Can a Creditor Challenge a Trustee's Mismanagement?

November 5, 2014

When you create a living trust, you transfer personal assets to a trustee, who then manages those assets on your behalf. In most cases, this won't be a problem, since you can name yourself as trustee during your lifetime. But when someone else serves as trustee, he or she owes a duty, not only to you as the person creating the trust, but to any persons you name as beneficiaries of your trust. Under California law, a trustee may not misuse (or co-mingle) trust assets for his or her personal benefit to the detriment of any beneficiaries.

Recently, a California appeals court addressed a question that apparently had not been considered before: Does a trustee owe a creditor a duty to avoid self-dealing? The appeals court answered no, reversing a lower court's decision to the contrary.

Vance v. Bizek

Wallace and Pearl Burt each had a daughter from a prior relationship. The Burts created a joint living trust, known here as the “WPB Trust,” naming both daughters, Sally Gordon and Linda Larsen, as co-trustees. The trustees were to use the income from the trust to support their parents during their lifetimes, and upon their deaths, both daughters (or their heirs) would receive an equal share of the remaining assets.

In 2011 a man named Don Bizek obtained a judgment of just under $1 million against Gordon arising from her conduct as trustee of another trust. Bizek asked a California probate court to enforce this judgment against Gordon's share of the WPB Trust. (By this time Wallace and Pearl Burt were both deceased.) The court granted Bizek's petition, and Gordon responded by disclaiming her interest in the WPB Trust. This meant her 50% share would go to her daughter, Cynthia Vance, who was not a party to Bizek's case.

Vance then filed her own petition with the probate court, seeking a declaration her mother's disclaimer was valid, and therefore Bizek could not pursue a creditor's claim against the WPB Trust assets. The court sided with Bizek, holding Gordon's disclaimer void because, while serving as trustee of the WPB Trust, she improperly transferred some of the trust's assets to herself while her mother was still alive. As the probate court saw it, Gordon's actions constituted an “acceptance of beneficial interest” in the trust.

The Court of Appeals disagreed. In a decision issued on August 12 of this year, a three-judge panel said Gordon's actions did not constitute an acceptance of her share of the trust. She simply exercised control over her mother's assets, during her mother's lifetime, in a situation akin to a power of attorney. More to the point, Bizek could not challenge Gordon's co-mingling of trust and personal assets. California law allows a trust beneficiary to challenge a trustee's mismanagement. But Bizek was not a beneficiary of the WPB Trust; he was a purported creditor. Gordon owed him no fiduciary duty.

Making Sense of Trusts

Cases like this make trusts sound complicated. But this is an exceptional situation, albeit one that highlights the importance of working with an experienced California estate planning attorney and selecting the right trustee. If you are considering creating a living trust, contact the Law Office of Scott C. Soady in San Diego today.

How Does a “Survivorship Clause” in a Will or Trust Work?

November 3, 2014

In making a will or trust, you should consider the possibility your chosen beneficiaries will not outlive you. It is therefore common practice to include a survivorship clause, specifying that a gift will lapse unless the recipient survives you. Some survivorship clauses require the recipient survive you by a specific period of time, say 30 or 60 days, in order to inherit.

A common survivorship clause scenario involves a married couple that dies simultaneously, for example in a car accident. The spouses may structure their wills or trusts to dictate which spouse is deemed to have survived the other. Absent such provisions, California law will presume each spouse predeceased the other. This means any estate will be distributed assuming there was no surviving spouse.

Marble v. Fibiger

Another survivorship clause scenario was the subject of a recent California appeals court decision. This case is discussed here for informational purposes only and should not be construed as a general statement of California law on the subject. In this case, one daughter died with 60 days of her mother, and the surviving daughter argued her sister's estate should not inherit from the mother's estate due to a survivorship clause.

Kenneth and Doris Porter established a joint revocable trust in 1990. Kenneth Porter died in 2006. The trust was then divided into what is known as an A/B trust. Part of the trust remained under Doris Porter's control. The other part, representing Kenneth Porter's assets, went into a bypass trust, which became irrevocable upon his death. Doris Porter would receive the income from the bypass trust assets, and upon her death, the trust assets were to be divided among the couple's two children, Cynthia Ayala and Lora Fibiger.

