California Trust, Estate & Probate Litigation

Self-Guided Tour Through the California Probate Process: Can you handle a probate on your own?

Keith A. Davidson — Thu, 10 May 2012 09:00:00 -0800

The probate process is probably one of the most archaic procedures we still have in our legal system. Probate simply means to prove-up a Will—it’s the process where a Will is determined to be valid by the Court, it is then “admitted” to probate (as we say), an Executor is appointed and the administration of the decedent’s assets begins.

Probate also applies where there is no Will, then the Court determines that no valid Will exists, an Administrator is appointed, and the administration of the decedent’s assets begins.

Sounds pretty straightforward, until you run face-first into the procedural wall of probate. There have been many times when I have been asked by non-lawyers “can I do the probate myself?” My response is: yes. This is America, anyone can represent themselves in Court—for the most part. There are a few exceptions to that rule, but a simple, uncontested probate can be handled by the Executor. All you need to do is know all the rules, procedures, and arcane terms of probate…well maybe its not so simple after all.

In fact, there are plenty of lawyers who have a hard time navigating the probate process. The rules that have been established over many centuries (yes, some of our probate laws/rules are that old) are not intuitive to understand. And if you don’t comply with the process, then your probate dies a slow death in Probate Court.

But still, it’s not impossible. It just takes a good amount of homework and an extra large dose of patience. And every probate can be broken down in three main parts (1) Starting the probate process, (2) administering the estate, and (3) closing the estate.

1. Starting probate. To start a California probate you have to file a petition with the Court. A petition is just a way of asking the Court to do something—in this case it’s to open a probate. There are other forms that go along with the petition too. Once you prepare the petition, you file it with the Court and the Court will give you an initial hearing date for sometime in the future. Once you have that date, you have to serve Notice of Hearing on all persons named in the Will AND all heirs at law. You also have to publish notice of the probate in the newspaper before the hearing date.

If all goes well and your papers are in order, then the Court will grant the petition, sign the Order opening probate, and issue Letters (either Letters Testamentary for an estate with a Will, or Letter of Administration for intestate estates (that’s estate’s with no Will)).

See my video on how to prepare a Petition for Probate. We also have a post with links to all necessary (well most necessary anyway) probate forms.

2. Administering the estate. Once the California probate estate is opened all estate assets must be gathered and inventoried and appraised. All cash can be appraised by the Executor, but any other assets, such as stocks, bonds, real estate, etc. must be appraised by the Court appointed probate referee.

Creditor’s of the decedent must be noticed, property sold or positioned for distribution, and any estate bills paid. If someone claims to be a creditor, but the Executor believes the claim to be invalid, then there may be a lawsuit to determine which claims are appropriate to be paid.

Once all creditor’s are paid and assets are either sold or positioned for distribution, its time to close the estate.

3. Closing the estate. The final petition that must be filed in a California probate is a report by the Personal Representative, which usually includes an accounting of the estate assets and a request to distribute the estate assets to the appropriate heirs.

The estate accounting is the trickiest part of this equation because it must be prepared in a manner that complies with Probate Code Section 1060 et seq. And an estate accounting is unlike any other type of accounting. So you have to find someone who knows how to properly prepare this type of accounting.

The final petition also asks for compensation to be paid to the Executor and the estate’s attorney. Both the Executor and the attorney are entitled to the same fee, which is a sliding scale percentage of the estate’s value. The fee equals:

4% of the first $100,000 of value $4,000

3% of the next $100,000 of value $3,000

2% of the next $800,000 of value $16,000

1% of all amounts up to $5 million $50,000

Most probate estates are not $5 million in value. However, a typical estate worth $500,000 would result in a fee to the Executor of $13,000. The estate’s attorney would receive the same amount, $13,000.

Navigating your way through the California probate process is not impossible, its just time-consuming and, at times, frustrating. But take a deep breath and see what you can do. If all else fails, you can always hire an attorney to take the probate to the finish line.

What is A California Trust and Will Litigation Lawyer?

Keith A. Davidson — Wed, 09 May 2012 14:26:32 -0800

It takes knowledge and experience in two district areas, trust and wills and litigation/trial, to make a California trust and will litigation lawyer complete.

Deadline to Sue: a discussion of the statutes of limitation in California Trust and Will cases.

