California Trustee – What Would Keep Me Up At Night – February 2015


Please also forward this blog post to anyone else who would be interested. At the request of friends I have also posted below the video the text of the discussion.  Thank you.  Dave Tate

Text:

California Trustees – What Would Keep Me Up At Night – February 2015

Hello I’m Dave Tate. I’m a San Francisco litigation attorney and I also represent trustees in trust administrations. This discussion is for California trustees, and what would keep me up at night February 2015.

Trustee responsibilities are extensive and they arise from different sources including the wording of the trust itself, statutes and case law. Of course you have to cover all areas of your trustee responsibility, but here is my list of primary issues that would keep me up at night as a trustee. This list is not in any particular order.

First, do you understand what the trust says and requires?

Second, have you marshalled and safeguarded the assets that are in or that are supposed to be in the trust? Are they in the trust and under your control?

Third, do you really understand your legal responsibilities including the wording and requirements in the trust, what the probate code and case law require of you? As a trustee you are a fiduciary. You have one of the highest standards of care, responsibility, liability and unbiased fairness and good faith required by law.

Fourth, are the trust assets being invested, managed and recorded properly and prudently? You need to evaluate and manage the returns and the risks, in accord with the wording of the trust and your fiduciary duties. So, for example, the stock market goes up and down. If the market goes down, is your approach to the portfolio management designed to help you avoid liability for losses?

Next, do you have the proper fiduciary demeanor and decision making approach required of a trustee?

Sixth, is the trust cash flow prudently managed? You might, for example, through no fault of your own have a trust with declining asset values or liquidity issues.

Next, do you know what to do if you have beneficiaries who are disagreeing with your decisions, or who are threatening litigation?

Eighth do you know what information you must or possibly should provide to the beneficiaries?

Ninth, do you understand that you have personal liability exposure for the actions that you take or don’t take as the trustee? You are required to be prudent with risk management. Also consider possible fiduciary insurance coverage although in most situations it isn’t required.

And last on this list, when necessary do you consult with professionals to advise you on your fiduciary duties and trust administration management?

That’s it for now. You can find more information at http://californiaestatetrust.com Thanks for listening.

Admissibility of Hearsay Evidence of a Decedent’s Will or Trust

In will and trust contest actions the person who signed or who supposedly signed the will or trust is usually deceased.  Statements that the decedent previously made are considered hearsay, i.e., a statement made out of court that is being admitted for the truth of the statement, and are not admissible in evidence unless a hearsay exception applies. California Evidence Code section 1260 provides an important possible hearsay exception that may apply in will and trust contest cases; however, the applicability of section 1260 depends on a determination by the Judge in the case and applicability can vary from case to case and from Judge to Judge.

California Evidence Code section 1260 provides as follows:

Section 1260.  (a) Except as provided in subdivision (b), evidence of any of the following statements made by a declarant who is unavailable as a witness is not made inadmissible by the hearsay rule:

(1) That the declarant has or has not made a will or established or amended a revocable trust.

(2) That the declarant has or has not revoked his or her will, revocable trust, or an amendment to a revocable trust.

(3) That identifies the declarant’s will, revocable trust, or an amendment to a revocable trust.

(b) Evidence of a statement is inadmissible under this section if the statement was made under circumstances that indicate its lack of trustworthiness.

And, in an action involving a claim or demand against an estate of a decedent, California Evidence Code section 1261 also provides an additional possible hearsay exception in appropriate circumstances as determined by the Judge in the case.  Section 1261 provides as follows:

Section 1261.  (a) Evidence of a statement is not made inadmissible by the hearsay rule when offered in an action upon a claim or demand against the estate of the declarant if the statement was made upon the personal knowledge of the declarant at a time when the matter had been recently perceived by him and while his recollection was clear.

(b) Evidence of a statement is inadmissible under this section if the statement was made under circumstances such as to indicate its lack of trustworthiness.

Dave Tate, Esq. (San Francisco / California)

Will and Trust Undue Influence in California

Undue influence is typically proven by inference or circumstantial evidence, not limited to the actual time that the will or trust was executed but also based on facts relevant to the issues both before and after execution. Estate of Franco (1975) 50 Cal. App. 3d 374, 382; Estate of Baker (1982) 131 Cal. App. 3d 471, 481.  To make the determination more difficult, different law and standards can apply depending on whether the document in question is a will or trust, different judges will apply different standards and approaches, and there can be a presumption that a signed will or trust that isn’t a forgery is valid and effective. On the other hand however, a presumption of undue influence can apply in certain statutory, fiduciary, and confidential relationship situations.  The facts and evidence in each case need to be carefully evaluated particularly when the will or trust contains provisions that are not natural to what the testator would have wanted and in cases where there are significant sudden or significant changes.

Undue influence consists of conduct that causes the testator to make a disposition of his or her property that is different from that which he or she could have done had he or she been permitted to follow his or her own inclination. Estate of Baker (1982) 131 Cal. App. 3d 471, 480-81.

