WILLS, TRUSTS, AND ESTATE ADMINISTRATION FOR THE PARALEGAL

Transcription

1 Dennis R. Hower California Supplement to Accompany WILLS, TRUSTS, AND ESTATE ADMINISTRATION FOR THE PARALEGAL Fifth Edition Prepared by George Yount Australia Canada Mexico Singapore Spain United Kingdom United States

2 CONTENTS 1 The Purpose and Need for a Will 1 2 The Concept of Property Related to Wills, Trusts, and Estate Administration 2 3 The Participants and the Proper Court 6 4 The Law of Succession: Death Testate or Intestate 12 5 Wills: Validity Requirements, Modification, Revocation, and Contests 19 6 Preparation to Draft a Will: Checklists and the Conference with the Client 23 7 Final Draft and Execution of a Valid Will 25 8 Introduction to Trusts 28 9 Classification of Trusts, the Living Trust, and Other Special Trusts Estate Planning and Long-Term Care Personal Representatives: Types, Pre-Probate Duties, and Appointment Probate and Estate Administration Informal Probate Administration Tax Considerations in the Administration of Estates Ethical Principles Relevant to Practicing Legal Assistants 103 In this supplement, a page reference follows each head (Hower 000). This page reference correlates with Dennis Hower s textbook, Wills, Trusts, and Estate Administration for the Paralegal, Fifth Edition. ii

3 1 THE PURPOSE AND NEED FOR A WILL Statutory Requirements for a Will (Hower 2) The statutes governing the requirements for, and validity of, wills in California are primarily found in the California Probate Code (which will be abbreviated Prob in this supplement). Basic Terminology Related to Wills (Hower 3) The terminology found in the text is generally consistent with probate practice in California. The court in California which has jurisdiction over probate matters (the probate court as defined in the text) is the Superior Court. There is one Superior Court for each county in the State, each with geographic jurisdiction over its county. The use of the term heir in California relates to anyone who receives or would receive any property whether real or personal through intestate succession (and not just those receiving real property, as defined in the text). It excludes surviving remarried ex-spouses. Prob 44,

4 2 THE CONCEPT OF PROPERTY RELATED TO WILLS, TRUSTS, AND ESTATE ADMINISTRATION PROPERTY: TERMINOLOGY AND CLASSIFICATION (HOWER 25) Real Property (Hower 25) The definition of real property in California is found in CC 658, et seq. and includes land, fixtures, appurtenances, and things growing upon the land, as well as airspace rights, solid minerals, and the right to drill for liquid minerals (gas, oil, and geothermal steam). Fixtures (Hower 25) Fixtures are defined in CC 660 and trade fixtures in CC Provisions regarding fixtures are as explained in the text, generally. CC 1013, In addition to the three tests identified in the text (annexation, adaptation, and intention), California courts may also look to the relationship between the parties (certain parties being generally favored over others tenants over landlords, buyers over sellers, borrowers over lenders the grantor having presumptively greater knowledge of the property in question); or the court may look to any agreement between the parties, since such agreements are binding between the parties absent other mitigating factors. Oroville-Wyandotte Irr. Dist. v. Ford 47 Cal.App.2d 531 (1941). Transfers of Real Property (Hower 27) Acquisition of real property and the modes by which property may be acquired, are embodied in CC 1000, et seq. Transfers of real property are addressed in CC 1039, et seq. Personal Property (Hower 28) Concepts regarding personal property in California are addressed in CC 946, et seq., and do not differ from the discussion in the text. 2

5 FORMS OF PROPERTY OWNERSHIP (HOWER 32) Ownership of property and all of the rights in property by a single person is absolute ownership. CC 679. When ownership is shared with another, or enjoyment of the property is delayed, or its use is restricted, ownership is qualified. CC 680. Tenancy in Severalty Ownership by One Person (Hower 34) In California, ownership by a single person is designated as a sole or several ownership. CC 681. Forms of Concurrent Ownership Ownership by Two or More Persons (Hower 34) California statutory law does not provide for tenancy by the entirety. However, within the definition of ownership by several persons, CC 682 includes joint tenancy, tenancy in common, community property, and partnership interests. Joint Tenancy (Hower 34) Joint tenancy interests and their creation are set forth in CC 683, et seq., and do not differ from the discussion in the text. Tenancy in Common (Hower 44) All co-ownership not otherwise defined in the grant as community, partnership, or joint tenancy property in California is held as tenancy in common. CC 686. Community Property (Hower 51) As noted in the text, California is a community property state. Any property acquired by a person while married, if not otherwise separate property, is community property (CC 687; Fam 760; Prob 28(a)) and the spouses share equally in community property. Fam 751. Separate property is property owned prior to marriage; or acquired while married by gift, bequest, devise, or descent; or the rents, issues, and profits of either of the foregoing (Fam 770) where neither spouse has any interest in the separate property of the other. Fam 752. Moreover, separate property may also be acquired by transmutation (the transfer of one spouse s interest in property to the other spouse, other than in a will) (CC 850, et seq.), or while the parties are separated (Fam 771, 772). When dealing with the characterization of jointly held property as community or otherwise, care must also be taken to recognize the purposes for which the characterization is being made, as the results will vary. For example, some statutes defining community property limit their application to particular circumstances. Prob 28(b) and (c) defining community property are applicable only for probate purposes; whereas Fam 2581 (defining joint tenancy interests acquired by husband and wife as community property absent an express declaration in the grant that the property interests of the spouses are held as separate property) is expressly applicable only to dissolution proceedings. Intestacy (Hower 54) The laws of intestate succession in California are generally found in Prob 6400, et seq. Contrary to other community property states, in California the length of the marriage has no effect upon the distribution of community property or separate property by intestate succession. 3

