Probate Litigation: Family Law And Probate Law Collide Where Widow Must Pay Support to Her Husband’s Previous Wife

In estate planning and probate, one sees the intersection of family law on a frequent basis. Late last year, the California Court of Appeal (Div. Three) held that a San Francisco-area widow must continue making support payments to her deceased husband’s previous wife. This case is now pending before the California Supreme Court. Kircher v. Kircher, 10 S.O.S. 6238.

This case shows the importance of consulting with an estate planning attorney at the time a marital or dissolution agreement is made. It is apparent that no one representing the husband or the new wife considered what would happen if the husband passed away. Perhaps the husband would have purchased separate insurance to provide for this continuing obligation or made some other changes to his trust. If the agreement or judgment is already entered into, it is still important to consult an estate planning attorney to provide for obligations under prior marital settlement agreements.

Div. Three said that the form of title in real property that passed to the widow (Wife 2) upon her husband’s death—joint tenancy—did not shield it from consideration when determining the extent of her personal liability for his obligation to pay Wife 1 support till she died. That ruling followed the panel’s conclusion, in an unpublished portion of its opinion, that the man’s written agreement to support Wife 1 until she died was sufficient to waive state law providing that such an obligation would normally terminate upon his death.

Wife 1 Bonnie Kircher, the former wife of San Francisco hotel and apartment house operator Vincent Kircher, sued Wife 2 Adelaide Kircher, his widow, when the latter stopped making monthly support payments in 2008, three years after her husband’s death.

Vincent and Wife 1 separated in 1970 following almost 10 years of marriage and entered into a settlement agreement in which he agreed to pay monthly support until either of the two died or she remarried. The two modified the agreement in 1987, agreeing to increase support and for payment of Wife 1's health insurance. The modified agreement provided that the obligation continued until Wife 1 died, remarried, or lived with another person “in a marital-like relationship” for 30 days, but omitted any language cutting off the obligation at Vincent Kircher’s death.

In 1998, Vincent Kircher married Wife 2 Adelaide Kircher and revised his will to leave his property to her upon his death. He also transferred title to three real properties to himself and his new wife as joint tenants, and continued to meet his support obligations while living. These properties had been separate properties.

Interestingly, if he had not transmuted them to community property, all of the value of the properties could have been used to pay Wife 1 instead of just his community share. Probate Code §13551 limits the liability of a surviving spouse for the deceased spouse’s debts to the fair market value of the deceased spouse’s separate property or his share of community property.

Upon his death in 2005, Wife 1 filed a creditor’s claim against his estate asserting a claim for past and future obligations under the modified agreement. Wife 1 filed a complaint against Wife 2 Adelaide Kircher three years later when Wife 2 terminated the ongoing monthly support payments while continuing to pay for the health insurance. Wife 1 claimed that Wife 2 was personally liable for husband's debts under Probate Code §13550-13552 and seeking damages and attorney fees for Wife 2’s breach of the modified marital settlement agreement’s terms.

Wife 1 sought a declaration that Wife 2 was obligated to continue to comply with the terms of the settlement agreement. Wife 2 argued that the support obligations could not be enforced against the real properties she held in joint tenancy with her late husband because a surviving joint tenant takes the property free of creditors’ claims.

In response, Wife 1 asserted that she did not seek a lien on the properties, only to impose liability for continuing payments up to the amount of the properties’ value, and Marin Superior Court Judge Verna A. Adams ruled in Wife 1's favor. The trial court judge Adams determined that calculation of Wife 2’s personal liability for her husband’s debts encompassed property held in joint tenancy, and that the support obligation to Wife 1 survived his passing, and the Court of Appeal agreed in an opinion by Justice Martin J. Jenkins.

Jenkins pointed out that the Probate Code provides that a surviving spouse is personally liable for the debts of a deceased spouse, and that liability is chargeable against property described in Sec. 13551. He said that the properties Vincent and Wife 2 held in joint tenancy fell within that section because the Legislature clearly intended for it to reach all property, including joint tenancies, so long as it could be characterized as community property or the decedent’s separate property.

Noting California’s presumption that property acquired by a married couple is community property, and explaining that characterization of property is not dependent on the form of title, Jenkins wrote: “At the time of decedent’s death, the property held in joint tenancy by Vincent and was presumed to be community property subject to rebuttal by Vincent that it remained his separate property. Either way, the property at issue falls within the ambit of section 13551."

