Can you modify an irrevocable trust in California? 2018 Changes to Probate Law Make it Easier

Just because a trust has become irrevocable doesn't necessarily mean it can't be changed. Bizarre, right? By definition, irrevocable means "not able to be changed, reversed, or recovered; final."

Generally, a trust becomes irrevocable when the Settlor (person who created the trust) dies. While that person is alive, it is called a "Revocable Trust," indicating that at any time the Settlor can make changes to it, or revoke it completely. The very wealthy may also create trusts that are irrevocable during their lifetimes, in order to shelter assets from the estate tax. Many people of more modest wealth also created what's known as "AB" Trusts in the 90's and early 2000's that become partially irrevocable upon the death of the first spouse. 

Luckily for many beneficiaries of these tricky so called "unchangeable" trusts, an irrevocable trust can potentially be altered. All it takes is a little harmony between beneficiaries and a knowledgeable trust attorney. Because we're talking about the law, that statement is, naturally, subject to a host of caveats. But the bottom line is - it's possible!

California Probate Code 15400 (ie CA Trust and Estate Law) refers to the state's laws regarding irrevocable and revocable trusts. Probate Code 15403 and 15404 refer specifically to how one can change or terminate a trust. And this year, something exciting happened to probate code 15400 - as of January 1, 2018, those laws were expanded, effectively making it easier to alter an irrevocable trust.

So, before we get to the changes made to the law, just what did Probate Code 15400 say to begin with?

Before the (much anticipated) 2018 changes, Probate Code 15403 read:

(a) Except as provided in subdivision (b), if all beneficiaries of an irrevocable trust consent, they may compel modification or termination of the trust upon petition to the court. In other words, if everyone agrees, you can change an irrevocable trust.

(b) If the continuance of the trust is necessary to carry out a material purpose of the trust, the trust cannot be modified or terminated unless the court, in its discretion, determines that the reason for doing so under the circumstances outweighs the interest in accomplishing a material purpose of the trust.  Under this section the court does not have discretion to permit termination of a trust that is subject to a valid restraint on transfer of the beneficiary's interest as provided in Chapter 2 (commencing with Section 15300 ). In other words, the court won't allow changes to a trust if there's a good reason not to, and the court can't make changes if a trust contains a spendthrift provision (or similar).

What are the 2018 revisions to Probate Code 15403? 

Under the prior code section, even with the consent of all beneficiaries, the court could not terminate a trust if that trust contained a valid spendthrift provision. Now - they can. Yes! As of January 1, 2018 such a clause will not limit the court's ability to bring a trust to its grave. So, essentially, part of the purpose of the new law (officially called SB 333) was to scratch out the last sentence of subsection (b), above.

But that's not it - SB 333 did even more: Subsection (c) was born, which allows the court to define the class of beneficiaries whose consent is needed for such an action. This would apply if, for example, a trust was left to "heirs" as opposed to living individuals. 

There's just one more important update made by SB 333, altering Probate code 15404:

Previous Probate Code 15404 reads:

(a) If the settlor and all beneficiaries of a trust consent, they may compel the modification or termination of the trust.

(b) If any beneficiary does not consent to the modification or termination of the trust, upon petition to the court, the other beneficiaries, with the consent of the settlor, may compel a modification or a partial termination of the trust if the interests of the beneficiaries who do not consent are not substantially impaired.

(c) If the trust provides for the disposition of principal to a class of persons described only as “heirs” or “next of kin” of the settlor, or using other words that describe the class of all persons who would take under the rules of intestacy, the court may limit the class of beneficiaries whose consent is needed to compel the modification or termination of the trust to the beneficiaries who are reasonably likely to take under the circumstances.

Revised probate code 15404, in turn, creates a private process for modifying or terminating a trust where the settlor and all beneficiaries consent by eliminating the requirement of court approval for such changes.  Lastly, both revised sections adopt clarifying language, such as eliminating the word “compel” to describe a request to the court.

New Probate Code 15404:

 (a) A trust may be modified or terminated by the written consent of the settlor and all beneficiaries without court approval of the modification or termination.

(b) If any beneficiary does not consent to the modification or termination of the trust, the court may modify or partially terminate the trust upon petition to the court by the other beneficiaries, with the consent of the settlor, if the interests of the beneficiaries who do not consent are not substantially impaired.

(c) If the trust provides for the disposition of principal to a class of persons described only as “heirs” or “next of kin” of the settlor, or using other words that describe the class of all persons who would take under the rules of intestacy, the court may limit the class of beneficiaries whose consent is necessary to modify or terminate a trust to the beneficiaries who are reasonably likely to take under the circumstances.

For questions about Revocable Trusts and Irrevocable Trusts, or how the Contra Costa and Alameda County Probate courts handle Trust matters, contact our SF East Bay Trust Attorneys at 925-322-1795.

The New York Times claims an Unsigned Will isn't Valid - But are they Correct?

The New York Times just published a question and answer in its "Social Q's" section regarding the legal validity of an unsigned Will. Another recent article referenced a Will written in a draft text message. Naturally the text also remained unsigned. The text message was approved as a valid will by an Australian court. In the U.S., probate courts are not usually so flexible when it comes to what constitutes a valid will. 

Without a signature, is a Will still valid in the eyes of the Probate Court? Let's look specifically at California Probate Law.

The easy answer is No. Without a signature, a Will is not valid. The more complicated answer is - if you have a good lawyer - the unsigned will might give you some leverage. 

And the answer for the rest of us is - sign your estate documents and do it with a reputable estate planning attorney. But we've all heard that one before. So let's move on to the juicy stuff.

