Showing Proper Respect for Death Certificates

May 14, 2015

Gov. Jerry Brown signed into law the “Respect After Death Act.” This law requires persons completing a death certificate to report the deceased person's correct “gender identity.” The law, sponsored by California Assembly Speaker Toni G. Atkins, is designed to clarify the responsibilities of coroners and funeral directors on this subject.

As of January 1, 2015, the new law will require the person preparing a death certificate in California to “record the decedent's sex to reflect the decedent's gender identity.” The person reporting the death is responsible for informing the person completing the certificate of the deceased individual's gender identity, unless presented with another official document, such as a birth certificate or driver's license, indicating a different gender identity. In such cases, the death certificate must reflect what is on the official document. If there is any disagreement between the official documentation or what the person reporting the death considers the deceased's gender identity, a “majority of persons” having the legal right to dispose of the person's remains shall decide the matter.

According to media reports, the Respect After Death Act was prompted by the 2012 death of Christopher Lee, a San Francisco filmmaker who was born female but identified as a male. His death certificate reported his gender as “female,” despite the fact his family provided official documentation noting his gender identity as male. The local coroner said existing law required identification of Lee as female unless he had gender reassignment surgery. Under the new law, that is not necessary.

The Importance of Death Certificates

Death certificates are an essential part of the probate process. A probate court will require an official death certificate before opening an estate and appointing an executor. Many asset holders, such as banks, may also request an official death certificate before releasing an account to the executor or a designated beneficiary.

Only certain people can obtain official (or “certified”) copies of a person's designate. These people include immediate family, an executor or attorney for the estate, a funeral home director, or a member of law enforcement conducting official business (such as investigating a potential homicide). Other individuals may still obtain an unofficial “informational” copy of a death certificate.

In addition to establishing a person's name and gender identity, the death certificate contains other information that may be useful during the probate process, such as marital status, date and place of birth, social security number and last known address. The death certificate will also contain any officially determined cause of death, which can prove important if the estate decides to bring a wrongful death action.

Obtaining and managing death certificates are just one thing an executor must manage as part of the probate process. That is why, while you are still living, you should prepare a proper last will and testament that designates an executor you know and trust. If you need advice from an experienced California estate planning attorney, contact the Law Office of Scott C. Soady in San Diego today.

Understanding Advance Health Care Directives and “Living Wills”

May 12, 2015

You often hear the term “living will” used to describe a document outlining a person's wishes in the event they become incapacitated or are otherwise unable to communicate with medical personnel. Actually, a living will is not a will at all. A will—i.e., a last will and testament—is a document that only takes effect after your death and relates to the disposition of your property.
In California, when we speak about a “living will,” we actually refer to one part of a document known as an advance health care directive. A health care directive performs multiple functions. First, it allows you to designate a person to make health care decisions for you if you become incapacitated. This person or agent would then hold your power of attorney for health care purposes only; he or she would not have control over your property or financial affairs unless you sign a separate power of attorney for that purpose.

The second part of the advance directive is what is commonly known as the living will. This part allows you to provide instructions regarding your care. For example, you might instruct your doctors not to prolong your life through artificial means should you fall into a coma. You may also specify whether you want to receive medication to ease your pain even if it might hasten your death.

The living will and the appointment of a health care agent must work in tandem. You can limit your agent's authority to certain matters, or you might give the agent broad discretion to decide whether or not to prolong your life. The agent is legally obligated to honor your wishes, both as written in the advance directive and as you may have orally expressed. Of course, writing your wishes down can help alleviate any confusion on the part of the agent or your health care providers.

Finally, in the event of your death, an advance directive may specify your wishes regarding organ donation. You can designate which organs you wish to donate and specify the purposes (transplant, research, et cetera) for which they may be used.

Keep in mind, an advance health care directive is a binding legal document. It should not be haphazardly scribbled on a notepad. You should work with an experienced California estate planning lawyer who can explain all of the legal aspects of the advance directive and its impact on your future medical care.

The final advance health care directive must be signed before two witnesses or acknowledged by a notary public. You should make sure to provide copies of your signed advance directive to your primary physician, your other health care providers, and of course the agent you name under your power of attorney. If you have any questions or concerns about a California advance health care directive, contact the Law Office of Scott C. Soady in San Diego today.

