No Deduction for $1.2m Claim for Services by Tax Attorney Son for Infirm Parents (Tax Prof Blog), part of the reason might be because there were no records of time spent on legal services provided, only estimates, CLICK HERE.

Link to a WFJ article 25 documents you need before you die, CLICK HERE

I came across this link to Independent Sector’s 33 principles for good governance and ethical practice, CLICK HERE.  You do have to register, but you do not have to become a member.  I have provided below the areas that the 33 principles cover.  As you might be aware, Independent Sector is a leader in the charitable community.  The principles provide good materials for thought and discussion.

“Principle 1: Laws and Regulations
Principle 2: Code of Ethics
Principle 3: Conflicts of Interest
Principle 4: “Whistleblower” Policy
Principle 5: Document Retention and Destruction
Principle 6: Protection of Assets
Principle 7: Availability of Information to the Public
Principle 8: Board Responsibilities
Principle 9: Board Meetings
Principle 10: Board Size and Structure
Principle 11: Board Diversity
Principle 12: Board Independence
Principle 13: CEO Evaluation and Compensation
Principle 14: Separation of CEO, Board Chair and Board Treasurer Roles
Principle 15: Board Education and Communication
Principle 16: Evaluation of Board Performance
Principle 17: Board Member Term Limits
Principle 18: Review of Governing Documents
Principle 19: Review of Mission and Goals
Principle 20: Board Compensation
Principle 21: Financial Records
Principle 22: Annual Budget, Financial Performance and Investments
Principle 23: Loans to Directors, Officers, or Trustees
Principle 24: Resource Allocation for Programs and Administration
Principle 25: Travel and Other Expense Policies
Principle 26: Expense Reimbursement for Nonbusiness Travel Companions
Principle 27: Accuracy and Truthfulness of Fundraising Materials
Principle 28: Compliance with Donor’s Intent
Principle 29: Acknowledgment of Tax-Deductible Contributions
Principle 30: Gift Acceptance Policies
Principle 31: Oversight of Fundraisers
Principle 32: Fundraiser Compensation
Principle 33: Donor Privacy”

The California Attorney General announces indictment of a Los Angeles skilled nursing facility on alleged abuse and neglect,  Click Here for link to California Attorney General.

BEING A NONPROFIT BOARD MEMBER CAN BE MORE CHALLENGING THAN BEING ON A PUBLIC COMPANY BOARD

David Tate, Esq. (San Francisco), http://davidtate.us, tateatty@yahoo.com

Yes, being a nonprofit board member can be more challenging than being on a public company board.  Why is that?  There are several reasons, but they are not necessarily good or bad, just different.  Here are a few.

1.  The people on the nonprofit board are probably more diverse in background than on a public company board.  Some examples—more diverse in life and work experiences, education, how they got on the board (who they knew), economic level, reasons for serving on the board, and past board or similar experience.  Just think about it, on a nonprofit board you have male/female; every race; wealthy and not as wealthy; graduate and less than graduate level educated; educators, medical professionals, social and community professionals, religious, computer professionals, trade workers, CPAs, lawyers, CEOs, and the list goes on without end reflecting the community as a whole.  The diversity is good as it probably benefits the nonprofit and the board in achieving the nonprofit’s mission.  The diversity can present challenges—if not guided skillfully, the board can reflect a scattered, undirected group lacking in cohesiveness where the members have difficulty relating to each other and where they are coming from with their demeanor, ideas and opinions.

2.  In a manner of speaking, identifying and agreeing upon nonprofit board responsibilities and functions is sort of like the Wild West, even less structured than for public companies pre-Sarbanes-Oxley.  For example . . . recognizing the nonprofit’s board level need for an audit committee, internal control oversight, etc. can be a somewhat recent development.  On the other hand, it is entirely possible that a nonprofit board could be more directly involved in fund raising and donations, whereas it would be unlikely for a public company board to be directly involved in revenue production (although a startup company board would exercise greater oversight of funding and capitalization).  It is probably a safe bet that if you went around the table at a nonprofit board meeting and asked the members to list the top five board responsibilities, other than helping the nonprofit to achieve its mission, you will probably get a wide variety of responses.  Broadly speaking, I view the nonprofit board member’s responsibilities as being the same as for a member of a public company board—that is, as being a member of the board which is responsible for oversight of the entity’s processes and functions pertaining to strategy, governance, risk, compliance and talent/succession.  In any event, the point is that on a public company board you are more likely to have a general understanding between the board members as to their responsibilities, functions, processes and time commitments.  That understanding might well be lacking on a nonprofit board.

