A person signs a last will with the help of a San Jose attorney
Lonich Patton Ehrlich Policastri

What Goes Into Setting Up A Last Will?

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The idea that you will not be around forever is never an easy truth to face, and knowing that you will leave behind loved ones makes it even more challenging. 

In order to make the situation easier for your loved ones, it is essential that you take the appropriate actions to guarantee that you will leave them with their intended assets.

The most important thing that you can do to ensure that your property is handled appropriately is to create a last will. A will is a legal document that dictates who will receive your property, names guardians for your children, and even allows you to specify funeral arrangements.

Steps to Creating a Last Will

1. Do Your Research

The most important step in setting up your last will is to conduct research and do your due diligence to ensure that the appropriate legal measures are taken. These specific processes vary by state, thus it is highly recommended to conduct this process with the assistance of a qualified and reputable lawyer.

2. Aggregate Your Assets

When setting up your last will, it is imperative that you create an organized list that includes all your real estate, bank accounts, insurance policies, and retirement accounts. Make sure that all of the account numbers, answers to security questions, and any other necessary information is included.

3. Choose Your Executor

An executor of the will is the person legally responsible for ensuring that all specifications of your will are carried out, your assets are appropriately distributed, and that your financial assets are resolved.

It is highly recommended that this person receives part of your assets since they bear the responsibility of executing your will.

4. Choose Your Beneficiaries

Your beneficiaries are the people who will receive your assets upon your passing. It is important that you are specific with naming the people and stating the amounts that they will receive. 

A person names their beneficiaries in their last will with the help of an attorney.

5. Name Guardians for Your Children

If you have children under the age of 18, it is recommended to make a list of at least three guardians (in order of preference) for your children if you pass away. This ensures that there are people of your choosing who will take care of your children if the first choice is unable to do so. If you have the means, it is wise to leave the guardians with financial assistance by naming them as beneficiaries as well.

6. Select a Witness to Sign Your Last Will

You must have a witness sign your will who is not a beneficiary. The number of witnesses involved and the formalities of signing vary by state. It is important that the specifications are carried through exactly as mandated or else your will may not hold up during probate 

7. Keep Your Will In a Safe Location

Once your last will has been lawfully created, it is important to keep it in a safe, secure, and accessible location. It is also wise to inform a trusted person, perhaps your executor, of its locations.

Updating Your Last Will

You should always update your will after the event of a significant life event regarding:

  • A marriage or divorce
  • An acquisition of new property
  • The birth of a child
  • The death of a spouse
  • The sale or purchase of a business

The Bottom Line

If your estate is particularly large, you have joint custody of a property, you own a business, you own property abroad, or if you think someone may question the validity of your will then it is especially important to hire a lawyer for your last will.

Lonich Patton Ehrlich Policastri in San Jose is a reputable law firm whose lawyers make it their priority to protect your assets from an extensive probate process. 

If you are living in San Jose and want to leave a legacy for your loved ones, our attorneys will help make your intentions a reality. Set up a free consultation with us. 

A person signs a buy-sell agreement
Lonich Patton Ehrlich Policastri

Buy-Sell Agreement In Family Business

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You may have heard of shareholder agreements but have you heard of the more specific Buy-Sell Agreement? This is a fundamental succession planning tool when it comes to owning and operating a business. It is especially helpful in the case of family businesses. 

What Is A Buy-Sell Agreement?

Similar to how a will dictates how assets will be transferred in death, a buy-sell agreement is a legal document that dictates where an owner or partner’s share of a business will go in the case of certain life events (i.e. death, retirement, etc.)

Having an agreement like this in place protects the family business. It protects family assets so that everything stays in the family’s control and so that nothing can be transferred outside the family. These agreements can dictate the succession of ownership.

How It Protects Your Family Business


Often, for a myriad of reasons, one family member or partner will try to sell their share of the business. This can cause issues if they’re trying to sell their share outside of the family.Without an agreement in place, they can sell their share off legally despite their intentions. Setting up a buy-sell agreement means you can dictate how shares and assets are transferred or sold. You can create certain stipulations that prevent a family member from selling outside the family. 