Pursuant to California Civil Code §1575, undue influence exists upon any one of the following separate and distinct criteria:

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

(2) taking an unfair advantage of another’s weakness of mind; or

(3) taking a grossly oppressive and unfair advantage of another’s necessities or distress.

There is no fixed definition or inflexible formula – rather the question is whether from the entire context it appears that the testator was induced or his decision making was induced to do or forbear to not an action which he or she would not do, or would do, if left to act freely. Keithley v. Civil Service Board (1970) 11 Cal. App. 3d 443, 451.

Under Cal. Civ. Code §1575(2) the weakness of mind can be temporary and need not be incapacitating. Odorizzi v. Bloomfield School District (1966) 246 Cal. App. 2d 123, 131. Under Cal. Civ. Code §§1575(2) and (3) the use of over-persuasion is often accompanied by certain characteristics examples of which might be: discussion of the transaction at an unusual or inappropriate time; consummation of the transaction in an unusual place; insistent demand that the event be finished at once; emphasis on the untoward consequences of delay; the use of multiple persuaders; the absence of third-parties; or statements that there is no time to consult others. Odorizzi v. Bloomfield School District (1966) 246 Cal. App. 2d 123, 133.

Although fraud and undue influence are separate grounds for setting aside a will, and undue influence can be found without any fraud, undue influence also can be a species of fraud or constructive fraud as undue influence and fraud can be closely related and fraud may be considered in determining whether there was undue influence. Estate of Garibaldi (1961) 57 Cal. 2d 108, 114; O’Neil v. Spillane (1975) 45 Cal. App. 3d 147, 158 (undue influence as a species of constructive fraud); Stewart v. Marvin (1956) 139 Cal. app. 2d 769, 775 (undue influence as a species of constructive fraud); Estate of Newhall (1923) 190 Cal. 709, 718; Estate of Ricks (1911) 160 Cal. 467, 480; however, see also, Hagen v. Hickenbottom (1995) 41 Cal. App. 4th 168(a showing of false or fraudulent statement is not a necessary element of undue influence).

The California elder abuse statutes provide yet another statutory definition of undue influence.  California Welfare and Institutions Code section §15610.70 provides the following definition:

15610.70. (a) “Undue influence” means excessive persuasion that causes another person to act or refrain from acting by overcoming that person’s free will and results in inequity. In determining whether a result was produced by undue influence, all of the following shall be considered:

(1) The vulnerability of the victim. Evidence of vulnerability may include, but is not limited to, incapacity, illness, disability, injury, age, education, impaired cognitive function, emotional distress, isolation, or dependency, and whether the influencer knew or should have known of the alleged victim’s vulnerability.

(2) The influencer’s apparent authority. Evidence of apparent authority may include, but is not limited to, status as a fiduciary, family member, care provider, health care professional, legal professional, spiritual adviser, expert, or other qualification.

(3) The actions or tactics used by the influencer. Evidence of actions or tactics used may include, but is not limited to, all of the following:

(A) Controlling necessaries of life, medication, the victim’s interactions with others, access to information, or sleep.

(B) Use of affection, intimidation, or coercion.

(C) Initiation of changes in personal or property rights, use of haste or secrecy in effecting those changes, effecting changes at inappropriate times and places, and claims of expertise in effecting changes.

(4) The equity of the result. Evidence of the equity of the result may include, but is not limited to, the economic consequences to the victim, any divergence from the victim’s prior intent or course of conduct or dealing, the relationship of the value conveyed to the value of any services or consideration received, or the appropriateness of the change in light of the length and nature of the relationship.

(b) Evidence of an inequitable result, without more, is not sufficient to prove undue influence.

The facts and evidence in each case need to be carefully evaluated.

Dave Tate, Esq. (San Francisco / California)

Determining California Mental Capacity to Execute a Trust or Will

The mental capacity to execute a trust or trust amendment is primarily based on California Probate Code §§810-812, and the mental capacity to execute a will or will codicil is primarily based on California Probate Code §6100.5; however, in the case of a trust or trust amendment §6100.5 may apply if the provisions are more simple in nature, and in the case of a will the provisions of §§810-812 may apply if the provisions are more complicated and in the nature of a trust. Andersen v. Hunt (2011) 196 Cal. App. 4th 722; Lintz v. Lintz (2014) 222 Cal. App. 4th 1346. However, various other rules and case law also apply including that it is the intent and natural wishes of the decedent testator that should prevail, extrinsic evidence and evidence of the surrounding circumstances might be admissible to determine that testator’s intent, presumptions for and against the validity of a document apply in certain circumstances, and the validity of the document can also be attacked in various other circumstances including for example, undue influence, fraud, forgery, elder abuse, fiduciary or confidential relationship and mistake.