3.  And the third area that I will mention, although certainly additional areas can be listed, involves the interaction between the nonprofit board and the nonprofit’s executive officers and senior managers.  As a general proposition, I would say that people who work at nonprofits, and people who serve on nonprofit boards tend to be more “personally” committed to the mission of the nonprofit than their counterparts are at public companies.  That is not to say that people who work at public companies and who serve on public company boards are not committed, but merely to say that as a whole, people at nonprofits have a greater tendency to become “personal” about their involvement and the good of the nonprofit.  This “personal” attribute or commitment can add a dynamic to relationship interactions.  As nonprofit boards are encouraged and expected to become more active and involved in their oversight activities, by necessity they must also increase their interaction with executive officers and at times with senior management.  In situations where this interaction has not been the norm, it can be viewed as excessive or unwelcomed second guessing.  In the public company arena this type of interaction should be expected, whereas for nonprofits there might be a learning curve.

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FINANCIAL ELDER ABUSE—SOME INDICATORS

June 26, 2011
David Tate, Esq. (San Francisco), http://davidtate.us, tateatty@yahoo.com
California Estate, Trust & Elder Litigation, https://californiaestatetrust.wordpress.com

The possible indicators of elder and dependent adult financial abuse are numerous.  It is not possible to provide an exhaustive list and from a legal perspective for a variety of evidentiary reasons proving abuse in a court of law can be problematic.  Whether actual abuse is occurring, or whether you should suspect that abuse is occurring, really depends upon the facts and circumstances at that time, and how you interpret those facts and circumstances.  While one person might suspect abuse in a particular situation, another person might view the situation differently.  And a legitimate explanation for the occurrence might exist, or it is possible that the elder or dependent adult simply is making what might be considered to be an unwise decision, but is not necessarily being abused.  The list below is intended to be for helpful discussion purposes only.  However, taken from presentation materials that I prepared to help financial institutions spot financial elder abuse for financial institution elder and dependent adult financial abuse legal reporting requirements, possible elder or dependent adult financial abuse typically becomes apparent from a financial situation that appears to be unnatural or out of character for that specific elder, or for the typical similar person in society.  So . . . I hope you find the following list of some of the possible indicators helpful.

-Increased or unusual banking activity.

-An unusually, or out of the ordinary, large transaction.

-The purchase of an unusual item or service.

-Money being paid to or for the benefit of someone out of the ordinary. The person could be a stranger to the elder, a caregiver, a housekeeper, a neighbor, a friend, a gardener, or even a family member.

-A change in account title or authority.

-Someone improperly using his or her authority over the elder’s account. Possibly a trustee, attorney in fact, co-account holder, or other person.

-Unusual credit card transactions or balances.

-A change in deed or real property title or ownership.

-Unusual ATM activity.

-Telemarketing and mail fraud; fake prizes; fake accidents; unnecessary purchases or home improvements; getting a windfall upon the payment of money or by providing information.

-Risky, unnecessary or unusual investments, insurance, warranties or annuities.

-Unusual people accompanying the elder; new or unusual acquaintances; new “friends,” boyfriends or girlfriends.

-The elder not speaking for himself, or herself; or some other person directing the elder, the situation or the proposed transaction.

-The elder acting in a secretive or evasive manner; or perhaps in an overly defensive or hostile manner in response to questions or even in response to typical conversations.

-The elder being forgetful, disorganized, disoriented, confused, or unaware of his or her surroundings or common events.

-The elder acting paranoid or fearful about the bank, or about his or her accounts.

-A change in the appearance, actions or demeanor of the elder; social withdrawal; unkempt; or health problems, including what is referred to as self abuse.

-The elder being concerned about who will help or assist him or her, or take care of him or her.

-Expressions of concern, pressure, worry or fear.

-Excessive payment for a product or subscription, or for services; or payment for an unnecessary product or subscription, or for services.

