Estate Planning in California

Adverse Possession

2013-05-08T14:47:00.000-07:00

Rarely in life can you take someone else's property without legal consequence. Adverse possession is an exception to this rule.

While recently listening to the radio in the Bay Area, a local news station mentioned the story of a West Oakland man attempting this. This individual was attempting to gain legal ownership of an ostenisbly abandoned home in West Oakland through adverse possession. The article was misleading in its description of adverse possession as it said:

"Adverse possession is an old law, with roots in California dating back to the Gold Rush, where someone can obtain title to a property without paying for it."

This is a misleading statement. There is no such thing as a free lunch in life.

As described below, the requirements of adverse possession require monetary expense on behalf of the adverse possessor, namely payment of property taxes. If the individual wishes to acquire title to this West Oakland home, they will only do so by paying the property taxes for it for 5 years. Hence, it is a stretch to assert that the individual can obtain title without paying for it.

The following five elements of adverse possession are:

"(1) Possession must be by actual occupation under such circumstances as to constitute reasonable notice to the owner.
(2) It must be hostile to the owner's title.
(3) The holder must claim the property as his own, under either color of title or claim of right.
(4) Possession must be continuous and uninterrupted for five years.
(5) The holder must pay all the taxes levied and assessed upon the property during the period."

Dimmick v. Dimmick (1962) 58 C2d 417.

In context of wills and trusts, adverse possession can possibly be an issue if real estate is involved.

For instance, assume Danny Decedent owned a farm in Alturas, CA, a remote region in northeast California. Danny was estranged from his entire family who lived mainly in San Francisco. Danny passed away in a tragic hot air balloon accident in 2003. Danny died intestate and did not write a trust.

Danny's neighbor, Sam Squatter, who was aware of adverse possession, began to occupy the farm immediately thereafter in 2003. Sam knew there was no mortgage on the property, after reviewing real property records, so he thought it was worth the gamble. Whereas if the farm was mortgaged, the bank could possibly accelerate the loan upon Danny's death. Yet since there was no mortgage and loan acceleration was not an issue, Sam thought it was worth a shot. Sam completed the steps necessary to assert an adverse possession claim and then instituted a quiet title action.

Danny's heirs eventually realized that Danny passed away after doing a Google search. When they realized that Danny passed away and owned real estate, they rushed to claim his estate through intestate succession. However, at that point, it was too late as Sam's quiet title action had concluded and he was awarded ownership of the property.

If you have any questions please call my office, (408)866-8382 for a complimentary consultation or email me, s.miri@mirilaw.com.

Proposed recording fee increase to support affordable housing

2013-05-01T16:32:00.004-07:00

A bill is currently being debated in the California Senate that would significantly increase the cost to record a real estate document.

Basically any document related to real estate must be recorded with the applicable county recorder's office. For example, a deed of trust involving a home in Gilroy would need to be recorded with the Santa Clara County Recorder's Office. Since thousands of documents are recorded each day in California, California is a large state geographically and very populated, the revenue that can be generated by a recording fee increase is immense. In particular, analysis by the California Senate Transportation and Housing Committee stated that between $300M and $750M could be generated each year if the bill passes. The range is due to the fact that in some years more documents are recorded than in others.

SB-391 (Saulnier) would add a $75 fee to every recordable real estate instrument. These funds would be allocated to principally support affordable housing programs for modest income individuals. The fee would apply to the following instruments: deed, grant deed, trustee’s deed, deed of trust, reconveyance, quit claim deed, fictitious deed of trust, assignment of deed of trust, request for notice of default, abstract of judgment, subordination agreement, declaration of homestead, abandonment of homestead, notice of default, release or discharge, easement, notice of trustee sale, notice of completion, UCC financing statement, mechanic’s lien, maps, and covenants, conditions, and restriction.

The typical cost to record a 1-page document is between $10-25. The reason for the variance is that each county sets its own recording fee. Santa Clara County charges $25 for the first page to record a document whereas Modoc County charges $10. Yes Modoc County is a California county. This bill would significantly increase the cost to record a document. For example, if SB-391 passes, to record a 1-page affidavit of death of a joint tenant in Santa Clara County would cost $100 instead of $25.

Still, the bill does exempt the $75 fee from documents where the documentary transfer tax is in effect. For example, if a person purchases a home, the $75 fee would not apply.

The bill's author previously attempted to pass a similar bill in 2012 but fell 2 votes shy on the Senate floor. Since the bill amounts to a tax increase, at least a 2/3 vote is required in both chambers of the California legislature.

To be clear, this is just proposed bill. It is not California law unless it passes both chambers of the California legislature, Senate and Assembly, and signed by Gov. Brown.

I express no approval or disapproval of the proposed bill whatsoever. This a legal blog, not a political blog.

If you have any questions please call my office, (408)866-8382 for a complimentary consultation or email me, s.miri@mirilaw.com.

Trust Accounting Exceptions

2013-04-26T15:31:00.000-07:00

A trustee is normally required to render an annual accounting to a beneficiary subject to the following exceptions.

Accounting Waived by Trust Instrument

The trust may waive the right to an accounting per Prob C §16064(a). However, despite an accounting waiver clause in the trust, such can still be required "upon a showing that it is reasonably likely that a material breach of the trust has occurred."

For example, Bobby Beneficiary receives a copy of his Aunt Gertrude's trust following her death. The trust specifically waives the right to an annual accounting. Bobby is aware that Aunt Gertrude's trust owns a rental home that is currently occupied. Bobby passes by the rental property one day to discover a rotting roof, cracked driveway and chipped paint. Bobby calls the trustee, Turner, who explains to Bobby that the house is in perfect condition and there is no need to worry because the rent checks show up timely each month for the correct amount. Bobby implores Turner to inspect the property given its state but Turner declines given that the house is cash-flow positive. Undeterred by Turner's indifference, Bobby asks for an accounting because Bobby is concerned that the structural repairs are substantial and Turner does not have adequate trust assets to cover these costs.

Beneficiary Waives Right to Accounting

Many legal rights in life can be waived. For example, you may waive your Miranda rights, i.e. the right to keep quiet or speak to an attorney if subject to custodial interrogration by law enforcement. Similarly, a beneficiary may waive their right to waive an accounting.

All that suffices is a simple written statement that the beneficiary waives the right to an accounting. However, this waiver is practically illusory. The waiver can be rescinded on a whim. Prob C §16064(b) states "a waiver of rights under this subdivision may be withdrawn in writing at any time as to accounts for transactions occurring after the date of the written withdrawal."

In light of the inherent flimsy nature of an accounting waiver, requesting one from a beneficiary is often of little value.

The Beneficiary is the Trustee

When a person writes a trust, e.g. a married couple, they are often the settlor, trustee and beneficiary initially. In such a case, no accounting need be given. Prob C §16069. Conceptually this is quite logical because a person does not have to tell the right hand what the left hand is doing.

A question I have seen on a few occasions is where a child is concerned about a parent's spending habits. The child is the beneficiary of the trust following the parent's death and wants to ensure there is something left when they inherit. Since the parent is trustee and beneficiary, the child is not entitled to one. However, there is nothing preventing the parent from providing an accounting. Although the accounting would not be compelled by law but rather kindness.

If you have any questions please call my office, (408)866-8382 for a complimentary consultation or email me, s.miri@mirilaw.com.

Out-of-state will in California

2013-04-17T16:31:00.000-07:00

Many people migrate to California each year. The fact that thousands of people come to the Golden State means that their estate planning instruments also follow them to California. The validity of out-of-state wills is subject to Prob C § 6113.

It reads as follows:

"A written will is validly executed if its execution complies with any of the following:

(a) The will is executed in compliance with Section 6110 or 6111 or Chapter 6 (commencing with Section 6200) (California statutory will) or Chapter 11 (commencing with Section 6380) (Uniform International Wills Act).
(b) The execution of the will complies with the law at the time of execution of the place where the will is executed.

(c) The execution of the will complies with the law of the place where at the time of execution or at the time of death the testator is domiciled, has a place of abode, or is a national."