A married couple sets up precautions of a divorce in their buy-sell agreement

It can also help to have an agreement in place in case of a divorce. In California, any assets acquired during a marriage qualify as community property. This means that a spouse of the family owner can lay claim to their share of the family business. If you create a strict buy-sell document that requires the spouse to sell their share back to the company in the case of a divorce, you can prevent the share from transferring outside of the family. 

The agreements are meant to be put in place in preparation of certain life events. If there is a divorce, or a retirement or a death, a plan is in place to prevent chaos.  It is also great to have in place in the case of incapacitation which can include dementia or other things that prevent a person from acting in a mentally sound way or making informed choices. 

Having a buy-sell agreement can assure the long term survival of a family business. Why would you not want to have that added layer of protection? 

A Buy-Sell Agreement…

  • Ensures shares stay in the family
  • Creates a special space where shares can be bought and sold under dictated parameters 
  • Identifies potential future events and conditions that trigger the agreement. These will determine what happens to that share
  • Determines the valuation of business shares
  • Specifies the source of funding for the purchase. Where does the money that will be paid in the transfer come from? 

If you own a family business or a partner in one, you should consider the benefits of having a buy-sell agreement. That extra protection can ensure the longevity of your company. Live in the greater San Jose and Bay area? Set up your free consultation with Lonich Patton Ehrlich Policastri today.

A man, granted power of attorney, signs a legal document.
Lonich Patton Ehrlich Policastri

How To Get Power Of Attorney In California

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There are many reasons residents of California seek out power of attorney(POA). If you have an older parent with dementia who struggles to act on their own, POA is a way to assure decisions that need to be made are made soundly. If you are being deployed, granting someone power of attorney can allow them to act for you in necessary areas while you are away. If you own a property and reside far away from it, you can grant POA so that someone who lives closer can manage your property for you. These are just a few instances in which the power of attorney becomes valuable. Most likely, you know why you need POA. The question is, how do you get it?

What Is Power Of Attorney?

POA is a legal document through which a person (aka agent) is appointed to make medical and financial decisions on a person’s (principal’s) behalf. 

This seems simple in theory, but there are several types of POA, and that’s where things get a little confusing. When you add the different laws per state, things become very murky for those seeking legal help. Lonich Patton Ehrlich Policastri, a legal firm in San Jose, CA, can help clear things up for California residents by breaking down the types of POA.

What Are The Different Versions Of Power Of Attorney? 

There are a few different types of POA. To get started, you need to determine which type is right for your situation. 

  • Durable – This document allows you to choose someone to act for you financially and medically, and grants decision making power regardless of future incapacitation. The incapacitation addendum for this specific document means that even if the principal becomes incapacitated, the document will remain valid.

    An alternate version of this is the Springing POA in which the document only becomes active when the person becomes incapacitated. 
  • General – This is known as the financial power of attorney as it grants no power over medical decision making. This also differs from the durable POA because it has no incapacitation addendum. This means if the principal becomes incapacitated, the document will become void. This document is effective immediately. 
A person with general power of attorney counts paper money
  • Limited – This document allows you to choose someone to act in your place for a specific or single duty. Once the duty is complete, the form becomes void. An example of this would be for a real estate transaction that is taking place. POA is only needed on a temporary basis for a very narrow and specific instance.
  • Medical – This is also known as a Health Care POA. This grants decision making power for all medical reasons. It also has an incapacitation addendum. It only grants power if the principal is unable to make decisions for themself.

What Happens Next?

So, you’ve determined which document you need. What’s next? There are a couple of legal requirements to complete a power of attorney. 

The agent must be 18 years old at least and mentally sound. They should also be someone you trust and can rely on to act in your best interests. 

Many people wonder if the document needs to be notarized or witnessed. Based on California law, it can be either. 

You can notarize a document for little cost. Some USPS locations now have notaries onsite. While it isn’t required, it is recommended to have real estate matters notarized for solid records.

Someone setting up power of attorney has a legal document notarized

Having a document witnessed can be a little more intricate. You must have 2 independent witnesses that are adults and mentally sound. The named agent of the POA cannot be a witness. For medical POAs, a healthcare provider or employee of the healthcare provider cannot be a witness either. Once you have your two witnesses, you must sign the document in the presence of the witnesses or you must go through a process known as acknowledgment. This can be as simple as signing the document and calling the witnesses over to say “I signed this. This is my signature.”