“Undue Influence” Can Undo Your Estate Planning Intentions

April 10, 2015

Your deathbed is not the right place to make a will or begin the estate planning process. Individuals who are hospitalized or dying are often subject to the undue influence of others. California courts may invalidate a will or other estate planning document if there is substantial evidence of such undue influence.

In Re Estate of Slocum

Here is a recent example of undue influence from a California Court of Appeal decision. This case is discussed for informational purposes only and should not be treated as legal advice.
In August 2011, a 76-year-old woman died following complications from surgery. She did not leave a will, but nine days before her death, while still hospitalized, she signed a deed transferring her home to one of her seven children. This child had lived with her for about five years prior to her death, and he was the one who arranged for the deed.

Another child was named executor of the mother's estate. She filed a petition to cancel the deed, alleging her brother exercised undue influence over their mother to acquire the house for himself. If the deed was not valid, the house (or the proceeds from the sale of the property) would be divided equally among the children, as the mother left no will.

A probate judge agreed with the executor. The court found the mother knew she was dying and “vulnerable to coercion.” The mother had indicated she wanted all of her children to inherit equally. The son knew this, yet still presented his mother with a deed she did not fully understand the “true impact” of. Accordingly, the probate court canceled the deed, returning the property to the mother's estate.

The Court of Appeal upheld the probate court's decision. The appeals court acknowledged there was conflicting testimony regarding the mother's intent. While some siblings testified their mother wanted the estate divided equally among all her children, other witnesses sided with the son, who said she decided to leave the house to him alone so it would not be sold and “stay in the family.”

That said, the court said there was more than sufficient evidence of the son's undue influence. For one thing, the mother never received independent legal advice regarding the deed. Her son simply presented her with a completed document and asked her to sign it, while she lay dying in a hospital room. These circumstances alone create a legal presumption of undue influence, which the son could not overcome, according to both the probate and appeals court.

Always Get Independent Legal Advice

This litigation could have been avoided if the mother had simply made a will before her final hospitalization, specifying her intentions regarding the property. If, in fact, she wanted to keep the property “in the family,” she might have established a trust to that effect. But in any case, the lack of any estate planning opened the door for her son's undue influence.

Estate planning allows you to take charge of your own property. Do not rely upon family members who may have their own agendas. An experienced California estate planning attorney can provide you with independent advice regarding the best options for you and your property. Contact the Law Office of Scott C. Soady today if you have any questions.

The Importance of Managing Trust Assets

March 22, 2015

A living trust can help provide for both you and your children. Married couples often establish a joint trust to manage their assets during their lifetimes, and when one spouse dies, the other spouse may continue to benefit from the trust. A trust may also make provisions for children or other descendants, but it is important to structure the trust so your priorities and intentions are clear.

While trusts generally help individuals avoid probate, there are unfortunately times where disagreements over a trust's provisions may lead to litigation between family members. Here is a recent example from a California Court of Appeal decision regarding a trust. This case is provided simply as an illustration and should not be taken as a comprehensive statement of California law on the subject of trusts.

Cavagnaro v. Sapone

In this case, a married couple established a trust in 1978. Like most living trusts, the couple intended for the trust to provide for them during their lifetimes, and after they were gone, to benefit their daughter and her three children. The husband died in 1991. At that time, the trust was divided into four sub-trusts—this is done for tax-planning reasons that need not be discussed here—with the wife named as the beneficiary of all trust income. Upon the wife's death, the remaining trust assets would be divided among her daughter and grandchildren.

The wife remarried in 1998. Her new husband was subsequently appointed by a probate court as his wife's conservator and successor trustee in 2007. The trust itself contains four pieces of real property located in and around San Francisco. One of those properties is a home where the wife's daughter lives.

The wife's second husband, now acting as trustee, asked a probate judge for permission to sell this home. He argued it cost the trust more than $1,300 per month to maintain the property. By selling the house and investing the proceeds in an income-generating asset (such as a mutual fund), the trust could start earning income for the wife—the trust's beneficiary—rather than continuing to subsidize losses.

The daughter objected. She argued the sale would represent an improper reduction of the principal assets of the trust. The court disagreed. As the Court of Appeal observed, the proposed sale merely changed the “form of the principal.” Although the sale would obviously pose a short-term inconvenience for the daughter—as she will be evicted from the house—the trustee's function is to preserve the long-term viability of the trust assets. In other words, selling the house now means there will be more money later to distribute to the final beneficiaries of the trust, including the daughter.