In the Times' article, Marie writes that her brother and his wife loved their Uncle Eddy. In fact, the brother & wife were apparently the only ones who loved Uncle Eddy. Eddy had three siblings, none of who spoke to him. Maria's brother and wife, on the other hand, spent a significant time with Uncle Eddy. Or at least as much as they could stand. Then Uncle Eddy died.

Now, before Eddy died he apparently wrote a Will leaving everything to Maria's brother and his wife. But he didn't sign it. According to intestate succession (the law governing asset distribution when there is no valid Will or Trust), Eddy's three siblings are entitled to his estate. Maria's brother and wife want to know what can be done. After all, the will clearly shows Uncle Eddy's intent to give everything to his nephew, right? And everyone knew Eddy did not like those pesky siblings. He certainly wouldn't want them to get his estate. 

The Times reporter tells Maria that her brother and his wife are [ ] out of luck. The law is the law, right? And the will wasn't signed, so it's not valid. Simple as pie. 

I can't speak to New York probate law, but in California it would certainly be worth having an experienced Probate Litigation attorney take a look at. If the will was written in the handwriting of Uncle Eddy (a holographic will), and the brother and his wife could show some kind of proof that Uncle Eddy intended to sign it and had just made a mistake - they might just have a chance. In the landmark case of 2015, Estate of Duke, California courts ruled that:

an unambiguous will may be reformed if clear and convincing evidence establishes that the will contains a mistake in the expression of the testator's intent at the time the will was drafted and also establishes the testator's actual specific intent at the time the will was drafted.

Estate of Duke effectively established that California probate courts can use extrinsic evidence (evidence contained outside of the actual document) to determine the intent of the testator.

Testator = person that died leaving a will or trust in place

The bottom line is don't ask the New York Times if you have a legal question- ask an attorney who specializes in the relevant field of law. When it comes to questions around the validity of a will or trust, ask a Trust and Probate Litigation Lawyer.

Our office specializes in Trust and Probate Litigation in Contra Costa County and Alameda County. Call 925-322-1795 for your Consultation.

Not All Heirs Are Created Equal: The Dangers of Letting the Court Decide How to Distribute your Assets

When a person dies who does not have a will the probate court must manage his or her estate. Without making a will the person is said to have died “intestate”.  Simply put, the court, according to the laws of each particular state, decides who shall receive outright your personal belongings and money.

But there are some heirs who do not necessarily benefit from receiving a direct line to significant funds. These may include:

• Heirs with addiction issues - Those persons with alcohol or drug dependency issues can go through large amounts of money in a short time, possibly contributing to their further downfall.

• Heirs that are known credit risks - People with poor credit ratings or who may have filed for bankruptcy may not be fiscally responsible.  Big spenders without financial discipline can also go through an entire inheritance due to reckless spending.

• Disabled spouses - As persons with disabilities may qualify for public benefits at some point, such as Medicaid or Social Security disability, their eligibility for such programs may be jeopardized by even a small inheritance.  

• Disabled children and minors - Minors cannot inherit from an estate until they are of legal age.  Any money left to a minor must be paid to the clerk of court without any guidelines in place as to how it should be spent to assist the minor. And minors with special needs can be put at the same disadvantage as spouses with disabilities; that is, minors with special needs may be eligible for government benefits and any inheritance may adversely affect their eligibility.  

If any of your family members are in one of these categories special provisions can be set up through a well-drafted trust based on the circumstances that will protect their inheritance. A trust permits its creator, or ‘trustor’, to control how the money is distributed by setting forth certain criteria for the beneficiaries to receive money.

For more information about the estate planning process, or how a revocable trust works, contact our East Bay Estate Planning Law Firm at 925-322-1795.

Prince Estate Inventory & Appraisal shows Property and Cash of Star

When Prince died without leaving a will his estate became subject to the requirements of the probate court.  One of the first things the probate court asks for is an inventory of one's assets. The value of an estate has to be established, and this is done by having a professional appraiser (called a probate referee) assign a dollar value to the deceased person's real estate and personal property.  This inventory of personal and real property, along with its corresponding values is known as the "Inventory and Appraisal" and must be submitted to the court in every probate. 

In Prince’s case the company overseeing his estate has only begun to submit the asset inventory to the Carver County District Court. Much of the estate value hasn’t yet been established.

Part of the reason for the partial inventory and appraisal is due to the complexity of assessing Prince's vast estate. Prince kept unreleased recordings and videos in his personal vault and owned several companies that have yet to be valued. In addition, personal effects such as his motorcycles, a 2006 Bentley, jewelry, musical instruments and many more items have not been appraised.

What property is on Prince's Inventory and Appraisal so far?

• Real estate worth approximately $25 million
• Cash in 4 bank accounts
• Gold bars

In Prince’s case the Bremer Trust has thus far been overseeing his estate as Special Administrator. The Administrator (called the executor when a will exists) is responsible for compiling and submitting the Inventory and Appraisal, along with the assistance of his/her attorney.

This aspect of dealing with the assets of a probate is just one of the responsibilities of the representative to the court.  Other responsibilities include the payment of  debts, taxes and liabilities of the estate and the distribution of the remaining assets to the persons entitled to receive them.

Why is it taking so long to submit a completed Inventory and Appraisal for Prince's Estate?