Doris Porter died in January 2009. Fifty-eight days later, Ayala died of cancer. The original trust contained a 60-day survivorship clause. Fibiger, the surviving daughter and now sole trustee of the trust, argued this meant her sister's share of the bypass trust had elapsed. Furthermore, Ayala also signed a document just before her death releasing her share of the bypass trust to Fibiger in exchange for a one-time payment.

Ayala's son and executor, Chris Marble, challenged both the application of the survivorship clause and the release his mother signed as a product of Fibiger's undue influence. A probate court agreed with the Ayala estate on both issues. Fibiger, acting as trustee, appealed.
With respect to the survivorship clause issue, the Court of Appeals agreed with the Ayala estate and the probate court. The survivorship clause referred to Kenneth Porter's death, not that of his wife. Ayala's gift fell under the bypass trust, which only came into existence as a result of Mr. Porter's death—and that trust simultaneously became irrevocable. Therefore, the court concluded, Ayala only had to survive her father—who died three years before her—by 60 days. The timing of her mother's death was irrelevant. (The appeals court went on to overturn the probate court's decision on the undue influence question, finding there was no evidence Fibiger abused her position or forced her sister to sign away her rights to most of the bypass trust assets.)

Draft Carefully

In a case like the one described above, the courts apply the written terms of the trust itself rather than a general principle of law. That is why it is essential any trust, will or other estate planning document be carefully drafted to avoid ambiguity or misunderstanding. Contact San Diego estate planning attorney Scott C. Soady today if you have any questions.

What Happens When an Equal Distribution of Property Is Not So Equal?

November 1, 2014

If you have multiple children, you may wish to structure your estate plan so that each child receives an equal share of your property. Sometimes this is easier said than done—or written. If your will or trust contains conflicting or ambiguous language regarding the division of property, a probate court may have to attempt to determine what your actual intent was. This adds time and money to the cost of administering your estate, which ultimately reduces the amount of any gift left to your children.

Estate of Ellis

Here is a recent example from Iowa. In 2012, a longtime married couple passed away within a couple weeks of one another. They left three surviving adult children. According to each of their wills, upon both of their deaths, the couple left several parcels of real estate to their children. The will contained specific descriptions and estimated acreage for each gift.

The problem was that the descriptions did not match the acreage. The couple clearly intended to leave each child about 210 acres of property. But following the actual property descriptions, one child would receive 259 acres, another would receive 239, and the third just 140.

The executor of the estates asked the probate court to “construe and interpret the wills” such that each child would actually receive an equal amount of property. The court agreed. One child—the one who would take 259 acres if the will were construed according to the property descriptions—understandably appealed. But the Iowa Court of Appeals agreed with the probate court. The appeals court said the wills were ambiguous—because the property descriptions did not match the stated acreage amounts—and the probate court properly resolved the matter by following the clearly manifested intent of the deceased couple to divide their property among the children equally.

Make Sure Your Will Reflects Your Intentions

This is an Iowa case and a California court might resolve the same situation differently. However, even California probate courts look to the intent of a person making a will when attempting to resolve any ambiguity or contradiction in the precise wording. The best way to avoid such issues is to double-check any property distributions to make sure they match your intended distribution pattern. Furthermore, you should periodically revise and update your will to account for changes in your assets.

Before making any decisions about your will, you should always consult with an experienced California estate planning attorney who can advise you on the best way to avoid potential conflicts and ambiguity. Contact the Law Office of Scott C. Soady in San Diego today if you need assistance.

When Does a “Revocable” Living Trust Become Irrevocable?

October 31, 2014

A revocable living trust is a flexible estate planning device that allows you to transfer your property to a trustee--usually yourself--thereby reducing those assets subject to a court-supervised probate after your death. Your trust document names a successor trustee to assume responsibility for the trust assets after your death. And as the name implies, a revocable living trust may be modified or revoked at any point during your lifetime.

But what about after your lifetime? Does a successor trustee have the right to modify the terms of your trust? That was the question before a California appeals court recently, which had to decide whether the spouse of a deceased trust grantor could alter the distribution of assets he specified.

Wright v. Tufft

James and Mary Tufft signed a revocable living trust in 1997. Although they served as co-trustees, all of the assets in the trust were originally the separate property of James Tufft (as opposed to marital property owed by both of them). The Tuffts had no children together but each had children from prior relationships. James Tufft’s trust stated that upon the death of both his wife and himself, all trust assets would be divided among his two daughters; Mary Tufft’s own three children would not inherit anything from the trust.