California Probate Code §§810-812 provide:

Section 810. The Legislature finds and declares the following:

(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. (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.

(d) The mere diagnosis of a mental or physical disorder shall not be sufficient in and of itself to support a determination that a person is of unsound mind or lacks the capacity to do a certain act.

(e) This part applies only to the evidence that is presented to, and the findings that are made by, a court determining the capacity of a person to do a certain act or make a decision, including, but not limited to, making medical decisions. Nothing in this part shall affect the decisionmaking process set forth in Section 1418.8 of the Health and Safety Code, nor increase or decrease the burdens of documentation on, or potential liability of, health care providers who, outside the judicial context, determine the capacity of patients to make a medical decision.

Section 812. 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.

California Probate Code §6100.5 provides:

Section 6100.5. (a) An individual 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.

(b) Nothing in this section supersedes existing law relating to the admissibility of evidence to prove the existence of mental incompetence or mental disorders.

(c) Notwithstanding subdivision (a), a conservator may make a will on behalf of a conservatee if the conservator has been so authorized by a court order pursuant to Section 2580.

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Evidence In Court – Some Thoughts To Keep In Mind To Prove Your Case

Some thoughts to keep in mind about evidence in Court to prove your case:

-One item of evidence in Court can be sufficient to establish a fact.

-Evidence can be oral or documentary/demonstrative, or both.  Generally, documentary or demonstrative evidence is more persuasive.

-Not all evidence is admissible.  The Judge determines admissibility.

-The trier of fact, i.e., the Judge or Jury depending on the type of case, determines which of the admissible evidence is most persuasive.

-The applicable standard or standards of care, and the burden or burdens of proof, and in some cases the shifting of the burden(s) of proof, are very important on the issues of liability and which party prevails in Court.

-I view evidence as falling in three different categories: (1) evidence that already exists and that we have in hand; (2) evidence that we don’t have but we very reasonably believe exists and we know where it is, how we can get it, and that we will get it; and (3) evidence or facts that we believe or hope exists but we don’t know if we will be able to get it.

-If you can’t sufficiently describe what you did and what did occur (and hopefully support them with documents or demonstrative evidence), you run the risk that it might be decided that you didn’t do it or that it didn’t occur.

-Your story must tell, and convince the trier of fact (i.e., the Judge or Jury) why you are there in front of them.

-Evidence also relates to damages and possible recovery or payment of attorneys’ fees and costs – what damages can be established, are the damages recoverable, and what are the possibilities of a party recovering or having to pay costs and attorneys’ fees to the other side?

-Consider the above when you are evaluating the probability of your case.

Dave Tate, Esq. (San Francisco / California)

 

Financial Abuse – Defined by Welfare & Institutions Code §15610.30

The following is the statutory definition of financial abuse of an elder or dependent adult as defined in California Welfare & Institutions Code §15610.30. Many of the aspects of the definition and its meaning as applied to different situations remain yet to be interpreted by the Courts. Nevertheless, the definition is helpful in may clear situations of abuse, and applicability can be argued in less clear situations.

(a) “Financial abuse” of an elder or dependent adult occurs when a person or entity does any of the following:

(1) Takes, secretes, appropriates, obtains, or retains real or personal property of an elder or dependent adult for a wrongful use or with intent to defraud, or both.

(2) Assists in taking, secreting, appropriating, obtaining, or retaining real or personal property of an elder or dependent adult for a wrongful use or with intent to defraud, or both.

(3) Takes, secretes, appropriates, obtains, or retains, or assists in taking, secreting, appropriating, obtaining, or retaining, real or personal property of an elder or dependent adult by undue influence, as defined in Section 1575 of the Civil Code

(b) A person or entity shall be deemed to have taken, secreted, appropriated, obtained, or retained property for a wrongful use if, among other things, the person or entity takes, secretes, appropriates, obtains, or retains the property and the person or entity knew or should have known that this conduct is likely to be harmful to the elder or dependent adult.

(c) For purposes of this section, a person or entity takes, secretes, appropriates, obtains, or retains real or personal property when an elder or dependent adult is deprived of any property right, including by means of an agreement, donative transfer, or testamentary bequest, regardless of whether the property is held directly or by a representative of an elder or dependent adult.

(d) For purposes of this section, “representative” means a person or entity that is either of the following:

(1) A conservator, trustee, or other representative of the estate of an elder or dependent adult.

(2) An attorney-in-fact of an elder or dependent adult who acts within the authority of the power of attorney.

Dave Tate, Esq. (San Francisco / California) – trust, estate, conservatorship, elder and civil litigation, and contentious administrations.

Review of Celebrity Estate Planning and Litigation Lessons

A great article, review of celebrity estate planning and litigation lessons, click here (and for additional discussion, click on the link at the bottom of the article).

Dave Tate, Esq. (San Francisco / California), trust, estate, conservatorship, elder and civil litigation, and contentious trust and estate administrations.