Administration of Missing Person's Estate
It is a traumatic experience to have someone close to you go missing. Not only is the mental trauma of not being to locate the person strenuous, but the financial aspect also begins to take its toll. The requirement to fulfill the needs of the absentee’s family and creditors and also to manage and protect the property has led to the enactment of legislature in many states including California.
For the immediate needs of maintenance and protection of property, a trustee can be appointed for a person missing for at least 90 days who is a resident of the state. This is only applicable in cases where the missing person is still presumed to be alive.
But, what is the recourse when a person has been missing for a very long period of time? In California, a petition can be filed to declare a person “presumed dead” when that person has been missing continuously for five years or more. The absentee’s surviving spouse, registered domestic partner, some family members, or creditors can file this petition in the missing person’s last known county of residence. The “presumed dead” petition is governed by California Probate Code Sections 12400-12408.
Under Section 12404, the petition must include the person’s last known place of residence and the address, the time and the circumstances when the person was last seen or heard from along with the description of the search and enquiry that had followed. The Court shall determine at the hearing whether the person can be presumed dead or whether the court wants further investigation about the whereabouts of the missing person, as per section 12406. If the Court finds the missing person presumed dead as per section 12401, then under Section 12407, the Court will also determine the date of death and appoint a personal representative to administer the estate in the same manner as that of a deceased person’s estate.
The missing person if he reappears later has the option of recovering his property from the beneficiaries under Section 12408. He will have to do so within a period of five years since the distribution of the assets. His right of recovery will be affected by what seems fair under the circumstances and will also take into account the cost of legal fees and other costs of administering the estate.
Are verbal wills valid California?
The short answer is: no. A will is a legal document, which lists down how a person called a “testator” would like his assets to be distributed after his death. A will also mentions the name of the executor of the will. If a person dies without leaving behind a valid will or intestate then his estate and all his assets have to be probated.
Just having something scribbled on a piece of paper does not amount to a valid will. The state of California, through Probate Code sections 6110-6113 specifically requires that wills be in writing.
The following is a summary of the various types of Wills and their validity in California:
Holographic will: A holographic will is a will, which is written by hand and not printed or typed on a computer. In California, a holographic will is valid only if all those sections of the will that make the will valid are written entirely in the testator’s hand, it is dated, and the will is signed by the testator. It must, however, be noted that the person writing this will must seek some professional legal opinion to ensure that none of the important language or components are left out, thereby, defeating the purpose of drawing up a valid will.
Oral will: An oral will is a verbal will and is also called “nuncupative will.” It is not valid in California and only recognized in very few states, and only under exceptional circumstances like an impending death of a soldier in a foreign land. This kind of will expresses a dying person’s wishes of disposing of his assets in the presence of a few witnesses. This is done in extreme circumstances where there is no time to do the procedures related to a written will.
Video will: A video will is an effort to leave your testamentary wishes on a video tape or other digital recording device. Video recordings are not valid wills in the state of California. Like an oral will, this could be done in those cases where time is of essence like in the case of a dying person. It could be admitted in the court only as a supportive tool of a written will, and not individually and that too only in extraordinary circumstances.
A formal or traditional will: This kind of will is in writing and is signed by the testator and also signed by at least two witnesses. This will can be signed on behalf of the testator, but in his presence and as per his directions. The witnesses must be present at the time of the testator’s signing of the will or at the acknowledgement of the signing. This is the most traditional kind of will and is recognized by the state of California as valid.
A California statutory will: A California statutory will must be completed and signed by a testator, and at least two witnesses must be present while the testator signs the will. The witnesses must also sign in the presence of the testator.
A will executed under the Uniform International Wills Act. An international will is valid in California. It does not matter where it was made, or where the asseets are located, or the nationality, domicile or residence of the testator.
An international will must be in writing and can be written in any language. Under the UIWA, the testator must state, in the presence of two witnesses and a person authorized to act in connection with international wills, that the document is the testator's will and that the testator knows the contents of the will.
Thus we have seen that a legal and valid will is only recognized in certain formats. Be sure and prepare your will pursuant to these guidelines.
Do-it-yourself (DIY) estate planning - Is it worth saving the few dollars?
Through online legal document portals, consumers have access to a number of DIY legal documents available on the internet to create their own wills and power of attorney. This may save them money and time. But has the internet really empowered the public to handle their estate planning or does it create many avoidable problems?
Most lawyers agree that using online legal documents may result in errors. While filling up the online documents, one may miss a simple question; some terms may be difficult to understand and may confuse the user and she may fill it incorrectly; and some may not update their online wills when changes are needed. There are numerous examples of a consumer who created an online Will, but had not updated it after some of his beneficiaries died.
