San Diego Estate Planning Lawyer Blog
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On September 21, 2015, California Gov. Jerry Brown signed legislation authorizing the use of “Revocable Transfer on Death Deeds” as an estate planning option for residential property owners. As of this year, owners may use these instruments to bypass the normal probate process when disposing of their homes after death. Several states already permit these types of deeds, although there are concerns about the potential for abuse.

What is a Transfer-on-Death Deed?

Under the new California law, a homeowner may file a deed naming a beneficiary who will automatically inherit the property upon the owner’s death. (The deed may also name multiple beneficiaries.) This means the property will not pass through the deceased owner’s probate estate. A transfer-on-death deed may only be used for residential properties, including condominiums, parcels with four or fewer dwellings, or farms containing 40 acres or less and a single-family home.

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Something to consider when you are making an estate plan is taking stock of just how much stuff you own. While we generally discuss an estate in terms of major assets (real estate, bank accounts, brokerage portfolios, etc.) there is also quite a bit of tangible personal property or household effects included. Some personal property can be quite valuable, such as artwork or antique furniture. But much of your tangible property has primarily personal or sentimental value—think of family photographs, books, and various mementos scattered throughout your house. Upon your death, someone must take responsibility for all of these items.

Your estate plan should specify how to distribute your tangible personal property. For example, you might direct your children to divide all household effects between themselves, with your executor settling any disagreements and disposing of any unwanted items. Similarly, if you place your assets in a living trust, you may authorize your trustee to decide the best means of disposing of the contents of your house.

Failure to Clean Out House Drains Trust Assets

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Unlike a last will and testament, estate planning through a living trust involves the transfer of title to assets during your lifetime. For example, if you want your house to be part of a revocable living trust, you must execute and file a new deed transferring ownership from yourself to the trustee—which in most cases is also you. Failure to properly transfer an asset means a probate court may determine it is not part of the trust at all and should pass instead under your will.

San Diego Court Finds New Trust Sufficient to Transfer Real Estate

What about cases where you create a new trust and want to transfer assets into it from an earlier trust? A San Diego appeals court recently addressed this question. In this case a man, now deceased, created a revocable living trust in 1985, into which he transferred a parcel of real property located in San Diego. The man created a second, irrevocable trust in 2009, which listed the same property on the schedule of trust assets. The man did not, however, sign a deed transferring the property from the 1985 trust to the 2009 trust.

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An “estate” does not necessarily include all of a person’s assets. In the context of estate planning, an estate refers to property subject to distribution under a person’s last will and testament—that is to say, their probate estate. This may exclude some or all of a person’s property depending on its type and ownership.

Assets That are Not in Your California Probate Estate

For example, any assets that you jointly own with someone else are not part of your probate estate. This would include a joint bank account or a house you co-own as a joint tenant. Upon your death, the surviving co-owner simply assumes full ownership of the asset. Your probate estate also excludes any life insurance policy or asset payable to someone else upon your death, such as a retirement account. And for purposes of determining your California probate estate, any real property that you own in another state—say a rental property in Arizona—is excluded.

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A power of attorney is a document authorizing someone to act on your behalf with respect to financial and contractual matters. Among other acts, a person holding your power of attorney may sell your house, write checks from your bank account, or access your safe deposit box. A power of attorney is “durable,” meaning it continues in effect until you revoke it. Your death would also terminate any outstanding power of attorney.

Daughter Improperly Delegates Father’s Power of Attorney

There are limits to what a person may do under a power of attorney. Here is one illustration from a recent California appeals court decision. This is only an example and should not be construed as a complete statement of California law on the subject of powers of attorney.

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The new year is a good opportunity to reconsider your estate planning needs. You should periodically review, and if necessary revise, your will, trust, and other estate planning documents such as a durable power of attorney, to keep your affairs current. Among other things, changes in the law may alter your estate planning needs.

What is the Estate Tax?

One of the most important laws affecting estate planning is the estate tax. This is a federal tax levied against the total value of a person’s assets upon their death. A handful of states also levy their own estate tax, although California does not. However, if you own property in a state where such a tax is still assessed, you will need to account for that in your estate planning.

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Estate planning is not just about disposing of what you have now, but also dealing with any unresolved legal claims that may exist at the time of your death. For example, if you have filed a civil lawsuit against someone, that case does not automatically end just because you die. The personal representative of your estate can continue the lawsuit on your behalf.

Survivorship Claims

There are also potential legal claims that may arise due to the circumstances of your death. Two common examples are car accidents and medical malpractice. If a person dies due to the negligence of another, the estate may pursue what is known as a survivorship claim. This allows the estate to seek compensation for its own expenses—the costs of the decedent’s funeral, medical expenses, etc. with the balance of any potential judgment reserved for the beneficiaries named in the decedent’s trust or last will and testament.

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It is an unfortunate reality that many people take advantage of the elderly and the mentally infirm. California has laws to prevent such elder financial abuse. Among other things, the law prohibits “excessive persuasion that causes another person to act or refrain from acting by overcoming that person’s free will and results in inequity.” For example, pressuring an elderly woman with dementia to sign a last will and testament naming a particular individual as the sole beneficiary of her estate could be considered elder financial abuse.

Court Rejects Daughter’s Allegations Against Nephew

But just because an elderly person may not be as sharp as they once were, that does not mean he or she is a victim of elder financial abuse. Nor does it necessarily defeat any estate plan the elderly person might have made. A recent California case helps illustrate this point.

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When you create a revocable living trust, your trustee has a legal duty to ensure your wishes, as expressed in the language of the trust document, are carried out. There may be pressure from family members or other interested parties to alter the trust’s meaning for their benefit, but at the end of the day, a California court will always look at the intentions of the person making the trust. Since most trust disputes occur after the settlor’s death, it is therefore important to seek the assistance of a qualified California estate planning attorney in drafting any trust instrument.

San Diego Court Rejects Unusual Trust Calculation Method

Recently the California Fourth District Court of Appeal, which has jurisdiction over San Diego and surrounding counties, decided a major case involving trust interpretation. The settlor was the late Donald Callender, the son of Marie Callender, the famous California restauranteur. Although the family’s namesake restaurant chain was sold in the 1990s, Donald Callender retained an interest in the licensing of the Marie Callender’s name, which combined with his other assets left a trust worth over $143 million at the time of his death in 2009.

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A guardianship is a type of probate proceeding where a person is appointed to oversee the property and finances of a minor. There are many circumstances that might necessitate such a guardianship. For example, if a minor inherits or receives a large amount of money, a court may appoint a guardian to take custody of those funds. The guardian can then make periodic disbursements of estate funds to pay for the minor’s education, health, or overall maintenance.

Guardianships and Structured Settlements

Here is an example of how guardianships work. This is a recent case from here in San Diego. In 2005, a San Diego resident was killed after a tree fell on his truck during a rainstorm. His family subsequently filed a wrongful death lawsuit against the City of San Diego, which led to settlement agreement. The settlement provided for payments of $1,100 per month to the each of the victim’s two minor children. The children were also slated to receive lump-sum payments on their 16th birthdays and stipends to pay for their college educations. The City financed this structured settlement through the purchase of an annuity from an insurance company.