Source: http://www.pooleshaffery.com/attorneys/jason-r-beaman/
Timestamp: 2018-08-21 12:14:32
Document Index: 448192153

Matched Legal Cases: ['§7000', '§13100', '§13200', '§1100', '§15200', '§850', '§850', '§15206', '§850']

Jason R. Beaman | Santa Clarita Business Attorney
jbeaman@pooleshaffery.com
Recent Articles by Jason R. Beaman
Despite the push over the past few decades by estate planning attorneys, CPAs, and financial advisors to urge all individuals with any assets to prepare an estate plan, there is a large number of people that pass away having done no planning. This is unfortunate because by choosing not to plan these individuals are choosing to subject their estates and their family to the probate process. In California this process is governed by Division 7 of the California Probate Code, §7000-12591.
In its simplest form, probate is the judicial supervised administration of a deceased person’s estate by an executor or administrator, which are both commonly referred to as the Personal Representative of the Estate. The Personal Representative steps into the shoes of the decedent and has full authority to handle the descendant’s assets in the same way the decedent could have, if he/she were still alive. The Court serves as a check on the Personal Representative’s power and acts to protect the interests of the heirs, beneficiaries, and even the creditors. In a probate, the decedent’s will is validated, beneficiaries and heirs are determined, creditors are paid, and the decedent’s property is distributed to the proper individuals.
Generally, a probate is required when an individual dies holding property in their individual name. However, there are some exceptions where the property passes to the designated individuals without the need for the probate process. For example, the following property is not subject to probate administration:
Property held in joint tenancy;
Property held in a Trust;
Proceeds of Life Insurance with designated beneficiaries other than the decedent’s estate;
Pension Plan distributions; and
Bank Accounts with a pay on death designation other than the decedent’s estate.
In addition, there are some items of property that can be transferred without going through the full probate process because the value of the property is less than the statutory limit. Summary procedures are available for:
Personal Property where the total value of the decedent’s estate in California is less than $150,000 (Probate Code §13100); and
Real Property, where the value is less than $50,000 (Probate Code §13200).
These two summary procedures are much faster and less expensive than full probate administration. However, because of the extremely low value thresholds, these procedures cannot be relied upon to pass most California estates. Also, one downside is that the beneficiary takes the property subject to claims of the decedent’s creditors.
The probate process?
A probate is opened by the filing of a Petition for Probate. From this initial filing date, it will generally take approximately one year to get to the point of final distribution of the assets. This timeline can be extended significantly by disagreements between the heirs and unexpected issues in the administration such as tax problems.
A probate can be very expensive for the Estate because attorney fees and Personal Representative fees are calculated based on a statutory prescribed percentage of the gross value of the estate. The rates are:
Based on this an estate with a gross value of $500,000 would be paying $13,000 in attorney fees and $13,000 to the Personal Representative for their respective services to the estate.
Final Accounting/Petition
Once all of the creditors have been paid, tax returns have been filed, and assets have been collected, the Final Account and Petition for Final Distribution can be prepared. This final petition is a detailed report of every action that the Personal Representative took during the administration and an accounting of every dollar of assets that was administered. The Personal Representative has an obligation to keep accurate records of the administration of the estate and failure to do so could result in a surcharge to the Personal Representative, which will be owed personally.
The best way to avoid subjecting your family to the cost and complications of a probate is to prepare an estate plan that includes creation of a revocable trust. Creation of a trust to hold your assets allows you and your family to take advantage of one of the exemptions to the probate process. It is always difficult to deal with the issues of death, but a small investment of time and preparation in advance has a huge benefit for your family down the road.
BUSINESS LAW: THE Importance Of Spousal Consent In TRANSACTIONS
Written spousal consents are fixture of most business transactions that involve married persons. These consents are everywhere, in asset purchase agreements, stock purchase agreements, leases, beneficiary designation forms, and real estate transactions. To some clients this requirement often seems unnecessary and inconvenient, especially when one spouse isn’t even involved in the business or property that is the subject of the transaction. In fact, because of California community property laws and the nonconsenting spouses right to void a transaction a spousal consent is highly recommended. For an especially striking example of why these spousal consents are so important we turn to Donald Sterling, disgraced former owner of the Los Angeles Clippers.