I was recently involved in a situation where a decedent, using will kit purchased from an office supply store, created his "Will" with the assistance of his friends. His one and only wish was that his child not be appointed fiduciary and not have any control over the finances. Either because he did not understand the form, or did not complete it, the wish was not upheld and the estate plan virtually worthless. Worse yet, the interested parties spent ten times the amount of an attorney prepared the estate plan fighting to enforce this wish.
An attorney can help in prevent errors and may also help in reviewing and updating the estate plan in case of changes in the family including those through divorce, pre-deceased beneficiaries or new births in the family. An experienced lawyer can show you methods of avoiding costly probate paperwork and court proceedings, and explain the intricacies of using trust funds and exemptions in your asset protection strategy.
If you own no real property or valuable personal property, have only one or two small bank accounts, and have no minor children, you can probably write your own Will, with the assistance of a reputable book, software package or online service. But even on following all the instructions, if the Will is not properly signed, it is presumptively invalid and your beneficiaries will spend large sums of money in legal fees rectifying the errors.
Common errors encountered when you do your own estate planning documents:
1. Failing to sign the Will;
2. Failing to execute the Will, in the presence of witnesses;
3. Invalid witnesses during execution of the Will;
4. Invalid amendments to a Will; and
5. The Will is outdated at the time of death.
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Probate is Going to Get Worse in These Tough Economic Times
One of the typical goals in estate planning is to avoid the probate administration of your estate. The principal reasons for avoiding probate administration are: (1) the cost; and (2) the delay associated with the process. In Los Angeles, the process of probate administration is controlled by the Los Angeles Superior Court system, nation's largest trial court system, with 600 courtrooms in 50 courthouses throughout the county.
These tough economic times have caused problems for all types of governmental agencies and private businesses. California, in particular, has suffered from massive budget operating deficits in recent years that have required severe cutbacks in most areas of governmental services. Over the past year or so, these budgetary problems have had a direct impact on the Los Angeles Superior Court system. Court fees, those charged for filing petitions and various pleadings with the Los Angeles Superior Court, have been slowly raised for most filings, including probate filings. Starting in July 2009, the Superior Court implemented a monthly furlough program, where the courts were closed the third Wednesday of every month. While the employee furlough program has been difficult, court personnel have made Herculean efforts to continuing the orderly processing of legal matters.
Unfortunately, the news of California budgetary problems is only growing worse and, earlier this week, there was a stunning announcement that will undoubtedly impact the speed of the probate administration process. On March 17, 2010, Presiding Judge Charles McCoy announced that the Los Angeles Superior Court will lay off 329 staff members and closing 17 courtrooms county-wide. The layoffs will most likely not be the last of the personnel cuts. Court officials predicted 500 more people could be laid off and 50 more courtrooms closed by September 2010. In announcing the cuts, Presiding Judge Charles "Tim" McCoy warned of delays and longer lines. "When you cut this deep into the workforce of this court, the system must ultimately wear down,"McCoy said.
Now, more than ever, it is important to create an estate plan that avoids the cost and delay associated with the probate administration process. A living trust is a private agreement that allows your chosen fiduciaries to administer your estate privately, outside of the Superior Court. A living trust, combined with powers of attorney, allow your loved ones to privately manage your affairs in the event of your sudden incapacity. These documents, working together, allow your loved ones avoid having to file a probate administration proceeding, or seek a conservatorship, through the Los Angeles Superior Court system. A well-crafted estate plan is usually significantly more economical than relying on the default probate systems administered by the Los Angeles Superior Court. If you have not done so, create an estate plan today—your loved ones will be grateful for your foresight.
Which is Better: a Will or a Trust?
One of the most frequent questions I receive from clients goes to the very heart of estate planning—the difference between a will and a trust. When creating a trust, most individuals also create a will (usually a pour-over will), which further confuses the issue. When a client seeks guidance from me on whether it is better to create a will or a trust, the short answer usually is: it depends.
A will (sometimes called a last will and testament) is a foundational estate planning document and one that should be considered by every individual. The primary purpose of a will is to provide a set of instructions for the probate court to follow after your death. Basic issues that are addressed in a will are your choice of executors (the person who will be in charge of your estate) and your desired distribution of your property at your death. While a will is essential to any estate plan, by itself a will has two key drawbacks: it does not avoid probate; and it does not address the issue of your incompetency.
By contrast, a trust (sometimes called a living trust) is usually designed to accomplish everything addressed in a will (naming fiduciaries and designating where your assets go upon your death) but also usually provides the added benefits of avoiding probate and allowing the management of your incapacity. Most people want to avoid probate because an administration proceeding generally costs between four to eight percent of the gross value of the assets and take a minimum of nine months, if not several years, to administer. In local cities such as Manhattan Beach or Santa Monica, where home values average close to $1,000,000, probate fees and costs can easily exceed $40,000 or more. A trust also allows incapacity management because if you (as the trust creator or ‘settlor’) are deemed to be incapacitated (such as by a stroke), the trust agreement usually allows your named successor to assume control of your trust estate. Thus with a trust your assets can be managed for your benefit without having to file a court proceeding.
