courts. This is important if there are minor children who need guardians or multiple adult children who are heirs.  
An important part of the will is naming the executor who is in charge of managing an estate, including paying bills. While you don't need to tell anyone what is in your will, it's important to let your designated executor know he or she has been chosen to do that job, and it might be a good idea to inform other family members, too.  You should also have have discussions with family members about how personal effects or family heirlooms are handled.
There may be a temptation to do a will on the cheap, using online resources. As the WSJ advised, "Tread warily." "Small details can end up invalidating wills or leaving your wishes unfulfilled."
2.  Durable power of attorney.
A power of attorney can give someone else the authority to act as your "agent" and make legal and financial decisions should you become incapacitated.
Don't take this decision lightly. Unlike an executor, this could be a continuing role. Give a serious thought about to whom you are giving power of attorney.  It's important to consider that this person will be managing your finances. Does this person have the skill sets for managing money?
In addition, always name a backup. Many people will name their spouse, but what happens if both are injured in a car wreck or both develop signs of dementia?
3.  Medical power of attorney.
This document—also known as a health-care proxy—enables any adult you designate to make medical decisions on your behalf should you be unable to make them yourself.  One idea is to pick the person who you think is going to stay calm in a crisis.  Who can handle making medical decisions in a difficult situation without being overcome by emotion or grief? 
4.  A living will.
A living will—sometimes known as an advanced health-care directive—specifies in writing your wishes for end-of-life care. That includes such things as whether you want to be resuscitated if your breathing or heartbeat stops, or whether you want to be kept alive through artificial respiration or feeding.
When it comes both to the medical power of attorney and living will, sit down and have a conversation with loved ones about your wishes. It may not be easy, but will help later in what will be a difficult time for your family.
5.  Be organized.  Make things easier for everyone by keeping your important documents, financial records and even information about doctors and medication updated and in one place. (Just not in a safe-deposit box, which will require a power of attorney to access.)
Once a year, provide your estate and probate attorney with an updated list of your bank and investment accounts, and any other important information, which they can hold in your file.  
Posted by Henry J. Moravec, III  You can reach him at  hm@moravecslaw.com or 626-793-3210.
Moravec, Varga and Mooney website: www.moravecslaw.com

Wednesday, September 11, 2013

Gifts To Caregiver - Special Protocols Are Required. Sample Case Where Court of Appeals Ruled Step-Daughter Was An "Heir" For Purposes of "Blood or Marriage" Exception

When a client (especially an elderly one) wants to make a bequest to a caregiver in estate planning documents (a trust or will), the law requires a special protocol. Similarly, when we are hired as an administrator or to represent beneficiaries, gifts to caregivers are subject to great scrutiny. Why? Gifts to caregivers are generally prohibited by law under California Probate Code section 21350 with some exceptions. 
Probate Code Section 21351, enumerates several exceptions to this general rule. One of the exceptions—found in Section 21351(a)—provides that section 21350 does not apply IF the transferor is related by blood or marriage to, is a cohabitant with, or is registered as a domestic partner of the transferee. Cal. Prob. Code § 21351(a). 
One California published decision addressed whether this provision applied to a stepdaughter by marriage and highlights the issues that arise when a caregiver is a beneficiary under a trust or will. This California Court of Appeal case is Hernandez v. Kieferle (2nd Circuit, 2011). 
In Hernandez v. Kieferle, the Second Appellate District of California reviewed a probate court decision which invalidated an amendment to a trust designating stepdaughter Claudine Kieferle as the trustee and sole beneficiary of her stepmother Gertrude’s estate.
In plain language, here is what happened. At one point, neighbor Florentina Hernandez was the trustee and principal beneficiary of Gertrude Kieferle's estate. The stepdaughter Claudine moved in with Gertrude and took care of her. Stepmother Gertrude amended her trust to make stepdaughter and caretaker Claudine the trustee and sole beneficiary. Now neighbor Florentina was not going to receive anything with the new amendment. 
After Gertrude passed away, Florentina challenged the validity of the second trust amendment under Probate Code Section 21351(a) mentioned above. The probate court ruled in neighbor Florentina's favor and invalidated that amendment. At the probate court level, the court ruled in favor of Florentina noting that section 21350 established a presumption that transfers to care custodians are the product of fraud, duress, menace, or undue influence and, since Claudine lived with Gertrude and cared for her in the evenings, Claudine was disqualified from taking under the trust.
Stepdaughter Claudine appealed the ruling and won on appeal. In reviewing the lower court ruling, the Appellate Court reversed this decision and concluded that it was an error not to apply the exception found in section 21351(a). The Court rejected the argument that the exception did not apply to Claudine because she was not an “heir”—where her stepmother’s estate did not actually contain property attributable to her father (who passed away eleven years prior)—and found that a person is the transferor’s heir if some intestate rule identifies the person as the transferor’s successor, regardless of whether the transferor’s estate includes the type of property distributed under the rule. Therefore, the section 21351 exception applied and the second amendment was deemed valid allowing Claudine to remain as the trustee and sole beneficiary of Gertrude’s estate.
Posted by Henry Moravec, III, Attorney at Moravec, Varga and Mooney.  
Contact at hm@moravecslaw.com or 626-793-3210