As outlined above, part of the reason for this is the complexity and extent of Prince's assets. Another reason is that Bremer Trust has reportedly asked to resign their position as Special Administrator and as such, the Minnesota court is in the middle of choosing a new Administrator for Prince's estate. -

The appointment of a new Administrator has sparked yet more litigation in an already complicated probate, with Prince's siblings in disagreement with who should be appointed. One proposed Administrator is New York entertainment attorney L. Londell McMillan, who represented Michael Jackson's mother in his estate. Filings by Randy Jackson assert that McMillan did not act in Katherine Jackson's best interest at all times, but was interested in personal financial gain instead. Furthermore, McMillan already gets a 10% cut of contracts signed by the estate - presenting a potential conflict of interest. 

Were Prince's estate being probated in Contra Costa County, I believe the Court would be most likely to appoint a neutral third party, such as a group of professional fiduciaries, or a trusted bank who had the resources to manage his vast estate. In the midst of litigation, the Court often will turn to a neutral third party, rather than choosing an Administrator whose appointment is contested by one party. 

Does this sound complicated? In Prince’s case, the complications are almost unceasing as many individuals have come forth as potential heirs, there is disagreement about the Estate's administrator, and litigation pending with the current Administrator. Nevertheless, even in the simplest of estates, the process of probate takes time and costs money. For residents of California (and most other states), a Trust is usually the simplest and least costly way to distribute one's assets.

For questions about Probate, Contested Probates, or Estate Planning, call my Walnut Creek Probate Law Firm at 925-322-1795 to set up a consultation.

Caregivers and Gifts: The Risk of Committing Financial Elder Abuse

Caregivers cannot accept gifts from elders without being at risk for committing financial elder abuse. 

If an older adult chooses to gift an estate or substantial sum of money to their caregiver, California Probate Code requires that the drafter (usually the lawyer) obtain a Certificate of Independent Review from an independent attorney. This means the lawyer drafting the will or trust must bring in an independent attorney to assess the situation. 

This is because when an older adult makes a gift of this sort to their caregiver, the law automatically assumes that elder financial abuse is present unless the drafter obtains the required certificate [California Probate Code Sections 21380(3) and 21384(a)]. While this presumption of fraud or abuse may seem extreme, this type of elder abuse is actually very common and can often appear harmless on the outside.

Even if the caregiver obtains a certificate of independent review, they may still be at risk for a financial elder abuse lawsuit.

CASE STUDY

We recently had a case involving an elderly man and the gift of his estate to a caregiver. The man, who had dementia and was physically dependent on medical devices, had gifted the entirety of his assets to a caregiver he had known for less than two years. His family was distraught over the change they saw in the elderly man under her care, and it was not until his death they learned he had left everything to her. In this case, the caregiver had personally arranged for the elderly man's estate plan to be done. 

It is likely that the caregiver was unduly influencing the man, as he lacked mental capacity and was very dependent on her for physical assistance. Furthermore, the lawyers who drafted the will in this case did not obtain the required independent review.

We eventually resolved the case and were able to recover a substantial portion of the man’s estate for his family members. The case could have easily gone to trial - and the caregiver would have potentially had to give back everything she'd inherited  - plus damages. 

Financial elder abuse is far more prevalent than most of us know. Many caregivers are wonderful, loving individuals who may feel deserving of gifts from their patients. Nevertheless, caregivers and family members alike must be extremely reticent when it comes to material exchanges between elders and their caregivers. California law is clear - any gift to a caregiver is presumed to be attained through undue influence. 

If you believe financial elder abuse is occurring, call our Walnut Creek Financial Elder Abuse Law Firm at 925-322-1795 for your consultation. 

Star Trek's "Chekov" dies at 27 with no Will

As many Star Trek fans may already know, 27 year old actor Anton Yelchin, known as “ Chekov” to fans, died in a freak car accident on June 19th when he was crushed by his Jeep Cherokee in the driveway of his Studio City home. Last Friday, Court records revealed he had no will or trust. 

His latest film, “Star Trek Beyond” has grossed more than $106 million in the first two weekends since it opened.

His parents, Victor and Irina Yelchin, filed to become administrators of their son’s estate in Los Angeles Superior Court.  Court records indicate that Yelchin’s assets included $731,000 in equity in his home and $641,000 in personal property.

According to the attorney who represents Yelchin’s parents, a wrongful death suit will be filed against Fiat Chrysler, who made the Jeep Grand Cherokee that was responsible for their son’s death.

The thought of estate planning crosses the mind of very few young people, even those worth millions, like Mr. Yelchin. Tragedies such as his are rare, and thus it makes sense that he had no Will or Trust in place. However, because he did not have Estate Planning documents, a sizable chunk of his assets will now go to attorneys. In addition to suffering the loss of their son, his parents will also have the added burden of sorting out his estate. 

What does the Probate Process look like for someone with no Will, no spouse, and no children? And who does everything go to?

With no legal spouse and no children, California Probate code states that all assets will be inherited by one's parents. Therefore, in Anton Yelchin's case, his parents, Victor and Irina, are entitled to his estate. 

The Probate Process begins with a person in an appropriate position (such as the parents) hiring an attorney and filing a petition to be appointed Administrator of the Estate. This is exactly what Anton's parents did last Friday. The court will set a hearing, and if all goes smoothly, appoint them as administrators. If granted, the court will grant the administrators "Letters of Administration," which effectively gives them the legal right to take care of all aspects of the estate. In Anton's case, his parents will likely become the administrators, and they will also be the beneficiaries. In the infamous probate of Prince's estate, the administrator is a Bank, and the beneficiaries are his siblings. 

