Is a Promise to Leave Your Estate to Someone Legally Enforceable?

June 26, 2015

A probate court in New York recently addressed an unusual will contest. An 82-year-old Roman Catholic nun died in 2012, leaving a surprisingly large estate worth over $2 million, the product of a 1982 personal injury settlement. The sister signed a will in 1994 dividing her estate among her siblings, her congregation and various other Catholic charities.

The congregation actually contested the will. When the sister entered the congregation back in 1959, she signed a declaration agreeing to abide by the order's requirements, which included a “vow of poverty.” To that end, the sister signed a will in 1979 leaving her entire estate to the congregation. This will, of course, predated the 1982 personal injury settlement and the subsequent 1994 will which, if valid, revoked the 1979 document.

Among other arguments, the congregation maintained admitting the 1994 will constituted a breach of contract, as it violated the sister's 1959 vow of poverty. In June 2015, a New York probate judge denied the congregation's motion for summary judgment on this issue. Without addressing the underlying breach of contract claim, the judge held under New York law, the purported 1959 contract did not affect the admissibility of the 1994 will.

Contracts to Make a Will

This case highlights an important point about estate planning. Under California law, a person can make “a contract to make a will.” This can, like the case above, be a purported written agreement to leave your estate to a particular person or organization. Or it could be a simple oral promise. A contract to make a will can also be a contract not to make a will—that is, to die intestate—or to revoke a previously signed will.

The easiest way to prove a contract to make a will in California is to incorporate the terms of such an agreement directly into your will or trust. Alternatively, your will or trust can refer to a separately signed contract. You can also sign a standalone document “evidencing the contract.” Absent any such express, written proof, a person who claims to have made a contract with a deceased person, orally or otherwise, must offer a judge “clear and convincing” evidence such an agreement was made.

Why Sign a Contract to Make a Will?

There are many circumstances where a contract to make a will might prove useful as part of your estate planning. If you own a business, such contracts can facilitate succession planning. If you are elderly or in declining health, you might promise someone a share of your estate in exchange for having them take care of you. And if you are getting married, a prenuptial agreement might include promises to make reciprocal wills naming each other as beneficiaries.

But as noted above, contracts to make a will should be in writing. Oral promises may be enforceable in court but they are never ideal. And before entering into any contract regarding your will or trust, you should consult with an experienced California estate planning attorney. Contact the Law Office of Scott C. Soady in San Diego today to speak with an attorney right away.

Dealing With Break Ups in Your Estate Plan

June 25, 2015

Estate planning is often a snapshot of your life at a particular moment. The beneficiaries or agents named in your will and other estate planning documents reflects your relationships at that point in time. And as those relationships change, so should your estate planning.

Say you draft a will and name your best friend as executor. If you later have a falling out with her, it is probably a good idea to revise your will and name a new executor. Or suppose you leave a relative a large inheritance in your will. If you later learn that relative is irresponsible with money, you might decide it prudent to revoke your gift.

How Divorce Affects A Previously Signed Will

There is one circumstance where California law assumes a major life event alters your estate planning. If you are married, make a will, and subsequently divorce, any gift to your ex-spouse or any provision naming him or her as executor of your estate is considered revoked. This does not prevent you from making a new will after the divorce naming an ex-spouse as executor or leaving him or her property. But absent an express declaration on your part, the law simply presumes you no longer want your ex-spouse to participate in or inherit from your estate.

Note this presumption only applies to legally married spouses who later obtain a divorce or annulment. If you are living with your long-term boyfriend and subsequently break up, that has no immediate effect upon any estate document you have naming him as an agent or beneficiary. You must sign new documents to reflect the change in your relationship.

To illustrate this legal principle in practice, consider a recent New York case. Like California, under New York law a divorce revokes any appointment or gift under the ex-spouse's will. In this case, a man signed a will naming his longtime male partner as executor and principal beneficiary of his estate. A year later, they held a “commitment ceremony,” as same-sex marriage was not recognized in New York at the time. The couple parted company on good terms in 2011, however, he did not amend or revoke his original will.

After his death in 2013, the man's mother and sister asked a Manhattan probate judge to revoke the ex-spouse's appointment as executor and nullify his inheritance. They argued the couple effectively married when they held their commitment ceremony, notwithstanding New York did not recognize same-sex marriage at the time. In other words, the probate court should treat their subsequent break up as a divorce and alter the man's will accordingly.
The court rejected this argument. For one thing, the judge observed, New York's same-sex marriage law did not apply retroactively. Second, the former partners were “under no illusion” they were ever legally married. Finally, and most importantly, the deceased had “ample time” to alter his estate planning documents after his break up. He chose not to do so, thereby demonstrating the will accurately reflected his intentions at the time of his death.

As this case demonstrates, there may be circumstances where you wish a former partner or spouse to still be a part of your estate plan. Still, whenever there is a major change in your personal situation, it is always a wise course of action to consult with an experienced California estate planning attorney. Contact the Law Office of Scott C. Soady in San Diego today if you would like to speak with an attorney right away.

