Witness Requirement for California Wills relaxed

Wills are relics of an ancient era, and the laws surrounding them are often incompatible with our modern world, and sometimes internally inconsistent. For example, if you print out your will from a computer or pre-printed form, it must be signed by you and two other people, who either saw you sign the will or can acknowledge your signature, and who know that the document they are signing is your will. You can also handwrite your own will. If you do, then you don't need anyone to witness your signature. Also, if you execute a living trust, your signature doesn't necessarily need to be witnessed by anyone in order be valid. Why is the law so much more strict for pre-printed wills?

The State of California recently took steps to make my rhetorical question moot. On July 1, 2008 Governor Schwarzenegger (I am never going to get used to that) signed into law a revision of Probate Code section 6110 relxing the formal witnessing requirements of a pre-printed will. In the latest issue of the California Trust and Estates Quarterly, published by the State Bar of California's Trust and Estates section, Silvio Reggiardo III writes about the changes. Basically, a pre-printed will no longer has to be signed by two witnesses in order to be valid, if the person trying to enforce the will (usually the executor) can show by clear and convincing evidence that the person who wrote the will intended that the document be their will despite the lack of witness signatures.

Here's how it would work: Joe prints out a will using a pre-printed will drafting program. He signs it, but no one signs the will as a witnesses, even though two if his friends saw him sign the will. Joe dies, and the executor of the will submits the will to the court for probate. The executor presents the evidence from the two friends who saw Joe sign the will, and there is no evidence of any other document that was intended to act as Joe's will. It is up to the judge to determine whether this meets the "clear and convincing evidence" standard, which is greater than the "preponderance of the evidence" standard used in civil courts, but less than the "beyond a shadow of a doubt" standard in criminal courts. If the judge decides that the evidentiary standard is not met, then the will is not valid, and Joe's estate is distributed per California law applying to people who die without a will.

While this change in the law helps modernize will execution standards, it is still more onerous than the standard for executing a trust. This is yet another reason why a living trust is superior to a will. Trusts are much more flexible, and are less likely to be invalidated on arcane technical grounds.

Ambiguity in Charitable Gifts

A gift in a will setting up a charitable trust is valid, even if the gift does not specify any particular charity or class of charitable recipient. In Estate of Clementi, The Fourth District Court of Appeals upheld an Orange County Superior Court ruling that allowed the following language from a will:

"I give the balance of my assets to a charitable foundation or trust in my
name to be run by Richard Weisz. If Richard Weisz is not alive when I die, then I
appoint his son, Frank Weisz[,] to run my charitable foundation or trust."

The court held that the general policy in California is that charitable gifts are highly favored and that a charitable gift in a will must be liberally construed to uphold its validity.

While this policy is admirable, it can create problems for the trustee who then must administer the trust with no guidance as to how to direct the funds. This is yet another example of how an estate plan must be carefully drafted in order to make sure the wishes of the client are carried out. Sometimes a person may have a charitable intent, but has no real idea who to give their estate to. At those times, the estate planning attorney should ask a lot of questions to try to get an idea of what kinds of charitable organizations may fit with the client's charitable impulse. Are there any friends or loved ones with a medical condition that they would like to donate money to? Is there a specific group of people who the client would like to help (seniors, orphans, veterans).

A crucial part of estat planning is for the attorney to ask questions and listen carefully to the client. That is the key to drafting a plan that is clear to all involved.

Gift Taxes and You

I haven't posted much on the gift tax. (actually, I haven't posted at all about the gift tax). But there is a first time for everything.

Joel Schoenmeyer posted on how to take full advantage of the Federal annual gift tax exclusion. You can read the post here. Currently, you can make a gift of $12,000 per year to anyone you want without having to pay taxes or even file a gift tax return. In 2009, the exclusion goes up to $13,000.

Under Mr. Schoenmeyer's plan, you could make a $12,000 on December 31, 2008, and then a $13,000 gift to the same person the next day on January 1, 2009, for a total of $25,000, tax free and without even filing a return. And you can do this for as many people as you want.

Many people use gifting to reduce the size of their estates in order to avoid or reduce estate tax exposure. The disadvantage of this is that, since you really can't predict when you are going to die, you run the risk of giving away too much of your estate too soon.

Thanks to Mr. Schoenmeyer for his useful post!

Be Careful with Mediation Confidentiality

Mediation of disputes in the world of Trusts and Estates is not as common as it is in civil litigation generally. Nevertheless, it can be very useful in settling things among beneficiaries, or between beneficiaries and trustees, or among heirs and executors.

In California, documents prepared during a mediation are confidential, except when they are not. The default is to protect these documents from disclosure in litigation in order to foster more open discussion, but this confidentiality can be waived.

Whether the children of Thresiamma Thottam waived this confidentiality was the Estate of Thottam matter. The children disputed the division of property after the death of their mother. They agreed to mediate the matter, and signed an agreement that protected the confidentiality of proceedings "except as may be necessary to enforce any agreements resulting from the Meeting."

