May 14

Wait, Wait, I Can’t Die — I Don’t Have A Will Yet! (Part One)

This is the first of a two-part series on the use of wills.

Have you awakened during the night and worried about the fact that you don’t have a will yet? If so, you are not alone. A study conducted a few years ago found that 55% of all adult Americans do not have a will. Apparently, misery still loves company.

Do I Really Need A Will?

Why do you even need to have a will? Contrary to what many people believe — that, if you don’t have a will, your property will automatically be transferred (“escheat”) at your death to the State (what sounds like it would probably be a good idea right now to help balance California’s upside down budget) — in most cases, your property will simply be transferred to your family members. But, it may not be the family members that you want to benefit from your property. Or it may not be in the percentages that you desire. Or maybe you don’t want everyone in your family to share in your estate, preferring instead to leave it to one or two special family members.

What Is A Will?

A will is simply a legally enforceable directive that you create which states how your property is to be distributed at the time of your death. You can specify that family members or friends will benefit from your property at your death. Or, you can forego giving anything to family or friends and give all of your estate to your church, the ASPCA (American Society for the Prevention of Cruelty to Animals), or some other charitable organization.

In your will, you can create a laundry list of specific bequests by which you parse out every pot and pan, or other piece of personal property, to a lengthy list of recipients. Or you can simply state that you leave your entire estate to one or more individuals. Or any combination of these two types of bequests. The types of provisions to bequeath your property are only limited by your imagination.

And a will can be more than merely a directive for the distribution of your property at death. It can be used to nominate someone to serve as the guardian of your underage children in the event that you should die before your children become adults. Or it can be used to state whether you want special burial arrangements or, perhaps, that you wish to be cremated.

A Perhaps Ill-Advised Use of Your Will

A will can even be used to diss that family member that you never had the courage to tell off during your lifetime. Really! Most good lawyers will usually discourage a client from using a will to do that, but it can certainly be done. Imagine something like this: “I intentionally fail to make any provision for my daughter, Lucy, for the reason that she has completely ignored me since she completed her college studies at my expense. So, Lucy, while your brother and sister each enjoy their millions of dollars in inheritance, think about all of the times that you could have visited me in the nursing home, but didn’t do so.”

A standard disinheritance clause does the same thing yet doesn’t make you look quite so petty after your death.

Can My Spouse And I Save Money and Create a Joint Will?

I can’t recall a single occasion in which I have recommended to a married couple that they create a joint will. I think that most of my professional colleagues would usually agree. Doing so can raise the suggestion that there was a contract made between the spouses to make specific reciprocal provisions in their wills which can lead to litigation if one spouse decides to later create a separate will with different provisions that don’t benefit the other spouse.

Separate wills also permit spouses to address the different issues or circumstances that they may each have, such as dealing with children from a prior marriage, or the distribution of a spouse’s separate property.

And simple wills are usually sufficiently inexpensive that there isn’t much of a cost savings if a couple were to create a joint will.

Who Handles Your Probate?

If you use a simple will to provide for the distribution of your estate, chances are good that your will will have to be probated. (The advantages of avoiding probate, and how to do it, will have to be the subject of a future article.) In your will, you can nominate the person whom you would like to manage the probate administration process on your behalf. That person is called an “executor”, or a “personal representative”. You can nominate your child, another family member, a friend, or, if you have a sizeable estate, you can nominate the trust department of your bank. And, if you fail to nominate anyone, the probate court can appoint anyone who seeks the appointment, or even the local county’s Public Administrator.

Do I Really Need An Attorney to Prepare My Will?

Does an attorney have to prepare my will? In a word, “no.” But, I also don’t recommend that you extract a decayed tooth by yourself or that you stitch up a deep wound on your own. Sometimes, it makes sense to consult with a professional and have him or her do the work for you.

Many stationery stores sell a preprinted will in which you fill in the blanks. Or you can buy a package of legal documents from one of O.J. Simpson’s criminal defense attorneys who advertises them on television. However, in California, if a will is not formally witnessed, there are strict rules about mixing handwritten provisions with preprinted language in a will. Is it worth it to risk having your will later be determined to be invalid just to save a few hundred dollars? Such a result would completely frustrate your testamentary intentions.