Posted by Henry (Hank) J. Moravec, III, a partner at Moravec, Varga & 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 or (818) 769-4221.

With respect to probate, Hank Moravec has over 20 years' experience as one of the best Los Angeles probate attorneys and Los Angeles probate litigation attorneys and is available should you need legal advice regarding your own or a family member's situation. For a consultation, You can e-mail Hank Moravec at hm@moravecslaw.com or call him at (626) 793-3210 or (818) 769-4221 to request a consultation.

The firm website is http://www.moravecslaw.com/. The firm has two offices and consultations and meetings can be held at either office.

The San Gabriel Valley office is located at 2233 Huntington Drive, Suite 17, San Marino, California 91108. There is ample free parking adjacent to the firm's office.

The San Fernando Valley office is located at 4605 Lankershim Boulevard, Suite 718, North Hollywood, California 91602-1878.

Cyberspace When You're Dead - Interesting New York Times Article Addresses Our Digital Afterlives

There is an interesting article in the New York Times entitled "Cyberspace When You're Dead" that addresses the fact that estate law has only begun to consider the topic of what happens to our digital afterlives.

Considering that only about a third of Americans even have a will, how many people write down all the passwords and screen names for digital photograph servers like Flickr, email, social networks and leave them in a place where their family or heirs could find them? Facebook now has an option that allows a profile to be switched to "Memorial" mode when an individual dies.

For some family-owned businesses that rely on the Internet for sales and marketing, the digital rights and passwords may be very important for running a business. For many of our older clients, this has not been much of an issue but this is something for each person to consider.

Years ago, you could find a person's address book and contact their friends and family to tell them of their passing. Now much of that information is kept in Outlook Contacts or on an iPhone. Another thought is that some people are creating online memorials with photographs or video and allow friends and family to share memories. This is obviously a personal preference but is something that can be addressed at the planning stage.

Posted by Henry (Hank) J. Moravec, III, a partner at Moravec, Varga & Mooney. 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 or (818) 769-4221.

Tax Relief Act of 2010: It Finally Happened

Well, no one would have predicted this!

Essentially, Congress had ten years to provide some certainty to the U.S. Federal Estate and Gift tax system. Incredibly, with the Democratic Party in control of both houses of Congress and the White House, the Estate tax was allowed to lapse completely in 2010. As 2010 wore on, there were periodic statements of what should happen to the law, should there be a retroactive bill? Would the law really be allowed to return to the 2001 standard, with high rates and only a $1,000,000 exemption?

Then, the mid-term elections occur and we have divided government again. Yet now, with a technical "lame duck" congress, incredibly, a new tax bill emerges!

And what a bill! In addition to extending the Bush tax cuts on the income tax side (along with some very interesting temporary adjustments to the Social Security withholding tax), the Tax Relief Act signed into law on December 17, 2010, lowers estate, gift and generation-skipping transfer (GST) taxes for a two-year period.

Here are some of the estate and gift highlights of the Act:

■ The estate tax will be reinstated for 2011 and 2012 with a top rate of 35 percent. The exemption amount will be $5 million per individual in 2011 and will be indexed to inflation in following years.

■ Estates of people who died in 2010 can choose to follow either 2011 or 2011's rules. The estate may choose between an estate tax based on the $5 million exemption and a step up in basis of the estates assets, or no estate tax and a modified carryover basis in the estates assets.

■ For gifts made after December 31, 2010, the Act reunifies the gift tax with the estate tax, allowing for an exclusion of $5 million and the 35% tax rate. For gifts made during 2010, the exclusion amount is $1 million and the maximum tax rate is 35%.

■ The generation skipping transfer tax exemption for gifts made or decedents dying after December 31, 2009 will be equal to the applicable exemption for estate tax purposes. Transfers made during 2010 subject to the generation skipping transfer tax are subject to a tax rate of 0%, and will be subject to a rate of 35% for transfers in 2011 and 2012.

■ In addition, the TRA allows for the estates of decedents dying after December 31, 2010 to elect to transfer the unused portion of the $5 million exclusion to a surviving spouse.

Aside from the fact that a $5 million estate tax exemption per person, or $10 million per couple, is good news, there are many other planning opportunities raised by this new bill, many of which are caused by the fact that the gift tax exemption will now also be $5 million per person. This is the huge difference between the law since 2001 and now. Under prior law, with the gift tax exemption at $1 million, many clients who could otherwise afford to do so (from a financial perspective) could not make gifts to children or grandchildren. Now, there are many gifts which can be made, in trust or otherwise, and the parent/donor will not owe tax.