In California, the attorney for the Probate is entitled to a statutory fee, or percentage of the estate, plus any "extraordinary" fees that go above and beyond the normal duties of probating an estate. Examples of extraordinary fees include an attorney's assistance with the sale of property. In Mr. Yelchin's case, it appears he has at least one property. While the court states he has $731,000 in equity in his home, the percentage that goes to the attorney is based of the total value of the home. Likewise, the statutory fee is based on the value of all other assets within the estate. While the court reports indicate Mr. Yelchin had only $641,000 in personal property, it is likely he is worth more due to his short but very successful acting career. Dealing with royalties and other future profits that are likely to occur on Mr. Yelchin's behalf, his parents will have the added complication and cost of how to deal with this income. It should be noted that the Administrator of an Estate is also entitled to a statutory fee equal to the attorney's. However, in this situation, the Administrators and the beneficiary are one and the same. 

Once the attorney and the Administrator(s) resolve issues relating to noticing creditors, paying creditors, selling real property, and resolving any litigation that may arise, a petition is presented to the court to close the estate. Upon the court's approval, the assets of the estate can be distributed to the beneficiaries. 

If Mr. Yelchin had been given more time, he would have benefited from setting up a trust. This would keep his estate, his net worth, and other private information out of the public eye. Attorney fees would be greatly reduced, and the entire process could be handled outside of the courts in a swift and efficient manner. As it is, a probate in California generally takes a minimum of 6 months, with most taking at least a year. Our hearts go out to his parents, family, and friends as they deal with this great tragedy. 

For questions about Probate, Trusts, or Estate Planning, Contact my Walnut Creek Estate Planning and Probate firm at 925-322-1795 for your consultation. 

New Bill Proposes Pro-LGBT changes to CA Probate Code

Modernizing California Probate Code to Reflect Marriage Equality

While attorneys are familiar with the terms "probate code" and "civil code," most people are not. The probate code in California governs everything related to probate, including trusts and estates and elder law. 

As you can imagine, much of probate law makes reference to married couples. As a community property state, California property and assets frequently pass to the remaining spouse when someone dies. As it stands now, California probate code uses the terms "husband" and "wife" to refer to married couples. 

In February of this year, Senator Hannah-Beth Jackson introduced a new law, SB 1005, that would change the language to make it gender neutral. In sections of the probate code with important implications for married couples, the word "spouse" would replace "husband" or "wife." 

With marriage equality now being recognized on a national level, it is only fitting that the law be updated to reflect that equality. SB 1005 will replace the words “husband” and “wife” with "spouse" in seventeen different sections of the California probate code. In addition, SB 1005 will also modify language to include registered domestic partners under the definition of "Spouse." 

Why has California taken so long to update probate laws to reflect marriage equality?

The California Supreme Court officially recognized marriage equality in May of 2008. Under the California Constitution, same-sex marriage was deemed legally valid. However, the law was repealed in November of that same year when voters approved Proposition 8. Same sex couples in California would have to wait two more years before the Supreme Court would eventually uphold Proposition 8 as unconstitutional, and marriage equality would become law once again. 

In 2014, California approved updates to the Family law codes with SB 1306 to reflect gender neutrality. With last year's Supreme Court decision to uphold same sex marriage across the nation in Obergefell v. Hodges, it was high time for California to update the probate code as well. Laws generally move through the house and senate at a slow pace, and as such it has taken several years to put together an update to the probate code. Hopefully, SB 1005 will be passed swiftly and changes made within the year.

When it comes to proper estate planning, specificity is crucial. Room for interpretation in estate plans, let alone the probate code, opens doors to potential litigation. By implementing SB 1005, California will not only be adjusting code language to reflect gender neutrality, it will ensure that fewer probate litigation cases will come before its courts. 

If you have questions about Estate Planning or Probate for married couples, call my Estate Planning firm in downtown Walnut Creek for your consultation. 925-322-1795

Probate 101: What to do if you inherit a house in the SF Bay Area

What do you do if you inherit a home in the SF Bay area that is not titled in the name of a trust? By now, you are most likely aware that in order to transfer the title of the home's deed, the property will have to go through probate.

With real estate values at their current value, inheriting a property of any kind in the bay area is nothing to balk at. Whether the home is worth$200,000 or $2 million, you'll need to get it re-titled in your own name if it is not contained in a trust. That means going through probate. The probate process frequently gets a bad rap, but in truth it can be a fairly smooth, uncomplicated process when heirs and beneficiaries are on the same page. In addition to consulting with a local attorney to initiate the probate, there are some practical things you'll need to consider as well. Here are five important things to think about if you've inherited Bay area property:

1. What is the Probate Policy of the County the Property is located in?

Once you've determined what county the home is located in, you'll need to find an attorney who specializes in probate in that county. This is important. A probate attorney who frequently goes to court in the county your property is located is in the best position to assist you. All county probate courts are not alike. After all, they are made up of people, and people have differences and preferences. An attorney familiar with your specific county will ensure your probate is completed as swiftly as possible, and can best guide you should any complications arise during the probate. For example, my office specializes in probates and contested probates in Alameda and Contra Costa County. 

A good probate attorney will also take the time to answer your questions, walk you through the probate process, and be available to answer your questions along the way. 

If you anticipate any objections or differences of opinion in regards to who will inherit the home, or become administrator of the estate, it is especially important to hire a probate attorney that also has significant probate litigation experience. 

2. What expenses are associated with the home?

Does the home have a mortgage that needs to be paid? Or homeowner's association fees? What are the upkeep costs - utilities, gardening, taxes, insurance, etc? Keep records and receipts of any expenses you incur on behalf of the property - they could be relevant in the probate process.