Keith A. Davidson — Wed, 09 May 2012 13:36:08 -0800

Like nearly every legal claim or cause of action, Trust and Will lawsuits carry various limitation periods within which to file suit. The complexity lies in how the various limitations work, when they apply, and how they overlap in this area.

Removing a California Trustee: Don't go away mad (just go away!)

Keith A. Davidson — Wed, 02 May 2012 09:25:00 -0800

This is a guest post prepared by our friends and colleagues at Hackard Law, whose office is located in the Sacramento, California area. They also practice in the area of Trust and Will litigation and they are outstanding attorneys. We asked Michael Hackard and Quinn Chevalier to share some of their experience and wisdom with us and they graciously agreed to do so. Hope you enjoy.

The emotional and financial costs spawned by a trustee removal fight can be overwhelming. Beneficiaries often feel much maligned or even cheated. In these broken and volatile relationships, beneficiaries don’t want a trustee to go away mad, they just want them to go away. Often feeling chosen, duty bound or privileged by their appointed status, trustees do not easily surrender their reins of power. However inept, embedded trustees often threaten the rapid dissipation of trust assets by burgeoning legal bills.

The Costs of Trustee Removal: a zero sum game

We have seen the trust dissipation threat in action. Attorneys who litigate trust disputes enjoy the challenges and intricacies of trust law. This enthusiasm is understandable. Ethical rules provide guideposts for aggressive and fair representation. Threatening to ravage trust assets to pay for the defense of an errant trustee does not fit well within these guideposts.

While trustees are entitled to defend charges of alleged wrongdoing, the payment for the defense should be fairly allocated to the trust or to the trustee. The trustee and his/her attorneys should initially and periodically assess whether the asserted defenses are meant for the trust’s advantage versus those meant for the personal benefit of the trustee. However inconvenient and frustrating to often bereaved beneficiaries, it can take years before a court determines whether trust payments for attorney’s fees were spent to protect the interests of a flawed trustee or the interests of the trust.

Affronted beneficiaries willing to litigate a trustee removal action should be ready for the time delays and legal expenses common to the wrangling over the peculiarities of trust law and administration. California courts have experienced severe budget cuts and have responded accordingly by closing courtrooms and terminating employees. The time lags from the filing of a petition for removal to an evidentiary hearing can easily be a year or more. Petitions for appointment of interim trustees face higher legal hurdles. Courts are reluctant to appoint interim trustees absent clear wrongdoing that puts the trust or its beneficiaries in great peril.

Attorneys hired to pursue or defend trust litigation have obligations to the court as well as to their clients. Professionalism can often support a call to be “above the fray,” yet the realities of exhausting litigation can affect the most stable of constituents, and particularly the trustees. It is not unusual for trustees to be totally unprepared for the tasks required after the death of a settlor. Affected beneficiaries, while not knowing the specific tasks required for trust settlements, can still readily observe that the trustee’s actions or inactions epitomize “amateur hour.”

The Nuclear Option: destroying both victor and vanquished

Trust litigation contains the risk of “catastrophic victory.” Such victory can evolve from multiparty litigation that includes trustees, co-trustees, successor trustees, proposed independent trustees, beneficiaries, spouses of beneficiaries and their respective counsel. Litigators on their own initiative or that of their clients can engage in “scorched earth” tactics designed to enrage and exhaust their opponents. Such tactics often have the same effects as short range nuclear weapons, destroying both the victors and the vanquished.

Catastrophic victory aside, the removal of a trustee by its nature involves a good deal of energy. Trust provisions, statutes and case law provide a laundry list of reasons for the removal of a trustee. Clients can look at the list and mentally check the appropriate boxes. Believing, knowing, and proving, however, are three different things. The belief of trustee wrongdoing can be followed by informal and formal discovery that translates belief into knowledge. Transferring knowledge into judicial proof is a different process – one protected by rights of due process and time constrained by discovery processes, court schedules and statutory mandates.

