Slow Month. Needed: More Appellate Cases

Well . . . it has been a slow month for relevant or important new California trust, estate and elder appellate decisions.  Here is a call for more appellate cases.  Yes, there are many important trust, estate and elder issues that still need to be determined or clarified by appellate court determination.  For example, I would like to see more in the accounting/information and conservatorship areas.  So, let’s get those appeals going.

New trust case—remainder beneficiary of revocable trust lacks standing to bring action against trustee—Estate of Giraldin

New trust case—remainder beneficiary of revocable trust lacks standing to bring action against trustee—Estate of Giraldin
Dave Tate, Esq. (San Francisco)
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In Estate of Giraldin (California Court of Appeal, Fourth Appellate District, Case No. G041811, September 26, 2011), the Court recently held that remainder beneficiaries of a revocable trust lack standing to compel an accounting or bring an action against the third party trustee for the alleged wrongful actions or omissions to act of the trustee that occurred prior to the time that the trust became irrevocable.  While the trust remained revocable, the trustee only owed a duty to the trustor.  The beneficiaries alleged that during the time that the trust remained revocable, and the third party trustee was serving as trustee, the trustor lacked mental capacity to make competent decisions, including decisions involving how he wanted to use and invest trust assets, and that the trustee wrongfully permitted the trustor to make those decisions and to take those actions.

Estate of Giraldin contradicts and criticizes the California Court of Appeal First District’s holding in Evangelho v. Presoto (1998) 67 Cal.App.4th 615, which held in a similar revocable trust situation that the remainder beneficiaries do have standing to bring a claim against the trustee’s actions that were taken while the trust was revocable.

The problem with the holding in Estate of Giraldin is that the Court seeks to reach a bright-line rule that could be correct in some cases, but that also ignores that in other situations trust disputes of this nature present factual situations that are not amenable to such a single simple rule.  After all, the Probate Court is a court of equity.  For example, in Estate of Giraldin itself the Appellate Court appears to not attach much if any importance to the fact that:

[t]he[trial] court “further [found] that [the trustor] Bill lacked mental capacity to understand that certain documents proffered by [the trustee] Tim were written directions to the Trustee to authorize any of these transactions by the Trust or to relieve Tim of any of the statutory trustee duties.” Moreover, the court concluded “Bill was not sufficiently mentally competent in late 2001 and thereafter to either analyze the benefits and risks of an investment in SafeTzone… or to authorize and direct Tim to make such an investment.”

Perhaps some of the difficulty in the case results because:

[s]pecifically, [the beneficiary] respondents’ petition sought to hold [trustee] Tim responsible for breaches of duties “owed to trust beneficiaries,” such as the duty to “administer the trust solely in the interest of the beneficiaries”; the duty “to diversify investments”; the duty to “deal impartially with beneficiaries”; and the duty “to make trust property productive.” Each of those alleged “duties” was actually inconsistent with Tim’s obligation, during Bill’s lifetime, to administer the trust solely for Bill’s benefit and pursuant to Bill’s direction.

The Court’s holding might have been different if in the alternative the beneficiaries sought to fashion a claim on behalf of an alleged wrong committed against Bill.  For example, in relevant part, the Court stated:

Of course, what the trustee cannot do is dispose of trust assets in a manner inconsistent with the settlor’s wishes. If, as respondents posited at oral argument, Tim had taken money from the family trust without Bill’s authorization just days before Bill died, so that Bill himself had no opportunity to do anything about it, there would still be a remedy. The representative of Bill’s estate would have the right to pursue an appropriate claim for recovery of those funds on behalf of the estate. (Code Civ. Proc., § 377.20, subd. (a) [“Except as otherwise provided by statute, a cause of action for or against a person is not lost by reason of the person’s death, but survives subject to the applicable limitations period.”].) And even assuming the representative of Bill’s estate was Tim himself, who might be expected to have little enthusiasm for bringing such a claim, respondents, or any other “interested person,” would have the right to petition for Tim’s removal in favor of an impartial special administrator who could then pursue whatever appropriate claims Bill might have had against Tim. (Prob. Code, § 8500.)