And an experienced estate planner will most likely provide you with options that you didn’t even know were available to you. In most cases, a professional will earn their keep.

Most everyone will benefit from having a will. They tend to discourage arguments between family members after you are gone and they make certain that your property will be given to just the right person(s) upon your death. Simple wills are usually very modestly priced (as compared with more sophisticated forms of estate plans). Do your family a favor and make an appointment today with an experienced estate planning attorney to discuss creating a personalized estate plan.

In the next installment, we will examine what types of issues you will need to consider before you pay a visit to your estate planning attorney to prepare your will.

May 7

Can A Real Estate Agent Really Be Required To Disclose More Than What He or She Knows?

At some point in time, most of us have purchased a residence or some other piece of real estate and have used the services of a real estate agent or broker in the transaction. (For the sake of convenience, I will collectively refer to agents and brokers as “agents”.)

Real estate agents play a vital role in the real estate industry as they interface between sellers and buyers. Among other things, they assist sellers in making a home attractive for potential buyers and they offer their expertise in helping a seller determine an appropriate listing price. They also assist buyers in determining what the buyer really needs in a residence and what the buyer can realistically afford.

The Agent’s Duty To Disclose

One of the most important services that an agent can provide to a buyer, and particularly an inexperienced one, is to assist the buyer in evaluating a property’s condition so that the buyer does not buy a house which has numerous mechanical or structural surprises that will cost the buyer more than was expected to make the house livable.

In adopting Civil Code Section 2079, the California legislature recognized the importance of the agent’s experience and knowledge by requiring the agent to conduct a reasonably competent and diligent visual inspection of a property offered for sale and to disclose to the prospective purchaser all facts materially affecting the value or desirability of the property that an investigation would reveal. The real estate agent satisfies much of that duty through the use of the Transfer Disclosure Statement (TDS), a form which the seller and both the seller’s and buyer’s agents complete and provide to a buyer during the escrow.

But, the agent’s duty doesn’t end with his or her signature on the TDS. The law imposes a more far-reaching duty of disclosure on an agent than merely completing the TDS form, which only requires that they disclose facts and conditions which would be revealed by a reasonably competent and diligent visual inspection. California law requires an agent to actively try to learn material facts that the agent does not know that might affect their client in making a decision to buy a property.

The Agent Has To Dig To Learn Information

In Field v. Century 21 Klowden-Forness Realty (1998) 63 Cal.App.4th 18, the Court of Appeals (Fourth District) said that an agent must place herself in the buyer’s position and to ask herself what type of information the buyer would need to know in order to make a well-informed buying decision. Then, the agent must investigate facts which are not known to the agent and disclose to the buyer all material facts that might reasonably be discovered.

I tried a case some years ago in which an agent sold a property to buyers which appeared to them (and any reasonable person) to be a duplex. Each of the units had separate kitchen facilities and each was accessed through a separate entrance. The buyers had informed the agent that they intended to use the property as a duplex for their respective families. The agent knew that there were many illegally-created duplexes in the area where this property was located, but he never took it upon himself to investigate with the local planning and building officials whether or not this particular duplex had been legally created.

At trial, the agent testified that he had no actual knowledge that the duplex had not been legally created and sought to defend himself on the basis that he only needed to disclose the information that he actually knew.

The jury was given a contrary instruction, however, based upon the Field v. Century 21 Klowden-Forness Realty case, because the agent should have considered that, even though the agent didn’t have information that the duplex was illegally created, the legal status of the duplex was an important fact which the buyers needed to know to make an informed decision about buying that property. In returning a verdict against the agent, the jury found that he should have actively researched that information with local officials in order to properly inform his buyers.