During the mediation, a chart was prepared showing an allocation of the assets of the mother's trust. The children all initialed the chart. Afterwards, disputes arose over the language of the settlement agreement memorializing the distribution and incorporating a copy of the chart. One child sued the other two for breach of the settlement agreement. The other children filed motions to keep the chart out of evidence, claiming that it was confidential under California. The trial court agreed, but the court of appeal did not, and reversed the trial court's decision.

The court of appeal held that California law provides an exception to mediation confidentiality where all parties agree in writing to waive it. The court found that the agreement the parties signed waiving confidentiality where necessary to enforce any agreements resulting from the meeting constituted a valid waiver under California law. They also held that the chart initialed by all parties was just such an agreement, although they did not rule on whether the chart was enforceable.

I think there are two important lessons from this case. First, remember that by law, all writings in a mediation are confidential. Be careful not to sign anything that could constitute a waiver of this confidentiality if you want to make sure that what happens in the mediation stays in the mediation. Second, if you come to a settlement, make sure that the document memorializing the settlement is clear and unambiguous. Even though the court did not rule on whether the chart in this case was enforceable, it frightens me to think that a chart, with no terms and nothing other than initials of the children, can be used as evidence of a settlement.

Legal documents sometimes seem pointlessly long and detailed. But there is often a very good reason for it.

CA Widow Cannot Use Husband's Frozen Sperm

The California Court of Appeal for the Third Appellate District (Sacramento) today held that a widow cannot obtain the frozen sperm of her husband, who requested that the sperm be destroyed upon his death.

Technically, the court upheld the probate court's denial of the widow's motion for preliminary distribution of the frozen sperm.

Iris and Joseph Kievernagel contracted with an IVF clinic to help Iris have a baby. Joseph did not want children, but agreed to the IVF because Iris did want them, and he was worried that Iris would divorce him if he did not agree. In completing the paperwork for the IVF clinic, Joseph signed a document entitled the "IVF Back-Up Sperm Storage and Consent Agreement." The Agreement stated that the sperm sample was Joseph's sole and separate property, and that he had two options for the disposition of the sample upon his death or incapacity: donation to his wife or disposal. The box for disposal was checked. The Agreement was filled out by Iris, and signed by Joseph.

After Joseph died in a helicopter crash, Iris was appointed Administrator of his estate. She filed a petition for preliminary distribution of the sample. The court denied the petition, citing that the Agreement indicated Joseph's intent that sample be destroyed, and noting that there was no contrary evidence of Joseph's intent.

The Court of Appeals upheld the trial court's ruling. The court noted that "gametic material," with its potential to produce life, is a unique type of property that is not governed by the general laws relating to gifts of personal property or transfer of personal property upon death. It also held that Joseph's "right of procerative autonomy" allowed him to control the disposition of his sperm, and that since this was not a frozen embryo, Iris' right to procreative autonomy was not implicated. The court noted that if Iris could only become pregnant with Joseph's sperm, then her rights would be implicated, but that this was not the case.

The court punted on the issue of contract law. Throughout the decision, the court used contract law language, but in the end it based its decision on the intent of Joseph. The court did note a French court decision holding that contract law did not apply to gametic materials.

The court concluded that the intent of the donor controls the disposition of sperm on the donor's death. What if Joseph had a will or a trust that stated that Iris was to receive the sample upon his death? Presumably, the court would see this as evidence of changed intent. As practitioners, we must make sure that the intent of estate planning client is being carried out, and that the estate planning documents don't contradict or conflict with other documents.

You can read the full decision here.

NY Times Article on "Learning to Share"

Earlier this week, I attended a workshop on mediating estate plan disputes. One of the biggest topics of discussion was how involved the heirs or beneficiaries should be in the preparation of an estate plan. Opinions varied widely, but most agreed that the more likely it was that a dispute would arise once the plan went into affect (i.e. when the testator died), the more important it was that the heirs and beneficiaries be involved during the planning process - espcially if the intention was to leave someone out, or to give them less than others.

Not to be outdone, the NY Times printed this article in yesterday's edition. They discuss how children fight over their parents' estates, and how to avoid the conflict. One person profiled, Eric Zeller, started the process of discussing his estate with his children early on. He intended to leave his estate to various charitable entities rather than to his children, so throughout their lives, he talked with them about how to make their own way in the world. As they grew up, they did not have the expectation that they would get their Father's money, and they became independent.

Not everyone agrees that a parent should leave nothing to their children in order to keep them from being too dependent on their parents. But whatever your intentions are, you should make them known to your children, relatives, friends, and anyone who may believe they might get a piece of your estate. It's not a guarantee against disputes, but it's certainly better than keeping it to yourself.

What do you think?

Keep Your Special Needs Trust Up to Date When You Move!

Remember your Special Needs Trust when you or your child with special needs moves. Kevin Urbatsch, a special needs trust attorney in San Francisco, relates this article that gives useful information for people on the move who have special needs trusts.

While most benefits for those with special needs are federal, many are provided by the state (such as Medi-Cal). If you move to another state, you will need to re-visit the process of getting state-specific benefits. If you have a special needs trust that deals with the state benefits, the trust will need to be changed to reflect the new state benefits.

Thanks to Mr. Urbatsch for this useful info.