Unfortunately for Donald, his fall from grace since being banned from the NBA for life in 2014 has been full of many interesting legal issues. First, in 2014, shortly after the release of the recording of his racist comments, Rochelle H. Sterling, Donald’s wife of more than 50 years, removed Donald as trustee of the Sterling Family Trust, which owned the Los Angeles Clippers, and attempted to sell the team to Steven Ballmer. Donald objected to the sale and refused to sign any of the sale documents. In response, Rochelle filed a petition in Los Angeles Superior Court to affirm the sale and her removal of Donald as trustee of the Sterling Family Trust. The Superior Court sitting in Probate agreed with Rochelle and affirmed the sale of the Clippers to Ballmer, finding that Donald lacked the capacity to understand trust transactions and that the trust would be substantially harmed if the sale did not close.
In a second Sterling case, this time involving lack of spousal consent, Sterling v. Stiviano, 2017 WL 3083472, filed shortly thereafter, the California Court of Appeal reaffirmed the right of one spouse to void unauthorized transfers of community property by the other spouse. In this case, Rochelle filed a lawsuit against Donald’s ex-mistress V. Stiviano for the return of roughly $2.8 Million in gifts of community property given to her by Donald. Specifically, Rochelle alleged that Donald had given Ms. Stiviano a 2012 Ferrari automobile purchased with $240k in community assets, a 2007 Bentley automobile purchased with $90k in community assets, a 2013 Range Rover purchased with $70k in community assets, a residential property in Los Angeles purchased with $1.8 million in community assets; and various cash payments totaling $430k in community assets. Obviously, Rochelle did consent in writing, or otherwise, to these gifts.
Rochelle invoked her power as the non-consenting spouse to void the gifts of community property. Rochelle argued that these gifts constituted an unauthorized gift of community property in violation of California Family Code §1100(b), which states “A spouse may not make a gift of community property, or dispose of community personal property for less than fair and reasonable value, without the written spousal consent of the other spouse.” The Court summarizes the well-established California law on the issue as “[g]ifts made without the consent of the wife are not void, but are voidable at the instance of the wife.” Sterling v. Stiviano, 2017 WL 3083472 at 3, citing Harris v. Harris, (1962) 57 Cal.2d. 367, 369. With this in mind, Sterling Court affirmed the trial court’s order that Ms. Stiviano must return all these gifts to Rochelle for the benefit of the Sterling community.
Obviously, the Sterling spousal consent case was a very clear cut case because there was no consideration for the transfer and no question that Rochelle had never consented to these gifts. The typical business transaction would be a much closer case because generally there would be an argument that the transaction was for “fair and reasonable value.” This theoretically provides an exception to the written consent requirement. However, allowing an important transaction to hang on the assumption the parties have agreed to a value that is “fair and reasonable” is far too much of a risk and the consequences far too great. Therefore, insisting on a written spousal consent for each transaction involving a married person is the only rational solution.
Navigating the Unfunded Trust Trap
By now we all know that in California, proper estate planning is essential to ensure that your property passes to your heirs as painlessly and effortlessly as possible. The majority of estate planning today involves establishing a revocable trust and pour-over will. The trust is a truly magical legal device. And when properly funded, a trust allows your heirs to manage your property when you pass away while avoiding the expensive, time consuming, and tedious California probate process. However, more and more often we are seeing that this careful estate planning can be undone or substantially frustrated by failing to properly fund your trust.
Establishing the trust is just the first step toward achieving your goals. To make a trust truly effective, you must fund the trust. Funding the trust consists of making sure that title to all your non-qualified assets are transferred into the name of the trust instead of remaining in your name as an individual or a couple. Funding does not happen automatically when you establish your trust. For real property, a deed must be recorded with the county recorder. Some estate planning attorneys will handle the mechanics of funding the trust for their clients but most do not.
The most common scenario that we encounter in the unfunded trust context is where parents own a home. For example, parents establish a trust with their daughter as successor trustee, but for some reason title to the house does not get transferred to the trust. The parents pass away and daughter tries to sell the house but, unfortunately, because the house is still in the name of her parents, daughter, as successor trustee of the trust, does not have authority over the house because the trust is not the owner of the house.
Historically, the daughter would be left with no option but to open a probate and obtain letters of administration to transfer title to the house. In 1993, however, the California Court of Appeal gave us an alternate option that provides a quicker and more cost effective solution than a petition for probate.
The Estate of Heggstad
In 1993, a similar set of circumstances reached the California Court of Appeal in the case of Estate of Heggstad (1993) 16 Cal. App. 4th 943. Mr. Heggstad owned about 35% interest in a parcel of real property in Menlo Park, California. He established a valid revocable living trust naming himself as trustee and his son as successor trustee. Mr. Heggstad owned several other parcels of real property and executed grant deeds transferring each of these properties to his trust but failed to transfer the Menlo Park property to his trust. All the real properties, including Menlo Park, were individually described on a schedule to the trust, which was attached to the Heggstad trust.