3. What should I do with the house?

You have three options for your newly inherited property: keep it for your personal use, rent it, or sell it. If you have siblings or other persons who stand to inherit part of the property, get together and discuss what option best suits everyone. Consider making a list of pros and cons for each option. One thing to keep in mind is that if you decide to keep the home, the costs of probate will have to be paid by you, the beneficiaries, or other funds from the estate. 

Communication among family members is key when it comes to inheritance - especially if there is no will to dictate who gets what.

Lack of Communication = likelihood of litigation = more money spent

4. What is the Property Worth?

Knowing the value of your property may help you decide what to do with it. Consult with several realtors who have sold homes in the nearby area to get estimates on the property's value. If you think you may end up deciding to sell, find realtors who have experience selling homes in the probate process. The sale of a home in probate is more complex than a regular sale, and a realtor equip to deal with that is your best bet for a smooth and successful sale. A knowledgeable probate attorney will be able to offer a few names. 

If you are not the only one who stands to inherit the property, you'll need a certified appraisal as well, even if you decide not to sell the home. The certified appraisal generally costs a few hundred dollars, and is one of the requirements set forth by the probate court.

5. At what point in the probate can you sell a property?

The majority of inherited homes are sold. Either beneficiaries and heirs do not live in the area, or they already have their own home and do not wish to move. In addition, the expenses of maintaining a home can begin to add up. Most heirs and beneficiaries also elect not to deal with the hassle of renting out a home, unless there is very little liquidity to be gained from sale.

Once an executor (if there is a will) or administrator (no will) is appointed by the probate court, that person is given either full or limited authority to sell the assets of the estate. For the purposes of real estate, this typically means they have the legal right to sell property. Sometimes, the sale of the property will be subject to court approval, but most often it is not.

Regardless, any property belonging to an estate which is going through the probate process can generally be sold once a personal representative (executor or administrator) has been appointed by the court. If there is more than one person who wishes to be the personal representative, or any question of who is legally entitled to do so, consult with a probate attorney as soon as possible.

Most Common Mistake when Inheriting large Assets

Because of the stress and grieving that accompany the loss of a loved one, resolving an estate can be an emotional and overwhelming process. This is one of the reasons that family members elect to hire an attorney to assist with the process, even when distribution is straightforward. The probate process can be long and complicated, just like selling a piece of property and paying the estate taxes. A solid probate attorney, knowledgeable real estate agent, and estate accountant can go a long way in relieving the burden and stress of settling an estate.

Choose professionals who you trust and feel comfortable with. Don't be afraid to interview several choices before making a decision. 

If you have questions about the Probate process in Contra Costa or Alameda County, feel free to call my office for your free consultation: 925-322-1763

Beneficiary Boo Boos

Who inherits your Investment Accounts if you die? Who gets your IRA? If you can't recall, it's worth double checking to make sure your designated beneficiary is someone you actually want to receive your money. If you have either separated from a spouse, or they have passed, this is particularly important.

When correct, beneficiary designations are a simple and efficient way to bequeath your assets to another when you die. No court proceedings are required, and beneficiary accounts are not subject to probate or trust administration. Unfortunately, many forget to update their designations, and some fail to name a beneficiary at all - thinking they'll take care of it at a later date. 

What kinds of problems can a beneficiary mistake cause for families and loved ones? Emotional stress, fighting, and attorney's fees are the three most likely results. Let's look at some examples. 

I currently have two probate cases where the decedents both named my clients as the beneficiary to some accounts, but failed to do so on others. This has a two-fold negative effect on the beneficiaries.

First, it increases the size of the probate estate when there is no estate plan (which is the case here). In California, estates greater than $150,000 are subject to probate - a lengthy court process in which attorneys charge fees based on the size of the estate. Without a listed beneficiary, accounts become part of the estate - meaning increased fees. 

Second, neglecting to name a beneficiary fuels or exacerbates any estate litigation because there is now more money to fight over. 

For example, in one of my cases, my client is the listed beneficiary on some of the decedent's accounts, while he was left out on others, such as an IRA. However, he is the logical beneficiary to the entire estate, as we were able to prove that an Oral Contract to Make a Will existed. He was not, however, a blood relative. As far as everyone knew, the decedent had no family. But just as we were about to file the petition to close the estate, a long lost Chilean relative came out of the woodwork and filed a lawsuit, claiming they are the legitimate heir to the estate. While this person may have come forward even if the estate only consisted of a home, and not additional beneficiary accounts, my client is now in a position of increased vulnerability because there are additional assets at stake. 

In another probate case I have, the situation is similar. In this case, the decedent had no children but was very close to his nephew, my client. He did, however, have step children. The decedent did not have a will, but verbally told my client that he wished for him to receive his assets when he died. My job, as his attorney, is to prove that it was the true intention of the decedent to leave his assets to my client. One way to clearly show that intent would be if my client was the listed beneficiary on all of his uncle's accounts. Unfortunately for my client, he was only listed on one account, while the beneficiaries on the other two were his deceased wife, the mother of his stepchildren. The decedent's step children are, by law, entitled to some portion of his estate, and with the listed beneficiary as their mother, have a stronger case that they are entitled to a larger part of the state, and possibly even to act as administrator of the estate. Becoming administrator might seem appealing to them, as the estate administrator is also entitled to a fee equal to a percentage of the estate. In this instance, the decedent failed to update his beneficiary listings, and has thus opened up the door to litigation.

The bottom line is that failing to name an account beneficiary, or update account beneficiaries creates additional stress for heirs, can tear families apart from fighting over the funds, and often leads to increased legal fees. I have seen entire estates eaten up by attorneys' fees because family members cannot agree on who is entitled to the decedent's assets. Even when a thorough will and trust is in place, failure to update beneficiary listings costs families significantly more in attorney's fees because the accounts must be included as part of the probate estate. 

