June 17, 2015

I'm the Successor Trustee in California; What do I do Regarding Giving Notice?

In California, a typical estate planning tool is the revocable trust. A husband and wife usually create one jointly, with the two of them serving as co-trustees until one dies. Then the other becomes the sole trustee. When the surviving spouse dies, the trust will usually name a successor trustee to take over the responsibilities of trustee.

A key feature of a revocable trust is to recognize that what was once a revocable trust becomes an irrevocable one when both of its creators/settlors/grantors die ( a portion of it could become irrevocable on the first death, depending on the language of the trust).

As the successor trustee, one of your responsibilities is to notify all named beneficiaries of the trust and heirs of the decedent that the trust has become irrevocable. This is as set forth in California Probate Code §16061.7, which prescribes the notice that is to be given by the successor trustee.

The notice is typically served by mail and the statute provides that it is to be sent within 60 days following the death of the surviving settlor (i.e. within 60 days of the event that made the trust irrevocable).

Generally, in at least 10 point boldface type, the notice must, among other things, separately state that:

"You may not bring an action to contest the trust more than 120 days from the date this notification by the trustee is served upon you or 60 days from the date on which a copy of the terms of the trust is mailed or personally delivered to you during that 120-day period, whichever is later."

This language starts a 120 day statute of limitations; if no one contests the trust within that 120 day period, no trust contest is generally possible by anyone given proper notice. This is a benefit, in that it provides some certainty to the trustee that the trust can be administered and the property distributed without fear of litigation, once the 120 day period has run out.

It is also a detriment to one unhappy with the terms of the trust; they only have 120 days to decide whether to file a contest, no more. If you are the contestant, consult competent counsel in a timely manner before deciding whether to litigate.

Bookmark and Share

March 10, 2015

When can Judgment Creditors Reach the Assets of a California Spendthrift Trust?

In California, Probate Code Sections 15300-15301 protect the principal and income of a spendthrift trust from judgment creditors. A spendthrift trust is one where there is a restraint written the trust instrument to prevent a transfer of a beneficiary's interest. This protection does not exist with respect to distributions from a spendthrift trust, once the distributions become due and payable (Probate Code Section 15301(b)); it also does not exist with respect to support orders for spousal or child support that exist against the beneficiary of the trust (Probate Code Section 15305).

Further, under Probate Code Section 15306.5, up to 25% (but no more) of the principal of a spendthrift trust may be reached by judgment creditors. Additional rules apply if there are both support orders and judgment creditors, with the general rule being that the support orders have a priority over those of judgment creditors.

The take away is that while spendthrift trusts are useful, they are not 100% bulletproof. Some portion of them will be made available to creditors regardless of the grantor's intent.


Bookmark and Share

February 2, 2015

With the massive increase in baby boomers retiring over the next decade, proper estate planning is more important than ever

Roughly 10,000 Baby Boomers will turn 65 today, and about 10,000 more will cross that threshold every day. (Pew Research)

With the massive increase in baby boomers retiring over the next decade, proper estate planning is more important than ever! When you are looking for an estate lawyer to assist you with planning -- experience and knowledge from a reputable attorney is key.

What is estate planning? Estate Planning isn’t just about protecting assets, it’s about peace of mind for you and your loved ones. Our comprehensive approach is a cost-effective “no homework” way to protect your assets and prevent disputes that might arise in the future.

Don’t be tempted by “Do It Yourself” guides and kits. I have known experienced professionals whose loved ones have seen estates ruined by poorly thought-out cookie cutter solutions that left families vulnerable to taxes, litigating family members, probate, guardianship issues and unknown creditors.

Here are a few questions to consider:
• How do I insure the financial security of my spouse and children?
• How do I avoid family conflicts and ensure equitable treatment of my children?
• How do I minimize the conflict and expenses of probate?
• How do I insure my loved ones can legally make decisions for me if I become disabled?
• How do I provide for minor children if I die?
• How do I ensure my assets are arranged so they easily transfer to my loved ones at the time of my death?
• How do I minimize estate taxes at the time of my death?
A poorly implemented estate plan (or no estate plan) can cause unnecessary hardships for you and your family. Administration & court fees, family conflict and, sometimes, taxes can quickly burn through any assets an estate might have.