A Buyer’s Failure To Investigate Does Not Absolve The Agent

The agent in my case also argued at trial that the buyers should have called the local building officials themselves to determine the legal status of the duplex property. However, a real estate agent, who owes a fiduciary duty to his or her client, and who usually has a superior knowledge about purchasing real estate over that of his client, cannot legally shift responsibility to the client to undertake that investigation. California law provides that the client has a right to rely upon the agent and that it is no defense that the buyer failed to exercise reasonable care to protect his or her own interests, or that the client might have learned the true facts by independently investigating the circumstances of the representations himself. Schoenberg v. Romike Properties (1967) 251 Cal.App.2d 154, 162; Sime v. Malouf (1949) 95 Cal.App.2d 82.

Agents Beware!

Most real estate agents are surprised to learn that they have an obligation to disclose to their client more information than they actually know and that they have to undertake an affirmative investigation of those facts which might be important for a buyer to know in deciding whether or not to purchase property. But, that is California law.

The extent of the agent’s affirmative duty to investigate and disclose facts to their client is not limitless. It depends upon the facts of the transaction and the buyer’s knowledge and experience, the questions asked by the buyer, and the nature of the property and terms of the sale.

What Are The Agent And Buyer To Do?

Diligent real estate agents should conduct an extensive discussion with their buyer to learn exactly how the buyer intends to use the property so that the agent will be better able to anticipate the information which would be important for the client to know to make the purchase decision. And, then, the agent should actually spend some time trying to think through the various issues which the specific property might possibly raise for the buyer’s anticipated use.

Similarly, an astute buyer should make certain that he or she has fully discussed with the agent how the property will be used, or what the buyer’s expectations are for the property. If the buyer has any unusual needs for the property, or if there is any expectation which is not customary in a garden variety residential purchase, the buyer should be certain to ask the agent about those issues so as to place the agent on notice that the information is important in the buyer’s purchase decision.

There is nothing worse than a real estate transaction that has gone bad. The buyer is unhappy because their dream home has become a nightmare. The seller is usually accused of having concealed information from the buyer, and the agents, who are the fiduciaries of their clients, are almost invariably made to refund some or all of their commissions to the clients. Worse yet, the seller and agents could get sued. The professional agent can avoid that, both for the agent’s sake and that of his buyer-client, by taking some time during the transaction to thoroughly investigate all of the facts about the property.

April 30

You Have The Right To Remain Silent – And You Probably Should

It’s a Tuesday morning, you’ve had your cup of coffee and are on your way to work, and, through no fault of your own, you are involved in an automobile accident. As your car comes to a rest, you are most likely confused, perhaps a bit dazed, and the adrenaline surge has left you just as quickly as it arrived. Other motorists have begun to stop and ask you if you are alright. And, within a brief period of time, the police arrive to investigate the crash.

Right now, at perhaps the worst possible moment for you, your right to pursue a personal injury claim for the injuries you have sustained could be in serious danger. You are about to be put through a series of different people questioning you about the collision and the injuries which you may have suffered, whether it is the other driver, other motorists who may have stopped, the investigating police officer, or, eventually, the other driver’s insurance claims adjuster. And the statements that you make to any of them could cause serious damage to your case.

Your Injuries May Not Be Immediately Apparent

Because of the physical forces that are involved in car crashes, by far, the most common injury that motorists sustain are soft tissue injuries – strains of ligaments, tendons and connective tissue, usually of the neck and back. Physicians and physical therapists will almost universally agree that you may have experienced one of these soft tissue injuries in the crash, yet you feel nothing at the scene of the accident. It may be only during that night, or the next day or two, that your neck or back begins to stiffen and you begin to feel the pain. Yet, you have everyone, first at the accident scene, and then later, pressing you for the details of your injuries.

At the collision site, even if you don’t then feel any aches or pains, you should never adopt an unequivocal stance that you have not been hurt. Doing so will only serve to cast some doubt at trial about the validity or severity of your injury claim if you later do begin to experience pain. Instead, you should politely thank the motorists for stopping, but you don’t need to answer their inquiries about the nature or severity of any possible injuries.

And, when approached by the other driver (who caused the collision) who wants to talk with you about the collision, resist the urge to engage in argument. It wins you nothing to do so, and later, at trial, hearing the other driver describe to the jurors that nasty conversation will cause you much embarrassment and can give the jury the idea that you are a bully or a hothead. And that’s not good for your case.

