Before litigation begins, and throughout the litigation, attorneys should attempt to determine what assets the defendant owns (or controls through a business entity, spouse, or other “cooperative” individual).  Techniques for discovering a defendant’s assets include asset searches, written discovery, and subpoenas.

Once information regarding the defendant’s assets is obtained, attorneys should consider a writ of attachment.  Attachment is a prejudgment remedy that allows a creditor to seize the assets of the defendant to secure a judgment, should judgment later be awarded to the plaintiff.  The property to be attached does not need to be the property that was misappropriated from the elder.

Although attachments are available on motion, attorneys should consider proceeding ex parte, without notice to the defendant.  Because the basis of the financial elder abuse action itself is the wrongful taking of money or property from the elder, attorneys will often be able to meet the irreparable injury or exigent circumstances test required for obtaining ex parte relief.  Using the ex parte process to obtain a right to attach order and writ of attachment can be essential to ultimately recovering the money or property that was wrongfully taken from the elder.

If the defendant owns real property, a lis pendens should also be considered.  A lis pendens is a document recorded with the county recorder’s office for the county in which the property is located.  The purpose of a lis pendens is to prevent a transfer of the property by providing notice of the claim asserted by the plaintiff and thereby clouding title.

Securing property pending a judgment is a critical component of litigating a financial elder abuse case to ensure that the elder can obtain recovery of the assets that were wrongfully taken.

With respect to a future appeal, the statement of decision provides a record of the trial court’s reasoning, which the appellate court may review in determining whether the trial court’s decision is supported by the evidence and the law.

If a statement of decision is not issued and the case proceeds to an appeal, the appellate court will invoke the doctrine of “implied findings.”  This means that the appellate court will presume that the trial court made all factual findings necessary to support the judgment for which substantial evidence exists in the record.  In other words, the necessary findings of “ultimate facts” will be implied and the only issue on appeal is whether the “implied” findings are supported by “substantial evidence.”  Invoking the doctrine of “implied findings” may result in affirmance on appeal of a judgment or order that otherwise might have been reversed.

Accordingly, when an estate litigation case proceeds to a nonjury trial, if an attorney anticipates filing a future appeal he should timely request a statement of decision from the trial court.

On January 1, 2010, new statutes governing the enforcement of no contest clauses became operative, with respect to truststhat became irrevocable on or after January 1, 2001.  Prob. Code, §§21310-21315.

The applicability of the new statutes is significant because the standard to bring a direct contest, without triggering the enforcement of a no contest clause, has changed from “reasonable cause” to
“probable cause.”

Under the former standard, Probate Code section 21306(a), a no contest clause was enforceable against a contest brought without “reasonable cause.”  Reasonable cause is defined as follows:
“the party filing…the contest has possession of facts that would cause a reasonable person to believe that the allegations and other factual contentions in the matter filed with the court may be proven…or are likely to be proven after a reasonable opportunity for further investigation or discovery.”

Under the new standard, Probate Code section 21311(a)(1), a no contest clause is enforceable against a direct contest that is brought without “probable cause.”  Probable cause is defined as whether “if, at the time of filing a contest, the facts known to the contestant would cause a reasonable person to believe there is a reasonable likelihood the requested relief will be granted after an opportunity for
further investigation or discovery.”

Although the Legislature intended to simplify the law pertaining to no contest clauses, we anticipate the new “probable cause” standard will be the subject of future litigation.

The standards for when an accounting is due vary considerably.  For example, trustees must account yearly, on change of trustee, and at termination of the trust, unless the trust modifies or waives the duty to account, subject to certain limitations.  Conservators must account within one year of appointment, and then every two years thereafter, unless required to do so more frequently by court order.  In some situations, third parties have a legal right to demand an accounting from you, irrespective of these deadlines.

The actual content of what must be set forth in an accounting is, for the most part, the same for all fiduciaries.  A fiduciary must explain all payments, identifying the payor, payee, amount, and purpose, made during the accounting period.  A fiduciary’s accounting must reflect gains and losses on sales of non-cash assets during the accounting period, based on the value of those assets at the beginning of the fiduciary’s accounting period.  A fiduciary must be prepared to defend the truth of each item in his or her accounting with documentary evidence.  It is easy to see how the accounting process can become quite daunting.