3 Things You Should Know About Estate Planning
• You need a plan for the cost-efficient and orderly transfer of assets to your loved ones when you die.
• You need to insure that if you become disabled a loved one or trusted advisor has the ability to make financial and healthcare decisions for you.
• You need to keep the courts out of your family’s life. The legal fees for probate and guardianship court can be for example, a $500,000 estate in California will result in probate fees of $13,000 or more. These fees could be avoided with a properly funded trust.

Ted Hankin is an experienced attorney who regularly deal with complex trusts, guardianships and probate issues. If you or your loved ones are looking for an attorney who is committed to your future, speak to Ted for a free initial consultation.



Bookmark and Share

January 29, 2015

Some Probate and Trust Litigation War Stories in California

I have represented three sisters against their brother over their mother’s will.

I’ve represented a child who was adopted and thought she had a great relationship with her presumed half-sister and then found out the sister wanted all of the deceased father’s estate. We had to find tissue and get DNA testing to resolve that matter despite all of the family photographs.

I’ve represented cousins against a decedent’s lover, who got the decedent to leave his entire multi-million dollar estate to the lover. We showed up for trial at 1PM. The judge sent us to discuss settlement … three different times I announced that I would proceed with the trial because there could be no settlement, and three different times the other side blinked. We finally settled at 7:30 PM (kudos to the judge and his staff for staying so late).

I’ve had to represent a probate estate against a former business partner to get what was due the decedent pursuant to the buy-sell agreement.

I’ve represented grandchildren against their father, who was named as trustee by the grandparents, to get him to account and give up the money, many years after it was supposed to have been distributed to the grandchildren.

And there have been so many more……

So is there a human cost to estate planning; yes there is…. It can be minimized if there is harmony in the family and the choices of individuals to serve roles (e.g. executor, trustee) are good choices. But if there is not, or there is a bad actor influencing the situation, the cost can indeed be a high one.

Bookmark and Share

January 25, 2015

Why is There a Bypass Trust in Most Estate Plans? To Save Federal Estate Taxes on the Second Death.

1. Each US citizen has a lifetime exclusion amount from estate taxes of $5,340,000 (this amount adjusts for inflation each year).
2. There is an unlimited marital deduction for gifts from a deceased spouse to a surviving spouse who is a citizen.
3. The two concepts at play at the threshold are whether to simply leave everything to the surviving spouse and take advantage of the unlimited marital deduction (therefore no tax on the first death) which may result in a tax at the second death (while the unused portion of a decedent spouse's lifetime exclusion may be "ported" over to the surviving spouse, the total assets on the second death may still exceed the surviving spouse's lifetime exclusion amount). or
4. Alternatively, fund a bypass trust to the maximum amount of the lifetime exclusion of $5,340,000…. This will not be taxed at the first death and will “bypass” the estate of the survivor (i.e. not be subject to tax at the survivor’s death; and if the survivor’s estate is $5,340,000 it will not be taxed on the survivor’s death).
5. If there is too much money to put into the bypass trust, fund the marital trust. This takes advantage of the unlimited marital deduction but only to the extent necessary to avoid estate tax on the first death. There are provisions that can be put into the marital trust that restrict the survivor’s ability to change its ultimate disposition on the survivor’s death (referred to as a “QTIP” trust).
Thus, by using a bypass trust, survivor's trust and marital trust, estate taxes may be minimized while keeping some control over the wealth of the first to die (i.e. lock it into the bypass trust and QTIP trust).

Bookmark and Share

December 1, 2014

When Litigating a Will or Trust Contest in California, What Evidence do I look for?

A typical case will involve a family member contacting me to complain about the dispositions in a will or trust of a deceased relative, with allegations that another family member or a caregiver "got" to the deceased relative to unduly benefit themselves at the expense of the other family members.

To properly analyze the case, I obtain copies of all prior testamentary documents (to determine if the terms are at variance with the current documents, and how great a variance there is).

I will also obtain all of the available medical records for that deceased relative, for the relevant time period. That includes hospital records, nursing records, physician records, records of mental health professionals, and any other medically related records that can provide insight as to the physical and mental state of the deceased relative at the time the will or trust was executed by them.