If you live in the greater Bay area, such as San Jose, and are in need of legal advice on POA, contact Lonich Patton Ehrlich Policastri. They offer free 30 minute consultations and can help you choose the right document for your situation. Set up your consultation here. 

A Trust administrator is responsible for handling money and the estate
Lonich Patton Ehrlich Policastri

What Does A Trust Administrator Do?

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There are a lot of responsibilities when it comes to being a trust administrator. Most likely, if you’ve found yourself in this position, you didn’t know much – if anything – about trust administration beforehand. That can leave you with a lot of questions. The lawyers at Lonich Patton Ehrlich Policastri can shed light on your responsibilities and guide you through the administration process. 

To start with, what does a trust administrator do?

Trust administrators have a huge responsibility and little room for mistakes. This can be overwhelming. It’s good to know what kinds of duties you will be responsible for going into the process.

A trust administrator goes over the division of assets and the estate laid out on the trust
  • Valuation Of Assets One of the administrator’s fiduciary duties is to assess the assets in the trust and value them. Valuation allows one to determine the total worth of the trust.
  • Deducting Liabilities Once the assets worth has been determined, it is the trust administrator job to deduct all liabilities from the total worth. Liabilities include all costs and expenses of the trust. 
  • Record Keeping The administrator must keep track of the trust funds, taxes paid, and all correspondence. These records must be completely transparent as beneficiaries can view them at any point, but most commonly every six months or on an annual basis. 
  • Filing Income Tax Returns The admin is required to file income tax returns yearly for the trust. This is because trust assets are not able to be distributed tax free. However, there can be deductions. Any taxes due are paid directly out of the trust. Go here for some tips on fiduciary tax returns.
  • Maintaining And Monitoring Assets It is the duty of the admin to maintain the value of the trust and the assets within it. You need to keep track of spending and costs to try and maintain the worth of the trust over time. This requires you to keep track of and audit any change within the trust. This ties back into record keeping. 
  • Updating/Informing Beneficiaries Beneficiaries must be informed of the trust and updated on the status of the trust over time. The administrator must share trust expenses among other things with all beneficiaries after the initial notice that the trust exists and they are named a beneficiary. 
  • Safeguarding Interests This means it is the admin’s job to protect the assets against unauthorized spending or use. What is needed to safeguard an asset varies case to case. An experienced attorney can help you determine what’s right for your situation and how to best protect assets. Contact Lonich Patton Ehrlich Policastri for a free 30 minute consultation on trust administration. 

Along with their fiduciary duties, trust administrators are also expected to operate under certain principles.

A trust administrator shares openly how the trust is being managed with 2 of the beneficiaries.
  • Good Faith This means that the administrator must be honest, open and transparent in the way they manage the trust and in the ways they benefit from it. This is incredibly important as the beneficiaries have the right to sue the trust administrator if they fail to act in good faith. 
  • Prudence/Fairness This requires that the administrator operates under these two principles. Fairness ensures the admin avoids playing favoritism amongst the beneficiaries. Prudence requires that the admin does not make risky investments with the trust which also has a hand in safeguarding the assets. 

If you’ve been named a trust administrator, it’s normal to feel overwhelmed. There is so much information and it is a huge responsibility. Reaching out to an experienced estate planning lawyer can set you on the right path and prepare you for the duties ahead. Contact Lonich Patton Ehrlich Policastri for a free consultation. 

An attorney sets up a revocable living trust with a client at their desk
Lonich Patton Ehrlich Policastri

What Is A Revocable Living Trust And Why Should You Have One?

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As the holidays approach, you might be thinking about family more. You want to take care of your loved ones, and while it’s a hard subject to discuss, you need to make sure everything is prepared when something happens to you.  The holidays are a good time to put your affairs in order and make sure your estate is in place so that when that time comes, your family can get through the process as easily as possible. If you know anything about probate, you probably know how time-consuming and expensive it is. A revocable living trust creates the opportunity to avoid probate and is an amazing estate planning tool.