Establishing a Trust

In establishing a trust, it is crucial to select a successor trustee who will manage your assets according to your wishes. While a trust can simplify probate, it is not a simple undertaking. Before creating a trust you should always speak with a qualified California estate planning attorney. Contact the Law Office of Scott C. Soady today if you have any questions.

Addressing “Joint” and “Community” Property in Your Estate Plan

March 20, 2015

California is a “community property” state. This means any property acquired during a marriage belongs to the spouses equally. In the event of divorce, any community property must be divided between the spouses. Of course, a divorced couple can still own property together, but they would do so as joint tenants or tenants in common; there is no “community property” once the marriage is dissolved.

If you are recently divorced (or contemplating divorce), you should be aware of the estate planning implications. It is important to revise your will or living trust to reflect the end of your marriage. In the event your divorce settlement leaves any unresolved questions over the ownership of former community property, your estate plan should address these issues.

Schmidt v. Turner

Here is a recent example of what may go wrong when community property is not properly dealt with in post-divorce estate planning. This case is discussed simply as an illustration; it is not legal advice nor should it be construed as a definitive statement of the law. Although this case was recently decided by a California appeals court, it deals with property initially received by a couple that divorced nearly 50 years ago.

At the time, the couple lived in New Mexico, which, like California, is a community property state. They received a gift of California real property in 1965 under a deed that identified them as “joint tenants.” A joint tenancy exists when two or more people own an undivided interest in the whole property. This means that when one joint tenant dies, his or her interest is automatically transferred to the surviving tenants. This is often known as a “joint tenancy with right of survivorship.”

The couple divorced in 1967, two years after receiving the California property. Under their divorce settlement, the husband paid the wife a lump sum in exchange for her one-half interest in the couple's community property. The settlement made no disposition of the California property. In 1972, however, the ex-husband signed a handwritten note purporting to give his ex-wife his interest in the California property.

The ex-husband died in 2006. His ex-wife died in 2011. Following her death, the respective heirs of both estates went to court to determine the ownership of the California property. The ex-husband's heirs argued it was community property, which belonged solely to the ex-husband under the terms of the 1967 divorce settlement. The ex-wife's heirs disagreed. They claimed the California land was always a joint tenancy. Both a trial court, and later the California Court of Appeal, agreed with the ex-wife's heirs. The land was held separately between each ex-spouse as joint tenants, and since the ex-husband died first, the ex-wife became sole owner upon his death. That meant that upon her death, the property passed solely to her heirs. (While neither court passed judgment on the validity of the ex-husband's 1972 note, the Court of Appeal suggested it proved the couple understood the property to be a joint tenancy all along.)

Don't Wait to Change Your Will

You shouldn't wait nearly half a century to settle any outstanding property issues from your divorce. It is certainly a waste of time and money for your heirs to argue over something that can and should be addressed through proper estate planning. If you are looking to amend your will or trust following a divorce, contact the Law Office of Scott C. Soady today for more information.

Understanding Reverse Mortgages

March 15, 2015

Many elderly persons wish to remain in their own homes, but lack the financial means to do so. One option for such individuals is to take out what is known as a “home equity conversion mortgage,” commonly referred to as a “reverse mortgage.” Whereas a conventional mortgage requires the borrower to make monthly payments until the loan is repaid, with a reverse mortgage, all payments are deferred until the borrower dies or decides to sell the property.

Most reverse mortgages are regulated and insured by the U.S. Department of Housing and Urban Development (HUD). Under HUD rules, any person over 62 who resides in the house they own may qualify for a reverse mortgage. HUD maintains an online directory of qualified reverse mortgage counselors to advise individuals on the best way to obtain such loans.

Reverse Mortgages and Estate Planning

A reverse mortgage can significantly impact your estate planning. If your home is your principal asset, it is important to keep in mind that any reverse mortgage must be paid in full upon your death. This will reduce the amount of any inheritance you leave to your beneficiaries.

Your personal representative or executor must also be aware of the reverse mortgage, as he or she will likely be responsible for selling your house during probate in order to pay off the loan (or for finding other funds from the estate to do so). You must also consider the needs of other family members residing in your home at the time of your death. They may find themselves forced to relocate if the property is sold.