Clearly California has a very broad rule for recognizing the validity of an out-of-state will. For instance, Thomas Walcott was a resident of Brookings, Oregon. Thomas worked for the CA Dept. of Corrections at Pelican Bay State Prison, a short car ride away from his home. Since Thomas did not want to have to pay sales tax or pump his own gas, he lived in Oregon instead of California.

In light of Thomas's very risky occupation, Pelican Bay houses the most violent inmates of California's prison population, he decided to write a will. Since Thomas was not an expert in probate law, Thomas hired an attorney he found on Yelp. The Oregon attorney crafted the will in conformity with Oregon law. The will named his long-time neighbor Nelly Nedson the sole beneficiary of Thomas' estate. Years later, Thomas retired and moved to Thousand Oaks, CA to be closer to his relative.

When Thomas eventually passed away, his family located Thomas' will. Upon seeing that the will was written in Oregon, his relatives initally became hopeful because they erroneously thought that the will was invalid and that they would inherit Thomas' estate through intestate succession. However, when they took the will a California attorney, the attorney informed them of Prob C § 6113 and said the will might nonetheless be valid.

The attorney then found the Oregon attorney who helped draft the will and the Oregon attorney provided a declaration attesting to the will's conformity with Oregon law. The California attorney then petitioned for probate with Thomas's Oregon will in Ventura County Superior Court. Eventually, Nelly was contacted and he inherited Thomas' estate at probate's conclusion.

If you have any questions please call my office, (408)866-8382 for a complimentary consultation or email me, s.miri@mirilaw.com.

Property ownership

2013-04-11T15:06:00.000-07:00

When a person inherits a piece of property, a question that naturally arises is "when does that person's interest in the property vest?" Or in other words, "when did that person become the property's owner?"

This is an important legal question because ownership gives the owner a bundle of legal rights. For example, ownership gives a property owner the ability to occupy, modify, improve, buy, sell, lease and exclude others from such property.

The California Probate Code says this on the following subject:

"Subject to Section 7001, title to a decedent’s property passes on the decedent’s death to the person to whom it is devised in the decedent’s last will or, in the absence of such a devise, to the decedent’s heirs as prescribed in the laws governing intestate succession." Prob C § 7000.

You might then wonder, what does Prob C § 7001 entail? It reads as follows:

"The decedent’s property is subject to administration under this code, except as otherwise provided by law, and is subject to the rights of beneficiaries, creditors, and other persons as provided by law. Prob C § 7001."

A common scenario where property ownership is important is when a relative has been staying with the decedent at their home. The following illustration encapsulates a scenario I have heard numerous times over the years.

Randy is a mooch and asks his Aunt Bee if he can stay with her at her country estate in Portola Valley. Aunt Bee is a widow without any chidren and longs for company at her huge home and pities Randy so she decides to take her nephew in. Aunt Bee then writes a will which bequeaths the entire home to her nephew Rufus, a modest man who lives with a spendthrift wife and sells women's shoes at the local mall. Rufus is Randy's brother. Aunt Bee does not believe that Randy should inherit anything because he is a scrounger and Rufus is a tireless worker. One day Aunt Bee passes away in a horrible canoe accident. Rufus retrieves the will from Aunt Bee's safe deposit box and reads that the country estate was bequeathed to him. Rufus retains counsel and his attorney informs him that he technically became owner of the home the moment Aunt Bee died, citing Prob C § 7000.

Rufus believes that Randy exploited Aunt Bee's kindness and demands that Randy leave the home immediately. Randy objects and says that he has squatter's rights and moreover, Rufus must complete probate before title will transfer to him. Rufus then asks his attorney to speak to Randy. His attorney informs Randy that title passed to Rufus on Aunt Bee's death and thereby he was he owner of the property and could make tenancy determinations. Consequently, Rufus was of the belief that Randy's tenancy was over and asked him to leave or face eviction. The attorney also explained that squatter's rights are the stuff of legal fiction. Randy then left the country estate in hopes of finding another sympathetic relative so he could freeload at their home.

If you have any questions please call my office, (408)866-8382 for a complimentary consultation or email me, s.miri@mirilaw.com.

Precatory Language

2013-03-27T14:48:00.001-07:00

I dream that the beneficiary will............

People like to be given clear instructions. It can be very frustrating for the recipient if given ambiguous directions because invariably he or she will perform unproductively. Providing clear instructions is not only useful but required when writing a trust.

California law states this requirement as follows "a trust is created only if the settlor properly manifests an intention to create a trust." Prob C § 15201. The logical question to this is, what constitutes an intent to create a trust?

California law does not require particular "magic" words to manifest an intent to create a trust. Rather, a combination of phrases or terms suffices if an intent to create a trust can be deduced from the writing.

Just about any trust, whether attorney-drafted or plucked from the Internet (yeah, bad idea to use one), will have an introductory clause that states that the settlor holds in trust for the benefit of others, certain assets that are listed at the end of the trust, typically referred to as Exhibit A or a Schedule of Assets. This satisfies the requirement of an intent to make a trust.

What becomes problematic is if the person writing the trust does not use definitive or clear language but rather wishful or aspirational language. Hopeful verbiage such as this is known as precatory langauge. This type of language is legally unenforceable. An example of the consequences of using precatory language is the case of Chris Collias. Estate of Collias (1951) 37 C2d 587.

Collias' will read in pertinent part:

"All the rest and residue of my estate, of every kind and description, and wherever situated, I give, devise and bequeath unto my nephew Argirios Collias a resident of Long Beach, California at the time this instrument is signed. It is my desire and wish that my nephew Argirios Collias will give half of my estate to my nearest relative heir in Greece instructing him or her to distribute said half of my estate in equal shares to all my close relatives in Greece."

The problem with Collias' will was that he used the terms "desire" and "wish" in asking Argirios to distribute half of his inheritance to his relatives in Greece. Naturally Collias' relatives asserted that "one half the estate is left to [Argirios] Collias in trust for the use and benefit of the nearest or close relatives of the decedent in Greece." Argirios balked at this assertion and litigation ensured. The California Supreme Court held that Collias' will did not create a testamentary trust because he used precatory language, i.e. he used the terms "desire" and "wish." Thus, Argirios was free to use the inheritance as he wanted and did not have to hold half in trust for his Greek relatives.

Another common example of precatory language is the term "hope." That is, "I hope my beneficiary uses his inheritance for educational purposes rather than a buy-in for a Texas Hold'em tournament in Las Vegas."

If you have any questions please call my office, (408)866-8382 for a complimentary consultation or email me, s.miri@mirilaw.com.

Removal of a Trustee - Breach of Fiduciary Duty

2013-03-20T16:16:00.002-07:00


100% financing for realty can cause problems/image: Bob Ionescu

When a trustee fails to execute their fiduciary duties, a trustee may request the trustee's removal via petition. The California law which provides for this is Prob C § 17200(b)(10). The following involves a case that has been litigated for years in the California court. This is almost expected given the amount of money involved. A reality of law is that cases which involve small sums of money, arguably less than $5,000, do not get litigated given the time and expense of litigation. This case however involves a pretty penny.

The founder of Herbalife, Mark Hughes, passed away in 2000 as the result of an accidental overdose of alcohol combined with antidepressants. During his career, Mr. Hughes amassed a huge fortune thanks to the success of Herbalife. Prior to his passing, Mr. Hughes drafted a trust which provided for a rather large inheritance to be distributed to his only son, Alexander, once he turned 35. The trust estate's current value is pegged at $350M. Yeah not too shabby of an inheritance.

This past Monday, a Los Angeles Superior Court Judge ordered the removal of the trust's 3 trustees, John Reynolds, Christopher Pair and Conrad Klein, an attorney. The 3 trustees all had a close connection to Mr. Hughes either through familial, business or professional relationships. Judge Mitchell Beckloff ruled that the 3 had breached their fiduciary duty owed to Alexander because they had failed to manage the trust estate with "prudence, skill and diligence." In particular, the ruling was based on the sale of real property the trust formerly owned in the Santa Monica mountains. The trust sold the realty to a business entity for $23.7M, yet did not require that the buyer tender any down payment. In other words, the trust sold the realty to the business entity with financing constituting 100% of the transaction. Following the purchase, the business entity sought bankruptcy protection.