I don't pretend to be a medical professional. Rather, I rely on the services of a forensic psychiatrist to assist me in the analysis, and to suggest other areas of discovery that may be useful in assisting that forensic psychiatrist in reaching an opinion regarding both the susceptibility of the deceased relative to undue influence and the actual use of undue influence in procuring the contested will or trust. This is also true when the capacity of the deceased relative to engage in a testamentary act is called into question (capacity and undue influence being regular bedfellows).

To the extent necessary, I will take depositions of the family members or bad actors in question, as well as of physicians involved in the direct treatment of the deceased relative (assuming that the deceased relative was under doctor's care).

On occasion, the bad actor gives in, withdraws from consideration the trust or will in question, and the matter is settled.... on other occasions, the only resolution that can be had is by trial.

I always bear in mind that everyone influences the actions of everyone else; it is only when the influence appears to rise to the level of undue influence that I have work to do.

Continue reading "When Litigating a Will or Trust Contest in California, What Evidence do I look for?" »

February 1, 2014

Undue Influence in California Will and Trust Contests

California defines undue influence in the Civil Code. Specifically, Civil Code Section 1575 states:

"Undue influence consists:

1. In the use, by one in whom a confidence is reposed by another, or who holds a real or apparent authority over him, of such confidence or authority for the purpose of obtaining an unfair advantage over him;

2. In taking an unfair advantage of another’s weakness of mind; or,

3. In taking a grossly oppressive and unfair advantage of another’s necessities or distress. [Enacted 1872]"

Undue influence will be presumed, in California, in many cases where a family member initiates estate planning for an elderly relative; this is even more the case if the if the new plan is unfair to the elderly relative or benefits the one family member exercising undue influence to the detriment of other family members who would otherwise be expected to share in the elderly relative's estate.

Proof of undue influence is made by the introduction, at trial, of circumstantial evidence; the trier of fact must decide based on the inferences shown by the evidence. This is because it is a rare case to have direct testimony of the undue influence.

An inference of undue influence may exist if it is proven that the dispositions of the elderly relative in the will are at odds with the elderly relative's stated intentions. It can also be inferred if there is a close relationship between the bad actor and the elderly relative, and it can be shown that the bad actor took an active role in obtaining the will or trust that is being contested.

In one case the California Supreme Court decided to deny probate to a will where it was shown that the deceased elder had a weakened mental and physical state when the contested will was signed, the bad actor had opportunity and actively procured the contested will and made misrepresentations to the deceased elder concerning other relatives (the bad actor's siblings). Estate of Garibaldi (1961) 57 C2d 108

Bookmark and Share

November 12, 2013

How to Contest a Will In California

There are times when a will is challenged in California. There are many reason why this happens and the law sets forth the procedures to follow in making a challenge. Some reasons a will may be challenged include:

The will is fraudulent.
The will wasn’t properly executed.
The person creating the will didn’t have the capacity to legally sign the will.
The person was unduly influenced into signing it.
The person challenging the will desires that a different personal representative be appointed by the court
.

Challenging or contesting a will is not to be taken lightly. In order to prove that the will is invalid, one of these reasons must be proven in a court of law. The idea of simply challenging a will because you don’t like the contents may seem reasonable -- but if you can’t prove one of the above factors for invalidating it, you may very well be wasting your time and resources.

Irrevocable Trusts are created in two ways:

1. A revocable trust becomes irrevocable after the grantor has died.

2. An irrevocable trust is established while the grantor is living.

Some types of irrevocable trusts will help to save estate taxes, or provide liquidity for paying the taxes.

Self-settled irrevocable trusts will not generally provide asset protection in California.

Working with an estate planning attorney now can offer so much solace and support for your family and friends later. It truly is a gift that you can give your family that goes far beyond financial rewards.

For more information, contact Ted Hankin today.

Bookmark and Share

November 4, 2013

Ted Hankin of Lytton Williams Messina and Hankin LLP as featured in: INLAND EMPIRE MAGAZINE, Top Lawyers Resource Guide, Fall 2013 edition.