What Is A Revocable Living Trust?

So, what is a revocable living trust? A trust is an arrangement with a third party to hold assets that will eventually be passed to a beneficiary. A revocable living trust means that the stipulations of the trust can be changed while the trustor is living and capable, as their situation evolves. 

Why Set Up A Living Trust?

A lawyer and client go over paperwork for setting up a revocable living trust

In estate planning, setting up a living trust is recommended for a common reason – to avoid probate. Probate is the lengthy court process in which the passing of assets are determined by a judge. It can take months to several years depending on the case.

Many people don’t even have wills, let alone trusts. Wills are important to putting your affairs in order, but they cannot avoid probate. For assets to pass through a will, you must die first – unlike a living trust – and all assets must go through probate whether you have a will or not. Living trusts are usually able to bypass the probate process altogether, saving your loved ones time and money. 

If you live in San Jose or the greater Bay area, set up a free consultation with our estate planning attorneys to learn about living trusts. 

How To Set Up A Revocable Trust?

There are a few steps that go into setting up a living trust. You must set up the trust while you are alive. You will need to work with an attorney to figure out the trust’s specifications such as who assets will pass to and how they must pass. 

For example, you can create a joint living trust for yourself and your spouse. If one spouse dies, the assets will pass to the living spouse, and after their death, the assets will pass to whomever you name beneficiary next in line. You can stipulate that the assets or property only pass under certain conditions such as if your daughter graduates college. This allows you to control and protect your assets, even after your death. 

An attorney hands over keys to a property that was listed in the revocable living trust to the beneficiary.

After you’ve worked with an estate planning attorney to put together a trust, you’ll have to fund the trust. This requires you to place property and assets in the name of the trust. Instead of the property being under the name “John Smith,” it will be titled “John Smith, Trustee of the John Smith Trust.” Forgetting to fund your trust can result in added expenses upon your death and a lengthy process to distribute assets in probate. 

Living trusts aren’t right for every situation however, so you should consult with an experienced estate planning attorney before setting one up.

Live in San Jose or close by? Contact Lonich Patton Ehrlich Policastri to find out if a revocable living trust is right for you. 

Executor of an estate works on paperwork
Michael Lonich

What To Know When Becoming An Executor Of An Estate

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When an individual is appointed to be the executor of an estate, they are entrusted with many duties and responsibilities. The executor is required to act for the estate using ordinary care and diligence. It is important, especially in estate planning, to know the difference between an executor of an estate and a power of attorney.

What Is The Difference Between An Executor Of An Estate vs Power Of Attorney?

It is important when it comes to estate planning to know the difference between an executor of an estate vs power of attorney.  An executor is the individual who is responsible for managing all affairs of an estate of an individual who has died.  A power of attorney is an individual selected and specified on a legal document that that individual has the authority to act for another individual in legal or financial matters. 

The executor of an estate is different from the power of attorney when dealing with legal matters

What Is An Executor’s Responsibility With Estate Taxes?

The executor has a fiduciary duty to pay the estate’s taxes when there is enough money in the estate available to pay the taxes. Failing to pay an estate’s taxes even negligently is a breach of the executor’s fiduciary duty owed to the estate. If it is shown that the executor caused the estate to incur unnecessary taxes, then the executor may be charged for the part of the taxes that resulted from the executor’s action or negligence.

When an executor breaches a fiduciary duty, the executor may be personally liable for the consequences of that action. However, if the executor acted reasonably and in good faith, the court may excuse the breach.

What If There Is Real Estate Or Physical Property Involved With The Estate?

It is important to remember that an estate is not strictly limited to financial assets. There may be physical property involved with an estate as well.  An executor of an estate must keep track of all property that is involved in an estate. The law may include real estate property, bank accounts, cash, and even stock or bond certificates as property of the Estate. Our firm, Lonich Patton Ehrlich Policastri can help with specifications for those who have estates or are executors of an estate in San Jose or Santa Clara County.

An executor of an estate looks to the will to distribute property assets

What Are My Next Steps As An Executor In San Jose?