A recent California appeals court decision illustrates the difficulties that can arise from reverse mortgages. This case is provided for informational purposes only, and is not a statement of California law on the subject. A woman obtained a $300,000 reverse mortgage on her San Francisco residence where she lived with her daughter. Upon the woman's death, the mortgage holder notified the daughter that the loan had come due. Within six months, the lender issued a notice of foreclosure.

The daughter, who by this point was the executor of her mother's estate, attempted to halt foreclosure proceedings by arguing she was a victim of racial discrimination. She claimed the lender unfairly targeted her (and her late mother) because they were African-American. The California courts rejected this argument out of hand. The Court of Appeal said the daughter presented no evidence—beyond her own conclusions—that race discrimination played any role in the foreclosure. To the contrary, this was simply a case of a lender collecting a lawfully owed debt.

Planning Ahead

It is certainly understandable that a person faced with the loss of her home may feel unfairly targeted by a large commercial lender. But the truth is, a reverse mortgage is not free money. It is a loan tied to a specific asset that must be repaid upon the borrower's death. That is why, if you or a close relative are thinking about taking out such a loan, you should speak with a qualified California estate planning attorney who can advise you on all the implications for your future estate. Contact the Law Office of Scott C. Soady today if you have any questions.

What is the Rule Against Perpetuities?

March 13, 2015

When you create a trust as part of your estate plan, you can effectively control the disposition of your property for years, even decades, into the future. This can prove useful if you want to limit the distribution of an inheritance until your chosen beneficiaries reach a certain age. But there is a limit to such control, as expressed through what is known in the law as the “rule against perpetuities.”

At common law, the rule against perpetuities dictates that a gift can last only until 21 years after the death of the last potential beneficiary alive at the time of the trust's creation. A number of states, including California, have amended the rule of perpetuities. Under the California rule, a trust must terminate after 90 years. This does not replace the common law rule entirely, but rather complements it. The common law rule declares a trust gift valid if it vests within 21 years after the last surviving beneficiary's death. This is still the case under the California rule, but it also declares the gift valid if it is completed within 90 years of the trust's creation.

What About Your Great-Great-Great Grandchildren?

The idea behind the rule of perpetuities is that you cannot tie up your assets forever in a trust after your death. The 90-year limit provides ample time to make provisions for your children and grandchildren, and maybe even your grand-grandchildren, but not beyond that. The rule against perpetuities presumes your will or trust does not mean to provide for descendants who are born in the distant future, long after your death.

But the rule against perpetuities is no longer universal. Many states, such as Florida and Delaware, abolished the rule, allowing for trusts to effectively continue indefinitely. It may benefit very wealthy individuals to establish trusts under the laws of these states.

Even within the rule against perpetuities there are exceptions. If your will or trust makes a conditional bequest to a charity, the rule may not apply. Let us say you own a piece of real property. Your trust states that, upon your death, the trust shall convey the property to Charity A, with the condition that the charity actually uses the property. In the event Charity A no longer uses the property, the trust states that the property shall then go to Charity B. This conveyance would not be subject to the rule against perpetuities. If, however, the trust states that, if Charity A no longer uses the property, it will go to a person, the rule still applies.

While the rule against perpetuities does not often come up in practice, a qualified California estate planning lawyer can still help explain this and other important legal concepts. Contact the Law Office of Scott C. Soady today if you have any questions.

Using Age Provisions in a Will or Trust

February 13, 2015

Prince Harry, the younger son of Prince Charles, the Prince of Wales, and his former wife, the late Diana Spencer, turned 30 last year. This milestone means Prince Harry will receive more than $17 million from his late mother's estate, according to the modified terms of a trust established as part of her estate plan.

Diana, Princess of Wales, made a last will and testament in 1993 and amended it in 1996. She left the bulk of her estate in trust for her two sons, Prince Harry and Prince William (now the Duke of Cambridge). Originally, the trust assets were to be paid to each prince when they turned 25. But the executors of the estate obtained a “variance” from an English probate court, modifying the terms to delay distribution until the children turned 30.