In this case, however, as we have already explained, respondents were not purporting to pursue Bill’s claims, or to seek redress for alleged wrongs done to him. Instead, they were seeking to vindicate their own distinct interests, by claiming Tim had breached duties allegedly owed to them during the period prior to Bill’s death. We hold merely that Tim owed them no such duties, and thus respondents lacked standing to assert those claims. We express no opinion on the merit of any theoretical claims that might have been asserted on Bill’s behalf. None were.

As factual circumstances vary widely in trust cases, whereas bright-line rules can apply in appropriate trust circumstances, care should be taken to not overstate a rule’s possible universal applicability.  In Giraldin for example, the Court also could have focused on the issue of the trustor’s original intent and whether the trustor’s actions and decisions were in keeping with that intent in light of the Trial Court’s finding that Bill was lacking in mental capacity to evaluate and make certain investment decisions.  I do agree, however, that the trustee was not required to evaluate Bill’s mental capacity or to have that mental capacity evaluated, at least in part because there was no evidence that caused the trustee to believe or suspect that Bill was incompetent to make the decisions that he was making.  The situation might have been different if the trustee was aware of red flags evidencing a lack of capacity.

Improving California’s Response to Elder Abuse . . .

The following are links to the California Elder Justice Workgroup report on Improving California’s Response to Elder Abuse, Neglect and Exploitation, Report, Click Here, Executive Summary, Click Here.  And the following is a link to the California Elder Justice Workgroup wiki site, Click Here.  If you are interested, see also the following elder abuse article from earlier this year, Click Here, and the Center of Excellence on Elder Abuse & Neglect at the UC Irvine School of Medicine, Click Here.

It is no secret, and it has been known for a long time that there is a lot of financial and physical abuse and/or neglect of seniors and dependent adults.  The resources are not made available to handle the cases, and, having represented clients in cases of both financial, physical and mental abuse, I can certainly say that elder abuse cases are usually difficult and very time-consuming to prosecute.  The best deterrent is for elders to have friends and family members who are regularly present, visible and vocal, and who take action.  As a society we have a long way to go to make stopping the abuse of elders a recognized national priority.

Dave Tate, Esq. (San Francisco)
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Interesting Articles: When Memory Lapses Are Not Just Signs Of Aging; California Asset Protection Overview

Here are links to two interesting articles that I came across (note, the discussions in the articles are the comments of the authors, they are not my comments, and I take no responsibility for them).

1.  A useful, basic California asset preservation discussion, Click Here.

2.  When memory lapses are not just signs of aging by Jane E. Brody, New York Times, Click Here.

Click Here for a brief introductory video by me – an overview of my practice.

Use of constructive trust and correction/reformation to cure and mitigate attorney and other professional malpractice in estate planning

The following is a link to an interesting article by Victoria J. Haneman discussing the possibility of using constructive trust equitable remedies to cure or mitigate testamentary mistakes, Click Here.  In fact, at least in California, wills and trusts are supposed to be read or interpreted to accomplish the decedent’s intent.  See, e.g., Cal. Probate Code Secs. 21101 and 21102, and related cases.  However, it is possible that a court might not always be procedurally willing to render a determination reforming the testamentary instrument to conform to that intent.  Although instrument reformation to intent is the preferable remedy, as an alternative, and although perhaps somewhat more difficult to implement and oversee, constructive trust might be argued to obtain a remedy that effectively requires that the assets are used for the purpose that the decedent intended.  See, e.g., Cal. Civ. Code Secs. 2223 and 2224, and related cases.  Of course, the unintended beneficiary of the mistake can oppose the action at reformation or constructive trust, arguing that the instrument is worded as the decedent intended, and that the decedent’s execution of the instrument creates a presumption that the provisions are as the decedent intended and that any admissible evidence to the contrary is insufficient to establish otherwise.  As in typical trust and will dispute cases, the outcome likely depends on the direct and circumstantial evidence relating to the decedent’s intent and natural testamentary dispositions, the nature of the mistake or erroneous wording, the decedent’s mental capacity to execute the testamentary instrument, the relationship between the decedent and the unintended beneficiary, possible undue influence, and other similar and related factors.