Perhaps the most surprising part of the Act is that estates of people who died in 2010 can elect to use either the new rules or the "old" rules. This addresses the situation in which an estate may owe significant capital gains tax even though no estate tax is owed. This is a surprising change because many times such inconsistencies are allowed to remain in the tax code because there is not much in the way of political capital to simply fixing an inconsistency. We have several estate matters which will be affected by this part of the Act.

The fact that the Act is in place for only two years is interesting. Perhaps Congress has realized that having these "deadlines" in place actually helps when it comes to compromise. We will see in two years' time.

Posted by Henry (Hank) J. Moravec, III, a partner at Moravec, Varga & Mooney. 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 or (818) 769-4221.

He focuses his practice on Estate Planning, Trust and Probate Administration, Beneficiary and Trustee Representation, Probate Litigation, Tax Law, and Nonprofit Law. He represents clients throughout Southern California and his offices are conveniently located for clients in the Los Angeles, Orange, Santa Barbara, Riverside and San Bernardino Counties.

The firm website is http://www.moravecslaw.com/. The firm has two offices and consultations and meetings can be held at either office. The San Gabriel Valley office is located at 2233 Huntington Drive, Suite 17, San Marino, California 91108. Telephone: (626) 793-3210.

The San Fernando Valley office is located at 4605 Lankershim Boulevard, Suite 718, North Hollywood, California 91602-1878. Telephone: (818) 769-4221.

Proposed Estate Tax Deal for Two Years: 35% Tax Rate And $5 Million Exemption. Bigger Question For Most Americans: Do You Have An Estate Plan?

On December 6, 2010, President Obama announced that he has reached a deal with Republicans regarding the estate tax and other Bush Tax Cuts. Under the deal, the repeal of the estate tax in 2010 would not be extended. The estate tax would be revived, but not as it is scheduled.

Under current law, if Congress reaches no agreement, the estate tax is scheduled to come back in 2011 at a top rate of 55% (60% in some cases) and an exemption of a mere $1 million for individuals.

Under the Obama-Republican deal, the estate tax would come back at a rate of 35% and with an exemption of $5 million for individuals -- for two years. However, it is unknown whether the lame duck House would pass an estate tax exemption this high. This proposal may also not be popular among the Democrats.

From a planning perspective, the question is what should we advise our clients? Our approach is simple. Plan with the current law and not based upon any politicians' proposal.

One problem with this current proposal is that it's not a permanent solution. Under the deal the 55% tax rate and $1 million exemption would return in 2013. Married taxpayers will still need to utilize highly flexible planning that will allow the surviving spouse to adjust the planning after the first spouse’s death. This can be done by utilizing a “wait-and-see” trust that can adjust for different Federal and State exemptions and can be adjusted for up to 15 months after the date of the first spouse’s death if congress changes the law.

Get an estate plan. According to a Lawyer.com survey in early 2010, many Americans do not have proper estate plans. Only 35% of Americans now report having a will and only 21% have a trust. Thus, while a great deal attention is focused on the proposed legal changes, it is important to focus on yourself and your family and get an estate plan in place and not wait for Congress to act.

Posted by Henry (Hank) J. Moravec, III, a partner at Moravec, Varga & Mooney. 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 or (818) 769-4221.

He focuses his practice on Estate Planning, Trust and Probate Administration, Beneficiary and Trustee Representation, Probate Litigation, Tax Law, and Nonprofit Law. He represents clients throughout Southern California and his offices are conveniently located for clients in the Los Angeles, Orange, Santa Barbara, Riverside and San Bernardino Counties.

The firm website is http://www.moravecslaw.com/. The firm has two offices and consultations and meetings can be held at either office. The San Gabriel Valley office is located at 2233 Huntington Drive, Suite 17, San Marino, California 91108. Telephone: (626) 793-3210.

The San Fernando Valley office is located at 4605 Lankershim Boulevard, Suite 718, North Hollywood, California 91602-1878. Telephone: (818) 769-4221.