The Undue Burden of Due Process of Law

In trust litigation, just like any litigation, writing a letter to a local court detailing what you know does not meet the demands of judicial due process. This is something not always understood by clients. In other aspects of their lives, changes can often be more timely and directly influenced by vigor and clarity of purpose. Such is not always (or ever) the case in litigation. We have all heard a variant of “the wheels of justice grind slowly.” There is truth behind the aphorism. This truth particularly tests the patience of wronged beneficiaries. Trustee fights can mimic civil war with all of its emotions and tragedies. Trust litigators are best when they can fairly and wisely advance their clients’ interests while at the same time exercise vigilance for opportunities of fair compromise or settlement. Litigation should not be a mindless and hardened exercise in wealth dissipation. As litigation battle lines are fixed and change, the end game should always be kept in mind. Catastrophic victory is no victory at all.

What You Need to Know When an Estate Plan Goes Awry: The complex road of successfully bringing a lawsuit for attorney malpractice in California Trust and Will cases

Stewart R. Albertson — Mon, 30 Apr 2012 15:21:43 -0800

There are times when people try to implement an estate plan, but things go awry. And that can happen when an attorney makes a mistake in drafting a California Trust or Will resulting in legal malpractice.

Bringing and prosecuting a legal malpractice case against an attorney who improperly drafted a California Living Trust or Will is complex, to say the least. It is particularly difficult because knowledge of three distinct areas of law is required for a hopefully successful outcome. First, you need to understand the law as it applies to estate planning (i.e. Living Trusts, Wills, etc.); you also need to understand the rules of civil litigation; and finally, you need to understand the rules and laws as they apply to insurance and bad faith insurance litigation.

Estate Planning: It takes years of experience to become a good estate planning attorney. Over the years, Trusts and Wills have become more complex due to multiple asset classes owned by individuals, married couples with children from previous marriages, and ever changing Trust, Will and Tax laws. Competition between attorneys that provide estate planning services is intense. What used to be only available from large and well-known law firms is now readily available across the spectrum of service providers--now large, medium, small, and solo law firms offer estate planning services. Even nonlawyers provide “assistance” in drafting estate plans. The costs for these estate plans range into the thousands of dollars to as low as $50 through several web-based providers. Unfortunately, with the intense competition between these providers, mistakes are made when attempting to convey the intent of the Trustors (the persons creating the Trust or Will) in the Living Trust or Will. This leads to beneficiaries being harmed if they do not receive the inheritance the Settlors intended. In all events, to successfully bring a successful malpractice claim in this area, one must have a good understanding of California estate plans, including Trusts and Wills.

Civil Litigation: Litigation is the process of filing a lawsuit, preparing for trial, and going to trial. The entire litigation process in California generally takes two to five years to complete. The majority of time in litigation is spent on discovery, which includes depositions, interrogatories, requests of admission, and demands to produce documents. Once discovery is completed the trial court will set a trial date. At trial a jury or a judge hears the case. The lawyers make opening statements, present evidence during direct and cross examination, and make a closing argument making their case why their client should prevail. The litigation process comes to a close with the jury or judge making a decision in favor of the plaintiff or defendant. One must not only understand the law as it relates to estate planning, but also civil litigation, to successfully prosecute a legal malpractice claim pertaining to California Trusts and Wills.

Insurance and Insurance Bad Faith Litigation: Most drafting attorneys have professional malpractice insurance, which covers the attorney up to a set amount for any lawsuit filed against them for legal malpractice. For example, if an attorney has an insurance policy of $1,000,000, then the insurance company who issued that insurance policy to the attorney will pay up to $1,000,000 for a successful litigation claim made against the attorney for legal malpractice. This is where an attorney bringing the legal malpractice lawsuit can do a lot for their beneficiary clients.

The goal is to force the insurance company to settle the lawsuit early on for the policy limits. If the goal is reached, the beneficiary obtains monetary damages for the loss they sustained by the drafting attorney’s malpractice without having to undergo the entire litigation process, which is time-consuming and extremely stressful. To implement the goal the attorney for the beneficiary simply needs to make a “reasonable” settlement offer (usually just inside policy limits) to the drafting attorney and the drafting attorney’s insurance company. If the insurance company refuses to pay the policy limit, it’s very likely the insurance company will be responsible for any judgment amount over the policy limit. This generally causes (and motivates) the insurance company to settle for policy limits. Or if the company still refuses to settle, then it sets the stage for a bad-faith action against the insurance company down the road. Either way, it’s a benefit to the beneficiary-plaintiff. Insurance and Insurance Bad Faith Litigation are perhaps the most misunderstood aspects of successfully bringing a legal malpractice lawsuit. You must know this area of the law.