-The elder’s difficulty or inability to describe or explain a rational need for or eventual use of the product, subscription or services.

-Excessive or unnecessary borrowing by the elder, or someone on his or her behalf.

-The elder wanting to avoid conversation.

-Unusual or unnatural Will, Trust, Power of Attorney, Deed or mortgage terms or documents; or unusual or unnatural changes in the terms or conditions of those documents; or the unusual or unnatural selection or nomination of the person to exercise authority in or over those documents.

-Documents, checks, payments, etc., missing, misplaced or stolen.

-The elder being evicted, or loss of utilities.

-The elder becoming isolated from others, either because of other people causing that isolation, or because of the elder’s lack of interest.

-Forged, missing, or strange looking signatures.

-Changes in financial institution.

-Changes in account, IRA, or insurance beneficiaries.

-Unpaid bills.

-The sudden appearance, assistance or interest of strangers, friends or relatives.

-New people helping the elder around the house, or with the yard; home improvements.

-Associating with much younger people.

-Reluctance to discuss financial matters.

-The elder’s increasing tiredness or depression.

-The sudden or unexplained transfer of assets.

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Conservatee is the party in interest in a breach of contract action involving the Conservator, Conservatorship of Buchenau

June 23, 2011
David Tate, Esq. (San Francisco), http://davidtate.us, tateatty@yahoo.com
California Estate, Trust & Elder Litigation, https://californiaestatetrust.wordpress.com

Conservatorship of Buchenau (California Court of Appeal, Second District, May 31, 2011, Case No. B222941)

Summary: The Los Angeles Public Guardian, Court-appointed Conservator for multiple conservatorship estates, listed for sale real property in two different conservatorship estates.  Appellants Tornel/Silva directly or indirectly through an agent offered to purchase both properties.  When the sale in Buchenau fell through, the Conservator retained buyers’ purchase deposit.  The opinion in Buchenau contains a good discussion about the entitlement of a real property purchaser to return of the purchase deposit when the sales falls through; however, that discussion is not extremely germane to this blog about trust, estate and elder topics.

I did find interesting the Court’s comment relating to Appellants’ argument of collateral estoppel against the Public Guardian arising from its appointment as Conservator in multiple conservatorship estates involving litigation on similar issues—the Court stated:

“Nonetheless, appellants have also failed to establish the third element of collateral estoppel which requires that the party against whom preclusion is now sought was a party or in privity with a party to the prior proceeding. Appellants argue that although the Buchenau estate was not a party in the Lathem proceeding, the fact that respondent [the Public Guardian] was the conservator of both the Buchenau and Lathem estates establishes the requisite privity between the two for purposes of collateral estoppel. We disagree. The concept of “privity” is highly dependent upon the facts and circumstances in each case, but generally “involves a person so identified in interest with another that he represents the same legal right.” (Zaragosa v. Craven (1949) 33 Cal.2d 315, 318.) Moreover, the “circumstances must have been such that the party to be estopped should reasonably have expected to be bound by the prior adjudication.” (Clemmer v. Hartford Ins. Co. (1978) 22 Cal.3d 865, 875.) There is no reason that any conservatee should expect to be bound by a ruling issued against its conservator in its capacity as conservator of a completely different estate; especially when, as in this case, the conservator serves this role for numerous other parties. Further, as respondent is not the real party in interest in this or any case, but merely “stands in the shoes” of its conservatees, any and all contractual rights under the breached purchase agreement must be said to belong to each individual party in interest (the conservatees) and not respondent itself. (Underline added.) Appellants have not cited to any relevant authority to the contrary. As such, appellants have likewise failed to carry their burden of establishing privity between the Buchenau and Lathem estates.”

The Court did not cite authority for the portion of the holding that is underlined above.  Certainly the interests of each individual conservatee should be protected when a conservator represents multiple different conservatees; however, caution should be exercised when emphasizing the legal standing of the conservatee when compared to that of the conservator as more often it is beneficial and correct to argue that the conservatee lacks legal capacity or standing to engage in a particular transaction.

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Does Section 366.2 Require That Breach Of Contract Action Be Filed Within One Year Of Decedent’s Death, Dacey v. Taraday, Tate California Estate & Trust Litigation Blog.