However, about 10 years after her husband died, Mary Tufft, now serving as sole trustee, modified the trust to name one of her children, Linda Wright, as successor trustee and naming her children as beneficiaries, while disinheriting her late husband’s children.

Mary Tufft died in 2012. Wright then asked a California probate court to name her successor trustee pursuant to her mother’s amendment. Margaret Tufft, one of James Tufft’s children, objected to the petition. She argued, under the terms of the original trust, she was the lawful successor trustee to Mary Tufft, and her stepmother had no authority to alter that. Furthermore, the trust became irrevocable upon James Tufft’s death, and therefore Mary Tufft also could not alter the distribution or beneficiaries.

The probate court agreed with Margaret Tufft and rejected Wright’s petition. The California Court of Appeals, in a decision issued on July 28 of this year, agreed that Linda Wright had no claim to be the successor trustee. The appeals court said nothing in the language of the trust authorized Mary Tufft, acting as the surviving trustee, to appoint her daughter as she did. Nor was there any provision giving Mary Tufft the power to revoke or amend the trust in any substantial way after her husband’s death. There was nothing ambiguous here. James Tufft clearly intended for his own children to receive the trust assets after he and his wife died.

Drafting a Proper Trust

As this case shows, the common practice in drafting a revocable living trust is that it becomes irrevocable after the settlor’s death. But careful drafting of the trust is essential to avoid any confusion on this point. That is why, if you are thinking about creating a living trust for your own assets, you should work with an experienced California estate planning attorney. Contact the Law Office of Scott C. Soady today if you have any questions.

Is a Will Necessary When There Is No Probate Estate?

October 12, 2014

A last will and testament is a document that applies only to your “probate estate.” A probate estate may not include all of your assets. In some cases, you might not even own any assets subject to probate.

Probate Assets

Generally, any asset titled solely in your name is a probate asset. For example, this would include your bank account or a house owned by you alone. After your death, these assets become part of your probate estate and may be disposed of according to the terms of your will. If you leave no will, your probate estate is subject to California's intestacy law, which distributes property to your closest surviving relatives.

Non-Probate Assets

If you own an asset together with other persons in a “joint tenancy,” this is a non-probate asset. Let's say you are married and you and your spouse own a house as joint tenants with right of survivorship. When you die, your spouse automatically becomes the sole owner of the property. The house does not pass to your probate estate because of the joint tenancy. The same would apply if you and your spouse co-owned a checking account.

Similarly, an asset is also non-probate if it is paid over to someone other than your estate after your death. This commonly includes life insurance policies or retirement accounts. If you name your spouse as beneficiary of your life insurance, for instance, then the policy itself does not pass to your probate estate.

Finally, any assets you transfer to a trust falls outside of your probate estate. Many people choose to set up such living trusts—which you may revoke or amend at any point during your lifetime—specifically to avoid probate. Instead of an executor or personal representative overseeing your probate estate, your trust names a successor trustee to manage or distribute any assets after your death.

Do I Even Need a Will?

So let's say you die without any probate assets. Does this mean you do not need a will? Not necessarily. If you choose to establish a living trust, there is always a chance you will neglect to transfer one or more assets into the trust. To cover your bases, you can sign what is known as a “pour-over” will, which is basically a last will and testament that leaves any remaining probate assets to your trust.

But what if you have no assets at all? A will is still advisable as you may acquire assets in the future. It may also be necessary to establish an estate after your death for other purposes, such as paying any debts. A will does not only distribute property; it allows you to appoint a personal representative to manage your interests.

Regardless of your asset situation, you should speak with an experienced California estate planning attorney who can advise you on the best course of action regarding a will or trust. Contact the Law Office of Scott C. Soady in San Diego today if you have any questions.

The Dangers of Using a Pre-Printed Power of Attorney

October 10, 2014

A power of attorney is a legal document whereby a person, known as the “principal,” grants to another person, known as the “attorney-in-fact,” the authority to act on his or her behalf in certain financial matters. The attorney-in-fact is an agent and therefore owes a fiduciary duty to the principal. California law requires an attorney-in-fact to keep his or her personal property separate from any owned by the principal and managed by the attorney-in-fact. This is to prevent self-dealing, where an attorney-in-fact may attempt to enrich him- or herself at the expense of the principal.