For more information on Probates or Estate Planning, call my Walnut Creek Trust and Estate Law Firm at 925-322-1763 for a free consultation.

10 Tips: The Probate Process in California

You may have heard the term "Probate," but no be clear on what exactly it means. Many people feel frightened by the possibility of probate, which has often been cited as a selling point for why one needs an estate plan. While there are many advantages to having an estate plan, probate is not something to be scared of. California courts make the probate process fairly straightforward, and with the help of an experienced attorney, probate can be easily navigated. Below I've outlined 10 essential facts about estate probate in California. 

1. MOST ESTATES GO THROUGH THE PROBATE PROCESS

Probate is the court managed process of distributing the assets of a loved one who has passed away with no estate plan, or only a will.

2. NOT ALL ASSETS ARE SUBJECT TO PROBATE

Assets that have a named beneficiary, such as a life insurance policy, assets held in joint tenancy, and assets that are "Payable or Transferable on Death" are not subject to probate

3. PROBATE TYPICALLY TAKES 6-12 MONTHS

Because of the way Probates work, in specific the 4-month waiting period for creditor claims, a probate generally cannot be administered in less than 6 months in Contra Costa County.

4. THE PERSONAL REPRESENTATIVE MANAGES PROBATE

When there is an executor who is named by a will, they will most likely be appointed by the court as the personal representative. If there is no will, or the executor is unable to act, the court appoints an administrator. Typically, this is the closest living relative.

5. THE PERSONAL REPRESENTATIVE MAY COLLECT FEES

The personal representative may earn a fee for their services, in addition to out-of-pocket expenses incurred for managing and settling the estate. Fees typically range from 2-4% of the probate estate.

6. THE PERSONAL REPRESENTATIVE CAN BE HELD LIABLE

The Personal Representative can be held personally liable for improper management of the estate. They can also be removed if an action is brought by a beneficiary or other individual that clearly demonstrates mismanagement.

7. THE EXECUTOR OF A WILL DOES NOT HAVE TO SERVE

The named executor of a will does not have to serve as the Personal Representative if they are either unwilling or unable.

8. PROPERTY OUTSIDE CA IS A SEPARATE PROBATE

If real property is owned by the decedent outside of their home state, a separate probate must be opened in that state. This is called "Ancillary Probate."

9. CREDITORS HAVE A TIME LIMIT TO FILE CLAIMS

One of the primary responsibilities of the personal representative (or their lawyer) is to properly notice all creditors of the estate. Once properly noticed, creditors must issue their claims to the court within the creditor claim period, typically 4 months.

10. HEIRS MUST BE NOTICED ABOUT PROBATE

CA Law require that heirs and beneficiaries are properly noticed when certain actions (such as sale of real property) occur. Failure to properly notice or handle issues regarding the estate may invite legal action from beneficiaries.

While the probate process is fairly straightforward for a simple estate (1 child, 1 house, for example) - probate can get increasingly complex if there are multiple beneficiaries and assets. I specialize in assisting clients with complex probate in Contra Costa County and Alameda County. Call my Walnut Creek Probate Law Office at 925-322-1763 for a free consultation.

Tom Clancy's Estate Plan not as Well Thought out as his Novels

Celebrity author Tom Clancy was widely known for his bestselling novels, which include popular titles such as "Patriot Games," "The Hunt for Red October,"  and "Clear and Present Danger." Unfortunately, his skills in crafting and meticulously planning espionage tales did not transfer over when it came to planning his Estate. When Clancy passed away in 2013, his estate was left in a bit of a mess. This "mess" led to a family fight which quickly crept its way in to the public eye.  

So just exactly where did Tom Clancy go wrong? Well, let's start with a bit of background. At his death, Clancy was married to Alexandra Clancy, with whom he had one daughter, a minor. He had 4 children from a previous marriage, as well as several grandchildren. His widow, his four children, and his grandchildren, were all named as beneficiaries to his estate, which is valued at approximately $83 million dollars. This does not include other investments or funds shared with his wife Alexandra, which would pass immediately to her and not be available for the public to see (that means you and me). Alexandra was left 2/3 of his estate, and 1/3 was to be split among his four children and grandchildren. $65 million of this was his share of ownership in the Baltimore Orioles, while the rest consists of several properties (one a 17,000 square foot penthouse at the Ritz Carlton in Baltimore!), 26 guns and rifles, and a WWII tank, among other items of value.

According to WSJ's article on the Clancy estate, Clancy's will specified that the family members shares be split between a family trust, a marital trust, and the children's trust(s). Now, first things first. You and I should not be privy to Tom Clancy's personal financial details (but it is awfully fun). After all, would you want the Wall Street Journal to publish articles that aired your family's dirty laundry? Well, the truth of the matter is that Mr. Clancy, with the help of a good estate planning lawyer, could have avoided this media fair. He only needed to fund the trusts he created for his family. What does it mean to fund a trust, you might ask. Well, any good estate plan will contain at least one trust. The trust is a legal entity which is created to hold assets, and sometimes shelter them from taxes. Tom did an excellent job of creating his trusts, but he (or his lawyer) failed to actually put $83 million is assets into these trusts. Instead, his will specified that his assets be split among the trusts. This means that the assets have to go through probate, which in turn means the documents become available to the public. And while no one may hunt down your court documents to be published in a newspaper, a trust done correctly leads to less administrative costs, legal fees, annoyance, and delay after someone dies. Setting his family up for a legal headache visible to the public was mistake number 1.