6 Division (Hower 54) As stated in the text, at dissolution (California is a no-fault state) the community property is divided equally between the spouses and the separate property of each is affirmed. As previously noted, however, a transmutation of the separate or community property of each spouse may be undertaken, dividing the estate even in the absence of a dissolution. To be valid, a transmutation must be in writing, expressly declaring the transmutation, and made, joined in, consented to, or accepted by the spouse whose interest is adversely affected. Fam 852(a); Estate of MacDonald, 51 Cal.3d 262, 272 Cal.Rptr. 153 (1990). However, no writing is required for gifts between spouses of clothing, wearing apparel, jewelry, or other tangible personal items not of substantial value in light of the circumstances of the marriage. Fam 852(c). Creditors Rights (Hower 54) In general, the separate property of a spouse and the community property are available to satisfy the debts of that spouse. Additionally, the separate property of the other spouse may be available to satisfy debts for necessaries of life of that person s spouse; however, the paying spouse is entitled to reimbursement if separate property of the other spouse or nonexempt community property is available. Fam Quasi-community Property (Hower 55) Quasi-community property is generally treated the same as community property. Fam 125, 912, 2660; Prob 66. ESTATES IN REAL PROPERTY (HOWER 56) Estates in real property are generally treated at CC 761, et seq. Freehold Estates (Hower 57) Fee Simple Estate or Fee Simple Absolute (Hower 57) Fee simple estates are defined at CC In 1983, California did away with the distinction between fee simple determinable estates and fee simple estates subject to a condition subsequent. All such estates are now considered fee simple subject to a condition subsequent giving rise to a power of termination should the stated condition arise. CC , et seq. The abolition of fee simple determinable estates replaced the common law possibility of reverter which accompanied that estate, with the requirement of affirmative action in exercising the power of termination (known at common law as a right of re-entry ). Life Estate (Hower 60) Life estates (treated at CC 761, 766, 779, and 818) are as explained in the text. Future Interests Reversion and Remainder (Hower 61) Future interests, reversions, and remainders are addressed in CC 767, et seq. Dower and Curtesy (Hower 64) Dower and curtesy have been abolished in California. C 5129, Prob

7 Spouse s Right to Election or Elective Forced Share ( Hower 65) A surviving spouse s election to take against a decedent spouse s will is limited to those instances in which the will purports to convey all or some portion of the surviving spouse s half interest in community (or quasi-community) property. Prob 141. Thus, if a spouse dies leaving a will which devises to another all of the community property (including the surviving spouse s 50% interest in that property), the surviving spouse is given an election to take what is provided for him or her in the will, or to take his or her intestate share of the estate as though no will existed. If the election is made to take against the will, the electing spouse receives his or her intestate share of the probate estate first, and the balance of the estate remaining is then distributed in accordance with the decedent s will. The election is made by filing a statement with the court indicating that the surviving spouse claims his or her one-half share of community (and/or quasi-community) property, or that the spouse waives that right and consents to the distribution of property in the will. Waste (Hower 66) CC 818 provides that a life tenant may use the land in the same manner as an owner in fee simple; however, He must do no act to the injury of the inheritance. Leasehold Estates (Hower 66) Tenancy or Estate for Years (Hower 66) Pursuant to CC 717, no lease of agricultural land may be valid for a longer period than 51 years; and no lease of any town or city lot (CC 718) or for the production of minerals, gas, oil, or other hydrocarbons in excess of 99 years in duration is valid. CC 718f. 5

8 3 THE PARTICIPANTS AND THE PROPER COURT THE PARTICIPANTS (HOWER 70) The Personal Representative (Hower 70) Appropriate Terminology (Hower 70) In California, an executor is a person named in a will by a decedent to carry out the terms of the will. Prob 8420, et seq. An administrator with will annexed is appointed where the decedent died testate (having written a will) but no executor was named in the will or all named in the will as executors were unwilling or unable to assume that role. Prob An administrator is appointed as personal representative where the decedent died intestate (without a will). Prob 8460(a). A special administrator is appointed where immediate action is required with regard to the estate but no permanent personal representative has yet been appointed. Prob 8540(a). The Role of the Personal Representative (Hower 71) The role of the personal representative is as described in the text; however, the authority of the personal representative to act is dictated by whether the personal representative is appointed under the Independent Administration of Estates Act (Prob 10400, et seq.), and whether, if so appointed, the personal representative has been granted independent authority by the court to sell real property, exchange real property, grant an option to purchase real property, or borrow money with the loan secured by an encumbrance upon real property. Absent such authority, all of the personal representative s dealings must be approved by the court. Each personal representative is required to acknowledge receipt of a statement of duties and liabilities in a form prescribed by the Judicial Council, prior to issuance of letters to the appointee. Prob The Attorney (Hower 75) The conduct of attorneys in California is governed by the provisions of the State Bar Act found in the California Business & Professions Code (B&P 6000, et seq.) and the California Rules of Professional Conduct. Prob 2640 provides for court-approved payment of attorney s fees in conjunction with guardianships and conservatorships. Prob 2644 authorizes contingent fee contracts, in writing, with attorneys when such is to the advantage, benefit and best interest of the ward or conservatee or the estate... 6