Thursday, June 6, 2013

Do I Need to Hire a Lawyer in Probate Court?

One common question that we often hear is the following:

"Do I have to hire a lawyer in Probate Court?"

or its close relative:

"Can I represent myself in Probate Court?"

I would note that this question also comes up during Probate Court hearings on a regular basis, because on a typical day, out of about 50 or so matters on the calendar there are bound to be 2 or 3 people representing themselves without lawyers.  Invariably, of the two or three, one or two of them is told by the judge to "seek legal advice."

You would expect a lawyer to say "of course you need to hire a lawyer" but the most accurate answer is that the need depends upon the facts:

1. If you have plenty of time on your hands, and no time pressure with respect to the estate, and no pressure from creditors or heirs, you might be able to represent yourself and have no downside.   Most people consider "wasting time" a downside, hence the first qualification.  A continuance, which is what the Court calls the situation where a matter scheduled for January 31 has to to be rescheduled for March 5 because a document is not properly prepared, causes a delay of the time of the continuance, in this example over 30 days.  So, if it does not matter how long it takes to, for example, take title to property, then the client would not be upset with the delay.  However, if a creditor or another heir wants things concluded, the delay is problematic.

So, that leads us to the next generalization:  if time is in any sense of the essence, only by using an experienced probate lawyer can you be confident to minimize delays.   This also applies if the client simply wants to not worry about the matter, because regardless of how long the process takes, the stress factor drops if a lawyer helps with the case.

3. Then, there are the situations in which you absolutely need a lawyer, and as soon as possible: (a) any time there is a party against you.  This is because a mistake you make may result in liability to the other party, be they creditor or heir.  (b) Any time there is a potential tax problem of the decedent.  (c) any time there is a creditor of the decedent which has a claim which may be disputed.

4. Finally, if you do not want the burden of responsibility, you should always hire a lawyer.   If, for example one sibling is nominated to be the administrator, and part of the job is reporting on the administration to the other siblings, use of an experienced probate lawyer greatly increases the odds that the administration will be stress free, since an expert will be available to answer questions.  This factor alone seems like a matter of common sense but is in fact important.  Many "probate disputes" start when the administrator is un-represented and an avoidable mistake is made.

 The Cost May Be Less Than You Think

 Probate fees are significantly less than fees charged by realtors to market and sell property.  Although there are some discount real estate (market your property yourself) brokerages, in the main no one considers the standard 5% commission on a real estate transaction to be out of line, and as a matter of fact considering the amount of people who voluntarily pay it, it is considered very much "in line."  To sell a $1,000,000 house, in a transaction which might take 60 to 90 days, costs $50,000.   To probate a $1,000,000 estate, which might take more than a year, and collect various assets and deal with multiple beneficiaries, and protect yourself as a fiduciary from liability costs a $23,000 statutory fee in Probate Court.   Although there are sometimes other fees and costs for additional work, at a fundamental level in this area legal representation is less expensive that selling a house.

So, it turns out that advice is actually simple.  Save money if you can, but don't be "penny wise and pound foolish."