As it is a binding legal document, it is always best to retain a qualified California estate planning lawyer to prepare a power of attorney. Although pre-printed power of attorney forms are widely available, they may offer insufficient protection for principals, especially when such documents are subjected to the laws of another state. A recent decision by an appeals court in the State of Washington, called upon to interpret a pre-printed power of attorney signed in California, illustrates the problems that may arise.

Boyd v. Pandera

Edith Clark had seven children, including daughters (and half-sisters) Mary Pandera and Ethel Boyd. In Clark's declining years, she lived with Pandera. In 2000, they lived in Las Vegas, Nevada. In late 2001, Boyd and Pandera decided to move Clark into a nursing home near San Diego, California. The nursing home required Clark to sign a power of attorney designating an attorney-in-fact. Clark and her daughters obtained a pre-printed form from a local stationary store and executed it in the presence of a notary public. Clark named Pandera as her attorney-in-fact.

Clark only resided in the nursing home a few days before returning to live with Pandera in Nevada. The California power of attorney remained in effect. Two months later, the pair moved to Hawaii to live with Pandera's son. While in Hawaii, Clark received an inheritance from her deceased brother's estate. Pandera, exercising her power of attorney, used the money to purchase a house in Hawaii, which she titled in her name. She said this was to “repay” her for caring for her mother the past several years.

Pandera and Clark eventually moved back to the U.S. mainland and lived in a town just outside Spokane, Washington. It was there Clark died in 2009. She did not leave a will.

By this time, Pandera and her half-sister Boyd had been fighting over their mother's care for some time. The probate court in Washington named Boyd executor of Clark's estate. In that capacity, Boyd sued Pandera, claiming she improperly gave herself the Hawaii house in violation of Clark's power of attorney. The probate court agreed with Boyd and ordered Pandera to pay damages to the estate.

But on July 24 of this year, the Washington Court of Appeals reversed that decision. The appeals court said Washington law, which applies in this case, does not require an attorney-in-fact to keep her property separate from that of the principal, nor does it prohibit the principal from making gifts to the attorney-in-fact. The language in the pre-printed power of attorney form Clark used was, as the appeals court saw it, merely a required notice stating California law on the subject: “The language was not an express provision and, thus, did not set the standard of fiduciary care in this case.”

Make Sure Your Estate Plan Is State-Appropriate

As this case demonstrates, probate laws vary from state to state. That is why it is never advisable to use a pre-printed form tailored to a single state's laws. And if you have relocated to California from another state, that is why you should consult with a local estate planning lawyer who can ensure your power of attorney and other documents are properly updated to reflect this state's laws. Contact the Law Office of Scott C. Soady in San Diego today if you have any questions.

Collecting Payments After Your Death

September 26, 2014

Although you might think of an estate plan simply as a way to dispose of your existing assets, in fact your future estate might also be responsible for collecting additional income generated after your death. If you work in the entertainment industry, for example, your estate may still collect residual payments for years—even decades—after you're gone. According to a recent report by the entertainment website Deadline Hollywood, the Screen Actors Guild (SAG-AFTRA) currently holds more than $40 million in unpaid residuals that belong to living and deceased members. In these cases, the union simply cannot locate the person or his or her estate to make the payments.

What Is a “Residual”?

A residual is any payment made to a performer in a television show or movie for the rebroadcast of that work. For actors, residuals are governed by a series of labor agreements between the studios and SAG-AFTRA. Since the 1970s, residuals have been unrestricted, meaning the performer must receive a payment for each rebroadcast without limit. This means residual payments may continue well after the performer's death.

Although SAG-AFTRA is responsible for administering these payments, residuals are the personal property of the performer, who may leave them to anyone in a will or trust. If a performer fails to make an estate plan, residuals would then pass under the intestacy laws of the state governing the person's estate.

Under SAG-AFTRA rules, neither the union nor the studios are obliged to split residual payments among multiple beneficiaries. So if a performer chooses to name multiple beneficiaries, those persons must agree upon a single “nominee” to receive the residual payments after the performer's death. The nominee is then responsible for dividing the residuals as specified by the performer's will or trust. This nominee may be a bank or other corporate trustee.

Unclaimed Property

As the Deadline report noted, SAG-AFTRA has been unable to locate the estates or beneficiaries of many well-known deceased performers, such as comedian Andy Kaufman, who died in 1984. A Deadline writer managed to locate Kauffman's daughter, who said she was unaware SAG-AFTRA had continued to collect her father's residuals. While SAG-AFTRA has an entire department dedicated to locating heirs and estates, it is apparently overwhelmed by the sheer number of “missing” recipients.

