Typical situation.  An elderly mom with two adult children, Sally & John, passes away with a house full of nice personal belongings (furniture, antiques, crystal and jewelry).  Sister Sally lives with mom or in the same town and brother John lives 500 miles away. When mom passes, Sally notifies John but it takes him a couple of days to get into town for the funeral.  Meanwhile, Sally picks through the personal belongings and takes for herself what she wants and doesn’t tell John about it.

What actually should be done but rarely happens.  A Upon a death, the law requires that the deceased person’s personal property as well as money and real property be inventoried and accounted for.  Whether it is a probate situation or a living trust situation (i.e. no probate because of there being a trust in place), somebody needs to pay immediate attention to the personal property within a day or two.  It is a sad fact of life that I and nearly all other estate attorneys have observed that personal property often disappears without any trace unless steps are taken to preserve it.  In the ideal situation, the entire house including the personal property is photographed immediately and then detailed lists are made, room by room, of what is there.  Then, a personal property appraiser is hired to make a detailed listing of everything and appraise the values.  Few people realize it, but there are professional appraisers.  One resource is the American Society of Appraisers which can be found at http://www.appraisers.org/Disciplines/Personal-Property

What can be done to recover missing personal property?  The short answer to this is that very little if anything can be done.  This is the classic case of once the horse is out of the barn the remedies are few an ineffective. Theoretically, as in the example above, brother John can file a probate court petition against sister Sally but it is up to John and John’s attorneys to prove that Sally took the items in question.  Unless there are photographs or written evidence created very close to the mom’s passing, John can’t produce evidence to prove (a) what the missing items were and/or (b) that mom still owned them at her death or (c) that Sally took the missing items.  If John files against Sally she will typically deny any knowledge of anything.  If it were money missing, then bank records can be subpoenaed to prove what money was taken and whose account it went into.  Not so with personal property, unless the items are of significant value or are put up for sale in something observable such as Craig’s list.  Because mom’s personal property is not typically on people’s minds in mom’s last days, not a lot of care or record keeping is done to keep track of what there is.

Image of adult son walking with his elderly father

Planning Can Still Be Done Where There is Lack of Mental Capacity

TYPICAL BASIC ESTATE PLAN GOALS THWARTED

People generally do a living trust and will to avoid probate proceedings and to have more flexibility about who will inherit their estate and when it will be inherited.  However, on occasion people wait too long to do their estate planning and get sick or incapacitated and then it is too late. This is where consideration of “Lack of Mental Capacity” enter the discussion.The alternative to not having an estate plan is that the person’s money and property has to go through expensive and lengthy probate proceedings and the person has no choice about how to divide up his or her estate. The mandatory attorneys fees in probate on a $1,500,000 estate are $28,000.  If probate can be avoided the fees to administer an estate are typically 1/3rd or less of what probate attorneys fees would be.  The law allows a person to divide up his or her  estate in any percentage that he or she feels like and there is no requirement that once estate be left to family members or relatives. However, without an estate plan, the surviving spouse and children and perhaps other relatives will be the ultimate recipients of the estate and the maker of the will or trust will have nothing to say about it.

THE CONCEPT OF LEGAL LACK OF MENTAL CAPACITY

The law in California has certain standards as to people’s capacity to make wills and to make trusts. If those standards are not met, then the will and are trust could be declared invalid if challenged in court. Here are the basic rules for wills and trusts.  Even worse, people who are seriously ill or seriously mentally incapacitated can be totally incapable of even having a discussion with their attorney about a will or trust and cannot sign anything.

CAPACITY TO MAKE A VALID WILL

A person must be at least 18 years old and of sound mind to make a will. A person is not mentally competent to make a will if at the time of making the will (i) he or she does not understand the nature of the testamentary act, (ii) does not understand and recollect the nature and situation of his or her property, (iii) and does not remember or understand his or her relations to living descendants, spouse, parents, and those whose interests are affected by the will.  Also a person is not mentally competent to make a will if he or she suffers from a mental disorder with symptoms including delusions or hallucinations, which result in his or her devising property in the will in a way which except for the existence of the delusions or hallucinations he or she would not have done.

Who Will Take Care of My Children and Their Inheritance if the Worst Happens?

Types of Guardianships For Children

Image of adult man and young boyGuardianships For Children – A guardianship is a legal status whereby an adult is given authority to take care of the person of a minor child and/or the estate of the minor child. A “guardianship of the estate” is where the Guardian has control and custody of assets, property and accounts belonging to a minor child. A “guardianship of the person” is where the Guardian is responsible for the care, protection, or custody and medical issues of a minor child. Guardianships typically arise in the unfortunate circumstance in which both parents have passed away. Guardianships may also arise where parents are unable or unwilling to care for their children.