In addition to these foundational benefits, trusts can also be designed to create a host of other benefits for the settlor including some protection from estate taxes, delayed and managed distribution of your assets for dependents, and some protection from potential creditors. All of these benefits usually require that a person spend more money preparing the estate plan, but given the various benefits for most people, the investment is usually money well spent.
In summary, a will-based estate plan is frequently ideal for those with minimal non-real estate assets. For those individuals with real property holdings, dependents including minor children, or a reasonable asset base, a trust-based estate plan usually is the better choice.
Do You Have the Right Kind of Trust?
I have written extensively about the importance of creating a living trust (sometimes called an inter vivos trust) as a centerpiece of your estate plan. A living trust provides numerous benefits including allowing your loved ones to swiftly and privately manage your affairs, in the event of your incapacity or demise, without the assistance of the probate court.
Recently I was contacted by old friends who thought it might be time to review and update the trustee designations in their trust. Over the years, I had spoken many times to these friends about the importance of a having a living trust. These friends had repeatedly assured me that they had a living trust (created before they knew me) and had arranged everything many years earlier. I had even helped these friends when they functioned as trustees of another trust and so they were familiar with the operations of a trust and how it was administered. So imagine my surprise when I reviewed their plan and discovered that my friends’ trust was not a living trust, but rather a testamentary trust, or a trust created by a last will and testament.
The differences between a living trust and a testamentary trust are significant. Since it is created by a will, a testamentary trust only comes into existence through a probate proceeding. A testamentary trust thus requires that your executor apply to the probate court to create the testamentary trust. The probate (and trust) estate is then subject to the extensive costs of probate (generally 4% to 8% of the gross value) as well as the mandatory notice periods that require a probate proceeding to remain open for at least eight to twelve months. In many cases, a testamentary trust is the worst of both worlds because the creator will incur the additional expenses of creating a more complex document and force his or her beneficiaries to wade through the probate process. Moreover, the testamentary trust is only created upon your death and therefore does nothing to help manage your affairs if you become incompetent.
Time and time again I encounter clients who assumed that they had created a fully functional estate plan only to discover when it was too late that the plan was deficient. Frequently these mistakes are by “do it yourselfers” but sometimes the deficiencies arise from simply not reviewing an attorney-created plan for numerous years. When was the last time you reviewed your estate plan? Does it operate in the most efficient manner? Does it include sufficient contingency options to deal with the variety of problems we face in life? If you don’t know, now is a good time to review your plan with a professional.
Your Mother Always Said: Don't Leave a Mess!
I was contacted by a young woman in her early 30s after the passing of her beloved grandmother. She described herself as grandma’s favorite and the only member of her family that grandma would trust to administer her estate. Grandma had left a car, an apartment complex and a home full of possessions. And while grandma has no minor children, she is the sole means of financial support for two minor grandchildren who have lost their parents. The young woman searched high and low but cannot find grandma’s Will. The young woman believed that the Will may be in a safe deposit box, but until she is appointed administrator, the bank will not allow her access to the box.
We commenced a probate proceeding only to discover that the young woman’s cousin has filed a competing petition. The young woman confided in me that her cousin was ‘troubled’ and probably stole many of grandma’s possessions. But the cousin has filed a competing petition for probate and to the young woman’s surprise she was being wrongly accused of improper conduct. She returned to grandma’s residence only to discover that the locks have been changed and the car was gone. The tenants refused to pay rent because they didn’t know who was in charge, the support payments to the minor child stopped and chaos ensues.
After several hearings the court appointed a professional special administrator to open the safe-deposit box but unfortunately, it contained no estate planning documents. Without a Will, the two relatives had equal standing and the probate court was forced to sort through the competing allegations of misconduct. In the end, neither the young woman nor her cousin were allowed to serve and the court appoints a stranger—an independent attorney who served as a professional fiduciary. The battle between the relatives had resulted in months of delay, thousands of dollars in legal fees and probable financial losses associated with the disrupted tenants.
Much of these problems could have been avoided if grandma had simply taken the proper steps to protect her Will. As explained in a recent Wall Street Journal story, survivors can face numerous problems when a deceased family member fails to organize her affairs and leave them in a manner that can be readily accessed by the survivors. In addition to lost Wills, heirs can lose financial accounts if they are not located and timely claimed. I have seen thousands of dollars in stock certificates stuffed in drawers which could have easily been discarded but for the actions of an alert administrator.
The lesson learned from these tales is timeless: don’t leave a mess!
Parents Should Review Guardian Nominations Annually.