It is important to note that while performers may earn residuals in perpetuity, once a studio makes a payment, SAG-AFTRA only has to hold it for three years. If it remains unclaimed by a performer's estate, the union may simply keep the money. This mirrors California's unclaimed property law, which requires banks and other financial companies to turn over a customer's account to the state controller if there has been no contact for three years.

Locating and collecting unclaimed property is actually a common duty of estate executors and trustees. That is why it is essential you prepare a proper estate plan and designate a person or persons to ensure every asset in your name is properly accounted for. Contact the Law Office of Scott C. Soady in San Diego today if you have questions about this or any other estate planning matter.

Establishing Paternity for Probate Purposes

September 25, 2014

When the law speaks of “heirs,” it refers to those individuals entitled to inherit a person's estate in the absence of a valid last will and testament. For example, if you live in California and die without a will or a spouse, but you do have children, those children are your heirs and inherit your estate. “Children” includes your biological offspring, as well as any children you legally adopted during your lifetime.

But what about children whose paternity is unsettled? California law states, for purposes of inheriting an estate, paternity must be “established by clear and convincing evidence that the father has openly held out the child as his own.” A court may also enter an order during the father's lifetime establishing paternity, whether or not he acknowledges a child as his own. If for some reason the father was unable to acknowledge paternity, it may be established after his death, also by the “clear and convincing evidence” standard.

Different States Have Different Rules

In some states, it is not enough for an alleged father to simply acknowledge a child as his own. An appeals court in Georgia recently dealt with such a situation. The deceased, James Hawkins, died without a will or spouse. He had, however, acknowledged his girlfriend's son as his child. In fact, Hawkins was not the biological father. He did acknowledge paternity on an official state form, but the document was not notarized. Georgia law requires a “sworn statement” to prove paternity, and both a trial court and the Georgia Court of Appeals agreed the un-notarized form did not qualify.

One of the appeals court judges noted this case illustrated the problem with “administrative legitimation,” which has been permitted in Georgia since 2005. The judge explained the process enables couples to “create a wholly fictitious father-child relationship, which is tantamount to an adoption without any of the procedural and due process safeguards of the adoption statutes for the actual, biological father.”

Plan Ahead to Avoid Confusion Later

Like Georgia, California allows a person to acknowledge paternity via a properly notarized form. But unlike the case discussed above, California does not necessarily require written proof paternity in order for a child to inherit. As a California Court of Appeal panel noted in a 2011 decision, the law only requires a putative father “acknowledge” the child as his own: “A written acknowledgment [is] not required, and proof by way of a word or act will suffice.” Again, a court would look at all of the available evidence in determining whether a parent-child relationship existed

Of course, issues regarding legitimacy only matter if you die without a will. If you make a proper estate plan, you can leave your estate to whomever you wish, regardless of your specific legal relationships. A good estate plan is especially important if you have property in different states—say you live in California but own real estate in Georgia—and you want to avoid a complicated examination of your family situation under possibly conflicting state laws. If you have any questions about this, or any other estate planning issue, contact the Law Office of Scott C. Soady in San Diego today.

Making Your Intentions Clear in a Will

September 19, 2014

A successful estate plan makes the final distribution of a person's property plain and clear. Ambiguity in a will or trust may lead to costly litigation over conflicting interpretations of a person's intent. But even the best executed estate plan may still leave some unhappy heirs, as one recent California Court of Appeals decision illustrates.

The Case of the Lanfermans

The deceased in this case was Paul Lanferman, who died in 2011. Lanferman and his wife, Susan Lanferman, executed an estate plan nearly two decades earlier. The Lanfermans had a total of six children, all from prior marriages. The Lanfermans executed identical wills. As applicable here, Paul Lanferman's will said upon his death that his one-half interest in any community property would go to his wife. The will attached no conditions to the gift, aside from an instruction to the executor, which stated that the couple's home could not be sold during Susan Lanferman's lifetime without her consent.

In addition to his will, Paul Lanferman executed a separate contract with his wife affirming their intention that upon both of their deaths, their community property would be divided equally among all six children. Susan Lanferman's will contains language to that effect. Finally, in 1989, the couple signed an amendment to this contract, clarifying that upon the death of the first spouse, the surviving spouse would have “a complete and unrestricted right” to use or sell any of the community property.