There are several general pre-emptive steps a fiduciary can take to make the duty to account easier to manage and fulfill:

1. Obtain copies of all bank statements for the accounting period.  For conservators, you will also need to have original statements for certain months in the accounting period.
2. Pay recurring expenses, such as monthly utilities, using online payments.  Whenever possible, pay for goods and services by check, and write descriptive information about the purpose of the transaction on the memo line.  If you are a fiduciary pursuant to a court order, you can ask the court to authorize cash allowances, and waive your duty to account for those allowances.  Absent court order, try to avoid ATM withdrawals of cash, or checks to cash, unless absolutely necessary, because these are nearly impossible to prove.
3. Avoid using the assets you are managing as a fiduciary as your own.  If you believe you are entitled to personal reimbursement from the assets you are managing, discuss this with your attorney before doing so.
4. Keep an itemized, periodically updated log of all account activity for your personal reference. 

By following these steps, you and your attorney will be able to quickly and confidently generate and defend your accounting.

All of these people – trustees, executors, attorneys-in-fact, and agents – are “fiduciaries” with respect to the person whose benefit they are charged with serving.  A fiduciary owes duties involving good faith, trust, special confidence, and candor towards another.  Trustees owe these duties to trust beneficiaries; executors, to the heirs under a will; attorneys-in-fact and agents, to their principal.  Without knowing it, many people already have a fiduciary relationship with someone else in their lives; spouses, for example, owe fiduciary duties to each other.  Put plainly, fiduciaries must exercise the highest level of care and trust to the persons to whom they owe duties.

In choosing the right fiduciary, it is important to consider the seriousness of the responsibility and duties involved.  This is as much a practical question as a legal one.  If your eldest child is heavily in debt and has a track record of financial missteps, he or she may not make a good fiduciary.  If you have children from at least two different relationships, and intend on leaving a share of your estate to all of them, you should consider whether these children get along with each other prior to choosing one of them as a fiduciary.  If you have a child with special needs, for whom constant care and supervision will be required, you should consider who in your family, if anyone, would be attentive enough to cater to those needs.  In all cases, you should consider your family’s dynamic and relationships, and perhaps discuss the “job” with your prospective nominees prior to naming them in your trust, will, or other document.  Sometimes, it may be prudent to nominate a private professional fiduciary or a financial institution, as opposed to a family member.

There is no general answer to the question of “who should be your fiduciary?”  You must take the time to carefully analyze the facts of your specific situation before choosing a fiduciary.  Doing so can help save your estate and your family’s relationships down the road.

In some instances, the elderly witness is disqualified from testifying based on incapacity.  A person may be disqualified to be a witness if he is incapable of expressing himself concerning the matter or incapable of understanding the duty to tell the truth.  (Evid. Code, §701)  The party objecting to a proffered witness has the burden of proving the witness’ lack of capacity.  (Comment to Evid. Code, §405) 

However, a more common situation is when an elderly witness is not “incapacitated,” but suffers from some form of cognitive impairment.  If a witness is not disqualified based on incapacity, his testimony on a particular matter is admissible if the witness has personal knowledge of the matter.  Against the objection of a party, such personal knowledge must be shown before the witness may testify concerning the matter.  (Evid. Code, §702(a))  The court may exclude the testimony of a witness for lack of personal knowledge only if no jury could reasonably find that the witness has such knowledge.  (Comment to Evid. Code, §701)  Therefore, the Evidence Code has made a person’s capacity to perceive and to recollect a condition for the admission of his testimony concerning a particular matter instead of a condition of his competency to be a witness.  (Comment to Evid. Code, §701)  If there is evidence that the witness has the capacity to perceive and recollect, the determination whether he in fact perceived and does recollect is left to the judge or jury.  (Comment to Evid. Code, §701) 

When preparing for trial involving an elderly witness, the attorneys should be prepared with medical evidence to support their respective positions regarding capacity and, if the witness actually testifies, be prepared to question the witness regarding his personal knowledge of the matter

The attorney-client privilege can only be raised by the “holder of the privilege.”  The holder of the privilege is usually the client, but this changes if the client becomes incapacitated or deceased.  For example, if a client is incapacitated, and a court has appointed a conservator for the client, then the conservator is the holder of the privilege.  If a client is deceased, then the successor-in-interest (such as a trustee or executor) is the holder of the privilege.  In this way, the client’s fiduciary succeeds to the attorney-client privilege previously held by the client.

 Additionally, when a fiduciary (such as a conservator, personal representative, or trustee) hires an attorney, the privilege belongs to the office of the fiduciary rather than the person serving as the fiduciary.  Thus, if the fiduciary is removed or resigns, the new fiduciary becomes the holder of the privilege, and effectively succeeds to the attorney-client privilege previously held by the prior fiduciary.