A fundamental principle in life is that things change; as our society becomes more interconnected and technologically advanced, the speed of change seems only to hasten. In response to this change, most of us regularly conduct annual reviews of important areas in our lives. For instance, most large employers review employees annually; many people schedule the traditional annual physical; and most financial advisors recommend annual portfolio reviews. But one area most people neglect a regular review is arguably the one most important: a review of guardianship nominations for their minor children.
The recent loss of musician Michael Jackson has focused attention on this most important issue. Upon his death, there were a number of individuals who could have had standing or a desire to serve as guardian to Mr. Jackson’s children, including Debbie Rowe, his ex-wife and mother to two of the children, his parents and his numerous siblings. Without instructions to the probate court, all of these parties could have petitioned to serve as the guardians. If more than one had petitioned the probate court for the appointment, the matter could have been highly contentious and resulted in an extended legal battle.
Fortunately, Mr. Jackson’s advanced planning prevented the stress and trauma associated with such court proceedings. In his Will, Mr. Jackson designated his mother as guardian for his children and named Diana Ross as a back-up guardian. Mr. Jackson’s decision to nominate these individuals appeared to facilitate the settlement, which was approved by the probate court on August 3, 2009. According to an article in the Los Angeles Times, “Neither side made any demands that were rejected, the source said, and the arrangement was agreed to without contentious negotiation.” In short, Mr. Jackson’s plan appeared to have worked as it should have and his children will be raised by Katherine Jackson, the guardian he designated in his Last Will and Testament.
In selecting guardians, most people designate those individuals they believe will best be capable of raising their children in their absence. But as time passes, circumstances change: couples divorce; parents age; and people relocate. When was the last time you reviewed the guardians for your minor children? Are you still close to the guardians? Do you still believe that they share your values? Are your nominees still healthy and capable of raising your minor children? If you cannot remember the last time you reviewed your guardian nominations, or who you nominated, it is time to review your estate plan.
Adjusting Your Expectations
I was speaking with a dear friend recently who consulted me about a concern she had regarding “her” inheritance. She explained to me that her grandparents, who were quite wealthy, had always led her to believe that she would receive a substantial bequest. As it turned out, the entire estate had been left first to another relative with the unwritten ‘understanding’ that the remainder of it would be subsequently distributed among the grandchildren. Unfortunately, the manner in which the distribution had been made gave her relative complete power over the estate with no binding obligation to leave anything to my friend or the other grandchildren. The grandchildren were now waiting for ‘their inheritance’ from their senior relative which created an atmosphere of uncomfortable tension among the grandchildren.
As a trust and estates practitioner, my friend asked me what could be done to protect ‘her inheritance’. I had the unfortunate job of explaining to my friend that under these circumstances there was little that could be done because given the way the estate plan had been structured, she had no right to ‘her’ inheritance. Unfortunately, my friend’s attitude is not unusual.
Many people are surprised to learn that, with the exception of a spouse and minor or disabled children, there is generally no ‘right’ to inherit. In California, a person retains the right to dispose of property at death as he or she chooses. Generally, as long as proper formalities are observed and the parent or grandparent has adequate capacity, he or she is free to dispose of his or her assets in any manner—no matter how bizarre the testamentary decision. A recent illustration of such capriciousness was Leona Helmsley’s decision to disinherit her grandchildren and instead leaving millions to her dog Trouble.
Moreover, in the absence of fraud, undue influence or competency issues, there is little chance the court system will remedy your perceived slight. In California, will or trust contests are disfavored proceedings with rigid evidentiary requirements; a relatively low percentage of contests are successful. In fact, a challenge to an estate plan is one of the few areas where the California Legislature has eliminated the right to a jury trial.
Are you ‘expecting’ an inheritance? Without a formal and binding contract, you have no legal right to your expectation. In most instances an inheritance is a gift, not a right, and you should consider adjusting your expectations.
Does Your Estate Plan Anticipate the Bereavement Effect?
Families are a complex system of support. No matter the generation, there is usually a division of labor between the principals. In the United States, the stereotypical model envisions a husband employed outside of the home while the wife manages the child care and/or household. Increasingly we are seeing a multitude of models, including the wife functioning as the primary earner or the spouses sharing the roles equally.
Whatever the division of labor, it is not unusual for these roles to change within a family overtime. Perhaps one spouse assumes more responsibility for child care when the other spouse returns to school. Or when one spouse loses his or her job, it is not unusual for the other spouse to become the primary earner. It is this flexibility present in most families that serves as a foundation of strength.
Unfortunately, this foundation of flexibility and support can be severely challenged when one spouse dies. Medical research tells us that when illness or death strikes one spouse, there is an increased likelihood that the other is going to face serious medical problems. Referred to as the “bereavement effect”, researchers have found that your health frequently becomes interdependent on the health of your spouse. In a 2006 study published in the New England Journal of Medicine, the authors concluded that an elderly surviving spouse had between a 17% and 21% of dying within the first year following the death of the first spouse.