David Tate, Esq., Practice Intro Video, Click Here.

Clinical Trials Neglect the Elderly (article link)

Interesting article in the NY Times, clinical trials neglect the elderly, to read article Click Here.

Interesting article link–protecting your parents, keeping the sharks at bay

Here is a link to an interesting CNN article, protecting your parents, keeping the sharks at bay (from financial predators), Click Here.

ABA Commission on Law and Aging Report and Resolution to Strengthen Protection of the Rights of Older Persons

AMERICAN BAR ASSOCIATION

COMMISSION ON LAW AND AGING

SECTION OF INTERNATIONAL LAW

SENIOR LAWYERS DIVISION

SECTION ON REAL PROPERTY, TRUST AND ESTATE LAW COMMISSION ON MENTAL AND PHYSICAL DISABILITY LAW

 

REPORT TO THE HOUSE OF DELEGATES

 

RESOLUTION

RESOLVED, That the American Bar Association urges the United States Department of State and the United Nations and its member states to support the ongoing processes at the United Nations and the Organization of American States to strengthen protection of the rights of older persons, including the efforts and consultations towards an international and regional human rights instrument on the rights of older persons.

REPORT

This resolution calls on the relevant authorities within the federal government to support efforts to strengthen protection of the rights of older person, including consideration of an international and regional human rights instrument. As background and justification for this resolution, this report traces the movement toward an international convention on the rights of the older persons, and the national, international, and U.N. activities appraising and promoting the need for such a convention. The resolution is timely in that there is an increasing interest in a convention among governments and international non-governmental organization (NGOs) and the American Bar Association brings a valuable set of skills and values that can help guide upcoming developments.

See copy of complete report (21 pages) at Click Here.

 

New California case–elder abuse claim not prohibited by prior omitted spouse adjudication . . .

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In Estate of Dito (California Court of Appeal, First Appellate District, Case No. A128921) the court addresses several important issues relating to financial elder abuse and an omitted spouse claim. Frank’s wife Rosana died in 1995. Elenice had begun working for Frank and Rosana as a live in housekeeper in 1994. Two years after Rosana’s death, at the age of 94 Frank married Elenice in 1997. Elenice was 28 when she married Frank. Frank and Elenice had a prenuptial agreement in which they both waived their rights to alimony, maintenance, and spousal support in the event of divorce or death. Frank died in December 2004.

Elenice petitioned for letters of administration and for her share of Frank’s estate as an omitted spouse, and also claimed that the prenuptial agreement and the surviving spouse’s waiver contained in it were unenforceable. Elenice also claimed that Frank’s daughter Barbara was liable for financial elder abuse and should be deemed to have predeceased Frank pursuant to Prob. Code §259. Barbara also petitioned to administer Frank’s estate and to admit his 1994 will to probate (the 1994 will identified Rosana as Frank’s wife). Subsequently Frank’s grandson Terrence (Barbara’s son) petitioned to administer the estate whereupon Barbara withdrew her petition to administer the estate.

The probate court bifurcated the issues raised in the competing petitions. The first issue to be tried was whether Elenice was Frank’s surviving spouse was entitled to receive a share of his estate as am omitted spouse pursuant to §21610 et seq., as well as whether the prenuptial agreement and the surviving spouse’s waiver contained in it were enforceable. After bench trial, the probate court found that Elenice was Frank’s surviving spouse pursuant to §21610 et seq. and was entitled to a share of Frank’s estate as well as that both the prenuptial agreement and the surviving spouse’s waiver in it were invalid and unenforceable. Those decisions were affirmed on an earlier appeal and are not at issue in this appeal.

After Terrence lost his appeal, Barbara initiated an action in the probate court, alleging that Elenice committed financial elder abuse against Frank and that as a result Elenice should be deemed to have predeceased Frank pursuant to §259. The court sustained Elenice’s demurrer on res judicata grounds holding that Elenice’s spousal share and her entitlement to receive a share of Frank’s estate was already determined at the prior trial and that decision was final, and that all parties had a fair opportunity to litigate the issue and Barbara’s attempt to plead the same spousal property entitlement under a theory of financial elder abuse was barred and should have been raised at trial. Barbara appealed.