 It is easy to see how, over the course of protracted fiduciary litigation, communications with your lawyer that you believed were confidential at the time they were made might be subject to disclosure at a later time.  Accordingly, it is especially important for attorneys and clients involved in fiduciary litigation to keep attorney-client privilege issues in mind when they begin their relationship.  Clients in these cases should (obviously) still speak honestly and candidly with their lawyer, but should exercise discretion to direct those communications to matters at issue before the court. 

 Fiduciaries should be aware that a lengthy, emotionally-driven, “venting” e-mail filled with inflammatory comments that is sent to a lawyer today could come back to haunt them tomorrow.

Joint Tenants

Joint tenancy is a form of ownership that includes a “right of survivorship.”  At the first spouse’s death, his or her interest passes to the surviving spouse by operation of law.  In other words, the property passes without probate administration, and passes to the surviving spouse irrespective of the terms of the deceased spouse’s will.  While this is a convenient and inexpensive method of passing real estate to a surviving spouse, joint tenancies can have negative tax consequences.  Upon the death of the first spouse, only the deceased spouse’s interest in the joint tenancy receives a “step-up” in basis for capital gains tax purposes.  For a married couple that has owned a home in the Bay Area for decades, this can result in increased capital gains taxes if the surviving spouse sells the residence.

Community Property

California utilizes the community property system for property owned by married couples.  If an asset is community property, then each spouse owns one-half of that asset.  The general presumption is that property acquired during marriage, and the income earned from that property, is community property.  Unlike property held in joint tenancy, each spouse has testamentary control over their one-half interest in the community property, which means that the property will pass according to the terms of the deceased spouse’s will.  There is no right of survivorship and the property may be subject to probate administration.  Holding property as community property is advantageous from a tax standpoint because upon the death of the first spouse the deceased spouse’s one-half interest and the surviving spouse’s one-half interest in the property receive a step-up in basis.

Community Property with Right of Survivorship

Community property with right of survivorship combines the ease of administration provided by a joint tenancy with the tax advantages of community property.  It allows the surviving spouse to avoid probate with respect to jointly-held assets while at the same time obtaining the step-up in basis afforded to community property.  Upon the death of the first spouse, the deceased spouse’s property passes to the surviving spouse by right of survivorship, without administration.  In addition, both the deceased spouse’s one-half interest and the surviving spouse’s one-half interest in the community property receive a step-up in basis.  For married couples without a living trust, this is often the preferred manner of taking title.

The New York Times recently ran an in depth piece analyzing the various sides of one such dispute involving a former Oscar-winning actress – Love and Inheritance:  Anatomy of a Family Feud.  Although the amount of money at stake in this story is much higher than the usual dispute, the actions and emotions of the various family members are quite common.

Estate planning involves more than determining who will get your estate when you die.  It can also be used to plan for the possibility of incapacity — to make plans now that willdetermine how your health care and finances will be managed if you experience poor mental or physical health in the future.  Here are a few simple tools for incapacity planning:

Power of Attorney

A power of attorney is a document that authorizes someone you nominate, called an “attorney-in-fact,” to make financial decisions for you.  Powers of attorney can be “springing,” meaning that your nominee’s authority as attorney-in-fact only begins after you become incapacitated, or “immediate,” meaning that your nomination takes effect immediately and remains effective should you become incapacitated.

Advance Health Care Directive

An advance health care directive authorizes someone you nominate, called an “agent for health care,” to make medical decisions for you.  The advance health care directive can also state your preferences for end-of-life and post-death decisions, such as whether to use artificial means to prolong your life, and for what purposes, if any, your organs can be donated.

Nomination of a Conservator

Estate planning also allows you to nominate someone to serve as your conservator if a court finds that a conservatorship is necessary and appropriate.  A “conservatorship” is a legal determination that a person should not make medical or financial decisions for him or herself, or is substantially unable to resist fraud or undue influence.  As a result of this determination, the court appoints a “conservator” to make decisions for that person, giving preference for appointment to that person’s nominee.  This nomination can be made in a separate document, but is typically included as a provision of the advance health care directive or power of attorney.

The consequences of failing to nominate an attorney-in-fact, health care agent, or conservator in advance of incapacity can be serious.  Having an attorney-in-fact and health care agent can eliminate the need for a court-supervised conservatorship should you become incapacitated.  In the event a conservatorship is still necessary, nominating a conservator greatly increases the likelihood that the person you want to serve as your conservator will be appointed.  Proper planning for incapacity can potentially save tens of thousands of dollars in legal fees, saving money for your care and for your heirs.