9 Prob establishes a fee schedule based upon the value of the estate accounted for by the personal representative for compensation of an estate attorney for conducting ordinary proceedings as follows: Four percent (4%) on the first fifteen thousand dollars ($15,000); Three percent (3%) on the next eighty-five thousand dollars ($85,000); Two percent (2%) on the next nine hundred thousand dollars ($900,000); One percent (1%) on the next nine million dollars ($9,000,000); One-half of one percent (0.5%) on the next fifteen million dollars ($15,000,000); and Areasonable amount determined by the court for all estates above twenty-five million dollars ($25,000,000). Thus, for example, an attorney representing an estate with a total value of $100,000 shall receive compensation of $3,150 (being.04 $15,000 $600 plus.03 $85,000 $2,550, totalling $3,150); or, for an estate with a value of $600,000, authorized attorney s fees for ordinary services would be $13,750 (being.04 $15,000 $600 plus.03 $85,000 $2,550 plus.02 $500,000 $10,000, totalling $13,750). In addition, Prob authorizes the award of additional compensation for attorney s extraordinary services in an amount determined to be just and reasonable by the court. A will may make provision for the payment of attorney s fees; however, if it does, those fees shall be the full and only compensation of the attorney for the personal representative unless the personal representative or the attorney petition to be relieved from that provision of the will and the court determines, after notice to all interested parties and hearing, that it is to the advantage of the estate and in the best interest of all interested in the estate to authorize an award of attorney s fees in excess of that provided for in the will. Prob Any agreement for payment of attorney s fees in excess of those permitted by statute is void. Prob Moreover, if a special administrator is appointed, the combined fees of the attorneys for both the special administrator and the other personal representative cannot exceed the sums set forth by statute for the ordinary and extraordinary services of attorneys for personal representatives. Prob 8547(c) and (d). However, Prob provides that a personal representative who is an attorney may be compensated as a personal representative, but may not receive compensation as the estate attorney unless the court specifically approves the right to compensation in advance after finding that the arrangement is to the advantage, benefit, and best interests of the estate. The Paralegal or Legal Assistant (Hower 77) Prob 2645 specifically states that: Legal services for which the attorney may be compensated include those services rendered by any paralegal performing the legal services under the direction and supervision of an attorney. The petition or application for compensation shall set forth the hours spent and services performed by the paralegal. The Probate Court/Jurisdiction (Hower 78) Exclusive jurisdiction over all probate matters rests with the Superior Court in California. Prob There is one Superior Court for each county in the State. 7

10 Venue (Hower 84) The proper venue for probate proceedings is the county in which the decedent was domiciled at the time of death, and not the place of death. Prob If the decedent was a nondomiciliary, then proper venue is in the place of death if the decedent s property is also located there; or, if the decedent owned no property located at the place of death or if the place of death was outside California, then the proper venue is any county in which the decedent owned property at the time of death. If property is located in more than one county, then proper venue is in the county in which a petition for ancillary administration is first filed. Prob

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13 4 THE LAW OF SUCCESSION: DEATH TESTATE OR INTESTATE DEATH WITH A WILL TESTACY (HOWER 90) Terminology Related to Wills (Hower 90) Holographic Will (Hower 91) As noted in the text, California does recognize the validity of holographic wills. Prob To be valid, a holographic will must be signed by the testator and the will s material provisions must be in the handwriting of the testator, and such a document will constitute a valid holographic will whether it has been witnessed or not. Prob 6111(a). In addition, the entire will need not be in the testator s handwriting; statements of testamentary intent in holographic wills may be made either in the testator s handwriting or as part of a commercially printed form will. Prob 6111(c). A holographic will may be proved in the same manner as any other writing (Prob 8222) including through the use of extrinsic evidence (Prob ). A holographic will need not be dated to be valid; however, if not dated and the provisions of the holographic will are inconsistent with the provisions of another will, the holographic will is invalid to the extent of the inconsistency unless the date of execution of the holographic will is proven to be after the date of execution of the other will. Prob 6111(b)(1). Nuncupative Will (Hower 92) As noted in the text, California does not allow nuncupative wills. Statutory Will (Hower 92) Prob 6200, et seq., set forth the provisions regarding the statutory will authorized in California, including the California statutory will form itself (Prob 6240) and its mandatory clauses (Prob 6241). 11