For reference, many of the real estate purchases that occurred during the great sale recession involved 100% financing. That is, the buyer did not have to tender a down payment. This is a very risky endeavor because the buyer lacks much equity in the home. Therefore, the buyer would be more willing to walk away from the home, i.e. strategic default, if issues go awry, e.g. loss of income, severe illness, since the buyer lacks money in the property so to speak. Lenders prefer to use a conventional 20/80 financing model, 20% down and 80% financed, because then the buyer has "skin in the game" (their own money).

Personally, I can definitely understand the judge's ruling given the buyer's financing arrangement. In light of the great recession, it would have been prudent for the trustees to at least require some down payment given recent history.

Obviously, the decision may be appealed and given that the trustees' have ample resources, this is a distinct possibility.

If you have any questions please call my office, (408)866-8382 for a complimentary consultation or email me, s.miri@mirilaw.com.

Attorney-Client Privilege

2013-03-13T16:13:00.001-07:00

A very well-known principle of law is the attorney-client privilege. Whenever an attorney is retained by a client, the communications between the two parties are considered confidential. Thus, these communications are not subject to disclosure to a third-party. While the client is always free to discuss the communications with whomever they want, granted it would be at their own peril. The attorney must "maintain inviolate the confidence, and at every peril to himself or herself to preserve the secrets, of his or her client." Bus & P C §6068(e)(1). The only exception to this rule is that “an attorney may, but is not required to, reveal confidential information relating to the representation of a client to the extent that the attorney reasonably believes the disclosure is necessary to prevent a criminal act that the attorney reasonably believes is likely to result in death of, or substantial bodily harm to, an individual.” Bus & P C §6068(e)(2).

One rationale for the attorney-client privilege is that it encourages the client to be honest, thorough, and open with their attorney. By shielding communications from basically the world, the client can be free and easy with their communication. The client will not have to worry about their statements coming back to haunt them. Even if the client discloses embarrassing, damaging or bizarre facts, the attorney must still maintain confidentiality subject to Bus & P C §6068(e)(2). This is especially important because an attorney must ascertain all material facts before they can offer advice. If the client is unwilling or afraid to divulge intimate details, the attorney will not be able to render competent legal advice. The following hypothetical illustration highlights the importance of being honest with your attorney and the consequences for secrecy.

Henry was looking to write a trust and was referred to an attorney by his neighbor Joey. Henry met with an attorney and explained that he wanted to leave his entire estate to the local Lion's Club. Years earlier, Henry had fathered an illegitimate child. Henry had purposely lost contact with the child and believed that the child was dead. Since the stigma of illegitimacy was so strong to Henry, he did not disclose this to his attorney, even though the attorney had to maintain confidentiality. Henry irrationally thought that the attorney might disclose the existence of the illegitimate child nevertheless and did not want to risk it.

When the attorney asked about children, Henry declined to name any. The attorney then wrote the trust and named the Lion's Club as the sole beneficiary of Henry’s trust estate. Unbeknownst to Henry, his son was actually alive at the time of the trust’s execution and his death. Henry’s omission of his will was problematic because of Prob C § 21622. This law states that if the person who signed the trust failed to provide for his child because he thought that the child was dead, such child is entitled to an intestate share of the person’s estate. Since the child was Henry’s sole heir, the child was exclusively entitled to Henry’s trust estate.

Henry passed away a few years after writing his trust. When the child was made aware of Henry’s death, he applied to be the sole beneficiary of Henry’s estate, and in light of Prob C § 21622, such was distributed to him.

The facts of Estate of Della Sala (1999) 73 CA4th 463 are somewhat similar to the above hypothetical, although the outcome was different.

If you have any questions please call my office, (408)866-8382 for a complimentary consultation or email me, s.miri@mirilaw.com.

Naming a Trust

2013-03-07T16:41:00.001-08:00

A common question I hear is, "what name should I give my trust?" Arguably there is no limitation as to what a person could name their trust. For example, a person could name their trust the Shakespeare Family Trust even if the person was not named Shakespeare but merely loved Hamlet, Othello and King Lear so much that he had to name their trust in Bill Shakespeare's honor.

However, a prudent person would adhere to the following principles when naming their trust. The reason to abide by these principles is for trust funding purposes. A trust only governs assets that are subject to its control, i.e. assets that have been titled in the name of the trust. Thus, having a sensible name ensures that the trust funder understands exactly how to title the asset, e.g. on the deed, on the bank account, on the brokerage account, etc.

The 3 main components that a trust name should have is (1) the name of the current trustee (2) the actual trust's name and (3) the date the trust was signed. For instance, assume Theo Wilshere wants to write a trust in 2013 and is pondering a name. Theo would be best served to name his trust as follows, "Theo Wilshere, trustee of the Wilshere 2013 Revocable Trust, dated March 7, 2013."

It should be noted that the trustee is the technically the legal owner of the property, so the trustee's name should always be apparent. Also, it is not required to insert the year in which the trust was written. Still, I like to include the year in the title because sometimes the date the trust was signed, e.g. 3/7/2013, is omitted on certain statements due to a lack of room. This provides the reader with a reference point as to when the trust was executed.

Another component which is optional in California is the inclusion of the term "revocable" in the trust's title. California is unlike other states in that a trust is presumed revocable unless specified otherwise. Prob C § 15400. That is, if a trust says Smith 2013 Trust it is presumed to be revocable instead of irrevocable. Regardless, it is better to include the term "revocable" in the title to erase all doubt. Many people who ultimately read the trust are not lawyers so it is doubtful that they are aware of California's law on revocability, Prob C § 15400.

As for the trust's name, the practice I think is most prudent is the use of simply the last name and not the full name, e.g. "Wilshere 2013 Revocable Trust" not "Theo Wilshere 2013 Revocable Trust." I prefer this method because inclusion of first name can make the trust needlessly long. This is especially true for couples. I doubt a person wants to write their first and last name, besides their spouse' first and last name, each time they sign on behalf of the trust.

Finally, it is important to include the date the trust was signed. This allows the reader to know at what stage in life the settlor executed a trust. For instance, if the person was feeling ill when the trust was signed, this can serve as evidence that the settlor was not competent when the trust was signed. Also, including the date can distinguish one trust from another. This is important for clients with common last names such as Jones, Smith, Chang, Gonzalez, Brown, Davis, Kim, Lee, Garcia, etc.

If you have any questions please call my office, (408)866-8382 for a complimentary consultation or email me, s.miri@mirilaw.com.

Estate of Giraldin

2013-03-05T10:03:00.000-08:00

Pyrite

When something goes awry and an appreciable amount of money is lost, there is the natural disappointment and despair, besides the typical legal consequence, litigation. The following California Supreme Court case illustrates that point.

Estate of Giraldin (2012) 55 C4th 1058

William Giraldin married Mary Giraldin in 1959. At the time of their marriage, William had 4 children and Mary had 3 kids. Thereafter, the couple had twin sons, Tim and Patrick. In other words, William and Mary were forerunners to Full House, The Brady Bunch and Just the Ten of Us. Sorry just too easy to highlight.

Prior to forming a revocable trust, in January 2002, William executed a document which expressed an intent to invest about $4 million, roughly two-thirds of his fortune, in a company Patrick had previously incorporated, SafeTzone Technologies Corporation (SafeTzone). In February 2002, William created a revocable trust and named Tim trustee. William was the sole beneficiary for his life, then Mary would be the remainder beneficiary following William's passing and the 9 children would be subsequent remainder beneficiaries.

According to the court opinion, the investment was hardly prudent in retrospect: "Between February 2002 and May 2003, William made six payments of various amounts to invest in SafeTzone, ultimately totaling more than $4 million. The company issued stock to William. After the investment was fully funded, the stock was transferred into the name of the trust. William died in May 2005. By this time, the investment in SafeTzone had gone badly, and the trust's interest in the company was worth very little."