thumbnail%20inland%20empire.jpg

Lytton Williams Messina & Hankin LLP (the "Firm") maintain close relationships with their clients and continue to make personalized service their number one priority. Partners Lytton Willaims and Messina were all formerly partners in the Century city law firm of Kelly Lytton & Williams. Prior to joining Kelly Lytton, Sheldon Lytton and Richard Williams, each with more than 30 years of legal experience practiced at O'Melveny & Myers and Manatt, Phelps & Phillips, respectively, and were then partners in Finely Kumble Wagner Heine Underberg & Manley, one of the largest national law firms in the United States. John Messina, head of the Firm's Temecula Valley Office, is a licensed real estate broker and was the head of a mortgage banking firm in the San Gabriel Valley before turning to the law. Ted Hankin, an attorney and CPA, heads the Firm's Newport Beach Office and was formerly the Division Chair of the Estates, Probate and Trust Division of Alvarado Smith APC. Henry Holguin, of Counsel to the Firm, was formerly a name partner in Miller & Holguin, and is one of California's most noted health care attorneys; he currently serves as the general counsel of AltaMed, the largest Federally qualified Community Health Center in the United States.

The Firm's Practice Areas Include:
1. General Business Litigation and Resolution of Disputes, including Representation of Public Agencies, and Representation of Clients before Federal, State and Local Government Agencies.
2. Real Estate Litigation and Transactions involving Natural Resources and Environmental Law (Air Quality, Public Utilities, Endangered Species, Water Quality, and CEQA), Real Estate Finance, Land Use and Entitlements, and Eminent Domain.
3. Trust and Estate Planning, Administration and Litigation
4. Health Care Law including Litigation, Regulatory Compliance, and General Health Care Legal Counseling
5. Business Entity Formation, Corporate Governance, Business Securities and Finance, and Business Tax Counseling and Strategies
6. Structure and Placement of International Investments in California Business and Real Estate
7. All Family Law Matters through Of Counsel, Richard Trugman

All four of the Firm's named Partners have a Martindale-Hubble AV Preeminent rating which is the highest possible rating for an attorney for both ethical standards and legal ability.

To see the archived article, click here.

Bookmark and Share

July 17, 2013

Judgments Come With An Expiration Date; Or Do They?

You have been successful and obtained a California judgment against your adversary. However, you have been unsuccessful in collecting on it. Should you be concerned about the passage of time? After all, interest on judgments is generally 10% annually in California.

The answer is, it depends. If you have a civil judgment, it must be renewed through the courts every ten years. If not, it will become unenforceable (California Code of Civil Procedure Section 683.020). Renewal is accomplished by submitting an application for renewal to the court prior to the expiration of the ten year period (California Code of Civil Procedure Section 683.120).

However, if you have a family law judgment (or order), it never expires (California Family Code Section 291). This is a very useful quality, if you should find, for example, that your ex-spouse's parent has died and that ex-spouse is about to come into enough money to satisfy that more than 10 year old judgment or order......

Bookmark and Share

April 26, 2013

Cause and Effect Resulting in California Trust Contest

Trust contests are very similar to will contests with similar allegations of incompetency and/or undue influence. The difference is that there may be only a very short time to decide if you are going to file a contest.

There is a procedure in the Probate Code (§16061.7) where the trustee gives notice to all beneficiaries that the trust has become irrevocable and a copy of the trust is provided; if that procedure is properly followed, then a contestant has only 4 months in which to bring a trust contest.

If the contestant waits too long, or there is a no contest clause, then they may be out of luck. That’s not to say that if you can prove the entire trust is invalid (and therefore the Probate Code §16061.7 notice is invalid) you can’t win; you might. It just makes a hard job harder.

Bookmark and Share

April 26, 2013

Cause and Effect Resulting in California Will Contest

Suppose a will is being offered for probate (the process by which the decedent’s debts are paid and the assets distributed) and someone thinks (a) the writer of the will was mentally incompetent when they wrote it or (b) the writer of the will was being unduly influenced at the time (in other words, without the influence, the will would have been written differently).

Their best option is to file a will contest to try and prove their theories as to why the will should not be subject to probate. They might have an earlier will that benefits them and they want to offer that document for probate.

All of the above amounts to a will contest which boils down to litigation in the probate court. I’ve represented both sides. Sometimes it is a niece against an uncle, three sisters against a brother, brother against brother.

At the end of the trial, if there is not an agreed settlement that addresses the issue, the court will decide which will works; that will determine who gets what.

But wait, what if the will has a “no-contest” clause? If it does, the contestant may be jeopardizing any inheritance that is given the contestant in the will. Of course, if the contestant gets nothing in the will, there is no risk (generally) in bringing the contest.

Bookmark and Share