Each of these three areas can be complex in their own right. And in attorney malpractice cases in the California Trust and Will arena, you’ll need to combine knowledge of all three areas to be successful.

Feel free to call me if you have any questions about initiating and prosecuting a legal malpractice lawsuit against a drafting attorney. Also, if you would like the letter our firm sends to insurance companies for these types of cases, let me know.

The Best (Private) Trustee in the World!

Keith A. Davidson — Mon, 30 Apr 2012 13:29:00 -0800

I happen to represent the best private Trustee in the world. No offense to professional Trustees—this does not include them. In the world of private individuals who act as Trustees, not as a professional calling, but by way of happenstance or accident, there aren’t many who do such a good job. It’s understandable, being a Trustee is hard work, it comes with a mountain of complex obligations and liabilities and very little, if any, appreciation. As they say, no good deed goes unpunished.

Many private Trustees make the mistake of thinking that they are acting in the shoes of the Settlors (a Settlor is the person or persons who created the Trust). That is an entirely wrong perspective because the Settlors (being that they created the Trust) have far more leeway and freedom in how they manage the Trust estate and invest the Trust assets—they can be downright reckless if they like. Whereas a private successor Trustee has no such leeway—they must meet a host of complex duties and obligations under California Trust law, which includes things like (1) prudent investing, (2) treating all the beneficiaries fairly, and (3) avoiding conflicts of interest.

It is also a mistaken belief that Trustees are like CEOs of companies. Not true. Corporate officers operate under the “business judgment rule” that allows them to take risks and make decisions that may or may not be prudent and conservative; provided that they are acting within acceptable business judgment. Companies are expected to risk capital in order to make money. Trustees have no such luxury. Trustees’ duties require them to be far more conservative and risk adverse than a corporation is allowed to be.

One guiding light principle of every Trustee, whether private or professional, should always be that the beneficiaries should be treated with a sense of goodwill and fair play. Sounds good, but not always easy to do, especially if there is hostility in the Trustee-beneficiary relationship (i.e., sibling rivalry). But the law does impose a duty on Trustees to treat their beneficiaries fairly—even where the Trustees do not like the beneficiaries for whatever reasons. Some Trustees do and some most certainly do not.

So how do I know I represent the best private Trustee in the world? Because the Trustee I am referring to meets all of these requirements. And this Trustee exudes a constant and consistent sense of goodwill and fair play towards some very difficult beneficiaries. This does not mean, by the way, that the Trustee is a pushover or does whatever the beneficiaries require. That would not make for a good Trustee. Instead, this Trustee makes hard decisions under difficult circumstances and takes all action necessary to keep the Trust administration moving forward and fairly proportioned among all the beneficiaries. But even after going through a very tough issue, or series of issues, the sense of goodwill and fair play remains ever intact. This is the way a good Trustee should act. And yet, it seems to be so rare among private Trustees.

Setting the Table for Bad Faith Claims: How attorney malpractice insurance claims for California Trust, Will and Estate cases can exceed policy limits

Stewart R. Albertson — Thu, 26 Apr 2012 09:58:18 -0800

From time to time we have clients come to our office upset that the attorney who drafted their parents’ California estate plan (i.e., living trust, will, and durable powers of attorney) got it wrong or perhaps failed to properly implement the parents’ estate plan.

In a recent case we handled an attorney drafted an amendment to a Trust for a mother. The mother intended the amendment to change the distribution scheme between her children. The original trust called for an equal division amongst the children, and now the amendment called for a different division. The mother signed the amendment, and believed that the distribution changes under the amendment would be followed after she died.

After the mother’s death, it was found that the drafting attorney did not properly draft the amendment. Due to the drafting attorney’s mistake, several of the children were significantly damaged; these children would not receive what their mother intended under the amendment because it was invalidly created.

That unfortunately led to a malpractice lawsuit being filed against the drafting attorney. The balance of this blog article outlines how we communicated with the attorney’s malpractice insurance carrier to settle the lawsuit prior to going to trial.