Consequently, 4 of William's children sued Tim, as trustee of the William's trust, for breach of fiduciary duty. The complaint alleged that Tim had depleted William's life savings for Tim and Patrick's benefit, to the detriment of the other 7 children, the contingent remainder beneficiaries of the trust.

The issue in the case was whether the 7 children had standing to sue Tim as trustee for breach of fiduciary duty committed while William was alive and the trust was still revocable. Since the California Probate Code was not clear as to whether such a beneficiary had standing, the case weaved its way through the California court system, first the trial court, second the appeallate and third and finally the California Supreme Court. Ultimately, the California Supreme Court held that "since a trustee's breach of the fiduciary duty owed to the settlor can substantially harm the beneficiaries by reducing the trust's value against the settlor's wishes, we conclude the beneficiaries do have standing to sue for a breach of that duty after the settlor has died."

If you have any questions please call my office (408) 866-8382 for a complimentary consultation or email me, s.miri@mirilaw.com.

Acknowledgement vs. Jurat

2013-02-20T15:50:00.002-08:00

In the context of estate planning, the services of a notary are often required. For example, a client might create a trust and need to transfer ownership of their home into the trust. This requires a trust transfer deed, which may be in the form of a grant or quit-claim deed. Since the deed has to be recorded to give proper notice to third-parties, notarization of the signature is required.

The two most common types of notarial acts are an acknowledgment and jurat.

Acknowledgement

An acknowledgement is a formal declaration made in the presence of an authorized officer, such as a notary public by someone who signs a document and confirms that the signature is authentic. Black's Law Dictionary (8th ed. 2004).

Technically, California law does not require that the actual signer appear before the notary. This is in contrast to a jurat which does require personal appearance before the notary. Through a complicated process, witnesses can vouch for the signature's authenticity provided they appear before the notary. Still, you will save the notary plenty of befuddlement if you personally appear before the notary and sign the document, since many notaries do not know the exact procedure for this and would have to look it up.

An acknowledgement is most freqeuntly used with a deed execution.

The following is how an acknowledgement should be worded:

ACKNOWLEDGMENT

State of California
County of _____________________________)

          On _________________________ before me, __________ (insert name and title of the officer) personally appeared _______, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature ______________________________

Jurat

A jurat is a certification added to an affidavit or deposition stating when and before what authority the affidavit was made. Black's Law Dictionary (8th ed. 2004).

The jurat certifies that the signer personally appeared before the notary when they signed the document. Govt C § 8202. That is, the signer was physically present when they signed it. Also, the notary is required to administer an oath or affirmation to the signer which requires that the signer attest to the document's truthfulness. Govt C § 8202.

An example of where a jurat is used is when there is the death of a trustee. Whereby an "Affidavit of Death of Trustee" is required and such is recorded with the appropriate County Recorder's Office.

The following is how a jurat should be worded:

State of California
County of _______________

          Subscribed and sworn to (or affirmed) before me on this ____ day of _______, 20__, by ________________, proved to me on the basis of satisfactory evidence to be the person(s) who appeared before me.

If you have any questions please call my office (408) 866-8382 for a complimentary consultation or email me, s.miri@mirilaw.com.

Breach of Trust

2013-02-15T14:56:00.001-08:00

In order to practice law in California, one needs to acquire a license. More particularly, a person needs to acquire a law license. Like any other license granted by the state of California, the license can be stripped from the licensee by the issuing body. Lawyers who lose their license are said to have been "disbarred." Yes lawyers are so special that they get their own word to describe loss of professional status.

Probably the fastest way for a lawyer to lose their license, disbarment, is to steal money from a client. This initially might seem like a difficult task at first blush but often times clients entrust their lawyer with a large some of money. For example, a few years ago, a client asked me to hold $60,000 in an escrow account. Since I was the sole signatory on the account, I could (if I wanted to destroy my professional and personal life) withdraw all the money from said account and expend it for my personal benefit. Since I am writing this post as an active member of the state bar of California, let us just say that the client's money was handled ethically.

Unfortunately some lawyers do not exhibit ethical behavior, commit egregious breaches of trust and suffer disbarment for stealing client money. An example of such is the sordid story of an attorney by the name of Sydney Kirkland, a soon to be former member of the state bar of California.

Jeanette Letman created a revocable trust which named Grover Gordon, a close elderly friend and companion, as sole beneficiary of her trust estate. Ms. Letman amended her trust numerous times and eventually settled on Mr. Gordon and Ms. Kirkland as successor co-trustees. This last amendment occurred on April 14, 2010. It should be noted that an attorney should rarely, if ever, name themselves as trustee because of ethical and legal
constraints.

Ms. Letman passed away on January 15, 2011 and thereby Mr. Gordon and Ms. Kirkland became co-trustees. According to state bar, the trust bank account when Ms. Letman passed away was $285,730. During her time as trustee, Ms. Kirkland's trusteeship was marked by serious problems. According to a ruling by a San Diego Superior Court judge: "Ms. Kirkland violated numerous fiduciary duties. Ms. Kirkland exercised undue influence. Ms. Kirkland forged a bank statement. Ms. Kirkland forged the signature of Mr. Gordon. Ms. Kirkland prepared a false accounting. Ms. Kirkland misappropriated substantial money and also jewelry and personal property without knowledge or consent of Mr. Gordon."

Ultimately it was found that Ms. Kirkland had misappropriated $275,742.5 of Mr. Gordon's inheritance. Consequently, Ms. Kirkland stipulated to disbarment in light of her wrongful conduct in a January 16, 2013 filing with the state bar court of California. Additionally, Ms. Kirkland faces criminal and possibly civil charges for her actions.

It is obviously difficult to rationalize why an attorney with no discipline record up to that point would act in such a heinous fashion. Lawyers are often entrusted with great sums of money and sometimes attorneys do not follow through on their ethical requirements. Ms. Kirkland is an unfortunate example of that.

If you have any questions please call my office (408) 866-8382 for a complimentary consultation or email me, s.miri@mirilaw.com.

Execution of a Witnessed Will

2013-02-06T16:20:00.002-08:00

When a person executes a witnessed will, certain formalities must be adhered to during the process. The following is a brief overview of the process.

First, the will must be signed by one of the following individuals. Prob C § 6110(b)(1)-(3).

By the testator.
In the testator’s name by some other person in the testator’s presence and by the testator’s direction.
By a conservator pursuant to a court order to make a will under Section 2580.

For reference, the testator is the person who wrote the will and a conservator is somebody who has been court-appointed to oversee the testator because the testator lacks mental capacity.

Second, the will must be witnessed by at least 2 other witnesses. Prob C § 6110(c). The requirements to be a witness involved a low threshold, "any person generally competent to be a witness may act as a witness to a will." Prob C § 6112(a).

Frequently the drafting-attorney and an employee will serve as the witnesses. It is highly recommended that the witnesses be disinterested. The reason for this is because of Prob C § 6112(c), which reads in pertinent part "unless there are at least two other subscribing witnesses to the will who are disinterested witnesses, the fact that the will makes a devise to a subscribing witness creates a presumption that the witness procured the devise by duress, menace, fraud, or undue influence."

For example, if Wilbur was a beneficiary under Theo's will and witnessed it, a rebuttable presumption would arise that Wilbur wrongfully procured this devise. Hence, if Wilbur was to inherit Theo's car, Wilbur would have to prove that there was no wrongdoing on his part for inheriting Theo's car. If Wilbur cannot rebut this presumption, he is entitled to take "such proportion of the devise made to the witness in the will as does not exceed the share of the estate which would be distributed to the witness if the will were not established." Prob C § 6112(d). In other words, Wilbur would be entitled to his share of Theo's estate as an intestate heir, if he qualified.