Many individuals delay or ignore estate planning assuming it is unnecessary because all of their assets will be inherited by the surviving spouse. A number of planning tools—especially the use of joint tenancy—makes the assumption ostensibly reasonable. But what happens in the event when there is a systematic failure in the family? I have counseled numerous families where the spouse that handled the business affairs passes suddenly, and the surviving spouse is unable to assume all of the management. I have also assisted families where the surviving spouse doesn’t know all of the couple’s assets or how they are managed.
Good estate planning anticipates the bereavement effect by attempting to plan not just for death also but multiple contingencies. Good estate planning allows the surviving spouse to find the assets and assume responsibility for the management of them immediately. If the surviving spouse is not capable of the management role, good estate planning includes contingency plans that allow others to assume the management responsibilities. Good estate planning uses tools—living trusts and durable powers of attorney—to avoid the cost and delay associated with probate court. Does your estate plan anticipate the bereavement effect?
The Ultimate No-Contest Clause--Russian Style.
A no-contest, or in terrorem, clause, is frequently used in wills, trusts and other estate planning documents to minimize the likelihood of a disgruntled beneficiary challenging the estate plan. The phrase ‘in terrorem’ is Latin meaning ‘to frighten’ or ‘terror’. The basic concept is that if a beneficiary launches an attack on the estate plan and is not able to convince a court to change it, then that beneficiary loses any gift under the estate plan. A typical no-contest clause might reduce an expected intestacy gift (perhaps 50% of the estate), down to something smaller, perhaps 10% of the estate. Under this hypothetical, if the beneficiary accepts the estate plan, he receives the 10% gift, but if he challenges the plan (hoping to receive 50%) and loses, he receives nothing. No contests clauses are quite common in California and have been the subject of evolving legislation and extensive litigation.
Now from Russia comes penalty that exceeds anything dreamed up by the most creative estate planner. On February 12, 2008, Badri Patarkatsishvili, described as a post-Soviet Oligarch, died of a massive heart attack leaving an estate allegedly valued at billions of dollars. According to his family, Mr. Patarkatsishvili did not leave a will. In a recent Los Angeles Times article, a Russian-born New York lawyer named Emanuel Zeltser appeared at Mr. Patarkatsishvili’s wake and advised the grieving widow that her late husband had signed a secret will naming him and a half-cousin as executor. During the following month, attorney Zeltser and the half-cousin sought access to Mr. Patarkatsishvili’s global investments. Mr. Patarkatsishvili’s family sued in U.S. federal court, accusing the two Americans of trying to loot the huge estate with forged documents. The family called Zeltser's documents "invalid …" noting that several "appear to be forgeries".
According to the Los Angeles Times, attorney Zeltser had a very colorful background. Born in Siberia, Zeltser immigrated to Texas in 1974 and in 1990, was admitted to practice law in New York. During his time in the United States, Zeltser has been sued at least three times for alleged fraud including one New Jersey case where a jury concluded that Zeltser had wrongfully seized a business and was ordered to pay more than $2 million in damages. In 1993, attorney Zeltser was retained by a Russian bank, but was later accused of using his position to steal as much as $6 million of investment accounts. An attorney for the bank declared that Zeltser was a "career con man" who "forges documents on a routine basis."
In early March, Zeltser met several times with Boris Berezovsky, another Russian oligarch and former business partner of Mr. Patarkatsishvili. While Mr. Berezovsky backed Mr. Patarkatsishvili’s widow, Zeltser allegedly proposed they work together instead and drafted an agreement to secretly divide most of the assets between them, leaving only 15% for the family. On March 11, 2008, the offer was rejected when Messrs. Zeltser and Berezovsky shared a meal at a London restaurant. After the meal, Zeltser allegedly boarded Berezovsky's private jet believing that he was heading to Miami, but instead landed in Minsk, the capital of Belarus. Zeltser was arrested at the airport and charged with economic espionage and using false official documents to defraud Mr. Patarkatsishvili’s estate. After a closed-door trial, Zeltser was sentenced to three years in Penal Colony #15 in eastern Belarus, where he remains to this day.
I can think of at least a few clients over the years that would love to include such a clause in their estate planning documents. While not possible in the United States, attorney Zeltser’s case certainly presents a cautionary tale for those fighting over estate planning documents in other jurisdictions.
Does it make sense to file probate to save a failing asset?
The shrinking values in the real estate market are truly frightening these days. I have received reports that values are falling less to approximately 25% of peak values (i.e. a 75% decline in value). I have even seen reports of homes being listed for as little as $100.00 in certain parts of the country. In recent weeks, I have encountered several situations where precipitous valuation declines impact the decision of whether to commence a probate proceeding.