June 22, 2011
David Tate, Esq. (San Francisco), http://davidtate.us, tateatty@yahoo.com
California Estate & Trust Litigation, https://californiaestatetrust.wordpress.com

Dacey v. Taraday (California Court of Appeal, First District, June 21, 2011, Case Nos. A125080, No. A125670 Consolidated)

California Code of Civil Procedure §366.2 states:

(a) If a person against whom an action may be brought on a liability of the person, whether arising in contract, tort, or otherwise, and whether accrued or not accrued, dies before the expiration of the applicable limitations period, and the cause of action survives, an action may be commenced within one year after the date of death, and the limitations period that would have been applicable does not apply.

In Dacey v. Taraday the Decedent had entered into a pre-death agreement which obligated the Decedent to make payment to others following the resolution, by settlement or trial, of various court cases that had been filed and were ongoing at the time of the Decedent’s death.  The cases did resolve after Decedent’s death.  Post Decedent’s death, a party to the agreement (Dacey) sought recovery under the agreement.  The administrator of Decedent’s estate refused to make payment.  Dacey filed a legal action to recover under the agreement but did not file his action until more than one year following Decedent’s death.  Accordingly, the administrator of Decedent’s estate sought to disallow the action for recovery in part based on the Cal. Civ. Code §366.2 one year statute of limitation.

The Court of Appeal held that in this case the legal action was not time barred by §366.2. The Court held that at the time of the Decedent’s death Decedent had a liability and an obligation but both were contingent on the occurrence of a future event which had not yet occurred.  Section 366.2 did not apply as the debt was not enforceable against Decedent while he was alive and the breach of the contract (by the administrator) occurred after Decedent’s death.

It should be carefully noted that in every case all potential statute of limitation issues need to be carefully evaluated and that the holding in Dacey v. Taraday was based on the facts of that particular case alone.  Depending on facts and circumstances the results could be opposite in other breach of agreement situations, and the results or holding would be different in a situation where a legal action could have been brought or existed on the agreement before the Decedent’s death, in which case §366.2 probably would apply.

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Tate California Estate & Trust Litigation Blog, New Spotlight on Elder Abuse and Neglect, Canadian Centre for Elder Law Discussion Paper

June 21, 2011
David Tate, Esq. (San Francisco), http://davidtate.us, tateatty@yahoo.com
California Estate & Trust Litigation, https://californiaestatetrust.wordpress.com

The Canadian Centre for Elder Law has made available a discussion paper for the Division of Aging and Seniors, Public Health Agency of Canada, entitled Moving from Scrutiny to Strategy: An Analysis of Key Canadian Elder Abuse and Neglect Cases.  The paper is written with health care workers, social and community service workers and other health care professionals in mind to help them identify and respond to situations of possible or actual abuse and neglect.  The paper also provides an overview of abuse and neglect, with examples.  You can find the paper at:  http://www.bcli.org/sites/default/files/Counterpoint_Project_discussion_paper.pdf

The paper is 75 pages, which is too long for my preference.  Nevertheless, the paper helps inform people about the various forms and dynamics of elder abuse and neglect, and encourages them to action.  And, like anything else, it is clear that keeping elder issues in the news is the best way to achieve positive results.  I like that the paper seeks to address not only abuse, but also neglect.  I would have expanded the scope to include not only elders, but also dependent adults.

The following is a brief summary of the paper’s 14 recommendations.  You should click on the paper to read the detail.     

1.  Provide workplace resources, including comprehensive training, in support of health care and social service staff to identify elder abuse and neglect in all its diversity.

2.  Develop or utilize thoughtful resources that support practitioners to make good decisions in complex situations.

3.  Explore what can be done within your own institutions to facilitate the development of a workplace culture that values elder abuse and neglect prevention.

4.  Support health care and social service staff to understand and respond to ageism before it leads to abuse and neglect.

5.  Develop tools, and provide comprehensive training, to support health care and social service workers to make inquiries about abuse and neglect and to document risk.

6.  Ensure health care and social service workers and other staff are able to easily access the appropriate contact numbers for reporting abuse and neglect.