Do You Talk To The Investigating Police Officer?

Where an accident involves bodily injury to any driver or passenger, law enforcement officers will conduct an accident investigation and later prepare an investigation report. As a part of their investigation, the police will want to talk with you since you may be the best witness to the collision and its causes. Should you answer the officer’s questions? Yes, answer honestly. However, your answers should be concise and you should only answer the specific question asked. And, do not under any circumstance admit any fault in causing the accident. Fault is something that judges and juries decide – not you, who has just been shaken up in a collision and who doesn’t yet have a full picture of the entire incident.

And, importantly, do not unequivocally deny to the officer that you suffered any injury. Instead, when the officer asks if you were injured, if you don’t yet feel any aches or pains, you simply tell the officer that it is too early for you to say for sure. Then, leave it at that.

“May I Record Your Statement?”

After the collision, the other driver will report the crash to his or her insurance company. The insurer will then assign the claim to one of its adjusters. Understand a very important concept: The job of that adjuster is to protect the company’s money. It is not to try to help you.

The adjuster may well call you at home or work to ask you about the details of the collision or your injuries. The adjuster will quite likely even ask to record your statement about the crash. Don’t. Just don’t. Fight your natural tendency to be helpful. You have absolutely no obligation to submit to the adjuster’s interview. And, trust me, the interview which you provide the adjuster will not be so convincing that the adjuster will want to immediately write you a check for your medical bills and provide you a rental car. That interview will be used for the purpose of trying to see if you will make an admission about the cause of the collision or about your injuries that can be used against you later on during an arbitration or trial of your injury claim. You should graciously decline the request to be interviewed and advise the adjuster that your attorney will contact her to discuss the claim.

If you do submit to such an interview, and you unwittingly make a statement which suggests that your own driving may have been a cause of the collision, or that you weren’t really significantly injured, you have just harmed your case. You will hear that statement (called an “admission”) repeated to you during your deposition, and later during your trial or arbitration.

I recommend to my clients that they allow me, as their attorney, to talk with the insurance adjuster. An experienced personal injury attorney knows how to give the adjuster the information that he or she needs to do her job in establishing the appropriate monetary reserves for the case, but which steers clear of making statements that can harm your case.

Once your lawsuit is filed, almost invariably, the defense attorney will ask to take your deposition. (A deposition is an opportunity for the lawyer to ask you questions about the accident and your injuries while you are under oath.) The transcript of the deposition will be used at trial by the insurance company’s attorney to try to show the jury that you are confused in your recollection of the events, or, worse yet, that you are not telling the truth. Under most circumstances, you must submit to a deposition. But, you will be accompanied to the deposition by your attorney who can raise appropriate objections to questions, or even instruct you to not answer certain inappropriate questions, if the circumstances warrant it. In other words, there is some degree of protection for you in that process.

So, if the insurance defense lawyer will always have the chance to ask you questions during a deposition, then why should you create an additional opportunity for possible misstatements by your providing the adjuster a recorded interview shortly after the collision? That’s right; you shouldn’t. Instead, opt to remain silent.

What You Should and Shouldn’t Do

In short, if involved in a collision, you need not, and should not, talk with other motorists, or the other driver, about what caused the collision or whether or not you have been injured. You should talk with the investigating officer about the events of the crash, and, if you can already feel that you have been injured, tell the officer that. But, if you don’t feel injured, do not deny to the officer that you were injured in the collision. Instead, simply tell the officer that you are not sure whether or not you were injured.

A Last Thought …

Finally, one last tip about what to do after an auto accident. Most people carry a smart phone that is equipped with a camera which can take still photos or video. If you are physically able to do so, right there at the scene of the accident before the wreckers arrive and move the cars from where they came to rest, use your smart phone to photograph or video the cars involved in the crash. Be sure to capture the location of all of the cars, particularly with respect to each other. Photograph or video the crush damage done to either vehicle. And, if you can do so without causing an incident, be sure to get the other driver in some of the photos or video. Those photographs or videos can be like gold for the attorney who will eventually handle your case.

Now, drive carefully because I am out there sharing the roads with you!