NOMINATION OF GUARDIAN PREFERENCES

Only the parent of a minor child has the legal power to nominate a Guardian of the person or a Guardian of the estate.  Also an adoptive parent has the power to nominate.  The nomination must be in writing and signed by the parent. A typical estate plan including wills and a living trust will contain paragraphs nominating guardians of the person and of the estate. Written nominations will be taken into account by the probate court when a guardianship legal proceeding has been started.

NOMINATIONS CAN DIFFER BETWEEN PERSON AND ESTATE

Often parents feel that some of their relatives or friends are more suited to be guardians of the person. Persons suitable to be guardians of the person are not necessarily suitable to take care of the estate of the minor so separate nominations are typically made for guardians of the person and guardians of the estate. Sometimes the same person is nominated for both positions but the law doesn’t require it.

Let’s Subtract the Money Johnny Got From His Share of the Estate

TYPICAL SITUATION

A father dies without a will leaving an estate of $100,000.  Under the laws of intestate succession which apply because there is no will, his 4 children are to receive equal shares of the estate which would be $25,000 each. However, during the 10 years leading up to his death, the father had transferred $20,000 cash in total to his son Johnny thus creating a pre-death transfer.   There was no documentation stating whether the $20,000 was a gift or a loan or an advancement against Johnny share of the father’s estate.

Siblings arguing over money

California Law Solution to Pre-Death Transfers

These pPre-death transfers and other similar types of situations have the potential for endless litigation to try to determine what was intended at the time the money was transferred. The state legislature solved this by establishing the following rules.  A decedent’s gifts to an heir during his life will be deemed an advancement against  his or her share of the estate only if one of the following conditions is satisfied:

  1. The decedent declares in a contemporaneous writing that the value of the gift is to be deducted from the heir’s intestate share of the estate or that the gift is considered an advancement against the heirs share of the estate. OR

WHAT IS IN THE ESTATE AND HOW THE PERSONAL REPRESENTATIVE FIND AND MANAGE IT?

PROBATE ESTATE ADMINISTRATION

Probate Asset Inventory & Collecting – If a person passes away leaving money or property there may need to be a probate court administration of the estate. If there is a living trust and all of the deceased person’s assets have been placed into the living trust prior to death, there is no need for a probate court administration and the procedures discussed in this article would not be applicable to a living trust situation. The point of a probate court administration is to get somebody appointed as the administrator or executor of the estate (also known as the personal representative) who has authority of the court to handle to inventory and handle the money and property and accounts of the deceased person. Upon appointment by the court, the administrator will obtain a form signed by the court entitled letters of administration. The personal representative will then take the letters of administration over to all banking and securities institutions and have the accounts transferred out of the name of the deceased and into the name of the personal representative.

COLLECTING AND INVENTORYING THE ASSETS

In probate estate terminology the personal representative’s initial and most important responsibility is the “marshaling” of all assets and property interests held in the decedent’s name and/or owned by the decedent. This would include the decedent’s separate property and one half interest in community property held with his or her spouse. “Marshaling” is further described as the process of discovering, identifying, and taking possession and control of the decedent’s assets so that they can be used to pay the taxes, creditors claims, and expenses of administration and ultimately distributed to the estate beneficiaries.

Probate Asset Inventory & Collecting – Identify ALL Real & Personal Property

Collecting of of all assets and property interests

CAN A DECEASED PERSON’S ESTATE ESCAPE PAYING DEBTS & TAXES?

PROBATE ESTATE ADMINISTRATION

Can we avoid paying debts?If a person passes away leaving money or property there may need to be a probate court administration of the estate. If there is a living trust and all of the deceased person’s assets have been placed into the living trust prior to death, there is no need for a probate court administration and the procedures discussed in this article would not be applicable to a living trust situation. The point of a probate court administration is to get somebody appointed as the administrator or executor of the estate (also known as the personal representative) who has authority of the court to handle the money and property and accounts of the deceased person. The personal representative is also responsible for paying the debts and taxes before the estate is distributed out to the heirs.

CREDITORS

Probate Debts & Taxes – Persons or companies who are owed money by the deceased person are known as creditors. Creditors include those with contract claims, tort claims (as an accident claim for example), or otherwise.  They California and local government agencies including the franchise tax board are generally subject to the same creditor claims and notification rules.  However, taxes owing to the federal government are covered by federal law.

NOTIFICATION TO CREDITORS

NOTIFICATION TO CREDITORSThe personal representative is required to notify the creditors so that the time limit for filing their claims with the probate estate starts to run. The initial notification to creditors is the publication of the notice of petition to administer estate in the local newspaper which is done as part of the procedure of filing the probate case with the probate court. The personal representative does need to send out a notice to “all known and reasonably ascertainable creditors” in the mail.  The court published form used for this notification contains a warning to creditors to file their claims within the applicable time limits which are the last to occur of the following dates: four months after the date the personal representative is appointed by the court or 60 days after the date the notice to creditors was mailed. It is incumbent upon the personal representative to notify every conceivable claimant so that these time deadlines begin to run because the estate cannot be closed and distributions cannot be made until these time periods have run.  The special limitations on creditors claims are designed to speed up the administration of a probate estate. Without these certain time periods, creditors would be allowed to file lawsuits far into the future. Typically, a claim on a written agreement or account which is unpaid can be sued on up to four years from the date of payment is due. The creditors claim rules supersede the 4 year limit.