7.  Develop best practices on how to offer services in a non-invasive manner that respects the unique lifestyle choices of each older adult and recognizes the social and emotional factors that make it challenging for adults to disclose abuse or neglect and accept assistance.

8.  Develop policies and protocols to assist front-line staff to apply their discretion to share a client’s or patient’s confidential personal and health information without consent.

9.  Emphasize, in all policies and protocols, the importance of always striving for a patient’s or client’s informed consent to interventions perceived to be in the adult’s best interests.

10.  Ensure all health care and social services professionals who interact with older adults understand the concept of mental capacity.

11.  Develop processes for scrutinizing the adequacy of caregiving relationships that do not involve a professional accountable to an employer or a licensing body.

12.  Offer support services to non-professional, informal, and volunteer caregivers of older adults to enhance their capacity to manage this physically, emotionally and technically challenging responsibility.

13.  Develop protocols and mechanisms to facilitate, in a respectful manner, periodic contact with older adult clients and patients with significant health problems who fail to attend medical appointments or maintain medical follow-ups.

14.  Develop mechanisms to facilitate interagency communications amongst police, health and social services in circumstances where an older adult appears to be at risk of abuse or neglect.

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David Tate, Esq. (San Francisco), http://davidtate.us, tateatty@yahoo.com
California Estate & Trust Litigation, https://californiaestatetrust.wordpress.com
Tate’s Blog: Law – Governance – Risk – Business, http://davidtate.wordpress.com

CA Estate & Trust Litigation Updates are also directly available by an email distribution list.  Send me an email if you would like to be added to the list.  Please also pass these materials to a friend.

Tate California Estate & Trust Litigation Blog, New California Trust Case–Capacity to Execute a Trust

Andersen v. Hunt (California Court of Appeal, Second District, B221077, June 14, 2011)

June 15, 2011
David Tate, Esq. (San Francisco), http://davidtate.us, tateatty@yahoo.com
California Estate & Trust Litigation, https://californiaestatetrust.wordpress.com

Summary: the capacity to execute a trust is evaluated pursuant to Cal. Prob. Code §§810 to 813; however, “§§810 to 813 do not set out a single standard for contractual capacity, but rather provide that capacity to do a variety of acts, including to contract, make a will, or execute a trust, must be evaluated by a person’s ability to appreciate the consequences of the particular act he or she wishes to take. More complicated decisions and transactions thus would appear to require greater mental function; less complicated decisions and transactions would appear to require less mental function.”  In the case of a simple trust or simple trust amendment, i.e., a less complicated decision, the standard that would be applied under §§810-813 is the standard applied under §6100.5 to make a will or codicil.

In Andersen v. Hunt the court acknowledged that capacity to make a will or codicil is governed by Cal. Prob. Code §§6100.5 and the cases thereunder.  Section 6100.5 states that a person is not mentally competent to make a will if at the time of making the will, either of the following is true:

“(1) The individual does not have sufficient mental capacity to be able to (A) understand the nature of the testamentary act, (B) understand and recollect the nature and situation of the individual’s property, or (C) remember and understand the individual’s relations to living descendants, spouse, and parents, and those whose interests are affected by the will.

“(2) The individual suffers from a mental disorder with symptoms including delusions or hallucinations, which delusions or hallucinations result in the individual’s devising property in a way which, except for the existence of the delusions or hallucinations, the individual would not have done.”

The court also acknowledged that whereas §6100.5 and the cases thereunder apply to the making of wills, Cal. Probate Code §§810-813 are applicable when evaluating capacity to execute a trust.

“Sections 810 to 813 set out the standard for capacity to make various kinds of decisions, transact business, and enter contracts. Section 810 provides:

(a) For purposes of this part, there shall exist a rebuttable presumption affecting the burden of proof that all persons have the capacity to make decisions and to be responsible for their acts or decisions.

(b) A person who has a mental or physical disorder may still be capable of contracting, conveying, marrying, making medical decisions, executing wills or trusts, and performing other actions.

(c) A judicial determination that a person is totally without understanding, or is of unsound mind, or suffers from one or more mental deficits so substantial that, under the circumstances, the person should be deemed to lack the legal capacity to perform a specific act, should be based on evidence of a deficit in one or more of the person’s mental functions rather than on a diagnosis of a person’s mental or physical disorder.