14 Types of Dispositions Gifts Made in a Will (Hower 97) Bequest, Legacy, or Devise (Hower 97) In California, a devise is a gift, or real or personal property, in a will (Prob 32), and vests at the death of the transferor. Prob Prob 2117 defines the classes of testamentary gifts in California as: specific gifts transfers of specifically identified property; general gifts transfers from general assets that do not give specific property; demonstrative gift a general gift that specifies the fund or property from which the gift is to be made; general pecuniary gift a gift of a fixed dollar amount or in an amount determinable by the provision of the instrument giving the gift; annuity a pecuniary gift that is payable periodically; residuary gift a transfer of a gift that remains after satisfaction of all specific and general gifts. Ademption, Lapses, and Abatement (Hower 99) Ademption (Hower 99) The recipient of a specific gift has a right to any portion of the specific gift remaining at the time of transfer plus any balance owing or amount due by reason of the sale or transfer of the specific gift by the transferor. Prob Lapses (Hower 100) Gifts to devisees who do not survive the decedent fail. Prob Failed gifts become a portion of the residuary estate. Prob 21111(a). If a residuary gift or future interest is transferred to two or more persons, but the share of one transferee fails from any reason, then that share passes to the other transferee(s) in proportion to their interest in the gift or future interest. Prob 2111(b). Abatement (Hower 101) The overriding concern in abating gifts is to do so in a manner which will not defeat the transferor s plan or purpose. Prob No distinction is drawn between real and personal property for purposes of determining priority in abatement. Prob Gifts abate in the following order, pursuant to Prob 21402: 1. Property not disposed of by the instrument. 2. Residuary gifts. 3. General gifts not to the transferor s relatives. 4. General gifts to relatives. 5. Specific gifts to others than the transferor s relatives. 6. Specific gifts to relatives. Within any class of gifts, shares of beneficiaries abate pro rata. Prob 21403(a). Annuities and demonstrative gifts are treated as specific gifts to the extent that they are given out of the identified fund, and general gifts to the extent that they may be satisfied out of property other than the specified source. Prob 21403(b). If a specific gift is subject to abatement, the recipient may satisfy the contribution for abatement out of other property to preserve the specific gift. Prob A specific gift is not subject to abatement to exonerate another encumbered specific gift. Prob

15 DEATH WITHOUT A WILL INTESTACY (HOWER 106) Intestate Succession Statutes (Hower 109) General Rules of Distribution Under State Intestate Succession Statutes (Hower 116) The bulk of the intestate succession laws are set forth in Prob 6400, et seq. in California. As California is a community property state, the intestate succession laws take into account the distinction between community property and separate property and treat each differently. [Please note, as previously discussed, that community and quasi-community property are treated identically in California. Hence, all further references to community property in this supplement should be understood to include quasi-community property as well.] In California, if a decedent dies survived by a spouse, all of the community property interest of the decedent passes to the surviving spouse. Prob 6401(a) and (b). This, combined with the surviving spouse s one-half interest, results in the surviving spouse being the sole owner of all of the community property. The decedent s separate property is distributed in accordance with Prob 6401(c). The surviving spouse receives all of the separate property as well if the decedent is not also survived by any issue, parent, brother, sister, or issue of a deceased brother or sister. Prob 64901(c)(1). The surviving spouse receives one-half (1/2) of the decedent s separate property if the decedent also leaves either: (a) one child or the issue of one deceased child, or (b) no issue, both a parent or parents or their issue, or the issue of either of them. Prob 6401(c)(2). The surviving spouse receives one-third (1/3) of the decedent s separate property if the decedent is also survived by: (a) more than one child; (b) one child and the issue of one or more deceased children; or (c) issue or two or more deceased children. Prob 6401(c)(3). That part of the intestate estate not passing to the surviving spouse, as above, or if there is no surviving spouse, is distributed (according to Prob 6402(a)) to the surviving issue of the decedent, in equal shares if of equal degree. If the issue are not of equal degree, then those of more remote degree take as provided in Prob 240 (per stirpes those of the nearest generation to the decedent still living each get a share, and the issue of those of that generation who are deceased equally divide the share of their deceased ancestor of that generation). Prob 6402(a) and 240. If there are no surviving issue, then the estate passes to the following categories of persons, per Prob 6402(c), either equally, if all of the same degree of kinship, or as provided in Prob 240, described above. If there are no surviving persons in the category identified, then the estate passes to the next category identified, in the order indicated: First, to the decedent s parents. Next, to the issue of parents or either of them. Next, to the grandparents or issue of grandparents. Next, to the issue of a predeceased spouse. Next, to the decedent s closest next of kin (if two or more kindred of equal degree claim through different ancestors, then those claiming through the nearest ancestor are preferred). Finally, to the parents of a predeceased spouse, or to the surviving issue of such predeceased parents. Notwithstanding the provisions of Prob 6402, if there are no surviving spouse or issue of a decedent, and the decedent had a predeceased spouse who died less than fifteen (15) years before the decedent, then the real property of the decedent attributable to the decedent s predeceased 13