We want to make it clear that insurance companies do not settle lawsuits for fair value—if they settle at all. The insurance industry has taken the position that they will vigorously litigate all lawsuits even if meritorious allegations are made and liability and damages are clear. In response to this position, we needed a strategy for getting the drafting attorney’s insurance company to agree to settle for policy limits—before going all the way to trial.

To implement our strategy, we needed to know what the damages were to our clients—the children harmed by the drafting attorney’s mistake. We determined the damages were in excess of $1,000,000. Next, we needed to know how much insurance coverage the drafting attorney had for legal malpractice coverage. Through discovery we found out that the policy limit for this case was $500,000. That means that the insurance company was only required to pay the first $500,000 of any judgment for legal malpractice against the drafting attorney.

Once we determined damages and potential insurance coverage, we sent out the balance of our written discovery and took the depositions we needed to establish all the elements for legal malpractice. We were now in a position to force the insurance company to settle for $500,000 or risk being on the hook for the entire $1,000,000 in damages.

We spent a lot of time on a settlement demand letter to the opposing attorney, which we copied on the insurance adjuster. The letter set out the facts, the clear liability, and the clear damages. We gave the insurance company 30 days to think about whether they would accept or reject the offer. In this case, the insurance company ultimately accepted the settlement demand. If they had not, then we would have gone after them for bad faith for refusing to settle for a reasonable amount. In this case the $500,000 settlement amount was reasonable, because the total liability was easily in excess of $1,000,000.

As you can see, when you carefully plan your strategy in a case, you can obtain good outcomes for clients without exposing them to several years of litigation, which is exactly what the insurance company wants to do. But our proactive actions put the insurance company in a difficult position—either settle for a reasonable amount now, or likely end up paying a much larger amount for the damages sustained by the mother’s children. We (and our clients) were okay with the insurance company choosing either option.

If you would like a copy of the redacted letter I sent to the insurance company, please let me know.

Troubled Trust Administrations: How to navigate the sometimes dangerous waters of California Trust Administration

Keith A. Davidson — Wed, 25 Apr 2012 14:02:12 -0800

We spend a good deal of time and effort discussing the mistakes Trustee's make in administering California Trust's. From bad management, to problems investing assets, to misinformed or even bad Trustees. But not all the blame for ugly Trust administrations lies with Trustees. Beneficiaries can cause their share of problems too.

That's what I call "Troubled Trust Administrations." When a Trustee who wants to do the right thing runs into problems with wayward beneficiaries some action needs to be taken. But it may be something short of going to court and starting a Trust litigation case.

To be clear, during a Trust administration, the Trustee is in charge. It is the Trustee, and only the Trustee, who decides what to do and when to do it. This can be a problem when a bad Trustee fails to follow the rules. But it can also be a good thing when a good Trustee is in office and is properly handling the Trust affairs.

Beneficiaries need to know that they do have rights, but they don't have legal authority over the Trust. That's the Trustee's job. And if the Trustee is following the Trust terms, and administering the assets according to California Trust law, then the Trustee should be allowed to do the work they were appointed to do. This includes things like, selling real property, investing assets, paying taxes, paying creditors, hiring professional advisors, making preliminary distributions and creating any additional sub-trusts that are reuqired under the Trust document.

And a Trustee has a reasonable timeframe in which to take these actions. Typically, a Trust administration can take from 3 to 18 months to complete, or sometimes even longer for complex Trust estates, depending on the amount and complexity of the Trust assets.

When a Trustee hits a roadblock, whether it be an outside issue, issues with a Trust asset, or issues with a beneficiary, then some action may be required. Hopefully, such action can be done outside of Court, but the Court process is available to a Trustee any time an issue cannot be resoovled through other means.

For example, under Probate Code Section 17200, Trustees have the ability to seek instructions from the Court. This process allows a Trustee to set forth the issues and gives the beneficiaries an opportunity to either consent to, or object to, the proposed actions of a Trustee. If the petition is granted, then the Trustee can take the action they asked to take without fear of being sued over it at a later date.

Further, communication between Trustees and beneficiaries is cirtically important to keep an administration on track. Communication can be hard to maintain in some cases, especially where the Trustee and the beneficiary (or beneficiaries) are hostile towards one another. But even when relations are strained, communication will go a long way towards keeping a Trust administration out of court and moving forward.