Section 811 sets out the findings necessary to support a conclusion of lack of capacity, as follows:

(a) A determination that a person is of unsound mind or lacks the capacity to make a decision or do a certain act, including, but not limited to, the incapacity to contract, to make a conveyance, to marry, to make medical decisions, to execute wills, or to execute trusts, shall be supported by evidence of a deficit in at least one of the following mental functions, subject to subdivision (b), and evidence of a correlation between the deficit or deficits and the decision or acts in question:

(1) Alertness and attention, including, but not limited to, the following: [¶] (A) Level of arousal or consciousness. [¶] (B) Orientation to time, place, person, and situation. [¶] (C) Ability to attend and concentrate.

(2) Information processing, including, but not limited to, the following: [¶] (A) Short- and long-term memory, including immediate recall. [¶] (B) Ability to understand or communicate with others, either verbally or otherwise. [¶] (C) Recognition of familiar objects and familiar persons. [¶] (D) Ability to understand and appreciate quantities. [¶] (E) Ability to reason using abstract concepts. [¶] (F) Ability to plan, organize, and carry out actions in one’s own rational self-interest. [¶] (G) Ability to reason logically.

(3) Thought processes. Deficits in these functions may be demonstrated by the presence of the following: [¶] (A) Severely disorganized thinking. [¶] (B) Hallucinations. [¶] (C) Delusions. [¶] (D) Uncontrollable, repetitive, or intrusive thoughts.

(4) Ability to modulate mood and affect. Deficits in this ability may be demonstrated by the presence of a pervasive and persistent or recurrent state of euphoria, anger, anxiety, fear, panic, depression, hopelessness or despair, helplessness, apathy or indifference, that is inappropriate in degree to the individual’s circumstances.

(b) A deficit in the mental functions listed above may be considered only if the deficit, by itself or in combination with one or more other mental function deficits, significantly impairs the person’s ability to understand and appreciate the consequences of his or her actions with regard to the type of act or decision in question.

(c) In determining whether a person suffers from a deficit in mental function so substantial that the person lacks the capacity to do a certain act, the court may take into consideration the frequency, severity, and duration of periods of impairment… .” (Italics added.)

Section 812 provides: Except where otherwise provided by law, including, but not limited to, Section 813 and the statutory and decisional law of testamentary capacity, a person lacks the capacity to make a decision unless the person has the ability to communicate verbally, or by any other means, the decision, and to understand and appreciate, to the extent relevant, all of the following: [¶] (a) The rights, duties, and responsibilities created by, or affected by the decision. [¶] (b) The probable consequences for the decisionmaker and, where appropriate, the persons affected by the decision. [¶] (c) The significant risks, benefits, and reasonable alternatives involved in the decision.

The court in Andersen v. Hunt further acknowledged that “California courts have not applied consistent standards in evaluating capacity to make or amend a trust,” citing Goodman v. Zimmerman (1994) 25 Cal.App.4th 1667, 1673–1679, in which the court applied section 6100.5’s standard for testamentary capacity to evaluate a decedent’s capacity to execute a new will and trust amendment, and Walton v. Bank of California (1963) 218 Cal.App.2d 527, 541, in which the court applied a higher standard to evaluate capacity to enter an irrevocable inter vivos trust, stating that a person lacking capacity to make an ordinary transfer of property has no capacity to create an inter vivos trust.  The court distinguished these two cases stating that in each case the proper standard by which to evaluate capacity does not appear to have been in dispute, and that therefore, the cases offer little assistance in resolving the question in Andersen v. Hunt which is the measure by which a court should evaluate a decedent’s capacity to make an after-death transfer by trust.