March 19

Two Heads Are Not Always Better Than One

In my estate planning practice, I have frequently had clients who wanted to designate one of their children to serve as their fiduciary, but were afraid that they would hurt the feelings of the other child or children who weren’t nominated. For example, in the instance of a living trust, the clients would want to name one child as successor trustee, but were afraid that, in doing so, they would create the appearance of favoring that one child and thought that that might create dissension among their children after their deaths.

Often, such clients will ask to nominate several or all of their children as co-trustees. Almost invariably, I discourage them from doing that. While I also don’t wish to see any distrust or dissension among siblings after the parents are gone, there are problems that creating co-trustees or other co-fiduciaries can create.

Inconvenience

Often, when dealing with a bank, or while undertaking some other financial transaction or sale of real property on behalf of the trust, the bank or escrow will want to have all of the trustees sign the transaction documents. Where the children who are co-trustees live in different states, this can lead to delays and inconvenience in having to circulate the documents among all of the children for their signatures.

Confusion and Possible Litigation

More importantly, however, having co-trustees can lead to confusion. For example, when dealing with third parties, those third parties can never be sure if they need only deal with one of the co-fiduciaries, or if they need to have both of their agreement. And where two co-trustees cannot agree on whether to take a proposed course of action, that may lead to litigation in the probate court to try to obtain court approval for the intended action, or to prevent the other trustee from taking the proposed action.

Liability for a Co-Fiduciary’s Fraudulent Conduct

Worse yet, the breach of fiduciary duties by one of the trustees can be imputed under some circumstances to the other trustee, which can create serious legal consequences for the innocent trustee.

I am familiar with a current probate administration in Southern California where the decedents named two of their children to be co-executors. During the course of the estate’s administration, the daughter, who worked for some accountants and was thought to have greater financial experience, handled most of the estate’s affairs while the son stood back and allowed her to do so. Unfortunately for the son, however, during the months that the estate’s administration was being handled by the daughter, and unbeknownst to the son, the daughter misappropriated substantial amounts of money from the probate estate’s accounts. Many creditors, including taxing agencies, were not being paid. Moreover, in the midst of the estate’s administration, the daughter quit her position as co-executor and moved to a distant location. She refused to communicate with her brother to transmit to him even simple documents about the estate’s financial condition.

At the time that the son was required to report to the court on the financial condition of the estate, he had to disclose that his sister had misappropriated the estate’s monies. The court then surcharged both the sister and the brother over $140,000, which requires them to repay the estate the stolen funds so that the creditors can be paid off and to permit a distribution of the remaining assets to the other beneficiaries. Applying California Probate Code Section 9631(b)(2), the court reasoned that the brother had improperly delegated the administration of the estate to his co-executor sister. The court didn’t care that the brother had received none of the monies misappropriated from the estate by his sister. They were both liable as co-executors.

I surmise that the court’s decision in that case has now created some real dissension between these siblings, something that the parents probably wanted to avoid and what they could never have conceived with their decision to make their children co-executors.

What Parents Should Do

So, what should parents of multiple children do in nominating an executor or trustee in their estate plan? They should select the child that they believe will do the best job in serving as the fiduciary, whether as an executor or as a trustee. A fiduciary needn’t have any special fiduciary training; however, I do recommend to my clients that they consider naming the child who is most accustomed to working under rules and regulations, or the child who is accustomed to maintaining books of account in their professional or personal life. And, if there is any question about a child’s honesty or integrity, or if a child is having serious financial troubles of his own, then that child should usually always be avoided.

And, then the parents should talk with their children and tell their children that they have made a decision to select the one child as the fiduciary and to give that child their vote of confidence to the other children. If the parents truly believe that naming one child as the fiduciary will create dissension with the other siblings, then the parents should consider naming another family member or a friend. Or perhaps their trusted accountant. Or they can name a private professional fiduciary or a bank’s trust department as the fiduciary.

While the parents’ concerns about maintaining sibling harmony after their own deaths is admirable, those parents should consider other alternatives instead of naming two or more of their children co-fiduciaries because that can be a recipe for a real disaster.