Age Provisions in Trusts

Setting aside the unusual decision by the British authorities to alter the term of a valid will, age provisions of this sort are quite commonplace in estate planning in the United States. Most trust instruments make a distinction between distributions of income and principal. For example, you might specify that a beneficiary can start receiving the trust's income at the age of 21, while delaying distribution of principal until the person reaches the age of 25.

A common estate planning practice is to divide distribution of trust principal into thirds. Let us say you want to leave a large inheritance to a child. Your trust could specify the child will receive one-third of the inheritance at the age of 21, the second third at age 25, and the final distribution at age 30. Meanwhile, the child could still receive an annual distribution of the trust income to provide for his or her expenses.

If you have more than one child or beneficiary subject to an age-specific distribution, you should consider the nature of your present assets. It is generally easier to divide liquid assets, i.e., cash. If your estate includes a significant amount of real property or other physical assets, your successor trustee will be responsible for ensuring there is an equal distribution to all beneficiaries.

Selecting a Trustee

Remember, if you leave any assets in trust, you must also nominate a trustee to administer those assets until your children reach the designated age for final distribution. The trustee is responsible for administering all trust assets in the best interests of your beneficiaries. Your trust may also authorize the trustee to make distributions of income (or principal) at any time for the beneficiary's benefit. It is common practice to allow such distributions for the child's “health, support, maintenance and education,” as the trustee judges appropriate.

Establishing a trust and nominating a successor trustee is just one part of the estate planning process. Even if you will not leave a large estate like the late Princess Diana, it is still important to make sure your children and other loved ones will be provided for after your death. If you need to speak with an experienced California estate planning attorney, contact the Law Office of Scott C. Soady today.

How a Conservatorship Can Protect You (and Your Assets)

January 31, 2015

During your lifetime, it may be necessary for a court to appoint a conservator to oversee your affairs when you are no longer able to do so. A conservatorship can apply to both a person—i.e., someone to make healthcare decisions for you—and to the property contained within your estate. While you can nominate a conservator as part of your estate plan, the final decision rests with a California probate court. You can also sign a power of attorney granting another person control over your financial affairs, without the need for a separate court order.
California courts will look at whether a potential conservator exercised “undue influence” over a person. For example, an unscrupulous individual might use a conservatorship as a means of using an elderly relative's assets for their personal gain. Similarly, other persons or groups with an interest in a person's estate might use the conservatorship process to manipulate the situation for their own advantage.

In re Conservatorship of Person and Estate of Melanson

Here is a recent example from a case
decided by the California Court of Appeal. This case is discussed here for informational purposes only, and should not be construed as a complete statement of California law.

Mary Melanson and her late husband established a trust in 1994. The original trust terms provided that, upon both of their deaths, most of the couple's property would go to Catholic Extension, an Illinois-based charity that provides support for Roman Catholic dioceses. In 2009, following her husband's death, Melanson amended the trust to name Catholic Extension as a co-trustee. Catholic Extension then assumed control of most of Melanson's finances.

The following year, Melanson expressed concern to family members about Catholic Extension's management of the trust assets. She feared Catholic Extension officials would force her to leave her home and enter a nursing facility. By this time, Melanson relied more and more upon her nephew, Ralph Zehner, to assist her with personal matters. In 2012, Melanson revoked her 1994 trust—and Catholic Extension's role as co-trustee—and formed a new trust with Zehner as the successor trustee. Under the new trust, Catholic Extension would still receive the majority of Melanson's assets after her death, with Zehner receiving the rest.

Catholic Extension moved to take control of Melanson's assets. It filed a petition with a California probate court seeking to rescind the 2012 trust, restore the 1994 trust, and appoint conservators of its choosing for Melanson's person and estate. Zehner, with Melanson's approval, filed his own petition seeking appointment as conservator.

The probate court, and later the Court of Appeal, sided with Zehner. Although there was a presumption of “undue influence” given that Zehner was a beneficiary of Melanson's amended trust, the court found he overcame that presumption. Testimony showed Melanson was clearly dissatisfied with Catholic Extension's handling of her affairs, and Zehner, her closest living relative, was capably assisting her. Further, there was no evidence Melanson lacked the legal capacity to revoke her prior trust and make a new one.

Always Plan Ahead

Whenever a person holds substantial assets, disputes can arise between potential beneficiaries. A good estate plan is always the best defense. If you need the services of an experienced California estate planning attorney, contact the Law Office of Scott C. Soady today.