These 2 witnesses must countersign after witnessing the testator sign or acknowledge their signature in front of them. The relevant statute reads "the will shall be witnessed by being signed, during the testator’s lifetime, by at least two persons each of whom (A) being present at the same time, witnessed either the signing of the will or the testator’s acknowledgment of the signature or of the will and (B) understand that the instrument they sign is the testator’s will." Prob C § 6110(c)(1).

For instance, Thomas types a will one Sunday afternoon and invites his neighbors William and Wendy to serve as witnesses that evening in his kitchen. Thomas just tells them that he needs them to witness a legal document but does not mention that it is a will. Just prior to coming over, Williams decides to make a phone call because he is addicted to his smart phone. Wendy leaves without him and enters Thomas' home to find him in the kitchen. Thinking everything is alright, Thomas signs the will and Wendy signs as a witness. After finishing his phone call, William comes to the kitchen for the first time and signs the will as the second witness. Since William was neither present when Thomas signed his will nor did Thomas acknowledge his signature or will to William upon entering the home, Thomas' will does not comply with the requirements of Prob C § 6110(c) and is arguably invalid.

However, Thomas' will may be found to be valid if "proponent(s) of the will establish by clear and convincing evidence that, at the time the testator signed the will, the testator intended the will to constitute the testator’s will." Prob C § 6110(d). Granted, this is not the ideal method to prove a will but it does provide an avenue for relief should the technical attestation requirements not be met.

Furthermore, a notary should not notarize the will. While studying to become a notary, my training manual actually said it was okay to notarize a will under certain circumstances. The training manual was and remains wrong on this issue. No competent California attorney will tell a client to have a notary notarize a will because
(1) it is not required and (2) it is so peculiar such that it will arose suspicion that something dishonest is at play.

Also, California law does not require the initialing of each page for a will. The purpose of this is to prove that the testator has presumably read and approved each page. I have seen some wills have initials on each page. Again, this is not required and personally I find this to be overkill.

If you have any questions please call my office (408) 866-8382 for a complimentary consultation or email me, s.miri@mirilaw.com.

Filing a Will

2013-01-30T14:38:00.002-08:00

Humboldt Superior Court

When a person passes away and has written a will, certain duties arise. For example, the custodian of the original will must lodge it with the probate court within 30 days of learning of the testator's death.
Prob C §8200(a). If the custodian fails to do so, he or she is liable "for all damages sustained by any person injured by the failure." Prob C §8200(b).

The custodian is the person in possession of the will. This person may or may not be the will's executor.

The will is to be delivered to "the clerk of the superior court of the county in which the estate of the decedent may be administered." Prob C § 8200(a)(1). For instance, if the decedent resided in Los Altos, CA (my hometown), his or her will would be lodged with the clerk of the Santa Clara County Superior Court. Prob C §8200(a). The exact courthouse is located in San Jose at 191 N 1st Street. Some counties only have 1 courthouse, such as Modoc, whereas larger counties, such as Santa Clara, have multiple courthouses. A quick check of the county's website will reveal the location of the courthouse where the will should be filed.

Furthermore, the custodian is to "mail a copy of the will to the person named in the will as executor, if the person’s whereabouts is known to the custodian, or if not, to a person named in the will as a beneficiary, if the person’s whereabouts is known to the custodian." Prob C § 8200(a)(2).

In the past, no filing fee attached to the lodging of the will. That is, the will could be lodged free of charge. On a couple of occasions I lodged the will of a deceased testator as a favor for the family of the former client because I occasionally go to the local superior court. However, effective June 27, 2012, a filing fee attached to the lodging of the will. The relevant law reads, "the fee for delivering a will to the clerk of the superior court in which the estate of a decedent may be administered, as required by Section 8200 of the Probate Code, is fifty dollars ($50)." Govt C §70626(d).

Once filed, the will becomes public record. Thus, the general public is free to inspect the will if they so desire. A copy of the will may also be obtained for a fee. Some wills may be read online through the website of the Alameda County Superior Court.

If you have any questions please call my office (408) 866-8382 for a complimentary consultation or email me, s.miri@mirilaw.com.

Slayer Statutes

2013-01-25T14:52:00.001-08:00

The topic of morality is often brought up in how it interacts with the law. Issues such as same-sex marriage, abortion, capital punishment and even taxation all have some hint of morality embedded in them. All these hot-button issues typically invoke a visceral response from most people. Still there are some issues which are almost universally regarded as immoral. For example, I would assume, if not expect, all would agree with the sentiments of California Civil Code § 3517, which states "No one can take advantage of his own wrong."

The Probate Code has a similar statute, in that it punishes those who commit an immoral act, namely the feloniously killing of another human being. This is known as California's slayer statute. It should be noted that the killing of another must be considered a felonious act. In other words, if you kill somebody in self-defense, justifiable homicide, this would not be considered a felonious killing. Conversely, if you murdered somebody, this would be considered a felonious killing.

Prob C § 250

(a) A person who feloniously and intentionally kills the decedent is not entitled to any of the following:

(1) Any property, interest, or benefit under a will of the decedent, or a trust created by or for the benefit of the decedent or in which the decedent has an interest, including any general or special power of appointment conferred by the will or trust on the killer and any nomination of the killer as executor, trustee, guardian, or conservator or custodian made by the will or trust.

(2) Any property of the decedent by intestate succession.

I can reasonably assume that the state of Illinois has a similar slayer statute. I bring this up because of the interesting case of Urooj Khan.

Mr. Khan was the holder of a winning lottery ticket worth $425,000. A few days before he was to collect his lottery prize, Mr. Khan died of presumably natural causes. However, an unnamed relative came forward to ask for a closer inquiry. A toxicology report revealed that Mr. Khad's blood contained lethal amounts of cyanide. The natural conclusion was that Mr. Khan had been poisoned and his death was re-classified as a homicide. At this point, nobody has been charged with a crime.

If you have any questions please call my office (408) 866-8382 for a complimentary consultation or email me, s.miri@mirilaw.com.

Apprasing an Estate

2013-01-14T14:41:00.000-08:00

When somebody passes away, the decedent, they leave their possessions behind. For as the common refrain goes "you cannot take it with you." In legal speak, these possessions are known as the decedent's "estate."

One of the first steps that an executor or trustee must do when administering a decedent's estate is to value the items in the estate. The principal reason why an executor or trustee needs to do this is for estate tax purposes. That is, it must be determined if the value of the decedent's estate eclipsed the estate tax exclusion amount. If the decedent's estate is under the threshold amount, no estate tax is due. Conversely, if the decedent's estate is above the threshold amount, an estate tax will be due albeit the amount will be dependent upon the amount over the threshold amount.

Another primary reason to value the decedent's estate is because many estates are distributed in percentages. For instance, a trust might call for a 50% distribution to the daughter and a 50% distribution to the son. The trustee would be breaching their fiduciary duty to the beneficiaries if they just "guessed" as to the estate's value and distributed off of that valuation. Rather, the trustee must reasonably value each item in the estate and then distribute the estate. The following are items typically found in a decedent's estate and how to value them.

1. Home

A decedent's home is typically the most valuable asset in their estate. Hence, it is critical that the executor or trustee accurately value the home's value. The best method to value a home is to retain a licensed California real estate appraiser. While the temptation is their to use an online resource such as Zillow to save time and money, this temptation, much like almost all temptations, is best avoided. The crux is that Zillow's algorithm does not account for physical features inside and around the home. A real estate appraiser can spot a shoddy roof or the noise of rush-hour traffic, whereas Zillow's algorithm cannot. Though personally I use Zillow, I would never advise a client to use it as a basis for a home appraisal.

2. Bank Account

This is probably the easiest asset to value. If you are literate you can figure out how much money the decedent had in their bank account when they died. I trust you.

3. Car

The bible for valuing a used car is Kelley's Blue Book. Though there are other resources, the KBB is the most popular guide for determining used car values. Personally I have used the KBB a few times when buying and selling a car. I have been very pleased with it.