Not knowing how to administer the Menlo Park property, Mr. Heggstad's son filed a petition for instructions with the California Superior Court. In his petition, Mr. Heggstad's son argued that the language of the trust alone was sufficient to create a trust with regard to the Menlo Park property and that a separate grant deed was not required. The trial court agreed.
In the appeal, the Heggstad Court affirmed the trial court's decision holding that "a written declaration of trust by the owner of real property, in which he names himself as trustee, is sufficient to create a trust in that property, and the law does not require a separate deed transferring the property to the trust." Estate of Heggstad (1993) 16 Cal. App. 4th 943, 950. In reaching this conclusion, the Heggstad Court cited two recognized methods for creating a trust "(a) A declaration by the owner of property that the owner holds the property as trustee," and "(b) A transfer of property by the owner during the owner's lifetime to another as trustee." Id at 948 (citing Probate Code §15200). The Court reasoned that Mr. Heggstad executed the written trust document declaring himself as trustee of all the property described on the trust schedule, including the Menlo Park property, and that this act "constitutes a proper manifestation of his intent to create a trust." Id. At 948. As a result, the Heggstad Court ordered the Menlo Park property be transferred to the trust.
The California legislature officially codified the authority to bring a Heggstad petition in Probate Code §850(a)(3)(B) which authorizes a trustee to bring a petition "where the Trustee has a claim to real or personal property…" Since 1993, petitioners have successfully relied on §850 and Heggstad to argue for post death transfers of property from a decedent's estate to their trust, thus avoiding a formal probate petition. Heggstad provides a possible solution in cases where a settlor's trust includes a detailed schedule of trust assets but still requires the trustee to rely on the probate courts to effect the transfer. However, many estate plans prepared today do not describe each item of property on an attached schedule or otherwise. Instead, the trust will provide a general assignment of "all real or personal property." In this case, Heggstad likely does not provide a solution.
Fortunately, just last year, the California Court of Appeal provided an answer in the case of Ukkestad v. RBS Asset Finance (2015) 235 Cal. App. 4th 156. In Ukkestad, the settlor, Mr. Mabee, established a trust appointing himself as trustee. Mr. Mabee, like Mr. Heggstad, failed to transfer two parcels of real property to his trust. However, Mr. Mabee's trust did not provide any specific information about the property. Instead, it only provided a general assignment which stated "Grantor…hereby assigns, grants and conveys to the Trustees of this instrument all of the Grantor's right, title and interest in and to all of his real and personal property." Ukkestad at 159.
The issue in Ukkestad was whether this type of general assignment is sufficient to satisfy the statute of frauds as codified in Probate Code §15206 which provides that "A trust in relation to real property is not valid unless evidenced…(a) By a written instrument signed by the trustee…(b) By written instrument conveying the trust property signed by the settlor…(c) By operation of law." The Heggstad Court analyzed the same issue and determined that the statute of frauds is satisfied when the owner of real property executes a written trust naming himself as trustee. Heggstad at 950.
The Ukkestad Court reasoned the statement in the trust "all of his real and personal property," did in fact identify which property of the settlor was included. Furthermore, the full identification of the property could be ascertained by reference to the real property records. As such, the Court held that where a settlor makes a general assignment of all real property to his trust and the real property description can be made certain from publicly available documents, the general assignment is sufficient to comply with the statute of frauds. Ukkestad at 163-64.
Now, thanks to Probate Code §850 and the authority in Heggstad and Ukkestad, as long as a trust is properly executed and provides a general assignment of all settlors real and personal property to the trust, it is likely that a post-death Heggstad petition will successfully save an unfunded trust, therefore allowing the heirs to avoid opening a full formal probate.
Obviously, the Heggstad petition is merely a backup plan and is not a replacement for proper estate planning. If you have any concerns about whether your trust is properly funded, you should contact us to discuss as soon as possible.
Jason R. Beaman is an associate attorney in the law firm of Poole & Shaffery, LLP. Mr. Beaman's practice includes general business and corporate law, probate, trust administration, and trademark law.
Mr. Beaman earned his Juris Doctor at Southwestern Law School in 2011. At Southwestern, Mr. Beaman graduated at the top of his class and received the Dean's Merit Scholarship, awarded to students who exhibit academic excellence. Mr. Beaman was admitted to the California Bar in 2011, and is admitted to practice before the U.S. District Court Central District of California. He is a member of the Santa Clarita and San Fernando Valley Bar Associations. Mr. Beaman graduated in 2006 from the University of California, Irvine, where he studied Political Science and was a member of the Dean's honor list for academic achievement.
University of California, Irvine, Bachelor of Arts, Political Science