Probate Battle Involving Heirs Of Book Author And Undue Influence Allegations Settles After Two Years And On Eve Of Trial

A notable probate battle in Vermont has settled just before trial was to start after a 2½-year-old fight among the heirs of children's book author and illustrator Tasha Tudor. The estate was worth $2 million. Ms. Tudor, 92, died in 2008 of complications from a series of strokes. The settlement agreement was confidential and not filed with the court.
The fight was over the legitimacy of the will and the key issue was whether Ms. Tudor was unduly influenced when she rewrote it to give nearly everything to her oldest son.
Although this case is not in California, it highlights trends we see in cases here in California. First, given the cost of probate litigation and the risks involved, most cases settle before trial. With a $2 million estate, a significant amount of the estate can be consumed in legal fees over a two-year period. It is important to analyze legal expenses and costs as part of the business side of evaluating whether it makes economic sense to proceed to trial.

Second, there is an increase in probate litigation given the economic and housing crisis with some heirs not willing to settle for less and with real estate prices being depressed. Third, when wills or trusts are changed to leave out other children -- it increases the likelihood of probate litigation unless the changes are well documented and planned.

Ms. Tudor, who quit school after the eighth grade, won a worldwide following with her whimsical watercolors and drawings in "Pumpkin Moonshine," ''Corgiville Fair," and "Little Women," among nearly 100 children's books she illustrated or wrote. Ms. Tudor celebrated old-fashioned family life at home, becoming known for her anachronistic lifestyle — often going barefoot, wearing vintage dresses or making linen for her own clothing and living in a replica of an 18th-century New England farmhouse built by her sons, in Marlboro, Vt.

Her 2001 will requested that her cremated remains be buried with her beloved predeceased Corgis and the ashes of her pet rooster. It left her copyrights and most of her assets to sons Seth Tudor and Thomas Tudor and Seth's son, Winslow Tudor, giving only $1,000 each to daughters Bethany Tudor and Efner Tudor Holmes.

But an amended 2002 version cut out Thomas, save for an antique highboy, because of his "estrangement" from his mother. Thomas contended his brother wielded undue influence over their mother and that there are suspicious circumstances surrounding the changes in the will.

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.

He focuses his practice on Probate Litigation, Estate Planning, Trust and Probate Administration, Beneficiary and Trustee Representation, Tax Law, and Nonprofit Law. He represents clients throughout Southern California and his offices are conveniently located for clients in the Los Angeles, Santa Barbara, Orange, Riverside and San Bernardino Counties.

With respect to probate, Hank Moravec has over 20 years' experience as a probate and probate litigation attorney practicing in Los Angeles and is available should you need legal advice regarding your own or a family member's situation.

The firm website is http://www.moravecslaw.com/.
The Los Angeles area office is located at 2233 Huntington Drive, Suite 17, San Marino, California 91108. There is ample free parking adjacent to the firm's office.

NYT Article On Competency: "Money Woes Can Be Early To Alzheimers" And How This Effects Deciding When A Client Lacks Capacity

The New York Times recently had an article entitled "Money Woes Can Be Early Clue To Alzheimers" which is a case study on why early estate planning and having powers of attorney in place before there are competency issues is important -- especially to avoid later charges of undue influence and competency. It also raises the issue, however, of “What do we mean when we say someone has enough decision-making capacity to be ‘competent’?" The issue promises to become even more complicated as researchers and doctors diagnose Alzheimer’s earlier and earlier.

The article notes that the Financial Industry Regulatory Authority, the largest nongovernmental regulator for securities firms doing business in the United States, recently met with individual financial services companies and the Alzheimer's Association to formulate guidelines on how to deal with clients who have trouble remembering and reasoning, a problem that is not new but is increasing as the population ages.

On one hand, it is generally agreed that decisions by a competent adult should be respected. On the other hand, if new brain scans and other methods show signs that a person is developing dementia, does that mean the patient should be watched, or that there should be limits on his or her abilities to make financial or legal decisions?

The article cites experts who say confusion over money and finances is perhaps the most important and most predictable early functional change as people descend into dementia. For lawyers, the main question is at what point a client lacks the capacity to execute a will, trust or other document, and who decides when that point has been reached. And if a lawyer lets a client go ahead, will the document be challenged?

The American Bar Association's Commission on Law and Aging created guidelines on this issue in 2005 entitled "Assessment of Older Adults With Diminished Capacity." The guidelines that include warning signs of diminished capacity, like memory loss and problems communicating and doing calculations. The guidelines instruct lawyers to look at the legal requirements for capacity in specific situations, like making a gift. Courts are always struggling to come up with principles and definitions of capacity and definitions of capacity vary among the states.