The court of appeal in the current case reversed, holding that Barbara’s petition was not barred by res judicata, but affirmed the granting of the demurrer on other grounds, with leave to amend. The court held that the primary right at issue in the former proceeding was Elenice’s personal right under §21610 to receive a share of Frank’s estate as an omitted spouse, whereas the primary right at issue in Barbara’s petition was Frank’s right not to be abused or defrauded which was a primary right that belonged to Frank and to the people who were entitled to assert that right.

The court held that the new financial elder abuse allegations had no bearing on the determination whether Elenice was an omitted spouse entitled to receive a share of Frank’s estate pursuant to §21610, et seq. Section 21610 specifies that an omitted spouse shall be entitled to a share of the estate unless one or more of the exceptions in §21611 applies. A finding of elder abuse is not one of the listed exceptions. Further, even if the elder abuse issue had been raised in the prior proceeding, a determination that Elenice committed financial elder abuse would not be a proper basis for denying her entitlement to a share of the estate under §21610 et seq.

Barbara’s petition also sought a determination that Elenice was deemed to have predeceased Frank pursuant to §259 as a result of the elder abuse. The primary right at issue under §259 was also the right of Frank’s right to be free from abuse. Section 259 simply provided a remedy for that primary right.  A §259 claim is distinct from a claim that an omitted spouse is entitled to a share of the estate notwithstanding the fact that it seeks a result that may appear to be contrary to the prior determination by the probate court that Elenice was entitled to a share of Frank’s estate.

“The parties and the court below appear to be operating under the assumption that a person found liable for elder abuse is deemed to have predeceased the decedent for purposes of any entitlement to property, interests, and benefits the abuser would otherwise receive by reason of the decedent’s death. While that may be the practical effect of section 259 in some cases, the statute does not necessarily disinherit an abuser entirely but rather restricts the abuser’s right to benefit from his or her abusive conduct.”

“Section 259, subdivision (a) provides in pertinent part that “’[a]ny person shall be deemed to have predeceased a decedent to the extent provided in subdivision (c)’ ” where it is proven that the person is liable for elder abuse of the decedent, acted in bad faith, and was reckless, oppressive, fraudulent, or malicious in the commission of the abuse. (Italics added.) Subdivision (c), in turn, provides in relevant part that “’[a]ny person found liable under subdivision (a)… shall not (1) receive any property, damages, or costs that are awarded to the decedent’s estate in an action described in subdivision (a)… , whether that person’s entitlement is under a will, a trust, or the laws of intestacy….’”

Section 259 does not necessarily entirely disinherit an abuser but rather restricts the abuser’s right to benefit from her abusive conduct.  “Thus, a person found liable under subdivision (a) of section 259 is deemed to have predeceased the decedent only to the extent the person would have been entitled through a will, trust, or laws of intestacy to receive a distribution of the damages and costs the person is found to be liable to pay to the estate as a result of the abuse.”  “Section 259 does not necessarily eliminate the abuser’s entitlement to a share of the estate; it simply restricts the value of the estate to which the abuser’s percentage share is applied and prevents that person from benefiting from his or her own wrongful conduct.”  Barbara’s §259 claim did not affect or threaten the determination that Elenice was a surviving omitted spouse under §21610. Elenice was still entitled to her share of Frank’s estate as specified in §21610, although she was not allowed to share in any damages and costs that she could be liable to pay to the estate as a result of her alleged elder abuse.  The court also distinguished Estate of Lowrie (2004) 118 Cal. App. 4th 220, 225 (stating that Estate of Lowrie did not address the scope of the remedy under section 259 but instead focused on the issue of standing; therefore, the court’s general description of the statute’s effect is not authority for the proposition that section 259 operates to completely disinherit a person found liable for elder abuse).

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Shortage of senior housing . . .

Article link, a shortage of senior housing resources Click Here.