16 spouse passes, according to Prob (a), to the predeceased spouse s issue, parents, issue of parents, and then kin. With regard to personal property having documents of title and an aggregate value in excess of $10,000, if the predeceased spouse died less than five (5) years before the decedent, pursuant to Prob (b), such personal property passes in a like manner. In order to take by intestate succession, a person must survive a decedent by 120 hours. Prob Relatives of the halfblood, adopted persons, and those conceived before but not born until after the decedent s death take as if they were relatives of the whole blood or had been born prior to the decedent s death. Prob 6406, 6407, 6450, and If a person is related to a decedent by two lines of relationship, he or she may take only a single share through the line of relationship resulting in a larger share. Prob RIGHT OF REPRESENTATION (HOWER 111) In California, the phrase by right of representation may have one of two meanings, depending upon the circumstances under which it is used. Whenever property passes by intestate succession, or a will specifies that property passes to the issue of a deceased beneficiary but does not specify by what method, distribution is made by dividing the property into as many equal shares as there are living members of the nearest generation of issue then living and deceased members of that generation with issue then living. Each living member of that generation receives one share and each deceased member s share is divided in the same manner among his or her then-living issue. Prob 240. Whenever a will, trust, or other document specifies that property is to be divided by right of representation or per stirpes, then the property is first divided into the number of shares equivalent to the total number of children living or deceased but having living issue, with each living child receiving a share and each deceased child s share divided in the same manner. Prob 246. Escheat (Hower 115) If there is no surviving person to whom a decedent s estate may pass pursuant to the laws of intestate succession, the estate escheats to the State. Prob 6404 and 6800, et seq. RIGHTS OF FAMILY MEMBERS TO A DECEDENT S ESTATE (HOWER 117) Rights of a Surviving Spouse (Hower 117) Surviving Spouse s Elective (Forced) Share (Hower 119) As previously noted, if a testator purports to devise the community property interest of a surviving spouse in his or her will, the spouse is put to an election to take either according to the provisions of the will, or to take his or her intestate share of the estate. Prob 141. If the surviving spouse elects his or her intestate share, that property is abated for purposes of distribution and only the balance of the estate is subject to distribution according to the will. This same right to an elective share arises whether or not the decedent or surviving spouse was a domiciliary of California, as long as the decedent left a will disposing of real property located in California. Prob

17 Effect of Divorce and Marriage on a Spouse s Rights (Hower 122) A final dissolution or an annulment of marriage terminates an ex-spouse s intestate succession rights (Prob 78) and revokes any disposition or appointment made in a will executed prior to the dissolution, unless the will expressly provides otherwise, or the parties subsequently remarry. Prob 6122, However, a mere decree of legal separation which does not terminate the marriage does not affect the spouse s inheritance rights (Prob 6122(d), 6227(c)); however, being a party to an action for separate maintenance, annulment or dissolution and living apart from the decedent at the time of the decedent s death will affect the spouse s priority for appointment as or nomination of an administrator of the decedent s estate. Prob 8462, If a testator fails to provide for his or her surviving spouse by will and the spouse and testator married after the execution of the testator s will, then (absent evidence that the testator failed to provide for the spouse intentionally, or that the testator otherwise provided for the spouse outside the will, or that the spouse made a valid agreement waiving any share in the estate Prob 6561), the omitted ( pretermitted ) spouse will receive the testator s one-half of the community and quasi-community property as well as the share of the testator s separate property that the spouse would have received had the testator died intestate. Prob Rights of Children (Issue) (Hower 125) Issue (Hower 125) Issue are all of a person s lineal descendants of all generations. Prob 50. Natural Children (Hower 126) According to California law, a parent and child relationship exists for the purposes of determining intestate succession between a person and the person s natural parents, regardless of the marital status of the natural parents. Prob 6450(a). Adopted Children (Hower 126) A parent and child relationship exists between an adopted person and the person s adopting parent or parents. Prob 6450(b). Adoptions sever the relationship of parent and child between an adopted person and a natural parent unless both: (1) the natural parent and the adopted person lived together as parent and child or both natural parents were living together before the person was conceived but one natural parent died before birth; and (2) the adoption was by the spouse of, or after the death of, either of the natural parents. Prob A natural parent cannot inherit from an adopted child (although the wholeblood siblings and issue of the adopted person may). Prob Nonmarital Children (Hower 127) California no longer utilizes the term illegitimate in reference to children, since the marital status of natural parents has no legal significance on the parent and child relationship, except insofar as that a person may not inherit from a child born out of wedlock if no parent and child relationship has been established. Prob 6450, 6452, 6453; Fam California has adopted the Uniform Parentage Act (Fam 7600, et seq.) for purposes of determining the existence of a natural parent and child relationship. California also recognizes a parent and child relationship between a person and that person s foster parent or stepparent for purposes of intestate succession, where it is shown that: (1) the relationship began during the person s minority and continued throughout the joint 15

18 lifetimes of the person and the foster or stepparent; and (2) the foster or stepparent would have adopted the person but for a legal barrier to doing so. Prob Pretermitted (Omitted) and Posthumous Children (Hower 128) If a testator fails to provide in a will for a child born to the testator after the execution of the will, the child is entitled to receive a share of the testator s estate equal to that which the child would have received had the testator died intestate (Prob 6570), absent evidence that: (1) the failure to provide for the child was intentional and that intention appears from the will; (2) the testator had one or more children at the time of execution of the will and devised substantially all of the estate to the other parent of the omitted child; or (3) the testator provided for the child by transfer outside the will with the intent that the transfer be in lieu of a testamentary share. Prob If a testator fails to provide for a living child in a will at the time of executing the will solely because of the testator s erroneous belief that the child was dead or because the testator was unaware of the birth of the child, the child is entitled to the share he or she would have received had the testator died intestate. Prob Additional Rights or Protections for a Surviving Spouse and Children (Hower 129) Homestead Exemption (Hower 129) In addition to the declared homestead provisions (CCP , et seq.) which provide protection for the equity in real property held by an owner, California law provides for a single probate homestead which may be set aside by the court for the surviving spouse and children. Prob 6520, et seq. The probate homestead provides a surviving spouse with the right to stay in for a period up to the balance of the spouse s lifetime and the minor children with the right to reside in the homestead property until the age of majority. Prob The homestead property is selected from the community property of the estate, or property held jointly by the decedent and those entitled to the homestead, or from property the right to possession of which is vested in another, if the other consents to the homestead. Prob The homestead property may be used to satisfy the costs of administration, creditors claims, and estate liabilities, subject to the homestead rights of the surviving spouse and/or children declared by the court. Prob The probate homestead is sought, declared, and amended by a petition process. Prob 6525, Exempt Property (Hower 131) The court may set aside to the surviving spouse or the minor children of the decedent, or both, all or any part of the property of the decedent exempt from enforcement of a money judgment, other than the family dwelling, on consideration of a petition filed by any interested person. Prob 6510, In addition, until sixty (60) days after the filing of an inventory (or until such further time as the court may direct), the surviving spouse and minor children of the decedent may upon order of the court or upon petition by any interested person and for good cause shown remain in possession of the family dwelling, the wearing apparel of the family, the household furniture, and the other property of the decedent, exempt from enforcement of a money judgment. Prob 6500, Family Allowance (Hower 131) California law provides that the surviving spouse, the minor children, and the adult children of the decedent who are physically or mentally incapacitated and actually dependent upon the 16