After Paul Lanferman's death, Susan Lanferman filed a spousal property petition with the probate court. This is an abbreviated form of probate permitted under California law when a spouse is the sole or primary heir to a deceased spouse's estate. Lanferman's son and executor, David Lanferman, objected to the petition, arguing the contract and its amendment created an ambiguity in the will, and that his father actually intended to grant Susan Lanferman a life estate in his share of the community property, rather than a bequest. A life estate would impose restrictions on Susan Lanferman's ability to sell any of her husband's share, whereas an outright bequest is unrestricted.

The probate court rejected the son's argument, and the Court of Appeals agreed. As the Court of Appeals explained, there was no ambiguity in the wording of the will, and the contract and amendment were not relevant to the probate court's analysis. Such “extrinsic documents” may only be considered if there is, in fact, ambiguity in the will itself. But here there was none. Paul Lanferman clearly intended to leave his community property to his wife outright, not as part of a life estate.

Always Be Clear

This case is simply an illustration and not a complete statement of California law. But it does show how drafting a clear, unambiguous will can minimize the time and expense of potential litigation. If you are looking to prepare your own will, it is important to work with an experienced California estate planning attorney. Contact the Law Office of Scott C. Soady in San Diego today if you have any questions.

Naming Backup Beneficiaries In Your Will or Trust

September 18, 2014

In creating a will or trust, a person may make specific bequests of property to a chosen beneficiary. But what happens if that beneficiary does not survive the person making the bequest? A well-drafted will or trust must anticipate such contingencies. Either the document should name an alternate beneficiary, or it should be made clear that the gift lapses and passes as part of the person's residuary (leftover) estate.

A recent California Court of Appeals decision illustrates the confusion that may arise when the intended beneficiary of a gift dies before the giver. This case is only provided as an example and should not be viewed as a comprehensive statement of California law on this issue.

Dilworth v. Tiernan

Magnolia Austin died in 2012. Her only living relatives were several nieces and nephews. Austin created a living trust in 1990, which she amended in 2002. Under the amended trust, after paying all funeral and other death-related expenses, the successor trustee was to divide the remainder of the trust assets into two shares. One share would go to one of Austin's niece, the other to her friend, Virginia Sexton. The trust went on to say that if the niece died before Austin, that first share would go to Sexton. And if Sexton died before Austin, the second share would be divided among Sexton's living heirs.

Both Sexton and the niece died before Austin. This left unresolved the question of what to do with the first share intended for the niece. In 2013, another of Austin's nieces, Rosemae Dilworth, filed a petition with a probate judge, seeking a declaration the first share passed to her aunt's estate. In effect, the share would pass under California's intestacy law, which meant Dilworth and the other surviving nephews and nieces would split the share originally left to the deceased niece.

Marilyn Tiernan, Virginia Sexton's daughter, opposed Dilworth's petition. Tiernan argued Austin's entire estate passed to Sexton's heirs under the terms of the trust. The probate court ruled for Tiernan and the Court of Appeals upheld that decision.

As the Court of Appeals explained, the key issue was whether the division of the trust into shares functioned as a residuary clause intended to make a complete distribution of the trust assets. Dilworth argued it did not; she said the two shares were separate gifts. Tiernan and the courts disagreed. The Court of Appeals said the trust language clearly manifested Austin's intent to make a final distribution. The courts have a duty to interpret wills and trusts, where possible, to avoid having any part of an estate pass under intestacy.

Planning Ahead

The whole point of a will or trust is to prevent litigation over your property after your death. Sometimes this cannot be avoided. But proper drafting of estate planning documents is always an essential first step. That is why you should always consult an experienced California estate planning attorney before making a will or trust. Contact the Law Office of Scott C. Soady in San Diego today.

California May Adopt Uniform Law on Conservatorships

September 5, 2014

California is poised to join the majority of its sister states in adopting a uniform law designed to promote interstate cooperation on the subject of adult conservatorship proceedings. In May, the California Senate passed SB-940, a bill that would enact the Adult Guardianship and Protective Proceedings Jurisdiction Act, a model law created by the National Conference of Commissioners on Uniform State Laws. A California Assembly committee approved the Senate bill on July 2, and it is likely to pass the full assembly sometime this month.

Making Interstate Conservatorships Easier

A conservatorship proceeding may be necessary when an adult cannot manage his or her own financial, personal or health care decisions. For example, an adult child might petition a California court to be named conservator of her elderly father's person or estate because he suffers from dementia. In California, a probate court supervises such conservatorship proceedings.