Posted by Henry (Hank) J. Moravec, III, a partner at Moravec, Varga and Mooney, A Partnership.
For a free 30 minute consultation (telephonic or in person), you can e-mail Hank Moravec at hm@moravecslaw.com or call him at (626) 793-3210. The firm website is www.moravecslaw.com

Thursday, May 9, 2013

Probate and Trust Administration Top Posts

 The other day I was looking through all the stats on the blog, to see the most popular posts.  In first place is What happens when someone dies without a will?  with 1550 views.  If you liked that one, check the  2013 related post: What happens when someone dies without a will? Does joint tenancy save the day? The rest of the top five posts of all time on the blog are:

2. Recent California Decision On Breach Of Trust & Trustee Fiduciary Duties   with 1010 views.

3. Recent California Decision Highlights Trustee's Breach Of Duties And Misconduct When Trustee Is Also A Beneficiary  with 961 views

4. What Is Undue Influence In California Probate Courts? with 740 views, and 

5. Potential Estate Tax Implications Of J.D. Salinger's Death  with 490 views.

We feel that there is an overall theme developing here, since the most viewed posts are probably connected with what people are searching for on the Internet and what brings them to the blog.  

As a technical matter, the permanent change to a $5,000,000 exemption per person means that for many people, estate taxes are no longer an issue which would drive estate planning.  It is a huge difference to not so long ago when the exemption was only $600,000.

However, family relationships cannot be legislated, and the conflicts which develop after death are very much unaffected by tax laws.  If one child thinks that their sibling unduly influenced Mom, well, that is simply an issue which will always be around.

We see our practice in disputed matters steadily expanding, so these stats are not surprising to us. 

Posted by Henry (Hank) J. Moravec, III, a partner at Moravec, Varga and Mooney, A Partnership.
For a free 30 minute consultation (telephonic or in person), you can e-mail Hank Moravec at hm@moravecslaw.com or call him at (626) 793-3210. The firm website is www.moravecslaw.com

The San Gabriel Valley office is located at 2233 Huntington Drive, Suite 17, San Marino, California 91108.

Thursday, April 18, 2013

What Happens when a Person Dies with an Ambiguous Will?

I have been posting lately on the various issue and challenges raised by probate and trust litigation.  Now, just to be clear, "litigation" means an actual filing in a Court of law.   But what of something that rises to the level of a mere "argument" or maybe a level or two above an argument, perhaps where each person feels they need a lawyer to advise them, but does not actually end up in court?  In other words, a "dispute?"

It is probably fair to predict that for every matter which actually results in litigation in the probate courts, there are some multiple of matters over which there is a dispute which, although it may be serious to the parties, does not (fortunately) result in actual litigation. 

A new matter came into the office the other day which reminded me of law school, where the law professors try to fit all of the possible legal issues into one fact pattern.  This matter had the following facts:

1. The decedent elected to have the most "simple" Will he could get.  I am not sure where he got it, but it only consisted of a couple of pages.  In it, his stepson was given "all the Widgets I own at the time of my death."   There was no list of Widgets either in the Will or set forth otherwise.

2. Of course, the relationship between the stepson and the biological son (who was to get the remainder of the assets) was not good.

3. Like many people do, the decedent made gifts during his lifetime.  One of them was a gift of a relatively valuable Widget #1 to his biological son.  This was actually shipped by the decedent to the biological son, but no written notation of the gift was made.

4.  The decedent also, like many people, talked.  All kidding aside, he also promised one reasonably valuable Widget #2 to his grandson (the son of the biological son).  Although he talked about it with various people, and referred to the Widget as "grandson's Widget" he never actually delivered it to the grandson.  After the decedent's death, biological son shipped this Widget to the grandson.  Like the Widget in paragraph 3 above, there was no written notation.

5. The decedent also had charitable intent.  Shortly before his death he had his biological son contact a charity which ran a Widget museum.  He wanted to donate one valuable and rare Widget #3 to the museum.  There was an email exchange on this topic between the museum and the decedent's biological son about three months before the decedent passed away, but no formal contract.  After the decedent's death the museum accepted the rare Widget.

6.  Last but not least, the decedent of course had a comprehensive set of Widget making and Widget repairing tools and spare parts.  He also was in the process of making a couple of Widgets (which would be #4 and #5 --- of course, the guy was a Widget maker, what would one expect?).   After the decedent died, the biological son, not being a Widget maker, asked the museum if they would like this esoteric set of personal property, the museum said yes.

Now the biological son learns a few things:  the step son basically wants to know why he should not get Widgets 1 through 3, and also that the step son thinks that some of the "materials" were close enough to being completed  "Widgets" that they should have gone to hims as "Widgets 4 and 5" under the Will.

What result?  Well, at the moment there is no court "litigation" on these claims.  Everyone is upset, but how will it work out?