Distinguishing Marital and Separate Assets in Estate Planning

June 17, 2015

In making an estate plan, it is important to make a complete list of all assets you own. This is especially helpful to your future executor or trustee, who will be responsible for marshaling your assets after your death and distributing them as you direct. Confusion over the ownership of assets can lead to litigation, as this recent California case illustrates.

Estate of Quon

A married couple had three children. In 1968, the father purchased a 5% interest in a company whose sole asset is an apartment complex in Glendale, California. The company's majority owner previously worked as the couple's accountant. In 1972, the majority owner issued formal stock certificates to the husband alone, who made all the financial decisions for the couple.

In 1991, the couple established a living trust and named themselves as trustees. One of the couple's children and her husband were named as successor trustees. Although the trust was supposed to contain schedules of each spouse's separate and marital assets, the schedules themselves were left blank. Simultaneous to the execution of the trust, the husband signed a last will and testament, which left the residue of his estate to the trust. The husband died in 2004.

At this point, the ownership of the apartment stock was disputed. The majority owner claimed the wife sold her late husband's shares back to him a month after he died for a total of $33,000. This sale was not disclosed on the estate's tax return, however, nor was it listed in an updated schedule of trust assets signed by the wife the following year.

In 2013, the daughter, now acting as executor of her father's estate, sued the majority owner, claiming the estate still owned the 5% interest, which she said was worth $400,000, not the $33,000 her mother received. The executor argued the wife never had the authority to sell the shares, as she never owned them; they were the separate property of the husband which passed to the estate upon his death. Furthermore, the executor argued the sales agreement between the wife—who could not read or understand English—and the majority owner was the product of fraud.

Unfortunately, the executor never got the opportunity to prove the merits of her argument. In June 2014, a probate judge dismissed the executor's complaint, holding it was barred by California's statute of limitations. The mother sold the stock in 2004. In California, the statute of limitations on a fraud claim is three years. The executor did not file her complaint until 2013, nearly six years after the deadline expired. Neither the probate court nor the Court of Appeal found any just cause to extend the limitation period, meaning the stock sale stands.

Keeping Accurate Accounts

The above case is merely an example and not a complete statement of California law. But it is instructive in highlighting the need to keep complete and accurate records of your assets. If you have a spouse, it is imperative you keep up-to-date schedules of marital and separate property, so there is no confusion later on as to which assets may be subject to probate or trust distribution. If you need advice on this or any related California estate planning matter, contact the Law Office of Scott C. Soady today.

Should I Write My Own Will?

June 15, 2015

A will is a formal document. California law requires a will be typewritten and signed by two competent witnesses. There are exceptions to this rule, but it is generally a bad idea to try and take advantage of them. A recent case from Arizona illustrates the potential pitfalls of trying to prepare your own will without the help of a qualified estate planning attorney.

Court Case in California

An Arizona woman died in 2012. The previous year, she began drafting a last will and testament on her computer. One of the beneficiaries named in the draft will was the woman's natural granddaughter. The use of “natural” here is significant, because the granddaughter was actually adopted after her birth mother—the woman's daughter—passed away. Grandmother and granddaughter later met and formed a close relationship.

The woman eventually made handwritten revisions to the typed draft of her will and signed it before a notary in July 2012, shortly before her death. The woman's sister then moved to open a probate estate. Although she acknowledged the existence of the 2012 document purporting to be her sister's will, she maintained it was invalid as it was never properly witnessed. The granddaughter objected, arguing it should be treated as a valid “holographic will” under Arizona law.

The Arizona courts disagreed. In a May 2015 decision, a three-judge panel of the Arizona Court of Appeals agreed with a lower court's finding the purported holographic will was not valid. A holographic will normally means the document is entirely in the handwriting of the person making it. Arizona's Supreme Court has recognized an exception for preprinted will forms filled out by a testator, but that was not the case here. The fact the deceased woman made handwritten revisions to a document she partially drafted on her own computer negated its potential status as a holographic will.

The appeals court also rejected the granddaughter's argument that even if the will is invalid, she was still entitled to a share of her grandmother's estate under Arizona intestacy law. As noted above, the granddaughter was adopted, which means as a matter of law, she was no longer related to her natural grandmother and thus had no right of inheritance. The fact she had a “close relationship” with her natural grandmother was legally irrelevant.

Get Help In Drafting Your Will

Although this was an Arizona case, the legal lessons are equally applicable in California. A last will and testament should be typewritten and witnessed by at least two other persons. Holographic or handwritten wills may be necessary in an emergency, but they are not reliable estate planning devices, especially if you wish to leave your estate to persons you are not legally related to. And while you may wish to write down ideas for drafting your will, the final document should be prepared in consultation with an experienced California estate planning attorney. Contact the Law Office of Scott C. Soady in San Diego if you would like to speak with an attorney today about these matters.

Can My Creditors Control My Estate?