California Appeals Court Expands Protections Against Elder Financial Abuse

January 30, 2015

On September 3, a California appeals court issued a landmark decision on the subject of financial abuse of the elderly. California maintains strict laws designed to protect persons aged 65 and above, who are more susceptible to fraud. In this case, the appeals court found the law could apply to potentially harmful financial transactions not yet completed.

Bounds v. Superior Court of Los Angeles County

This case involves an unusual legal remedy known as a writ of mandamus. In California, a mandamus proceeding is brought by a petitioner against a lower court, and the defendant or respondent is designated the “real party in interest.” If granted, the writ is a command issued by the appellate court to the superior court.

The petitioner in this case was an 88-year-old woman diagnosed with Alzheimer's disease. Through a living trust, she controlled a business and real property in Los Angeles County. In early 2013, she entered into an agreement to sell the real property and some of the business's equipment to two buyers. The parties signed a letter of intent and proceeded to open escrow.
The petitioner did not consult with an attorney until after signing the letter of intent. At that point, an attorney advised her to renegotiate the terms of the deal, believing the buyers' offer was substantially below market value. The buyers balked, and the petitioner decided to terminate the escrow. The buyers sued the trust for performance of the sale.

The petitioner, acting for herself and the trust, filed a cross-complaint against the buyers, accusing them of elder financial abuse. The cross-complaint said the buyers took advantage of the petitioner in her weakened mental state, intentionally low-balling their offer and misleading her into believing the sale would resolve her business's financial problems.

The buyers filed a demurrer—an objection—to the cross complaint, which a Los Angeles Superior Court judge sustained. The petitioner then filed a petition for a writ of mandamus with the 2nd District Court of Appeal, seeking an order to vacate the Superior Court's decision. The appeals court granted the writ of mandamus, reinstating the cross-complaint without deciding the merits of the case.

California law says elder financial abuse occurs when a person “takes, secretes, appropriates, obtains, or retains real or personal property of an elder . . . for a wrongful use or with intent to defraud, or both.” Here, the buyers argued they did not “take” the petitioner's property—the sale never closed—and they could not be liable under the statute. The appeals court declined to read the law so narrowly. The court explained, the whole purpose of the law is “to protect elderly individuals with limited or declining cognitive abilities from overreaching conduct that resulted in a deprivation of their property rights.” It would make no sense to require the victim to wait until she was already victimized to enforce her rights under the law.

Here, the letter of intent and subsequent escrow were enough to “significantly impair” the value of the petitioner's property. It also limited her ability to borrow against the property. These are part-and-parcel of the “property rights” the elder financial abuse law is designed to protect, according to the appeals court. Therefore, the petitioner can proceed with her cross-complaint.

Always Get Advice

The potential for elder financial abuse highlights the importance of careful estate planning. It is not enough to simply create a trust or will. You should also execute a power of attorney so a competent agent can act on your behalf in the event of your mental or physical disability. It is never a good idea to enter into any transaction disposing of trust property without the advice and assistance of an attorney. Contact the Law Office of Scott C. Soady today if you have questions about this or any other California estate planning matter.

Understanding a Successor Trustee's Potential Liability

January 15, 2015

A person who makes a living trust usually names himself or herself as the initial trustee. The trust instrument should also name successor trustees to act in the event the trust's maker dies or becomes incapable of managing their own affairs. In many cases, the successor trustee is a spouse or other family member. But a successor trustees can also be a corporation. Many banks and financial companies provide “corporate trustee” services, which can be useful if the trust assets include a substantial investment portfolio.

If your trust contemplates naming a corporate successor trustee, it is important the trust instrument define the scope of that trustee's liability. A recent California appeals court decision illustrates the importance of such language. This case is discussed for informational purposes only and should not be construed as a complete statement of California law on this subject.

Sommerfield v. Wells Fargo Bank, N.A.

Jean and Jane Sommerfield, a husband and wife, created a joint living trust with themselves as the trustees. Jean Sommerfield died in 2007. Jane Sommerfield is in her 90s and in poor health. Over the years, she transferred decision-making power over her finances and healthcare to her children, including her son, Larry Sommerfield, who holds his mother's power of attorney.