19 decedent for support are entitled to such reasonable family allowance out of the estate as is necessary for their maintenance and support during the administration of the estate. Prob 6540(a). In addition, family allowance in the court s discretion may also be given to other adult children and parents of the decedent actually dependent, in whole or in part, upon the decedent for support. Prob 6540(b). A family allowance may be granted retroactively or prospectively from the date of the court s order, for a time period specified by the court, but no earlier than the date of the decedent s death and no later than the distribution of the property of the estate or, if the estate is insolvent, no later than one year after the granting of letters. Prob Family allowances are sought by petition and may be granted or modified only after a hearing, with notice to all interested persons. Prob

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21 5 WILLS: VALIDITY REQUIREMENTS, MODIFICATION, REVOCATION, AND CONTESTS REQUIREMENTS FOR THE CREATION OF A VALID WILL (HOWER 142) The statutory requirements for creating a valid will in California are found in Prob 6100, et seq. Intent of the Testator (Hower 143) The intent of the transferor is controlling in the interpretation of testamentary documents. Prob 21102(a). Only when the intent of the testator is not clear are the rules of construction set forth in the statutes applied. Prob 21102(b). Capacity of the Testator (Hower 143) Atestator must be at least eighteen (18) years of age and of sound mind to make a will. Prob A person does not have mental competence to make a will if: (a) the individual doesn t have sufficient mental capacity to: 1. understand the nature of the testamentary act; 2. understand and recollect the nature and situation of the individual s property; or 3. remember and understand the individual s relations to living descendants, spouse, and parents, and those whose interests are affected by the will; or (b) the individual suffers from a mental disorder with symptoms including delusions or hallucinations, in which the symptoms result in the devising of property in a way which, except for the delusions or hallucinations, the individual would not have done. Prob To the extent that a will may have been procured by duress, menace, fraud, or undue influence, the will or a part of the will is ineffective. Prob

22 Formal Requirements of a Will (Hower 145) AWritten Will (Hower 145) A will must be in writing (Prob 6110(a)) and signed (1) by the testator or (2) in the testator s name by someone else in the testator s presence and at his or her direction. Prob 6110(b). A will must also be witnessed and signed by two (2) persons, each of whom is present at the same time and witnessed either the signing of the will or the testator s acknowledgment of the signature or of the will, and who understand that the document which they are signing is the testator s will. Prob 6110(c). As previously discussed, a will which fails to meet the formal requirements previously set forth may yet qualify as a holographic will if the signature and material provisions of the will are set forth in the testator s handwriting, whether or not witnessed, and regardless of whether statements of testamentary intent are set forth in the handwriting of the testator or as part of a commercially printed form will. Prob A written will may also take the form of a California statutory will, also as previously discussed. See Prob 6200, et seq. Nuncupative (Oral) Wills (Hower 92) California does not recognize nuncupative (oral) wills. Signature of the Testator (Hower 147) See Prob 6110(b) and 6111, as previously noted. Signatures of Witnesses (Hower 150) See Prob 6110(c) and 6111, as previously noted. MODIFICATION OF A WILL CODICIL VERSUS NEW WILL (HOWER 154) California statutory wills may be modified by codicil, as any other will might be. Prob REVOCATION AND REJECTION OF A WILL (HOWER 156) Revocation by Physical Act (Hower 156) A will is revoked by being burned, torn, canceled, obliterated, or destroyed (or, if executed in duplicate, by such acts upon one of the duplicates (Prob 6121)) by the testator with the intent to revoke it, or by another person in the testator s presence and at the testator s direction. Prob 6120(b). 20