Paying the federal and state income taxes on the estate, including for the year the creator of the estate passed away, are only one of the many duties owed to the estate by the executor. If you have been appointed an executor or have concerns with an estate’s executor based out of San Jose, please contact our office for a consultation with our estate planning attorneys. The attorneys at Lonich Patton Ehrlich Policastri offer free 30-minute consultations. 

Please remember that each individual situation is unique, and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

Michael Lonich

Tom Petty’s Estate is Having a Breakdown

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Tragically, Tom Petty passed away in 2017. He left behind his wife, Dana Petty, and daughters, Adria Petty and AnnakimViolette, from a previous marriage.

Before he passed away, Tom Petty had prepared an estate plan. Upon his death, Dana was appointed as the sole trustee of Tom Petty’s entire estate. In the documents, there was a provision included that required Dana, and Tom’s two daughters, Adria, and Annakim, to participate equally in the management of the estates’ artistic assets.

Unfortunately, it turns out that Tom Petty’s estate plan was not as precisely written as the lyrics he was famous for.

The Beginning of a Long Lititgation

Adria Petty and Annakim Violette filed a lawsuit against Dana Petty for the court’s interpretation of the term “participate equally” in regards to the estates’ artistic assets. The daughters believe that the term “participate equally” would mean that Adria, Annakim, and Dana each get a vote with majority rule. Dana did not have the same interpretation of the same term.

Dana Petty responded to the lawsuit by claiming that as sole trustee, she alone has the authority to create the entity that will manage the estate’s assets and that “participate equally” applies only to management of that entity. As a result, this disagreement of definition sparked an extremely long and arduous litigation to decide what the document’s language meant.

Determining the Meaning of Language in Estate Plans

When an estate plan has terms with an unclear interpretation, it will lead to many issues including expensive litigation. The court process for interpreting an estate document can be complicated when the language used in an estate document can be interpreted in multiple ways.

Firstly, In California, to determine what the settlor intended, the court will have the express language of the document examined. If the language is determined to be clear and definite by the court, the analysis will end and the matter is settled. However, if the court believes the language to be ambiguous, the court will then consider the circumstances under which the estate was created.

Secondly, and finally, if the court determined the document’s language to be ambiguous, the court will attempt to place itself in the estate creator’s shoes. The court will exercise its independent judgment of the estate creator’s intention by examining evidence that is uncontested from outside the document. For example, the court may consider when the document was created, if there the documents were created by an attorney, and what kind of state of health the settlor was in. If that is the case, the process could potentially be excruciatingly long no matter how large or small an estate may be.

How Do I Get Legal Assistance for Estate Planning?

Involving the court in determining your wishes is costly, time consuming, and frustrating for your beneficiaries. If you are interested in planning your estate, please contact one of the experienced attorneys at Lonich Patton Ehrlich Policastri to assist in drafting your documents with the most clear and definite language possible.

Meanwhile, please remember that each individual situation is unique, and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

Michael Lonich

Reverse Mortgages: How it Works

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What is a reverse mortgage and why would I want it?

A reverse mortgage is a type of home loan which can be used for any purpose. Unlike a standard home loan where you make monthly payments, with a reverse mortgage, the lender makes payments to you.

A reverse mortgage provides a way to use the equity accumulated in your house without losing ownership of your house or increasing your monthly payments.

When Can I get a Reverse Mortgage?

To obtain a Reverse Mortgage, you must be at least 62 years of age and the house must be your primary home, where you live at least six months out of the year.

The amount of the Reverse Mortgage is affected by many factors, however generally the value of the Reverse Mortgage increase with your age and the value of your house.

How does a Reverse Mortgage Work?

There are two types of reverse mortgages available, Home Equity Conversion Mortgages (HECM) and proprietary reverse mortgage.

HECM are federally-insured, widely available and have no income requirements. Proprietary reverse mortgages are not federally-insured as they are borrowed through private lenders, however they allow for higher loan amounts. The choice of reverse mortgage that is best for you will depend on your circumstances and needs.

You as the homeowner get to choose how the reverse mortgage is received. The payments may be received monthly, lump sum, or as a credit line. Interest is only charged on the amount received and the interest is added to the loan balance. This means that you do not have to pay the interest up front. Additionally, as the payment from the reverse mortgage is a loan, it is not considered income and is not taxable.