June 13, 2015

Estate planning includes not just how to dispose of your assets, but also how to deal with any creditors you may still owe money to after your death. This includes lawsuits which may be pending or occur as a result of your death. In some cases, even if you leave no assets as part of your probate estate, an estate must still be opened in order to address such litigation.

Estate of DeMotto

Here is a recent example which is discussed only as an illustration and should not be taken as a correct statement of the law. A man died in 2013. The man was living with a woman—not his wife—at the time of his death. Their relationship began in 2001. Although the woman claimed he intended to provide for her in his estate planning, he did not name her as a beneficiary of his will or trust.

The probate estate itself had no assets, presumably because the man transferred all of his property into the trust. The woman then filed what is known in California as a “Marvin action” against the estate. A Marvin action refers to a 1976 California Supreme Court decision holding contracts between unmarried partners who lived together are legally enforceable. Here, the woman sought enforcement of the alleged promises made to her through judicial imposition of a “constructive trust” against both the man's estate and his children, who were the successor trustees of his trust.

Since no estate was opened—as, again, there were no probate assets to speak of—the woman simultaneously filed a petition for appointment as administrator of the estate. The children objected. They claimed the woman was nothing more than a “gold-digger” trying to “enrich herself to the detriment of a no-asset estate.” Indeed, the children claimed the probate court had no jurisdiction to appoint an administrator over a no-asset estate, and in any case at least one other person—the public administrator—had priority right to appointment over their father's lover.

The courts did not see it that way. Both the probate judge and the California Court of Appeal agreed the woman could be named administrator of the estate. As the Court of Appeal explained, although this was a “no-asset” estate, it actually did contain “property” in the form of the woman's Marvin action. That is to say, under California law, a claim against an estate is considered its “property” for probate purposes. A person may open an estate simply to resolve a potential lawsuit against it.

It may seem counterintuitive that the person suing the estate could also be its administrator, but as the Court of Appeal noted, a creditor is an “interested person” and may be appointed if nobody with a higher priority files a competing petition. Here, the children suggested the public administrator had higher priority. That is true, the appeals court said, but the public administrator did not file a competing petition—nor, for that matter, did the children, who also have priority. Objecting to a creditor's petition is not the same thing as filing a competing petition.

Need Advice On Your Estate Plan?

The above case is just an illustration and not a complete statement of California law. But it does highlight the importance of proper estate planning. If you need advice on drafting your will or trust from an experienced California estate planning attorney, contact the Law Office of Scott C. Soady in San Diego today.

Can One Estate Inherit from Another Estate?

June 12, 2015

One thing to consider when making a will or other estate planning arrangements is how your actions (or inactions) may affect other people's estates. Consider a recent story from North Dakota. A Fargo dentist died after another man brutally attacked him with a hammer. It turned out the dentist's father-in-law hired the killer. Both men were convicted of murder and sentenced to life in prison.

Local prosecutors said the father-in-law wanted to obtain custody of his three-year-old granddaughter. Several months before the murder, the dentist's wife passed away. The dentist himself did not leave a will. Like California, in cases of intestacy North Dakota law requires dividing the deceased's estate equally among his three surviving children. Yet nearly six years after his death, the estate remained open before a North Dakota probate court.

Why the unusually long delay? According to a local newspaper, the executor of the estate was still waiting to receive an inheritance from another estate, that of the deceased dentist's father, who died before his son. The father's estate remained pending before a probate court in Louisiana. The news reports did not elaborate on the reasons for the delay in the administration of the Louisiana estate.

Survivorship and Simultaneous Death

While the delay in the above example is uncommon, it is not unusual for one estate to have a vested interest in another estate. Even in a routine estate administration where there is no disagreement among heirs, it can still take several months to fully probate an estate. During this time, it is conceivable one or more heirs may themselves pass away, making their estates heirs or beneficiaries of the first estate.

There are also many cases where two or more people die simultaneously, say in a common accident. This can present significant challenges, especially when there is no reliable way to prove which person died first. For instance, if a husband and wife die in a car accident, does the wife inherit from the husband or vice versa?

One way to minimize the chance for such confusion is to include a survivorship clause in your will or trust. Also known as a “simultaneous death clause,” this basically says in order to inherit from your estate, a person must survive you by a certain number of days. Some states automatically impose a survivorship period (usually 120 hours or five days). California does not, so it is up to the person making the will or trust to make that determination. The typical survivorship clause is for around 45 to 60 days. Federal tax law discourages survivorship periods of more than 120 days.

But even with survivorship clauses, there will still be situations where an heir or beneficiary dies before receiving a distribution from another estate. This emphasizes the importance of estate planning. Your executor is responsible for gathering your assets after you die, which includes any inheritance not barred by a survivorship clause or similar provision. Similarly, you may wish to include language in your will or trust to prevent your estate from passing through someone else's estate. Whatever your wishes, if you need to consult with an experienced California estate planning attorney on this or any related issue, contact the Law Office of Scott C. Soady in San Diego today.

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.