4. Stocks

The advent of the Internet has made it much easier to gauge the price of a stock on the day the decedent died. Whereas in the past an executor or trustee might have to go to the library to locate an old newspaper to look up the stock price, the Internet has rendered this practice obsolete. Since stock prices can easily be found using Yahoo or Google Finance, an executor or trustee's job has been made much easier in this instance. A stock price is now just a proverbial click away.

However, if the decedent owned stock that was not publicly traded, a business appraiser will be needed.

If you have any questions please call my office (408) 866-8382 for a complimentary consultation or email me, s.miri@mirilaw.com.

Estate Tax 2013

2013-01-02T14:28:00.000-08:00

1. What is the Estate Tax limit in 2013?

The applicable exclusion amount in 2013 is $5M plus inflation.

2. What does this mean?

If an estate is valued at less than or equal to $5M, the Estate Tax will not be applied to the decedent's estate. However, if the decedent's estate exceeds $5M, then the Estate Tax will apply albeit only in regards to the portion above $5M.

For example, Danny Decedent died on New Year's day 2013 in a tragic hot air balloon accident. Danny's entire estate consisted of a $6M bank account because of his miserly ways. Since Danny's estate exceeded the applicable exclusion amount in 2013, $5M, the Estate Tax would apply to the excess, namely $1M. However, if Danny's estate was worth $4.5M, no Estate Tax liability would arise because it does not exceed the applicable exclusion amount.

3. What was the Estate Tax limit in 2012?

The Estate Tax limit in 2012 was $5.12M

4. Which year applies to a decedent's estate?

The applicable year is the year in which person passes away. The chart below summarizes the following years' Estate Tax regime. Consequently, if a person died in 2002, the $1M exclusion amount would apply or if a person died in 2007, the $2M exclusion amount would apply.

Of note, it does not matter when a person writes their will or trust. I have been asked this question numerous times. Some people are under the impression that the year in which the decedent wrote their testamentary document controls. This is simply not true. I give them credit for creative thinking though. A trust written in 1985 by a 2005 decedent results in the application of the 2005 Estate Tax law, not the 1985 Estate Tax law.

As you can see by the below chart, the applicable exclusion amount has increased tremendously recently. In particular, the rise in the applicable exclusion amount easily outstrips inflation over this time.

Year                   Amount Excluded                Maximum Tax Rate

2001                   $675,000                                 55%

2002                   $1M                                        50%

2003                   $1M                                        49%

2004                   $1M                                        48%

2005                   $1M                                        47%

2006                   $2M                                        46%

2007                   $2M                                        45%

2008                   $2M                                  45%

2009                   $3.5M                                     45%

2010                   Repealed                                 0%

2011                   $5M                                        35%

2012                   $5.12M                                   35%

2013                   $5M                                        40%

5. What is included in a decedent's estate?

Any personal, real or intangible property the decedent owned wherever located. In other words, everything you own basically. IRC §2031(a). There are other categories of items included in a gross estate but are too technical to explain succinctly.

6. What is not included in a decedent's estate?

Real property earmarked for a qualified conservation easement. IRC §2031(c).

7. When is the Estate Tax due?

The Estate Tax return must be filed 9 months after the decedent's death unless an extension is granted. IRC §6075(a). The form used is IRS Form 706.

8. Can I get an extension?

Yes, a 6-month extension is automatically granted upon request. Treas Reg §20.6081-1(b). However, this does not extend the time to pay the tax. Generally speaking, the Estate Tax must be paid when the return is filed. IRC §6151(a).

9. What is the Estate Tax's top rate?

The maximum rate in 2013 is 40%.

10. Will California have an Estate Tax in 2013?

No, legislation recently passed by Congress to avoid the "fiscal cliff" eliminated the state Estate Tax credit. Therefore, there will be no California Estate Tax in 2013.

If you have any questions please call my office (408) 866-8382 for a complimentary consultation or email me, s.miri@mirilaw.com.

Retirement Accounts: Traditional IRA v. Roth IRA

2012-12-31T13:39:00.000-08:00

The federal tax code is structured to provide benefits to those who plan for their retirement, i.e. those who set up an individual retirement accounts ("IRA"). These benefits include tax-preferential treatment for these accounts. Two commonly used retirement accounts are traditional IRAs and Roth IRAs.

In a traditional IRA, the participant contributes pre-tax earnings to the account. This contribution is often considered to be tax-deductible. In other words, if Theo earned $50,000 in 2012 and contributed $5,000 to his traditional IRA, he could write off $5,000 for this as a tax deduction. Years later when Theo retires and withdraws a portion of his traditional IRA, this withdrawal is subject to ordinary income taxation. One of the benefits for using a traditional IRA is that a person can defer realization of income taxes to a future date when their income tax liability will be presumably smaller. The presumption is that a person will earn less money during their later years than during their middle ages. For example, Theo earns $50,000 in 2012 at the age of 40. Theo retires in 2027 at the age of 65 and begins to collect social security. Theo also begins to withdraw from his traditional IRA. The benefit for Theo is that his tax burden will be less at 65 than 40 because his earnings are far less because income taxes are progressive (the more you make the more you pay). Thus, Theo would presumably have more after-tax dollars by contributing to his traditional IRA at 40 and withdrawing his money incrementally at 65 than if he never made a traditional IRA contribution in the first place.

One of the criticisms of traditional IRAs is that there is no guarantee that it will increase in value over time. Theo could make thousands of dollars of contributions earlier in his life but if his investments go awry he might have a smaller traditional IRA than he anticipated. Conversely, if Theo had a pension he would be arguably guaranteed a certain amount when he retired. For example, I have had a few clients who had modest pensions of $2,000 per month. On a personal level, my father received a $1,200 per month pension from Lockheed Martin.

In a Roth IRA, the participant contributes after-tax earnings to the account. This contribution is not a tax-deductible expense. For instance, if Theo earned $50,000 in 2012 and contributed $5,000 to his Roth IRA, he could not write off $5,000 for this as a tax deduction. One of the key distinctions between a traditional IRA and a Roth IRA is that the former is subject to income tax upon distribution whereas the latter is not. Assume Theo creates a Roth IRA and funds it with $15,000 over a periods of years. Theo's Roth IRA grows substantially in size as Theo makes a number of shrewd investments. When Theo begins to withdraw from his Roth IRA at retirement, these withdrawals are tax-free. In contrast, if Theo had created a traditional IRA, his withdrawals would be subject to income tax.

There are a multitude of rules and regulations that govern IRAs. This post is by no means an exhaustive explanation of all the nuances involved. Rather the point is to highlight key distinctions between traditional and Roth IRAs, (1) tax liability upon creation and (2) tax liability upon withdrawal. Each has different results for (1) and (2).

If you have any questions please call my office, (408) 866-8382 for a complimentary consultation or email me, s.miri@mirilaw.com.

Trustee Compensation

2012-12-19T16:28:00.001-08:00

6th Circuit Court of Appeal, San Jose, CA

A trustee is entitled to reasonable compensation under the circumstances unless the trust provides otherwise. Prob C § 15681. A recent 6th Circuit California Court of Appeal case emphasized the extent of specifying trustee compensation.

Thorpe v. Reed, No. H037330 (Cal. Ct. App. Dec. 13, 2012).

Danny Reed was the beneficiary of a special needs trust. Mr. Reed had unfortunately been injured in multiple accidents which resulted in the creation of a first-party special needs trusts to hold his recovery proceeds. His mother, Jolaine Allen, was the original trustee. Then Thomas Thorpe of Dragomir Fiduciary Services Inc. became the successor trustee for approximately 4 1/2 months. Then Jenivee Reed, Mr. Reed's sister, became successor trustee.

The issue in the case was whether or not Mr. Thorpe and his associated parties, lawyers Diane Brown and Michael Desmarais, were entitled to compensation for their services during Mr. Thorpe's time as trustee. The reason that this was an issue in the case was because the trust specified that a successor trustee was not entitled to compensation.