23 Lost Wills (Hower 157) If neither a will nor a duplicate original, last known to be in the testator s possession, cannot be located after the testator s death, it is presumed that the testator destroyed the will with the intent to revoke it. Prob However, lost or unintentionally destroyed wills may be proven by a petition including a written statement of the testamentary words or their substance. Prob Revocation by Operation of Law (Hower 159) As previously noted, provisions of a will are revoked by dissolution or annulment of marriage with regard to the rights of an ex-spouse. Prob If a second will, which would have revoked a prior will had it remained effective at death, is subsequently revoked, the first will remains revoked unless it is evident from the testator s subsequent or contemporaneous declarations or from the circumstances of the second revocation that the testator intended the first will to take effect. Prob 6123(a). Revocation by Subsequent Writing (Hower 160) A valid subsequent testamentary instrument will revoke a prior testamentary instrument either expressly or insofar as the provisions of the two instruments are inconsistent, and the provisions of the later instrument will be given effect over those of the earlier. Prob 6111(b), 6120(a). If a second will, which would have revoked a first will had it remained in effect at the time of death, is subsequently revoked by a third will, the first will is revoked except insofar as it appears from the terms of the third will that the testator intended the first will to take effect. Prob 6123(b). WILL CONTESTS (HOWER 161) The provisions regarding contest of a will are generally contained at Prob 8250, et seq. Who Can Contest a Will (Hower 161) Generally, any interested person may contest a will. Prob 1043, 8004(b), 8270(a). Grounds for Contesting a Will (Hower 162) A will may be contested on any ground which tests the validity of the document; for example, lack of due execution (Prob 6110, 6111), lack of testamentary intent (Estate of Sargavak, 35 Cal.2d 93 (1950)), lack of testamentary capacity (Prob 6100, ), undue influence, fraud, duress (Prob 8252(a)), mistake (Prob 8252(a)), or revocation (Prob ). Prob 8252(a). In Terrorem or No Contest Clause A Forfeiture Clause (Hower 166) In California, forfeiture clauses are valid according to their own terms (Prob ); however, they are strictly construed. Prob If, however, a beneficiary with probable cause challenges a will on grounds of forgery or revocation, a no contest clause is not enforceable against him or her. Prob Similarly, such a clause is not enforceable against a beneficiary, with prob- 21

24 able cause, who contests a provision that benefits: (1) a person who drafted or transcribed the instrument; (2) a person who directed the drafter of the instrument regarding its substantive provisions or to include a no contest clause in the instrument; or (3) a person who acted as a witness to the instrument. Prob Moreover, a beneficiary may seek declaratory relief from the court by petition to determine whether a beneficiary s actions would constitute a contest within the meaning of a no contest clause without reaching the merits of the clause or the action proposed and, hence, without activating the bar of the no contest clause. Prob 21320, et seq. 22

25 6 PREPARATION TO DRAFT A WILL: CHECKLISTS AND THE CONFERENCE WITH THE CLIENT The discussion in the text is applicable to California practice. 23

26 7 FINAL DRAFT AND EXECUTION OF A VALID WILL CONTENTS OF A STANDARD WILL (HOWER 201) SPECIFIC TESTAMENTARY GIFTS (HOWER 207) Inter vivos transfers of property by a transferor to a testamentary beneficiary is treated as a satisfaction of a testamentary gift to that person in whole or in part only if: (1) the instrument provides for the deduction of the lifetime gift from the testamentary gift; (2) the transferor declares in a contemporaneous writing that the lifetime gift is to be deducted or is in satisfaction of the testamentary gift; or, (3) the transferee acknowledges in writing that the lifetime gift is in satisfaction of the testamentary gift. Prob Appointment of a Personal and/or Property Guardian (Hower 214) The provisions regarding guardianship, conservatorship, and other protective proceedings are contained, generally, in Division 4 of the Probate Code. Prob 1400, et seq. In addition, the California Uniform Transfers to Minors Act can be found at Prob 3900, et seq. Simultaneous Death Clause (Hower 216) If a situation or document does not otherwise provide for disposition in instances of simultaneous death (Prob 221), and it cannot be established by clear and convincing evidence that one person survived the other, the property of each person is administered or dealt with as though that person did, in fact, survive the other. Prob 220. With regard to community and quasicommunity property, one-half of the property is dealt with as though one spouse survived the other and the property is the surviving spouse s; and the other half of the property is similarly treated, as though the other spouse had survived the first. Prob 103. If a right to receive property by a beneficiary is conditioned upon surviving another, and it cannot be proven by clear and convincing evidence that the beneficiary did so survive, the beneficiary is deemed not to have survived the other. Prob 222(a). Similarly, if it cannot be proven that either of two or more beneficiaries, or joint tenants, survived the others, the property is divided into equal shares and distributed as if each had survived the others. Prob 222(b), 223. Moreover, in order to be deemed to have survived another, a person must survive a decedent by 120 hours, or the person will be deemed to have predeceased the other (unless application of the 120-hour survival requirement would result in escheat of property to the State). Prob 6211,

27 Testamentary Trust Clauses (Hower 217) The Rule Against Perpetuities and its application are contained in Prob ADDITIONAL NONTESTAMENTARY DOCUMENTS (HOWER 224) Self-proving Provision or Affidavit Clause that Creates a Self-proved Will (Hower 224) Prob 8220 provides for proof of a will, where there is no contest, on evidence of one witness to the will only. Such evidence may consist of an affidavit of a subscribing witness to which a copy of the will is attached, or by an affidavit in the original will that includes or incorporates the attestation clause. Prob 8220(b). In addition, if a subscribing witness is not available, the court may permit proof of the will by: (1) proof of the handwriting of the testator and one witness; or, (2) proof of the handwriting of the testator and (a) a writing in the will bearing all of the subscribing witnesses signatures or (b) an affidavit of a person with personal knowledge of the circumstances of the execution of the will. Prob Right to Die Laws and Related Advance Medical Directive Documents (Hower 228) Durable Power of Attorney for Health Care (Hower 231) Durable powers of attorney for health care are governed by the provisions of Prob 4600, et seq., and a statutory form durable power of attorney for health care deemed valid in California is set forth in Prob WHERE TO KEEP THE WILL (HOWER 240) Prob 700, et seq. deals specifically with the duties and liabilities of attorneys with whom deposits of estate planning documents (including wills, trusts, powers of attorney, or other estate planning documents) have been made. 25