Once you have received the payments, there are no restrictions on how the money may be used. The money can be used to supplement your income, pay debts, or even to buy a new home.

A reverse mortgage will continue until all borrowers permanently move out of the house, sell the house, or the last surviving borrower passes away. Once the reverse mortgage ends, the loan becomes due, which can be paid by the sale or refinance of the house.

Is There Any Cause for Concern with a Reverse Mortgage?

A reverse mortgage can provide invaluable assistance in retirement and is the one of the few ways to access the equity you have built up in your home without increasing your monthly payments. However, there are several things to be aware of and consider before you make the decision to get a reverse mortgage.

The first thing to be aware of is that reverse mortgages often have higher fees than standard mortgages. These fees are rolled into the reverse mortgage and will further reduce the amount of equity you have accumulated in your house.

Second, the loan amount becomes due when the house is sold. As the sale of a house may happen unexpectedly it is important to consider the likely hood of this happening and the impact the reverse mortgage will have on the sale.

A final consideration is the effect the reverse mortgage will have on your estate. As you continue to receive payments, the equity in your house is reduced which will affect the amount received by your heirs.

Is a Reverse Mortgage right for me?

A reverse mortgage is a financial tool available to those who understand how the loan works. When considering a reverse mortgage, it is important to understand as much as you can about the reverse mortgage process, and balance that with your needs.

If you are thinking about a reverse mortgage loan, please contact one of the experienced attorneys at Lonich Patton Ehrlich Policastri. We offer free half-hour consultations.

Please remember that each individual situation is unique, and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

Michael Lonich

Aretha Franklin Did Not Have a Will

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But Did Aretha Franklin Need a Will?

Tragically, Aretha Franklin passed away on August 16, 2018 from pancreatic cancer. She left behind four sons but no will or estate plan. Because she did not have a will, during the court process all her assets will be made public. Aretha Franklin’s estate is estimated to be around $80 million and includes financial accounts, personal and real property, and music copyrights. The law of Michigan, where Aretha Franklin died, requires that her assets be divided equally between her four sons. While this may seem simple, it is very common when there is no will for the estate to be contested.

For example, Prince’s estate has been highly contested by the executor of his estate, Comerica Bank and Trust, and his heirs – his six siblings – over the value of his estate and how it should be divided.  Prince passed away in 2016 and his $200 million estate has paid lawyers and consultants over $5.9 million while his heirs have yet to receive anything. Lawyers for three of Prince’s heirs claim that it is a “legitimate concern” whether Prince’s heirs will receive anything at all.

If Aretha Franklin had created a trust, her estate would remain private, fees would be reduced, and her heirs would receive their portion of the estate much faster.

Do I Need a Will?

Over half of Americans do not have a will. Most claim they have simply not gotten around to it and many believe that they do not own enough property to pass down.

While most Americans will not leave behind an estate as large as Aretha Franklin or Prince, a will or trust is still extremely valuable.

It is important to remember that your debts as well as your assets are included in your estate. With a will, you can dictate which debts are paid first, this could allow specific property to not be used to pay debts.

Another crucial element is guardianship of children. When there is no will, the court will appoint a guardian. The court will generally appoint the surviving spouse as guardian. However, if the spouse is unavailable the court will appoint a grandparent, and failing that, the next closest relative. With a will, you may nominate a specific guardian who you feel will be best equipped to care for your children.

One more significant factor to consider is who you want, or who you don’t want to execute your wishes. In California if you do not leave a will, your family members may petition to be the administrator of your estate. The court will appoint the petitioner as an administrator if all family members with higher priority decline to serve as an administrator. With a will, you can appoint an executor who you feel is most capable. Alternatively, you may spell out in your will who you do not want to execute your will.

There are many tangible benefits of a will, however the process of drafting a will can be complex. If you are considering a will or another form of estate planning, please contact one of the experienced attorneys at Lonich Patton Ehrlich Policastri. We offer free half-hour consultations.