My predictions, which I will expand upon in upcoming posts, are:

Widget #1 stays with biological son.  Widget #2 might have to be returned, depending upon whether the executor can enforce the "oral" gift under local law.  Widget #3 may well come back into the estate, because charities do not like to get a reputation for holding on to property at the expense of heirs.  However, Widget #3 also has a written pledge (the email).  Widgets #4 and #5 probably stay with charity, as the executor can conclude that they are not completed Widgets.

This is exactly the sort of disputes which can be avoided if appropriate time is taken in the drafting of estate planning documents in the first place.  And this avoidance does depend upon having someone with experience advise you when you draft documents.  A good lesson to keep in mind.

Posted by Henry (Hank) J. Moravec, III, a partner at Moravec, Varga and Mooney, A Partnership.
For a free 30 minute consultation (telephonic or in person), you can e-mail Hank Moravec at hm@moravecslaw.com or call him at (626) 793-3210. The firm website is www.moravecslaw.com

The Los Angeles area office is located at 2233 Huntington Drive, Suite 17, San Marino, California 91108.

Tuesday, April 9, 2013

Litigation in the Probate Courts Part II, How Long Does it Take?

In the first installment of this series of posts, we talked about the general aspects of probate litigation, and what to expect if you find yourself involved in a case.  In this post I will talk about how long each phase of a case may take, and what a litigant can expect along the way.  Often, the timing of a case is as important as the substance of the claims.

A case breaks down into the following segments:

A. Pleading, or the making of allegations by one side and the corresponding denial of allegations by the other side.  Pleading alone can take several months.  In a Probate case, it is rare for one party to file any sort of motion, the other party to receive it and object, and for the parties to both agree with the Court to move to the next stage in anything less than about four months, sometimes much longer.  The other factor is that in a Probate case there are often more than two sides.  Each beneficiary of an estate could have a different view of a matter.

B. Discovery, or additional fact finding.   Additional fact finding always takes time.  For example, let say that the matter at issue is a beneficiary demanding an accounting.  Well, the court may say "when can you have that accounting done?"  The party may respond "in three months."  Then the court orders it filed, and of course the other side gets time to examine it and have specific objections, which might take a couple of more months.  So now you could easily have taken a year.

C. Preliminary Orders, which are Orders from the Court to keep the case moving along.  There may be some preliminary orders along the way, but those could be expensive to get and are always time consuming.  To continue with the example above, a typical case may start with a beneficiary accusing the trustee of some act and asking that the trustee be removed.  However, if there has not been an accounting filed the court will want to see that first, and that may take a few months.

D.  A formal mediation. At this point a year or so may have gone by, and the parties are already growing tired.  At this point the Court will offer the parties a chance to mediate the matter before a private mediator.  Often, this is the point at which the case settles.  Mediation can be very helpful, since it is often in mediation that, for the first time, one side hears how the other side's arguments and their arguments are viewed by an unbiased third party.

E.  An Evidentiary Hearing.  Thiis is what most people consider "a trial" to be, or what they think of by "going to court."  Not only do the first four steps often take more than a year to complete, it now may take a year to get a hearing date on a matter that will take more than a couple of hours of evidence.  Two years with no resolution feels like a long time, and it is.

F.  Appeals, if any.  An actual appeal, with briefing schedule to the appellate court, could be another year.  Often, appeals are filed simply to create the possibility of additional settlement discussions.

As you can see, the rather extreme length of time it can take to obtain a court order is a factor in the dispute,  independent of the actual merits of the claim.  Time is a factor which simply must be discussed with the client, because not only is "time" an issue, but costs rise along with time.  There is no positive way to really spin this, but this is why most cases settle -- it would simply take too long and cost too much to achieve complete victory.

At Moravec, Varga & Mooney we have extensive experience with disputed matters and the various phases of a case.  We have found that it is a great help to a client to give them an honest appraisal of how long a case can actually take.  It can be an extremely bad thing if a lawyer is "too optimistic" about how quickly a client can get a case to a judge.  If the client does not understand the time and costs involved, the time and cost can simply overwhelm the merits of the case, which can be a disaster if the case is actually a good one.

Posted by Henry (Hank) J. Moravec, III, a partner at Moravec, Varga and Mooney, A Partnership.
For a free 30 minute consultation (telephonic or in person), you can e-mail Hank Moravec at hm@moravecslaw.com or call him at (626) 793-3210. The firm website is www.moravecslaw.com

The Los Angeles area office is located at 2233 Huntington Drive, Suite 17, San Marino, California 91108.

Tuesday, April 2, 2013

What Happens When Someone Dies Without a Will? Does Joint Tenancy Save the Day?