The typical situation involves a decedent-borrow who was struggling to remain current on his mortgage and/or found himself with an ‘underwater’ property (i.e. a property where the loan balances exceed the fair market value). With the death of the borrower, it is not usual that the loan is not being paid and frequently there are few resources available to make such payments. Sometimes the loan is already in foreclosure and literally weeks away from auction.
Recently, I encountered one situation where, at best, the estimated fair market value of a condominium was approximately $200,000 with equity remaining of approximately $10,000. With the mortgage several months in arrears and the foreclosure process already started, the heir wanted to know if the property could be ‘saved’ or somehow the foreclosure process could be stopped. While it is within the probate court’s power to temporarily stop an asset sale, most courts are reluctant to issue an injunction if it will be a useless act. With little cash in the estate it was not clear that filing a probate proceeding to save the real property from foreclosure would be a productive exercise.
Using this situation as an example, if the property would be sold, typical property sale commission and closing costs are approximately five percent of the gross sales price or, in this circumstance approximately $10,000. Moreover, to process the probate, the costs and statutory fees alone, which are measured on the gross value of the asset (not the equity), would exceed $15,000.00. With more in minimum costs and fees to handle the matter, what would remain in the estate? Under these circumstances, nothing would be left for the heirs or beneficiaries. Worse yet, the executor could easily lose money filing the proceeding, especially if non-probate assets (such as the administrator’s personal assets) are used fund the administration process.
It is entirely possible that other assets justify or require a probate filing. It is also possible that an administrator can negotiate to reduce outstanding loan balances which would warrant a probate filing. Painful as it may seem, however, sometimes the best course of action may be to do nothing. Naturally, such an important decision should never be made without deliberate consideration, counsel and an understanding of the personal risks associated with electing to lose the real property to the lender.
On a personal note ... are you ready?
I lost my beloved father last week. With him my family lost a piece of our collective heart and soul. Relatively young and healthy, my father’s vicious illness was as swift as it was unexpected. A little over three weeks ago, my father returned from a short vacation with flu-like symptoms and a few days later checked into the hospital. So powerful was this disease that we almost lost my father twice in the first week after his diagnosis. Two weeks after his admission to the hospital, my father was gone. Despite my pain, I was more fortunate than most because at least I was able to say goodbye.
During his final weeks, our family struggled to cope with numerous issues including simply understanding his disease and helping him manage a course of treatment. Despite having a brother in the pharmaceutical business, we toiled to understand the complex medical vernacular and on more than one occasion, finished a doctor consultation only to realize that we were still no closer to understanding the challenges my father was facing. My father and all those around experienced the many of the stages of grieving. For those who have not been this close to such a loss, making decisions in this emotional pressure-cooker was incredibly draining.
After his passing, we were faced with another level of challenges that ranged from managing the details of his memorial to dealing with the grief and surprise of others who surrounded our lives. And it was only when the memorial was over that you begin to realize the incredible void left in his wake. Suddenly we were left to assist my mother with everything from the mundane (changing light bulbs) to the more immediate (how to manage on-line banking). Since those days, we have slowly coped and come to realize that these problems can be solved and life will go on. Knowing that my father had organized his affairs gave his family—especially my mother—great comfort during the most challenging period of her life.
I did not prepare my parents estate plan because of the obvious conflict of interest but also because my parents live in a state where I am not licensed to practice law. Until shortly before my father’s death, I never reviewed my parents’ estate plan although I had discussed its general components. As many children, I struggled with the mixed emotions of whether or not to more forcefully interject myself into the situation. Near the end, I was blessed to share with my parents their concerns and fears as to whether or not their affairs were in sufficient order. During our time of need, they discovered that their estate planning attorney had retired and was no longer available. Fortunately, with my professional experience and the assistance of a local friend, we were able to manage the process. In the end, my father’s affairs were in excellent shape, we will avoid the probate process and we were all grateful about my father’s forethought and consideration. Every week I see families that are not as fortunate or prepared as we were for this sad inevitability.
For most of us, we know not our ultimate fate; life is as short as it is sweet and the sands of time can slip through our fingers in an instant. Are you ready?
What is a PVP Attorney?
The abbreviation “PVP” is short for “Probate Volunteer Panel”, which is a panel of attorneys who register with the Los Angeles Superior Court to assist with the resolution of various probate proceedings. The PVP panel consists of attorneys who the court appoints in probate and family law matters, including conservatorships, guardianships and related proceedings. In a typical proceeding, a PVP attorney is appointed to represent the interests of the potential conservatee or ward.
In Los Angeles County, PVP attorneys are required to be members of the State Bar of California in good standing for each of the previous three years and have no pending disciplinary proceedings. The PVP attorney must also meet certain educational requirements and maintain proscribed levels of professional insurance. Within the panel, attorneys frequently designate special expertise and certain members are appointed to deal with particular issues such as special needs trusts, taxes, or complex litigation.