Please remember that each individual situation is unique, and results discussed in this post are not a guarantee of future results. While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

Michael Lonich

GIFTING REAL ESTATE TO FAMILY MEMBER CARETAKER: RED FLAGS

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Giving gifts to loved ones late in life is a meaningful way to make family and friends feel cherished. Gifts of real estate to family and friends may show appreciation, but a gift of real estate made late in life to a family member or caretaker can raise several red flags. Is the donor susceptible to fraud or undue influence by the recipient of the gift? Does the donor have sufficient mental capacity to make the gift? To address these red flags, courts require certain documentation or evidence if a gift is contested.

One of the court’s primary concerns regarding gifts from adults late in life is whether the gift was influenced by fraud or undue influence, especially when gifts are given to people who have close relationships with the adult. Therefore, California law requires courts to apply a legal presumption – an assumption that any gift from a dependent adult (person over 65 who is unable to provide for his or her personal needs) to a “care custodian” was the product of fraud or undue influence. (Cal. Prob. Code, § 21380.)

A “care custodian” is a person who provides health or social services to a dependent adult. A “care custodian” is not someone who provided services to a dependent adult if the custodian had a personal relationship with the dependent adult at least 90 days before providing health or social services, at least 6 months before the dependent adult’s death, and before the dependent adult was admitted to hospice care if he/she was admitted.  (Cal. Prob. Code, § 21362.)  The person in favor of the gift can rebut, or oppose, the presumption of fraud or undue influence with evidence that the gift was not the product of fraud or undue influence.  (Cal. Prob. Code, § 21380.)

Courts will not assume the gift is a product of fraud or undue influence if a “certificate of independent review” is executed with the transfer. A certificate of independent review shows the court that an independent attorney consulted with the person making the gift about the nature and consequences of the gift and attempted to determine if the intended gift was the result of fraud or undue influence. This consultation must occur out of the presence of the any heirs or proposed recipients. The certificate is signed and given to the person making the gift.

The court will not assume the donor’s family members and cohabitants received gifts from a dependent adult by fraud or influence. (Cal. Prob. Code , § 21382.)  However, gifts to family members and cohabitants will be invalid if the family member or cohabitant drafted the transfer document themselves. Family members and cohabitants are also subject to claims that the donor’s gift was subject to fraud or undue influence. (Cal. Prob. Code, § 6104.) They may also be subject to a claim that the donor did not have sufficient mental capacity to make the gift.

To prove undue influence, one must show the donor acted under excessive persuasion that overcame his/her free will. In California, the court will assume undue influence occurred if the party contesting the gift can prove three elements: (1) the existence of a confidential or fiduciary relationship between the donor and the person allegedly asserting undue influence over the donor, (2) active participation by the alleged influencer in the creation of the transfer document, and (3) an undue benefit on the alleged influencer (typically the receipt of the gift).

A gift may also be contested on the basis of the donor’s lack of mental capacity at the time the gift was made. The court can consider testimony and documentation showing the donor may or may not have been mentally competent to make the gift while alive.

Gift of real estate to family members and caretakers can be complicated and raise red flags that the donor, recipient, or other family members did not intend to face. If you are contemplating giving a gift to a family member or caretaker, receiving a gift from a family member, or contesting a gift to a donor’s family member or caretaker, please contact one of the experienced attorneys at Lonich Patton Ehrlich Policastri. We offer a free half-hour consultations.

Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results. While this post may detail general legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

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Located in San Jose, Lonich Patton Ehrlich Policastri handles matters for clients in northern California, especially San Jose and Silicon Valley. Our services are available to anyone within the following counties: Santa Clara, San Mateo, Contra Costa, Santa Cruz, Monterey, and San Benito. For a full listing of areas where we practice, please click here.

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This web site is intended for informational purposes only and is not legal advice. Nothing in the site is to be considered as either creating an attorney-client relationship between the reader and Lonich Patton Ehrlich Policastri or as rendering of legal advice for any specific matter. Readers are responsible for obtaining such advice from their own legal counsel. No client or other reader should act or refrain from acting on the basis of any information contained in Lonich Patton Ehrlich Policastri Web site without seeking appropriate legal or other professional advice on the particular facts and circumstances at issue.

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