A Practical Postmortem: Convincing Opposing Counsel to Dissect a California Lawsuit

Stewart R. Albertson — Fri, 20 Apr 2012 13:42:34 -0800

At the end of every case—whether it’s settled or by way of judgment after a trial—I ask the opposing attorney to sit down with me to do a full review of the case. All issues in the case are open for discussion, except for attorney-client communications or any other privileged matters.

The purpose of the meeting is to become a better attorney by learning from the strategic missteps I made during the course of the litigation. When I say “missteps”, I don’t mean legal malpractice, I mean what strategic decisions I made that had little or no value, versus the strategic decisions I made that have better or greater value in the eyes of the opposing attorneys. Of course I encourage the opposing attorney to ask me the same questions about his/her strategic decisions—which ones I felt were good or not so good.

Less than a third of opposing attorneys agree to do this exercise with me. I’m not sure why it’s not 100 percent after some of the meetings I’ve done in the past. I’ve learned so much about what is effective in prosecuting my case and what isn’t. Additionally, I hear opposing counsel tell me his/her thoughts of the case as the litigation was unfolding. What stressors they had. What stressor they didn’t have. His/her view on settlement versus going to trial. And on and on…

I agree to keep the postmortem meeting with the opposing attorney confidential. And I trust they will return the same courtesy.

I challenge all California attorneys to offer to do a postmortem analysis of their cases with opposing counsel. We would all be better for it—learning and becoming better attorneys based on the analysis of our work from the impressions formed by the opposing attorney during the lawsuit and vice versa. And, doing this type of meeting would help foster better relationships between plaintiff and defense attorneys who may meet again in future cases.

Power to Amend a California Trust NOT the Same as the Power to Revoke

Keith A. Davidson — Thu, 12 Apr 2012 14:48:45 -0800

One of the most obvious features of a revocable living Trust is that you can revoke it. It’s right there in the name “revocable Trust.” But you can also amend a revocable Trust because, for a long time, California courts have interpreted the power to revoke (which means to entirely do away with a Trust) as including the lesser power to also amend the Trust. Sounds reasonable enough.

But that has now changed with the California Court of Appeal’s, Fifth District, ruling in King v. Lynch, which holds that the power to revoke may be different from the power to amend—at least in the way in which each is accomplished.

Prior to 1987, there was no statute that provided the manner in which a Trust revocation could be accomplished. With the adoption of Probate Code Section 15401, that changed, and the law provided two distinct ways in which to revoke a California Trust: (1) revoke using the manner provided in the Trust instrument, or (2) revoke by any writing (other than a Will) signed by the Settlor and delivered to the trustee during the Settlor’s lifetime. So if the Trust stated that a revocation required a writing signed and notarized by the Settlor, then you could follow that directive to revoke the Trust. But you could also simply follow number 2 above and revoke by any writing (other than a Will). In other words, either manner was available for revocation as long as the Trust did not expressly say that its manner was the exclusive way in which to revoke.

And it was thought for quite some time that the same rules applied to amending a Trust because under Probate Code Section 15402, it said that the method of amendment is the same and the method of revocation contained in Section 15401. So you could use the Trust terms to amend, or you could amend by any writing (other than a Will). Each method was available for amendments as long as the Trust did not expressly say that its method was the only way in which to amend.

But now, Justice Levy has, for the first time, decided that amendment and revocations are not so similar after all. He holds, under Section 15402 (the amendment language) that a Trust can ONLY be amended by the method specific in the Trust and NOT by any language in Section 15401 that allows any writing other than a Will. He reaches this decision by quoting the following language of Section 15402:

“unless the trust instrument provides otherwise, if a trust is revocable by the settlor, the settlor may modify the trust by the procedure for revocation.”

He reasons that the term “unless the trust instrument provides otherwise” means that any Trust that has an amendment method stated in the Trust instrument does “provide otherwise” and therefore the statutory language for revocation under Section 15401 cannot be used for Trust amendments.

It seems like an odd ruling because there is no logical reason why the method of revocation should be any different from the methods available for amendments.

Whatever may be in the Court’s mind, we now have a ruling that says the methods available to amend a Trust are different from the methods available to revoke. Something good to keep in mind when amending a Trust…or when contesting an amendment to a Trust…food for thought.