In 2009, Jane Sommerfield agreed to name Wells Fargo Bank as successor trustee of the trust. Wells Fargo named one of its employees, Jann Watenpaugh, as the trust officer. Acting in this capacity, Watenpaugh advised Larry Sommerfield in late 2009 to switch his mother's health insurance coverage from an existing preferred provider organization (PPO) plan to a less expensive health maintenance organization (HMO). Sommerfield never responded to Watenpaugh's advice. Watenpaugh then went to Sommerfield's sister, who also held her mother's power of attorney for financial matters, and she agreed to the switch.

This led to confusion. In 2011, Larry Sommerfield was unable to obtain medical care for his mother under the HMO plan. He moved his mother out of the HMO and into a new PPO plan. Sommerfield then sued Wells Fargo to recover the cost difference between the new PPO and the original PPO, which he said was approximately $25,000.

A trial court granted summary judgment to Wells Fargo, finding there was “no evidence of damages” Sommerfield could recover. Furthermore, the court absolved Wells Fargo of any liability under the terms of the trust. A California Court of Appeals panel disagreed with the trial court on both issues and reversed the ruling in a decision released in August of this year.
Regarding the question of trust liability, the appeals court focused on the plain language of the trust, which said, “No trustee (other than a corporate trustee) shall be liable to any beneficiary or any heir of either of Grantors for that trustee's acts or failure to act, unless the act or failure to act constituted willful misconduct, gross negligence, bad faith or fraud.” By excluding corporate trustees, Wells Fargo was subject to the general, higher standard of care for trustees under California law, whose job it is to “administer the trust with reasonable care, skill, and caution under the circumstances.” If Sommerfield can prove Wells Fargo violated this standard with respect to his mother's health insurance, he can recover the damages sought.

Selecting the Right Successor

Selecting a successor trustee is a critical part of estate planning. You must ensure the person—or corporation—you designate to manage your affairs is competent and will act in your best interests. As with any such matter, you should consult with an experienced California estate planning attorney. Contact the Law Office of Scott C. Soady today if you have any questions.

Dealing With People to Whom You Owe Money – After You Die

January 14, 2015

The administration of an estate includes not just distributing a person's property, but collecting any debts owed to the deceased. This is why it is important to make a will naming an executor who can act in your name after you are gone. The executor stands in your place and can take any legal action to collect what is owed to you—and, by extension, the designated beneficiaries of your estate.

Here is an illustration from a recent California case of a situation where an executor must act to protect a deceased individual's property interests. This case is discussed for information only and should not be taken as a statement of the law in California. The deceased in this case passed away in 2010. Sometime prior to his death, he and his wife divorced. In the course of divorce proceedings, the couple's marital residence was sold. The husband's share was deposited into a client trust account maintained by his divorce attorney. For some reason, the attorney never released the funds to his client.

After the man's death, his executor sought payment of the funds, totaling more than $300,000. The executor obtained a court order directing the attorney to pay over the funds and provide a full accounting of his trust account. The attorney did not comply. Instead, he filed for bankruptcy.
This created a significant hurdle for the estate's recovery. Bankruptcy is governed by federal, not California law. Once a person or business files a bankruptcy petition, a federal bankruptcy judge enters what is known as an automatic stay—an order preventing any creditor from pursuing further collection against the bankruptcy filer until the judge directs otherwise.

This led to more confusion. While the bankruptcy petition was still pending, the probate court held a hearing on the estate's motion to double the attorney's liability as punishment for failing to comply with the previous orders. Although the probate court granted this motion after the bankruptcy stay was lifted, a California appeals court later held this was inappropriate. The probate court had no authority to conduct further proceedings while the stay was in effect. The appeals court therefore negated the double-liability award.

Getting Your Own Affairs in Order

This case illustrates just one example of the type of legal problem an estate may face. It also emphasizes the importance of careful estate planning. A will enables you to designate the person you believe most capable of managing your affairs. If you do not make a will, you forfeit the ability to make that choice.

It is also critical to your estate planning to maintain a current accounting of any assets and debts you have, including moneys owed to you. Such an accounting will make it much easier for your executor to quickly get up-to-speed on the financial condition of your estate. There are too many cases where an estate must be initiated years after a person's death because some previously unknown debt or property was discovered and requires administration.

A qualified California estate planning attorney can advise you on all of these issues. If you have any questions, contact the Law Office of Scott C. Soady in San Diego today.