Because probate is handled at the state level, complications may arise if a person under conservatorship has to be moved to another state. Let's say the daughter named conservator of her father moves him from California to another state. A new conservatorship proceeding must then be initiated in that state, costing substantial time and money.

The uniform act, as contained in SB-940, would eliminate such duplication. The act allows California courts to communicate with other state courts in order to establish a single jurisdiction over the guardianship or conservatorship. The “home state” where the individual lived for the six months preceding the conservatorship action would have priority, followed by any state where there is a “significant connection,” such as a family member.

If and when a person under a conservatorship is moved from one state to another, the uniform act allows for transfer of the conservatorship without the need for a second judicial proceeding. The courts in both states must approve such a transfer, and both states must have adopted the uniform act as law. In no case could a conservatorship be transferred from another state to California without the consent of a California probate court.

The uniform act also allows for registration of conservatorships obtained in one state so they may be recognized in another. For instance, let's say a person under a conservatorship lives in Nevada but owns property in California. The conservator could register the Nevada conservatorship with the California probate court, thereby enabling the conservator to sell the property without going through a new conservatorship proceeding.

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Regardless of whether the uniform act takes effect—and if adopted, it would not become law until 2016—you should carefully consider the possible need for a guardian or conservator as part of your estate plan. A durable power of attorney lets you name someone to manage your financial affairs in the event of your disability, and an advance health care directive does the same for your personal and health care decisions. By nominating agents in advance, you can spare your loved ones (and your bank account) an extended court battle over who should take responsibility for your affairs. Contact the Law Office of Scott C. Soady in San Diego if you have any questions about this or any other estate planning matter.

Leaving a Legacy or Financial Abuse of the Elderly?

September 4, 2014

Many people use their estate plan to “leave a legacy.” A common example of this is making a gift to a charitable organization as part of a last will and testament. A person might, for instance, leave a gift to a university with instructions to establish a scholarship in his or her name. Some wealthier individuals might go so far as to establish a charitable foundation as part of their estate plan.

Then there are more unusual efforts at leaving a legacy that, unfortunately, often lead to expensive and unnecessary litigation. A recent case from Illinois presents one example. The case involved the estate of the late Virginia Rogers. In 2000, Rogers was a widow with no children or other immediate family. In a purported effort to continue her family name, Rogers signed a contract with her neighbor, George Dohrmann, whereby she would leave more than $5 million worth of property from her estate to him; in exchange, Dohrmann agreed to legally change the names of his two children to include the middle name “Rogers.”

Dohrmann apparently held up his end of the bargain. Rogers, however, did not amend her estate planning documents to reflect the terms of this supposed agreement. Instead, Rogers' will left her estate to various friends, distant relatives and charities. In 2004, Rogers transferred ownership of her apartment—which Dohrmann claimed was part of the $5 million promised to him under the contract—to her living trust. By 2008 Rogers, who suffered from dementia, was judged legally incompetent to continue managing her own affairs.

In 2007, Dohrmann sued Rogers to enforce the terms of their purported agreement. The litigation continued against Rogers' estate after she died. An Illinois trial court granted summary judgment to the estate, holding the contract was not enforceable as a matter of state law. In a decision issued on June 26 of this year, an Illinois appeals court agreed with the lower court.

The key defect with the contract, the appeals court noted, was the “grossly inadequate consideration” Dohrmann offered Rogers. In exchange for more than $5 million, all he offered was giving his sons an additional middle name. Dohrmann argued this was valuable consideration, as Rogers wished to perpetuate her family name. But as the court explained, “Dohrmann did not change the boys' surnames to Rogers, nor even exchange their middle names for Rogers.” He simply gave the children a second middle name of “Rogers.”

The appeals court also pointed to the “circumstances of unfairness” surrounding the contract. Rogers was a widow in her 90s. Dohrmann was a highly educated surgeon. His attorney prepared the contract. The court clearly believed he took advantage of her advanced age and declining mental capacity.

The Best Protection

This is certainly an unusual case. But financial abuse of the elderly is a common problem in California. There are laws to protect against such abuse, but the best protection is a good estate plan. An experienced California estate planning attorney can help protect your assets while ensuring you leave a proper legacy. Contact the Law Office of Scott C. Soady in San Diego today if you have any questions.