One of the features of Blogger is that you can see the list of the most popular posts on a blog.  Currently our number one post is "What happens when someone dies without a Will?"    It is easy to see why this would be a popular search, since it may well be true that a very large number of people die without a Will or a Trust, which is known as dying "intestate" (the technical legal term). 

The chap to the right looks very satisfied with himself.  He may have been thinking "I have my property sorted out and I did it all by myself!"  However, he may well have simply created a minefield for his heirs.

Our post from 2009 addressed the basic question of what happens in an intestate estate administration.  That post set forth the basic ways in which property can be transferred when someone dies without a Will or Trust: (I) by small estate declaration, (II) by "contract" or (III) through a probate proceeding.

In this post I will elaborate a bit on what by "contract" means.  We use "contract" to cover a wide range of non-probate transfers.  The most common may be the joint tenancy.   Joint tenancy means that title to a piece of property, either personal property, such as a bank account, or real property, is in the name of two or more people as joint tenants.  The long phrase is "joint tenants with right of survivorship" and what it simply means is that when any joint tenant dies, upon proof of death, the property passes to the other joint tenants.

Joint tenancy has always had one advantage going for it -- simplicity.   It is not a big deal to put a bank account into joint tenancy, you just fill out the appropriate form at the bank.  For real property, a deed is required, but these days many people attempt to fill out their own deed and often are successful.  When real property is purchased, the escrow company can simply put the title into joint tenancy at the request of the buyer.

However, joint tenancy has a number of disadvantages, which can run the gamut from annoying to serious:

1. It assumes order of death.   For estate planning purposes, properly drafted documents take into account variables in who dies first.  At best, if a parent puts a child on as a joint tenant and the child dies first, it is a waste of effort.  At worst, if the child is put on only one deed with the intent of that particular property going to that child, and ultimately to that child's children or spouse, and the child dies, then the property reverts to the parent, and does not go to the child's heirs.

2. It provides no protection against disability.  One of the benefits of a revocable trust is that it applies if the settlor (or creator) of the trust becomes disabled.   Putting property in joint tenancy does not have any management upside -- both joint tenants must executed any documents of sale or financing.  So if a parent puts a property in joint tenancy and becomes incompetent, that parent could not execute any documents with respect to that property, and problems could easily arise.

3. No creditor protection on first death. Another issue with a simple joint tenancy between husband and wife is that the change in tax laws has perhaps led some to ignore other, non tax issues.  For example, a couple who are in no danger of amassing an estate worth $10 million could have all of their assets in joint tenancy, and thus if one dies all goes to the survivor.  However, this does not deal with: creditors of the surviving spouse, everything from potential remarriage to medical bills.   With a trust, half of the couple's net worth would have been protected.  Plus, upon the death of both parents a probate would be necessary.

4. It is easy to forget.  A joint tenancy is so simple that its easy for a person to forget they even have set one up.  We have had many instances where one of the contingencies discussed in this memo occurs and the client, or the client's children, are surprised to learn of  a joint tenancy property or account set up years before.

5. It does not verify actual ownership interest.  This is a real nuts and bolts problem.  For example, take refinancing or sales of property.  Once a person is a joint tenant, they have to sign off on all of the documents relating to that property.   A second point that comes up is whether, when a couple puts a child on a deed as a joint tenant, if they intended a specific gift.  The IRS generally says "no" but the County Assessor, who is looking to re-assess property, may say "yes."  In California, the Proposition 13 property taxation system always needs to be considered.

The other, most common way an interest in property can pass is by "beneficiary designation" which I will cover in another post.

For now, the main thing to consider is that estate planning is all about "planning" for various contingencies.  Many clients are unaware of all the possible contingencies which might affect them.  That is where we can help, since we have experience with just those contingencies a client might miss.

When it comes to sorting out an estate of a person who dies intestate, many of the same contingencies a client should have considered while alive are triggered.   This is where our expertise again is of great help to clients, because just as much planning can occur after a person dies as before.

The majority of the work in our practice, in terms of hours spent, is always on post death administration, be it sorting out an intestate estate or resolving a dispute.

Posted by Henry (Hank) J. Moravec, III, a partner at Moravec, Varga and Mooney, A Partnership.
For a complimentary 30 minute consultation (telephonic or in person), you can e-mail Hank Moravec at hm@moravecslaw.com or call him at (626) 793-3210. The firm website is www.moravecslaw.com