The court concluded that whereas §§810-813 provide the standard for determining contractual capacity and the capacity to execute a trust, §§810-813 do not set out a single standard of capacity.  “To the contrary, section 811, subdivision (a) provides that a determination that a person lacks capacity to make a decision or do a certain act, including without limitation ‘to contract, … to execute wills, or to execute trusts,’ must be supported by evidence of a deficit in one of the statutorily identified mental functions and evidence of a correlation between the deficit and the decision or act in question. Section 811, subdivision (b) contains similar language, stating that a deficit in one of the statutorily defined mental functions may be considered only if it significantly impairs the person’s ability to appreciate the consequences of his or her actions with regard to the type or act or decision in question. And section 812 provides that a person lacks capacity to make a decision only if he or she cannot appreciate the rights, duties, consequences, risks and benefits ‘involved in the decision.’ (Italics added.) Accordingly, sections 810 to 812 do not set out a single standard for contractual capacity, but rather provide that capacity to do a variety of acts, including to contract, make a will, or execute a trust, must be evaluated by a person’s ability to appreciate the consequences of the particular act he or she wishes to take. More complicated decisions and transactions thus would appear to require greater mental function; less complicated decisions and transactions would appear to require less mental function.”

The court held that “[w]hen determining whether a trustor had capacity to execute a trust amendment that, in its content and complexity, closely resembles a will or codicil, we believe it is appropriate to look to section 6100.5 to determine when a person’s mental deficits are sufficient to allow a court to conclude that the person lacks the ability ‘to understand and appreciate the consequences of his or her actions with regard to the type of act or decision in question.’ (§ 811, subd. (b).) In other words, while section 6100.5 is not directly applicable to determine competency to make or amend a trust, it is made applicable through section 811 to trusts or trust amendments that are analogous to wills or codicils.”

In Andersen v. Hunt the court determined that “while the original trust document is complex, the amendments are not. Indeed, none of the contested amendments does more than provide the percentages of the trust estate Wayne wished each beneficiary to receive. The May 28, 2003 amendment provided that Pauline was to receive 60 percent of the trust residue, and Stephen, Kathleen, and John were to receive the remaining 40 percent in equal shares; the November 18, 2003 amendment specified the same 60 percent/40 percent allocation if Wayne predeceased Pauline, but provided that if Pauline died first, Taylor should receive a portion of the trust assets; and the July 6, 2004 amendment eliminated John as a beneficiary, providing that ‘Steve will have the portion that had been set aside for his son.’”

“In view of the amendments’ simplicity and testamentary nature, we conclude that they are indistinguishable from a will or codicil and, thus, Wayne’s capacity to execute the amendments should have been evaluated pursuant to the standard of testamentary capacity articulated in section 6100.5. The trial court erred in evaluating Wayne’s capacity under a different, higher standard of mental functioning.”

It appears that Andersen v. Hunt is not the last word on the standard that is applicable when evaluating capacity to execute a trust.  Indeed, although the court sought to distinguish the holdings in Goodman v. Zimmerman and Walton v. Bank of California both of those cases were First District decisions which may simply conflict with or contradict Andersen v. Hunt.  Additionally, under the holding in Andersen v. Hunt a court would also still need to determine whether the trust or trust amendment as simple or more complex in nature, and presumably apply a higher standard than that articulated under §6100.5 when the trust or amendment is determined to be more complex.  Among other things, in appropriate circumstances other authorities might also become applicable such as Cal. Civ. Code §39 relating to persons of unsound mind.  Capacity to execute will continue to be a question of fact determined on a case-by-case basis.

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David Tate, Esq. (San Francisco), http://davidtate.us, tateatty@yahoo.com
California Estate & Trust Litigation, https://californiaestatetrust.wordpress.com
Tate’s Blog: Law – Governance – Risk – Business, http://davidtate.wordpress.com

Fee arrangements: referral (15-25% depending on circumstances), hourly (variable for fee sensitive cases), contingency, split fee / co-counsel, contract, fixed fee and other arrangements.

CA Estate & Trust Updates are also directly available by an email distribution list.  Send me an email if you would like to be added to the list.  Please also pass these materials to a friend.

-Trial, arbitration, mediation and appellate practice.

-Trust/probate litigation; difficult administrations; advising fiduciaries and beneficiaries; conservatorships.

-Elder and dependent adult care and protection; disabilities and discrimination; nursing home; physical and mental injury.

-Civil litigation; business; insurance coverage and bad faith; property and casualty; public entity; personal injury; product liability; employment/workplace; real property; professional liability litigation.

-Serious personal physical and mental injury.

-Disabilities; discrimination; harassment; and bullying.

-Officers, directors, boards, audit and other committees, governance, risk management, compliance, and investigations.

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