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29 8 INTRODUCTION TO TRUSTS SCOPE OF THE CHAPTER (HOWER 245) Trusts are generally addressed in Division 9 of the California Probate Code. Prob 15000, et seq. THE ESSENTIAL ELEMENTS OF A TRUST (HOWER 250) The Settlor: The Creator of the Trust (Hower 251) A settlor must manifest an intention to create a trust to do so. Prob A trust may be created for any purpose which is lawful and does not violate public policy. Prob Atrust may be created by a declaration by the settlor that he or she holds the trust property as a trustee; a transfer of property by the owner during his or her lifetime to another as trustee; a transfer of property by testamentary document to another as trustee; or an exercise of a power of appointment to another person as trustee. Prob The Settlor as Trustee or Beneficiary (Hower 252) The settlor may also act as a trustee or beneficiary of the trust. However, if there are successor beneficiaries after the death of the settlor, the trust is not merged or terminated if either: (1) the settlor is both the sole trustee and sole beneficiary during the settlor s lifetime; or (2) there are two or more settlors, one or more of whom are trustees and one or more of whom are beneficiaries during the lifetime of the settlors. Prob The Trustee: The Fiduciary and Administrator of the Trust (Hower 253) Natural or Legal Person as Trustee (Hower 253) A trust company is an entity which has qualified to engage in and conduct a trust business in California (Prob 83) and may be appointed to act as a trustee in the same manner as an individual (Prob 300) without the requirement of giving a bond. Prob 301. Co-Trustees (Hower 255) A co-trustee has an obligation to participate in the administration of the trust, and to take reasonable steps to prevent a co-trustee from committing a breach of trust or to compel a cotrustee to redress a breach of trust. Prob Unless otherwise expressly authorized in the trust document, a power granted co-trustees must be exercised only by unanimous action. Prob

30 A co-trustee may act alone for the trust only where they are the only other trustee and their co-trustee is absent, ill, or temporarily incapacitated, or where there is a vacancy in the office of the co-trustee, where necessary to accomplish the purposes of the trust or to avoid irreparable injury to the trust. Prob , Acceptance or Disclaimer of Trusteeship (Hower 255) A person may accept the position of trustee by a written acceptance, either by signing the trust document or through a separate document; or by knowingly exercising trust powers or authorities (except where the person does so solely to preserve trust property to which there is an immediate risk of damage and the person delivers a written rejection of the trust to the settlor or, if the settlor is dead, to the beneficiary, within a reasonable time). Prob A person named a trustee may reject the trusteeship either by a writing, or by not undertaking any of the acts of acceptance previously identified, within a reasonable time after becoming aware of being named as trustee. Prob Removal or Resignation of Trustee (Hower 255) A vacancy in the position of trustee arises either through resignation or removal, or through death, rejection, inability to identify or lack of existence of the trustee, or appointment of a guardian or conservator of a trustee, bankruptcy of the trustee, revocation of a trust company s charter or suspension of its powers, or appointment of a receiver for a trust company. Prob Having accepted the position, a trustee may resign only: (1) as provided in the trust instrument; (2) if the trust is revocable, with the consent of the person holding the power to revoke; (3) if the trust is irrevocable, with the consent of all adult beneficiaries or conservators of beneficiaries; or (4) pursuant to a court order to do so. Prob A resigning trustee s liability or the liability of the trustee s bond is not affected by his or her resignation. Prob Atrustee may be removed in accordance with the provisions of the trust document or by a court, either on its own motion or on the petition of a settlor, co-trustee, or beneficiary. Grounds for removal by the court include: (1) breach of trust by the trustee; (2) unfitness or insolvency of the trustee; (3) hostility or lack of cooperation among co-trustees impairing trust administration; (4) failure to act by the trustee; (5) excessive compensation to the trustee; (6) disqualification of the sole trustee; or (7) for other good cause. Prob If a vacancy does occur in the position of trustee, a trustee may be appointed by any method specified in the trust instrument; or, failing that, by appointment of a trust company with the consent of the beneficiaries; or, failing that, by appointment of a trustee by the court, giving consideration to any nominations by beneficiaries over the age of 14; or, failing the appointment of any other qualified person willing to act as trustee, the court may appoint the public guardian as trustee of the trust. Prob 15660, Powers of the Trustee (Hower 256) Atrustee has any powers conferred by the trust instrument, and (except as limited by the trust instrument) those powers conferred by statute or to perform any act that a trustee would perform to fulfill its standard of care. Prob However, the mere grant of power to a trustee does not require its exercise, and the exercise of any power by a trustee is subject to the trustee s fiduciary duties. Prob By statute (and absent limitation in the trust document), trustees have the power to: Collect, hold, and retain trust property (Prob 16220). Accept additions to the trust property (Prob 16221). 28