What normally occurs in a bonafide real estate sale

INTRODUCTION – Real Estate Sales Legal Overview

Real Estate Sales Legal Overview – While there are many different factors in any real estate sale, there are certain common procedures and steps involved in most transactions. This is a birds-eye view of a typical sale but is by no means a comprehensive checklist of everything involved. It is up to the brokers and or attorneys involved to make sure everything is taken care of properly. Most real estate sales in California involve the use of California Association of Realtors (CAR) standard forms which are widely recognized.  Over the last 100 years, there have been thousands of court cases involving real estate disputes and contracts and as a result the law and the forms are pretty well defined and established. A licensed California real estate broker or real estate attorney has access to those forms and should be familiar with them.

Sample of Bespoke Realty, Inc. Exclusive Listing Agreement (CAR)

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Bespoke Realty, Inc. - Residential Listing Agreement - Exclusive

PLACING THE PROPERTY ON THE MARKET

You do not need a real estate broker to sell your own property.  You can simply place an ad in the paper or on the Internet or place a sign of the property to find a buyer for your property.  If you’re going to sell somebody else’s property, a real estate license is required.

How can I tell if the deed is a valid legal transfer of ownership

WHAT IS A DEED?

A deed is the legal name for the document which transfers ownership of real estate. California state law has specific requirements for a deed to be valid. In a typical home sale or transfer, the deed will be prepared by the escrow company or by the attorney handling the transfer. Further, in a typical sale, there is title insurance paid for by the seller and the title insurance company always reviews the deed to make sure that it is legally correct and proper.

Example of a Grant Deed

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Example of a Grant Deed

REQUIREMENTS FOR A VALID DEED

Whomever is preparing the deed for the transaction is charged with creating a document that fulfills all the requirements of California law. First, the deed must be in writing and have the names of the grantor and grantee. The grantor is the person selling or giving the property and the grantee is the person buying or receiving the property. Second, there must be a sufficient description of the property which typically is a legal description with an assessor’s parcel number although in some instances a lesser description will suffice. Third, there must be proper “words of conveyance”. Fourth, the grantor must be legally competent.  Fifth, the deed must be signed by the grantor or the grantor’s legal representative. Sixth, the deed must be delivered to the grantee and it is effective upon delivery.  For example, if a grantor signs a deed and it is delivered, and then the grantor dies before the deed is recorded with the County recorder, the transfer is still valid because it was delivered.

What To Do When Someone Lacks Mental or Physical Capacity?

WHAT IS A CONSERVATORSHIP?

A conservatorship is a court proceeding to protect a person and/or his or her property. Conservatorships are regulated by the California probate code and operate under the supervision of the probate court system.

Can I give everything to the “love of my life” and keep it secret?

NO DISCLOSURE TO OMITTED HEIRS?

Up until 1997 a person could legally change his or her estate plan and the people previously benefited did not have any legal way to find out what the situation was. Before the law was changed to require disclosure as it is now, the state legislature committee reviewing the proposed legislation was presented with a case of a 90-year-old man who met the “love of his life” on a bar stool and married her three months later.

Love of his life.

He then changed his entire estate plan to disinherit his three children and six grandchildren and to leave everything to his new wife. At that time, the persons administering the 90-year-old man’s estate could legally refuse to tell his children and grandchildren what happened to his estate and could legally refuse to provide any of the documentation. The family was left in this type of situation with no alternative but to pursue expensive and timely court litigation.

THE LAW NOW REQUIRES DISCLOSURES

Where there is a living trust which becomes permanent on death and no probate court proceeding, there is no access to the trust document or its terms unless the successor trustee provides it. In a typical living trust situation, the person who established the living trust is the trustee of his or her own trust. The trust document provides for somebody else to be a successor trustee when the person establishing the trust either resigns or becomes deceased and no longer able to be the trustee. Upon the death of the person establishing a trust, the trust typically becomes permanent and irrevocable. The California probate code now provides that the trustee has a duty to provide a true and complete copy of a revocable trust after it has become a revocable to not only the beneficiaries named in the trust but also to any heir of a deceased person who requests a copy of the trust. The beneficiaries are the people named in the trust who are to receive benefits from the trust. Persons who are legal heirs have no legal right to receive benefits from the trust unless they are actually named as beneficiary of the trust. The term “heir” basically refers to a person who would be entitled to inherit from a deceased person if there were no will or no trust establishing who is to be paid the estate of the deceased person.

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