April 2009 Archives

April 5, 2009

Who Would Receive Your Property if Your Testamentary Transfer is to a Disqualified Transferee Under California's Care Custodian Statute?: Part III

Who receives your property if you die without an estate plan, if your designated beneficiary(ies) predeceases you, disclaims their interest in your gift or is found to be a disqualified transferee?

Following our example in related postings on March 11,2009 and April 4, 2009 regarding California's Custodian Care statute (California Probate Code Section 21350), Ken was found to be a disqualified recipient of his friend's property and was not allowed to accept any property left to him by Bob, in Bob's Last Will and Testament.  

Who then would receive Bob's property?  Let's assume Bob only provided for Ken and did not provide for a contingent beneficiary in the event Ken predeceased Bob.  Or alternatively, Bob's contingent beneficiary properly disclaimed any interest that the beneficiary might have in Bob's estate.  

Bob's estate would pass to his heirs at law as determined by intestate succession.  Bob's blood line would be followed until the first level of relatives were identified and each heir at that level would share Bob's estate. If an heir at that level is deceased, the issue of the deceased heir would take that share.

California Probate Code Section 6401 codifies to whom and in what share property will pass that is not otherwise effectively disposed of by Will or other estate distribution device as follows:

   (a) As to community property, the intestate share of the
surviving spouse is the one-half of the community property that
belongs to the decedent under Section 100.
   (b) As to quasi-community property, the intestate share of the
surviving spouse is the one-half of the quasi-community property that
belongs to the decedent under Section 101.
   (c) As to separate property, the intestate share of the surviving
spouse or surviving domestic partner, as defined in subdivision (b)
of Section 37, is as follows:
   (1) The entire intestate estate if the decedent did not leave any
surviving issue, parent, brother, sister, or issue of a deceased
brother or sister.
   (2) One-half of the intestate estate in the following cases:
   (A) Where the decedent leaves only one child or the issue of one
deceased child.
   (B) Where the decedent leaves no issue but leaves a parent or
parents or their issue or the issue of either of them.
   (3) One-third of the intestate estate in the following cases:
   (A) Where the decedent leaves more than one child.
   (B) Where the decedent leaves one child and the issue of one or
more deceased children.
   (C) Where the decedent leaves issue of two or more deceased
children.

As Bob did not have a wife, children, siblings, etc., the gift would continue down the line and in this case stop at Bob's second cousin.  Presumptively, these distant relatives will prevail over Bob's intent and Bob's property will pass to the second cousins that Bob barely knew.

The same statutory structure to determine the recepients of a decedent's estate holds true for those who pass away without directing the disposition of their assets such as a Will.

There are anticipated changes to the California Care Custodian statute.  Assembly Bill 2034 directed the California Law Revision Commission to look at the current law and its effectiveness in protecting a dependent transferor against abuses.   The goal is to protect while at the same time preserve the rights of the transferor to make desired dispositions (absent coercion) without discouraging the altruistic person from providing services.   

The Commission has issued a recommendation for improvement to Probate Code Section 21350. Senate Bill 105 has been introduced to implement the Commission's recommendation.
April 4, 2009

Disqualification of an Inheritance under California Probate Code Section 21350: California's Care Custodian Code: Part II

How could Ken be disqualified as Bob's beneficiary?

In our example posted on March 11, 2009, the contestant of Bob's Will (Bob's second cousin) who is attempting to circumvent Bob's gift to Ken, will attempt to convince the court that Ken is a Care Custodian as described under Probate Code Section 21350 and invalidate Bob's intent to bequest Bob's property to Ken.  

Should the cousin prevail, it is logical to infer this to be an unfair resolution and that Ken logically should be able to receive Bob's property as both were such good friends.  It is apparent that Bob appreciated Ken, especially in light of all Ken's assistance during those last months of Bob's life.  It also makes sense that without other family, Ken would be the logical choice as a beneficiary of Bob's estate.

Probate Code Section 21350 provides for specific situations in which a gift to certain persons will be invalidated.  One such circumstance in which a transfer would be deemed invalid is that from a dependent adult to the "care custodian" of that dependent adult.

The question would then be, what is a care custodian?  In addition to the obvious defining attributes of what might constitute a care custodian such as the administrator or an employee of facilities providing services to dependent adults (nurses, health care workers, etc.), California Welfare and Institutions Code Section 15610.17  includes in the definition those "persons providing health services or social services to elders or dependent adults".

Now the question becomes, what would constitute health or social services?  As a result of conflicting opinions in the lower courts, the matter was brought to the California
Supreme Court in Bernard v Foley (2006) 39 C4th 794, 47 CR3d 248.  In the court's decision they found that an unrelated person may be a disqualified care custodian if that person provided "substantial, ongoing health services" to a dependent adult.  

There is a previous case wherein the court dismissed the notion of invalidating the transfer to a care custodian if the care giving was a direct result of a preexisting friendship and relationship.  The Bernard Court apparently didn't agree with the whole friendship exception and added that it doesn't matter if the care giving relationship naturally arose out of a preexisting friendship as in the case of Bob and Ken.

Then one must ask themselves, what exactly are those health and social services that, if performed by a potential beneficiary of a testamentary gift, would disqualify the potential recipient and invalidate the gift?  The caregivers in Bernard assisted the dependent adult by doing her laundry, helping her to and from the bathroom, administering oral medication, cleaning the bedroom and typically performing such acts that one would hope a lifetime friend would do for you in your time of need.

In our hypothetical, there is a very good chance that Ken would be considered a care custodian and Bob's gift to Ken will be invalidated as a transfer from a dependent adult to a care custodian of that dependent adult.  If Ken is determined to be a disqualified beneficiary, Bob's cousins, some whom he has never met, will receive and share Bob's property.

You might try to say that the ne-er do well cousins are violating the Will's no-contest clause and therefore will lose their right to receive the estate.  However, a no-contest clause will not be enforceable against a beneficiary who brings the contest on the grounds of the invalidity of a transfer to a disqualified person.

This is not an isolated case.  With the age demographics as they are these days and other contributing factors, it is not that unusual to find people leaving their estates to friends rather than remote relatives.  Despite the fact that you care for and love your lifelong buddy and want to recompense your relationship with a bequeathing gesture,  should your friend lend a helping hand in those last days, such acts of compassion and kindness could very well be penalized. 

The code's intent is to limit, reduce if not eliminate the instances of abuse to elders and dependent adults.  Many in this category are manipulated and unduly influenced to transfer their property to persons who are not the objects of their love and affection.  Of course, in enforcing and interpreting the code, the good Samaritan and lifetime friend has been penalized.

A qualified estate planning professional will be able to advise you on how to avoid an unwanted care custodian consequence.  One method is to obtain a Certificate of Independent Review from a lawyer other than the drafting attorney.  However, the downside of this solution is that you would need to hire two attorneys. One attorney would draft the documents and the other would interview you and review your estate plan to make certain your testamentary wishes are not the result of menace, duress, undue influence or fraud.  Absent any of the aforementioned, the reviewing attorney will sign a Certificate of Independent Review.

Assuming Ken is found to be a disqualified transferee, who would receive Ken's assets?