In Mr. Thorpe's petition, he asked for $65,844.08, $31,047.85 for Ms. Brown and $11,879.14 for Mr. Desmarais as trustee and trustee attorney fees. The trial court judge reduced the fee for all 3 parties whereby Mr. Thorpe received $27,006, Ms. Brown $19,540.61 and Mr. Desmarais $4,739.02.

Ms. Reed appealed this decision and the appellate court reversed, holding that the trial court improperly re-wrote the trust to provide for Mr. Thorpe and his attorneys' compensation. The appellate court reasoned that since Mr. Thorpe accepted trusteeship without it being predicated upon modification to provide for compensation, he was entitled to no compensation as provided for in the trust. The opinion's final footnote summarizes it nicely "Before the appointment order, plaintiff (Mr. Thorpe) wrote the Supervising Court Investigator that he was willing to accept the trusteeship and conservatorship "subject to my attached fee schedule." But the probate court's order was unconditional, plaintiff began performing duties, and the trust was never amended to eliminate the no-compensation provision." The ultimate result was that Mr. Thorpe and his attorneys were entitled to $0.00 as compensation for their services.

Going forward, this case presents an interesting precedent. Presumably, a successor trustee of a special needs trust is entitled to $0.00 compensation if (1) the trust provides for such and (2) the successor trustee does not condition acceptance upon modification of the compensation clause.

If you have any questions please call my office, (408) 866-8382 for a complimentary consultation or email me, s.miri@mirilaw.com.

Medi-Cal Reimbursement

2012-12-12T15:33:00.000-08:00

When Congress enacted the Social Security Act of 1965, it created two public benefit programs, Medicaid, known as Medi-Cal in California, and Medicare. Medi-Cal is the government-sponsored medical program for largely the poor and disabled. Medicare is the government-sponsored medical program for those 65 and over, or those with disabilities.

A key distinguishing feature of Medi-Cal is the mandatory reimbursement of funds, subject to certain conditions, expended for the benefit of the patient once the patient passes away. Welf & I C §14009.5. Medicare has no such reimbursement feature. In other words, the state of California is entitled to be repaid what it spent on the patient once the patient has died, subject to certain qualifications. If the patient had assets when they passed away, the state of California will seek recovery whether such is a short or lengthy endeavor. The following case illustrates how long the process can take.

Bunnie R. Gregoire was the owner of a home in Brisbane, CA. In 1997 she transferred this home into her restated revocable trust. She named her granddaughters, Selena H. Firth and Jennifer C. Martin, the beneficiaries. In 2001, Firth applied for Medi-Cal benefits on behalf of Gregoire given her advanced age of 90. On the application form, Firth acknowledged that "the State has the right to seek reimbursement from my estate for all Medi-Cal benefits I received after age 55."

In 2002, the San Mateo County Public Guardian was appointed conservator of the person and estate of Gregoire. In 2005, Gregoire died and the Public Guardian tendered notice to the State Department of Health Care Services (DHCS) that Gregoire had died (this is required by law). On the schedule of assets, the Public Guardian erroneously listed the value of Gregoire's estate as "0.00." An official from the DCHS then did a public records search which revealed that Gregoire owned a home in Brisbane. Over the next couple of years, the DCHS sent notices to the Public Guardian to explain the discrepancy, albeit to no avail. In 2007, the successor trustee sold the Brisbane home and distributed the funds in accordance with Gregoire's trust.

Eventually the DCHS filed suit in 2008 against the beneficiaries for Medi-Cal reimbursement given that it believed that Gregoire's estate was solvent when she died. The beneficiaries objected to the claim by the DCHS because they believed that the DCHS should have filed suit sooner. Ultimately in 2011, the beneficiaries lost on appeal because they used the wrong law to support their statute of limitations argument. I will spare you the boring legal arguments. Just know that the beneficiaries lost. End of story.

My takeaway from this case is that it is demonstrative of the phrase "the long arm of the law." Gregoire died in 2005 but the validity of her Medi-Cal reimbursement liability was not settled until 2011, six years later.

If you have any questions please call my office, (408) 866-8382 for a complimentary consultation or email me, s.miri@mirilaw.com.

Heggstad Petition - Is an Attorney Required?

2012-12-05T10:55:00.000-08:00

A very common trust administration procedure is a "Heggstad petition." Many people who write a trust often forget to transfer the home they own to the trust. When the person passes away and the trustee seeks to sell the home, they encounter the fact that the home is still in the settlor's name and not in the trust's name. Herein the Heggstad petition comes into play.

A Heggstad petition seeks to obtain a court-order that finds that the home is a trust asset. The best piece of evidence to include in a Heggstad petition is a declaration of trust stating that the home is a trust asset. This is customarily found at the end of the trust document. As mentioned, if the petition is granted, the home becomes part of the trust and the trustee may dispense of the property as the trust dictates. If the petition is not granted, the home will likely have to be probated which is a costly and lengthy legal process.

Since this is a common procedure, I have received inquiries over the years from people seeking information about this procedure. One aspect of a Heggstad petition that is not entirely clear is whether a trustee, who is not an attorney, can file a Heggstad petition without the assistance of an attorney. California law is unsettled in this regard.

A person is free to act as his own lawyer. Famous court cases have involved litigants who acted as their attorney, e.g. Gideon v. Wainwright, 372 U.S. 335 (1963) which involved an indigent prisoner successfully appealing his criminal conviction to the United States Supreme Court.

However, such is not true if a person represents a third-party. A California court held that a trustee who was not an attorney could not represent the trust in regards to a lawsuit involving the sale of a mobile home to the trust. Ziegler v. Nickel (1998) 64 CA4th 545. The court found that the trustee would be representing the interests of other parties, i.e. the beneficiaries. Since representing others constituted the practice of law, he was required to have a law license. Bus & P C § 6125. Whereas the trustee did not have a law license, the lawsuit was dismissed.

A few years later, another California appellate case was decided involving an unrepresented trustee. Tami Finkbeiner was appointed trustee of a family trust and petitioned to terminate the trust, among other items, following the sale of the family home. Finkbeiner v. Gavid (2006) 136 CA4th 1417. The trial court rejected the petition, finding that Ziegler barred a trustee from representing a trust without the assistance of counsel. The appellate court reversed, finding that Finkbeiner was merely fulfilling her duties as trustee by filing the petition. Hence, Finkbeiner was allowed to proceed with her petition as trustee of the trust despite not being an attorney.

In light of Ziegler and Finkbeiner, it is not entirely clear whether a Heggstad petition requires an attorney. A Heggstad petition does not entail the trustee suing a third-party so the facts of a typical Heggstad situation would not mirror the facts of Ziegler. Conversely, there can be competing interests with a Heggstad petition which would arguably necessitate an attorney. That is, the trust might provide for one set of beneficiaries while a will might provide for another. For example, assume John Brown owns a home in his name alone. He writes a trust and a will, yet never formally transfers the home into the trust. The trust beneficiaries are his neighbors while the will devisees are his children. Naturally, the neighbors will support the Heggstad petition while his children will not because if the Heggstad petition is not granted, they will get the home through probate. Ultimately, there has been no California case that has directly addressed the issue of the need or lack thereof for the assistance of counsel when filing a Heggstad petition.

If you have any questions please call my office, (408) 866-8382 for a complimentary consultation or email me, s.miri@mirilaw.com.

Annual Gift Tax Exclusion Amount for 2013

2012-11-28T15:18:00.003-08:00

"Gift" is the painting's title

For the past couple of years the annual gift tax exclusion amount was $13,000. This meant that a person could gift up to $13,000 to another person without (a) having to file a gift tax return and utilizing a portion of their lifetime gift tax exemption amount or (b) filing a gift tax return and paying the gift tax in order to avoid a loss of a portion of their lifetime gift tax exemption amount. Of note, the gift tax applies to any type of property transfer, personal, real, intangible, etc. IRC §2511(a) Thus, the transfer of stock, a home or a musical copyright would count as a gift if certain conditions were met.

In October, the IRS announced that the annual gift tax exclusion amount for 2013 would be $14,000. The reason for the increase is to reflect inflation. In prior years, inflation did not merit an increase in the exclusion amount.