The PVP attorney’s compensation is usually paid either from the conservatee’s estate (if there are resources) or by the County of Los Angeles. As with any attorney, a PVP attorney is required to zealously represent the interests of his or her client. Having been appointed by the court, however, the PVP attorney is given a secondary duty: “The PVP attorney's secondary duty is to assist the court in the resolution of the matter to be decided.” Rule 10.85, Los Angeles County Superior Court Rules.
The interesting conundrum in conservatorship cases is this: the PVP attorney is appointed to defend the legal rights of a client, but those rights include the client’s right to form an attorney-client relationship with the attorney (i.e. the right to contract). If the allegations of the conservatorship petition are true, that the potential conservatee may not have legal capacity to enter into a contract, how can the attorney create an attorney-client relationship with his or her client? If the proposed client isn’t mentally competent, then how can an attorney rely on the client to state his or her desires? Likewise, if the conservatee is legally incompetent is it in his or her best interests to fight the conservatorship proceeding?
Thus the apparent rationale for the court proscribing a secondary role for the PVP attorney; the court wants the PVP attorney to assist the court with the resolution of the matter. The PVP attorney frequently functions like an arm of the court attempting to investigate the various allegations (especially in contested proceedings) and provide objective information about the status of circumstances affecting the welfare of the conservatee. Often the court looks to the PVP attorney to provide an objective, unvarnished assessment of the merits of the conservatorship proceeding.
Another frequently asked question is whether or not the proposed conservatee is entitled to retain an attorney of his or her own choosing. In my experience, the probate court generally prefers using the PVP attorney because of a level of trust associated with the PVP attorney for, among other things, having completed the educational requirements. The non-PVP attorney then must decide whether he or she believes that it is in the client’s best interest for them to continue as additional counsel. The risk posed by this non-PVP attorney is that if the client is found incompetent, he or she may have a difficult time being compensated for services or a demand may even be made for the return of previously paid compensation. A recent opinion of the California Court of Appeals, however, has advised that a prospective conservatee must be given an opportunity to explain why he or she wants to retain other counsel.
When performing his or her duties, the PVP attorney must balance the competing requirements to protect their client’s interests and their court-directed duty to resolve the proceeding. Generally, it is not in the best interests of a proposed conservatee to engage in protracted litigation regarding his or her mental state and most PVP attorneys (in my experience) work hard to find a resolution that is in the best interests of their client.
To paraphrase the Miranda warning, you did not need a PVP attorney but if you are a proposed conservatee, one will be appointed for you. If you are a party to these types of proceedings, how do you deal with a PVP attorney? In my bias opinion (as a current member of the PVP panel), it is usually in the best interests of all parties to fully cooperate with the PVP attorney. As charged by the Court, the PVP attorney has been appointed to “assist the court in the resolution of the matter ….”
New Ebay-Like Site Helps With Estate Administration
Likewise, trustees and administrators are often left with the emotionally challenging task of fairly dividing up a lifetime of personal property among beneficiaries or heirs. As the old adage goes, one person’s garbage is another person’s treasure. Some items particularly have little or no commercial value but immense personal value to the heirs or beneficiaries. How does one divide grandma’s favorite quilt among competing heirs without cutting it into pieces? The division of personal property can often be one of the more stressful aspects of estate administration.
Recently, a new web site has offered a creative solution bringing market forces to the equitable distribution of personal property. According to its promotional material, eDivvyup is an online auction site designed specifically to help with the division of the deceased personal’s property. Operating in a fashion similar to eBay, an auction on eDivvyup is a private auction restricted to invited participants. The trustee or administrator catalogs the deceased’s personal property and allows the beneficiaries or heirs who are interested to bid on it. As aptly stated on the eDivvyup web site, “While specific items may hold sentimental value for you, they are not worth the fighting and long-term damage to relationships.” Thus heirs and beneficiaries can express their true desire for particular items of personal property through the efficient application of market forces.
While not necessary or appropriate for every estate, the eDivvyup site appears to offer a novel solution to an age-old problem of dividing personal property that may be commercially worthless but emotionally priceless. According to the site, eDivvyup offers its services for $49.99 for the first 50 items and an additional 99 cents for each additional item listed. If you find yourself facing a King Solomon dilemma, eDivvyup may be just the solution.
Treated Like a Dog?
Now it appears that poor Trouble will not receive the entire gift and have to survive on a mere $2 million. Helmsley’s grandchildren alleged that Helmsley was not mentally competent when she signed the 2005 will which left the large bequest to Trouble. According to this article in the New York Post, a Manhattan judge approved an agreement to reduce Trouble’s inheritance from $12 million to $2 million. Under the new deal, $10 million of Trouble’s bequest will go to Helmsley’s large charitable foundation.