With respect to probate, Hank Moravec has over 20 years' experience as one of the best Los Angeles probate attorneys and Los Angeles probate litigation attorneys and is available should you need legal advice regarding your own or a family member's situation. For a consultation, You can e-mail Hank Moravec at hm@moravecslaw.com or call him at (626) 793-3210 or (818) 769-4221 to request a consultation.

The firm website is http://www.moravecslaw.com/. The firm has two offices and consultations and meetings can be held at either office.

The San Gabriel Valley office is located at 2233 Huntington Drive, Suite 17, San Marino, California 91108. There is ample free parking adjacent to the firm's office.

The San Fernando Valley office is located at 4605 Lankershim Boulevard, Suite 718, North Hollywood, California 91602-1878.

LEGISLATIVE UPDATE -- Odds On No Action On Estate Tax This Year Just Went Through The Roof

Its October 1, and there is still no action pending on Federal Estate Tax this year. Based upon several well publicized remarks, including a speech by Charles Grassley on the floor of the Senate and an op-ed piece by Robert Rubin in the Wall Street Journal ("Bring Back The Estate Tax Now"), it is fair to say that, with one quarter left in 2010, policymakers have finally noticed that the tax is coming back at only a $1 Million exemption and a 55% rate next year.

With an election looming in a month, there is basically no chance of action prior to Mid-November, I think that any retroactive application is now over.

I also think that a return to the $3.5 Million exemption and 45% rate is now the most likely scenario, because the government needs the money and has to get it from somewhere.

In an October 2, 2010 New York Times article entitled "TARP Bailout to Cost Less Than Once Anticipated" there is a good opportunity to imagine, as a legislator, (or even a top aide, like all those guys and gals in "The West Wing") how you would (a) address this issue and more importantly (b) explain it to your constituents.

It is no easy task. The New York Times article mentioned above, for example, points out that, according to one poll, 3 out of 10 voters are against the"bailout" even though the bailout is not going to cost $700 billion and may actually make money for the government. In another New York Times article "In Tax Cut Plan, Debate Over the Definition of 'Rich'" (Sept. 30, 2010) is a very thorough dissertation on one of the major issues in tax policy -- who, exactly, are "the rich?"

The only thing missing is the one fact which is rarely discussed, tax policy must address distribution of whatever it is that is being taxed. (It is rarely discussed because it is not entertaining enough, that is for sure!) For example, imagine an economic system with one peasant who is only paid in food, who works for the farm owner. The farm owner, who is "only 50% of the population" pays "100% of the taxes." He pays 100% of the taxes because he makes 100% of the income. The U.S. economy is more complex than that, but the principal is the same, in order to raise money you have to levy taxes on actual streams of income or assets -- you cannot just tax "in theory."

So, now read the two articles and figure out the best solution. (I know I don't know the best solution, that is for sure!) Remember, these are the guidelines:

(i) if you actually apply the taxation to those who have the money, you are vulnerable to the argument that "so and so voted to have 5% of the population pay 37% of the tax";

(ii) you know the average voter basically does not like rich people, since a program to essentially stabilize one of the worst recessions in memory is thoroughly demonized even though it may actually be profitable for the taxpayers, basically on the grounds that people don't like banks; and

(iii) no one agrees on who the "rich" are -- at least no one agrees based on any logic.

Good luck. And if you ever wonder why the Internal Revenue Code is complicated, or why politicians only speak in sound bits with no substance, imagine trying to explain these considerations in 30 seconds.

Posted by Henry (Hank) J. Moravec, III, a partner at Moravec, Varga & Mooney. 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 or (818) 769-4221.

He focuses his practice on Estate Planning, Trust and Probate Administration, Beneficiary and Trustee Representation, Probate Litigation, Tax Law, and Nonprofit Law. He represents clients throughout Southern California and his offices are conveniently located for clients in the Los Angeles, Orange, Santa Barbara, Riverside and San Bernardino Counties.

The firm website is http://www.moravecslaw.com/. The firm has two offices and consultations and meetings can be held at either office. The San Gabriel Valley office is located at 2233 Huntington Drive, Suite 17, San Marino, California 91108. Telephone: (626) 793-3210.

The San Fernando Valley office is located at 4605 Lankershim Boulevard, Suite 718, North Hollywood, California 91602-1878. Telephone: (818) 769-4221.