Mistake number 2 relates to ambiguity in the will over who will pay the estate taxes - his widow or his four children. Let us say for the record that this a problem of only the very wealthy. Estate taxes only apply to individuals who have over $5.34 million dollars at their death. This means a couple can jointly hold close to $11 million dollars and still be exempt from estate taxes. Clancy's $65 million dollar share in the Baltimore Orioles alone puts him well above the exemption limit. So, now to the mistake. Shortly before he died, Clancy made an amendment to his will, with his lawyer and executor of his Estate. Wealth Management Magazine reported last year that when Alexandra's tax bill came due, she claimed that this amendment clearly stated that she would not be responsible for any of the tax burden, and it should all be paid by the children. This would save her from owing about $7.5 million dollars. The very lawyer and estate executor who had amended Clancy's will stated that Alexandra was incorrect and this was not Mr. Clancy's intention. So, Alexandra quickly petitioned to have him removed as executor. 

So the big question became whether or not the 2013 amendment was intended for the children’s trusts to carry all of the tax burden or not. With better estate planning, this $8 million question of intent would not need to be litigated, as a well drafted will or trust would clearly make these distinction. However, despite arguments from the very lawyer who drafted the amendment to Clancy's will, a Baltimore judge ruled yesterday that "the clearest and the predominant evidence" of Clancy's intent did not wish for Alexandra's family trust to shoulder the tax burden. Those familiar with the case believe an appeal by the children is imminent. 

It also appears Tom made a third mistake in not taking full advantage of what I call specialty trusts. When there is significant money at stake, estate planning gets very creative to avoid taxes. QTIP trusts, generation skipping trusts, and GRATs are just three examples of such specialty trusts. A GRAT (grantor retained annuity trust) is one of the most interesting. Essentially, the GRAT allows money to be invested with any gains to go to heirs tax free. While a bit more complicated than that, the Center on Public Policy estimates that this specialty trust has allowed estates to avoid nearly $100 billion in taxes since 2000. The Center on Public Policy also states that while the estate tax rate is between 35-40%, the average effective rate in 2013 was just 16.6%. No doubt this was in large part due to creative estate planning that Mr. Clancy could have taken advantage of with the right lawyer. 

While Tom Clancy's estate planning errors may be on a much larger scale that most,  his story is not unusual. Improper estate planning is extremely common and can lead to serious rifts between families. If you have questions about your estate plan, or need help with a Trust Administration or Probate, feel free to call our Law office in downtown Walnut Creek at 925-322-1763. I offer  free consultation and will be happy to speak with you. 

FAQ: Estate Planning in Alameda and Contra Costa County

FAQ: Estate Planning in Contra Costa and Alameda County

An Estate Plan may have been on your "to do" list for some time. You are not alone. Most of the couples I talk to in the San Francisco East Bay area have not yet done their estate plan. It's one of those things that just keeps getting pushed off to a time when you feel more relaxed, or have less on your plate. The good news is that it's actually pretty easy to start the process - and it probably won't take nearly as long as you think to complete it. So, jump in! Make an appointment, and get it done. Here's some questions you may have in the meantime:

PART 1: How an Estate Plan saves you Money

What is included in an Estate Plan?

An Estate Plan is a set of legal documents that typically includes a Will, Power of Attorney, Advance Health Care Directive, and Revocable Living Trust. Larger estates may include sub trusts, life insurance trusts, or other instruments to reduce estate taxes and distribute assets as smoothly as possible. Your attorney can advise you on this.

An Complete Estate Plan will:

• Provide a complete plan for how and when your estate will be distributed to your beneficiaries
• Name a guardian for the care of minor children
• Name someone to administer your estate when you pass
• Name someone to make financial/medical decisions for you if you become incapacitated
• Reduce or avoid taxes associated with the estate

How can an Estate Plan save money?

1. There are a host of ways that having well drafted estate planning documents will save you and your family money as you age, or when you pass. The first is touched on below, and often cited by attorneys as a reason to do your estate plan - "Probate."Generally the cost of a probate is higher, and the process much longer, as the court must oversee the distribution of your assets. See below for specific costs of Probating an estate in California.
2. This is not the only way having an attorney complete your estate plan can benefit you, however. An experienced Elder Law or Estate Planning lawyer can ensure that your will and trust meet all of the legal requirements for validity. The probate court (the courts which handles estate law) can and is very discerning when it comes to the language and content of wills and trusts. If there are any mistakes or oversights, the documents can potentially be declared invalid.
3. An attorney will also keep copies of your documents on file, should anything happen to your copies. While this may not seem likely, I have seen many instances in which wills are in questions due to forgery, and estate planning documents are misplaced or tossed out by accident. 
4. An experienced Elder Law attorney can also help you guard against future litigation in regards to your estate. A huge percentage of estate litigation cases are predicated upon errors, lack of specificity, or missing information in regards to the intention of the testator (person who owned the assets and has died). While avoiding litigation is never guaranteed, an airtight estate plan provides significant protection against it. 
5. A valid Power of Attorney document avoids conservatorship. A large portion of my elder law practice in Contra Costa County is devoted to helping family members establish conservatorships over parents or loved ones. A conservatorship gives one many of the same powers as a power of attorney, but must be done through the court. They become necessary when someone no longer has the mental capacity to sign a Power of Attorney, or there is a problem with their Power of Attorney (such as a coerced signature). In the SF East Bay, the majority of conservatorships I have established are for elderly persons with Alzheimer's or dementia. Unfortunately this is a medical condition which is strikingly common. The cost of a conservatorship in Contra Costa or Alameda county is typically upwards of $4000. Conservatorship matters of more complicated estates can be ongoing and much more expensive. They are typically paid for using the funds of the person being conserved. 
6. The Healthcare Directive, also included in an Estate Plan,  is another document that can potentially avoid costs. A healthcare directive allows you to specify your wishes for end of life, should you be incapable of stating them at that time. Extraneous hospital bills or long term care costs can potentially be avoided. 