There is no California gift tax. Hence, the increase only affects the federal gift tax.

It should be noted that certain items are not subject to gift tax regardless of the size of the gift. For example, gifts made to charity, payment of medical expenses, payment of school tuition and intra-spousal gifts are all considered exempt from the gift tax. This means that a person could pay the entire tuition costs for a student attending McGeorge School of Law for Spring 2013, $21,486, and not have to worry about any gift tax liability or ramifications. I use McGeorge as a reference because I went to school there.

As of this writing, there has been no legislation affecting the estate and gift tax regime for 2013. For both of these items, the exclusion amount for 2012 is $5.12M. If no legislation is passed, the estate and gift tax will revert back to $1M exclusion limits for each. Still, the last time the estate and gift tax was addressed occurred in December 2010 in a lame duck session of Congress. Hence, just because it is the 11th hour, it does not mean that nothing will be enacted.

So while the annual gift tax exclusion amount for 2013 has been addressed, the more important lifetime exclusion amounts for both gifts and estates remain a mystery. Ultimately, something will occur in the next month or so. Either the estate and gift tax will be amended to increase the lifetime exemption amount or nothing will happen and each will revert back to $1M. An optimist would say that at least some resolution will be reached shortly.

If you have any questions please call my office at (408) 866-8382 for a complimentary consultation or email me, s.miri@mirilaw.com.

Estate, Inheritance or Death tax?

2012-11-14T09:46:00.000-08:00

The estate, tax and death merge as one just as the Ohio and Kanawha Rivers

When a U.S. citizen or permanent resident passes away, the federal and state government may impose a tax, when applicable, on the estate of the deceased person. The correct legal term for this is the "estate tax." Depending on when the person passed away and the size of their estate, will dictate if the estate tax is imposed.

On a daily basis I check Google Analytics to see how Internet users found my blog. One of my particular interests is to look at the keywords used to find my blog. What I find particularly interesting is that people often search the term "California inheritance tax", "is there is an inheritance tax in California" or "does California have a death tax."

The point of this post is to make clear that the following terms: (1) estate tax, (2) inheritance tax and (3) death tax, all have the same meaning. These three terms all relate to the tax imposed on a decedent's estate by the federal or applicable state government. I have never heard of a municipality, i.e. a city, imposing a tax on a decedent's estate.

Many people ask me about the estate tax, although they use the term "inheritance tax" typically. I explain what it is and then they ask if the estate tax is different from the inheritance tax. As mentioned, there is no difference between the terms. So if you invoke the inheritance tax, you are also alluding to the estate tax as well. One could say that all roads lead to Rome when the phrase (1) estate tax, (2) inheritance tax or (3) death tax is mentioned.

Similarly, many people have heard of the term "living trusts." This is another informal legal term that has supplanted the formal legal term. If a trust is created during a person's lifetime, this is known as an "inter vivos" trust (Latin for among the living). Since the term "living trust" is more easily comprehensible than "inter vivos trust," (trust me on this one) the former is used instead of the latter. For reference, if a trust is created at death, this is known as a testamentary trust. A trust is created at death commonly through a will. For example, the 1951 will of newspaper tycoon William Randolph Hearst created a massive trust than is expected to sustain until 2040. Hearst v. Ganzi (2006) 145 CA4th 1195.

If you have any questions please call my office at (408) 866-8382 for a complimentary consultation or email me, s.miri@mirilaw.com.

Grant Deed - For a Valuable Consideraton......

2012-11-07T10:57:00.003-08:00

To transfer real property in California, a deed must be executed by the "seller" and be given to the "buyer" for recording.

The introductory language for deeds is "FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged." This phrase encapsulates that the seller and buyer have entered into a bilateral agreement, seller conveys the realty to the buyer in exchange for the buyer's money.

The term "consideration" has a legal meaning to it. The California Civil Code defines consideration as

"Any benefit conferred, or agreed to be conferred, upon the promisor, by any other person, to which the promisor is not lawfully entitled, or any prejudice suffered, or agreed to be suffered, by such person, other than such as he is at the time of consent lawfully bound to suffer, as an inducement to the promisor, is a good consideration for a promise."

In normal language, consideration basically means something of value, e.g. money, property, etc.

An issue then presumably arises if a person receives real property as a gift. In such case, the "buyer" does not exchange any consideration for the realty. Instead, they receive something for nothing. The buyer then becomes concerned that the inclusion of the language "FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged" on the deed makes it void or voidable. However, a California case held that such language did not have to be listed on the deed. Goad v Moulton (1885) 67 C 536.
So in the case of a gift deed, the above language need not be included on the deed.

While this might not seem like a major issue, I think it is emblematic of the propensity of many people to handle document drafting themselves instead of retaining an attorney. I have seen this question raised a few times. Over the years, I have received requests to provide a copy of (1) a small estate affidavit, (2) a grant deed template and (3) a Heggstad petition to various people.

I usually cringe when I hear these requests because I tell them what purpose does the document serve if they cannot understand it. If a person gives you the keys to a stick shift car (I proudly drive one) and you can only drive automatic, what benefit does the car provide you? The same applies to a blank grant deed as a non-attorney typically has no idea what language is necessary and what each component represents. A person is free to act as their own attorney, they should just be aware of the intended (and unintended) consequences.

If you have any questions please call my office at (408) 866-8382 for a complimentary consultation or email me, s.miri@mirilaw.com.

Transfer iTunes on Death?

2012-11-01T09:55:00.001-07:00

The advent of digital media has made it much easier to amass an enormous collection of music, movies, television shows, etc.. My cousin Bob told me that he has more than 10,000 songs on his iTunes playlist a few years ago. The need to store and catalog compact discs, cassettes and records (for those of you old enough ) is ostensibly an antiquated practice. The smart phone and laptop have replaced them.

In terms of estate planning and digital media, a common question raised is whether or not you can transfer said digital media, e.g. iTunes, to a beneficiary when you pass away. The short answer is no. According to the terms and conditions of iTunes:

a person "may not rent, lease, lend, sell, transfer redistribute, or sublicense the Licensed Application and, if you sell your Mac Computer or iOS Device to a third party, you must remove the Licensed Application from the Mac Computer or iOS Device before doing so. You may not copy (except as expressly permitted by this license and the Usage Rules), decompile, reverse-engineer, disassemble, attempt to derive the source code of, modify, or create derivative works of the Licensed Application, any updates, or any part thereof (except as and only to the extent that any foregoing restriction is prohibited by applicable law or to the extent as may be permitted by the licensing terms governing use of any open-sourced components included with the Licensed Application)."

The above legalese means that only the original licensee is allowed to use it, not your friends, neighbors, family members, will beneficiaries or trust beneficiaries. So your entire collection of music, The Beatles, Metallica (personal favorite), Michael Jackson, Elvis, Abba, Pink Floyd, etc., is for your ears only you could say.

For reference, a license is a permit to own or do something subject to certain restrictions. Many people erroneously believe that when they purchase a song through iTunes, they own the song outright. As mentioned, this is simply not true as the terms and conditions specify that "The Mac App Store Products and App Store Products (collectively, “App Store Product(s)”) made available through the Mac App Store Service and App Store Service (collectively, “App Store Service(s)”) are licensed, not sold, to you."

The legal term "license" is applicable to the daily lives of many Californians, though you probably never think about it. For example, a California driver's license is roughly analogous to the license granted by iTunes to a song purchaser. Provided you meet the requirements, the state of California will issue you a license to operate a motor vehicle. If you cannot abide by the rules, i.e. incur excessive speeding tickets or DUI convictions, the state may rescind your license. The same holds true for an iTunes song, use it in the correct manner, namely follow the terms and conditions, or else you will lose your right to use it.

Ultimately, I am sure some people will find a way around the license agreement but my point here is that iTunes does not legally permit it, since you merely have a license and thus do not own your iTunes catalog.

If you have any questions please call my office at (408) 866-8382 for a free consultation or email me at s.miri@mirilaw.com.