It seems only appropriate that Leona Helmsley, dubbed by some as the “Queen of Mean” would have an equally controversial animal. According to a former housekeeper, Trouble slept in Helmsley’s bed and was fed chef-prepared meals in porcelain bowls and silver trays. This same housekeeper actually sued Helmsley for nerve damage she allegedly suffered after being repeatedly bitten by the animal. Trouble’s care taker estimated Trouble’s annual expenses at $190,000 including an estimated $100,000 for the dog’s security squad (which was apparently warranted because of the alleged death threats against Trouble). Given that Trouble is already nine years old, Trouble’s trustees did not oppose the settlement, apparently believing $2 million was adequate for Trouble’s care.
Can I Avoid Probate by Placing My Child on Title to my Assets?
Under California law, joint tenancy includes what is referred to as the “right of survivorship” which means that when one tenant passes away, the asset transfers to the surviving tenant by operation of law. With a bank account, a surviving tenant can present a death certificate to the financial institution and remove the surviving tenant from the joint tenancy account. With real estate, the surviving tenant executes a form known as an affidavit of death of joint tenant which then places title solely in the name of the survivor. While these devices can work well with domestic partners or married couples (who are also bound by family law), they often fail when used with other parties such as children. In fact, using joint tenancy in these situations often creates more problems than it solves.
With respect to financial accounts, the decision to place another person on the account as a joint tenant grants an ownership interest in the entire account to the new joint tenant. The most obvious risk is that the new joint tenant has ownership over the entire account, and can clean it out almost immediately. While the original owner would have a legal claim against the new joint tenant under these circumstances, often you have to sue the joint tenant and find the missing assets before they will be returned (which is frequently challenging if not impossible in many cases). With respect to real estate, making such a transfer, unless accompanied by separate agreement, is frequently considered an irrevocable transfer. What this means is that if the original owner changes his or her mind about disposition, or wants to sell or refinance the property, the original owner will not be able to do so without the consent of the new tenant.
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The Never Ending Will Contest
Dummar, at the time a Utah service station owner, claimed that he picked up Howard Hughes along a desolate desert highway approximately 150 miles north of Las Vegas, Nevada. Hughes allegedly asked Dummar to take him to the Sands Hotel in Las Vegas and during the trip, Hughes revealed his identify to Dummar. After Hughes death, a handwritten will was discovered at The Church of Jesus Christ of Latter-day Saints (“LDS”) in Salt Lake City. The new will (commonly referred to as the “Mormon Will”) was allegedly prepared in 1968 and had a number of strange discrepancies including the fact that it left money to the LDS (Hughes had never been a member), named a dismissed former employee as executor and referred to Hughes’ famous flying boat by the term “spruce goose”, a moniker Hughes allegedly despised. Most importantly for Dummar, the Mormon Will left 1/16th of Hughes’ estate to Dummar. In June 1978, after a lengthy trial, the Mormon Will was ruled a forgery by a Nevada jury and Dummar received nothing from the Hughes estate.
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The Latest Service: a Virtual Safe-Deposit Box?
One frequent issue that arises in both estate planning and estate administration is effective communication. Many individuals are concerned that their beneficiaries will not find their estate plan, asset accounts or important confidential information after their death. Often these individuals don’t want to share their confidential information with their beneficiaries while they are alive, but are concerned that their beneficiaries will not find the information after their death. Conversely, I have encountered numerous heirs and beneficiaries (usually administering probate estates) who are concerned that they might not have located all of the decedent’s assets or accounts.
One company, iGoodBye.com, has harnessed the power of the internet to create a novel solution to the problem of communicating confidential financial information after your death. At iGoodbye, the user creates a private account which can store copies of estate planning documents, financial accounts, passwords and other private, personal information. The user is provided with a password that will allow his or her beneficiaries to access the private information only after the users’ death (your death is verified with a death certificate). The user is given the security of knowing that all of their information is stored in one central location but accessible by their beneficiaries only after their passing. Essentially, the service appears to be a virtual safe-deposit box for your important estate documents. At this posting, iGoodBye.com service is $29.99 per year and the service can even be used without cost, if the user agrees to charge the annual cost to his or her beneficiaries following the users’ death.
Do You Know Who Will Receive Your Retirement Accounts?
Do you know who your beneficiaries are?
In one case, a son reviewed his late father’s affairs only to discover that his father had only one substantial asset: an IRA account. When reviewing the IRA account, the son discovered for the first time that he was not named as the beneficiary. Who had his father named as his beneficiary? The father’s ex-girlfriend. Worse yet, it was an ex-girlfriend the father had not seen, or had any contact with, for approximately 15 years. It was unlikely that his father wanted to leave this money to his ex-girlfriend and exclude his son but by failing to review his beneficiary designations, this is exactly what happened.
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