What is the cost of Probate?

Probate Costs in California will typically include a filing fee of $435-$465 + closing. $200-300. In addition, the executor of the estate is entitled to statutory fees based on the value of the estate. If an attorney is hired, the attorney will also receive statutory fees under California law. This is the base fee. Should there be any "extraordinary" fees, attorneys will also receive an hourly rate. In Contra Costa County, this is $325/hr. Extraordinary fees include work such as resolving disputes between family members, among other things. The fee structure for both the executor and the attorney (individually) is:

• 4% of the first $100,000
• 3% of the next $100,000
• 2% of the next $800,000
• 1% of the next $9 million
• .5% of the next $15 million

The percentages refer to the total of the probated estate (any assets or funds that are not in a trust). To estimate the cost of probate, add up the value of all your assets and then calculate the amounts that go to the executor and attorney, add in court fees and additional attorney fees, and you have the total estimated cost of a probate. 

Part 2 of our Estate Planning FAQ will address the specifics of a Trust vs. a Will, and what you'll need to get started with your estate plan. I'll also provide details on when you need to update your estate plan. 

If you have any questions regarding your estate plan, I offer a free consultation from my Elder Law and Estate Planning office in Walnut Creek. I frequently work with clients from Lamorinda, Danville, Concord, Pleasant Hill, San Ramon, Martinez, and the surrounding areas of the San Francisco East Bay. Call 925-322-1763 to schedule your appointment. 

The Dangers of Probate: Embezzlement

This story is an example of what can happen in a worst case scenario probate. Probate is a court process by which an estate (funds and real property) is distributed when a person dies. Probate only occurs if an estate plan has not been set up. Under California law, this means a person's assets exceed $150,000 and their assets are not in a trust. Even if someone has a will, a probate still takes place.  Such was the case with Miriam Strong, long time Connecticut resident, who died in 2010 at the age of 85 with an estate estimated between 3 and 4 million dollars. This May, nearly 5 years later, prominent real estate attorney Peter Michael Clark, was arrested and charged with embezzling $1.8 million of that money. 

Clark was Ms. Strong's lawyer, and assisted her in drawing up her will, in which he appointed himself as co-executor of her estate. Why Mr. Clark did not have Ms. Strong put her assets in a trust to protect them is unclear. This misstep alone would guarantee Mr. Clark received at least $60,000 in legal fees when she died, because the estate would have to go through probate. This could have been avoided with an Estate Plan. 

In California, if someone dies without an estate plan, and there is no obvious choice for an executor (such as an heir), an attorney can be appointed as the executor of an estate. The executor, often with the help of an experienced probate lawyer, is responsible for distributing the assets of the estate and accounting to the court. In this case, the executor and the attorney were one and the same - and the unthinkable happened - the money "disappeared". The $1.8 million dollars was earmarked to go to the town of Oxford, CT for student scholarships and a new library, and Ms. Strong's church, which was desperately in need of repairs to its boiler room. The shocking part is that it took nearly five years for this embezzlement to surface. According to the affidavit, the Probate court scheduled a hearing to determine what had happened to the money after beneficiaries reported not receiving the funds. The FBI began an investigation, and Mr. Clark was arrested several months later. 

Despite the jokes made about attorneys, most attorneys I know in Contra Costa and Alameda County hold themselves to a very high ethical standard. And by law, an executor of an estate or trustee of a trust has a "fiduciary duty" to the beneficiaries of an estate. This means that they will act in the highest interest of the beneficiaries, and uphold themselves to the highest ethical duty of loyalty to those beneficiaries. According to an FBI report, Peter Michael Clark had filed "false and misleading documents" to the probate court, indicating that the money had gone to beneficiaries when instead it went to himself. It seems that greed overcame Mr. Clark and he became blind and deaf to his responsibilities. In a similar case involving embezzlement by tax collector Karen Guillet, when questioned by the judge if substance abuse led to her severe misjudgment, she replied "no," it was simply greed.

One interesting point to note is that typically, an executor or trustee is bonded until the will or trust is administered in full. A bond, in short, is an insurance policy.  While the bond can be waived by the beneficiaries or the court, this is not what I recommend as a Probate and Trust attorney. A bond, in short, is an insurance policy. If Mr. Clark had been bonded, the bond company would "insure" him for the full value of the estate, and should anything happen with the money, they would pay the beneficiaries what they were entitled. This means the town of Oxford and Ms. Strong's church would get their money, and no longer have to worry. The bond company, in turn, would sue Mr. Clark to recover the funds. It is unclear if this is what occurred in this particular probate case. It does appear Mr. Clark was sentenced to 4 years in prison, however, which seems low given his crime.

This is a particularly stark example of what can go wrong if one fails to do an estate plan. An estate plan does not guarantee that no foul play will occur, but it certainly lessens the chances. For more information about drawing up your estate plan, or assistance with your trust or estate, I offer a free 30 minute consultation at my estate planning and elder law office in Walnut Creek.

http://www.ctlawtribune.com/id=1202727144175/Lawyer-Accused-of-Stealing-18-Million-from-Clients-Estate?mcode=0&curindex=0

http://www.rep-am.com/articles/2015/06/11/commentary/886956.txt