Estate Planning for Millennials

Posted September 28, 2016 in Estate Planning by Michael Lonich.

While estate planning may sound like an activity reserved for the baby boomer generation, even Millennials can get in on the fun!  Further, estate planning is not only for people with ample assets—planning for your future can extend to healthcare decisions and even your Facebook account.  Of course, thinking about death—especially one’s own—is hard, but there are many benefits to be reaped from laying out a few guidelines for your loved ones.

To begin, estate planning at a young age may not involve complex financial considerations, but there are two key areas to focus on: healthcare and personal property.

First, once you turn 18 years old, family members no longer have the legal right to access your medical records, and should you become incapacitated, your family would not be able to speak to your doctors or make medical decisions on your behalf.  Estate planning ensures that in the event of your incapacitation, your health is taken care of according to your wishes and by people you trust—

1) Advanced Healthcare Directive: A legal document in which you detail what medical actions should be taken if you are incapacitated or unable to make decisions on your own.  This document can be used to record your preference (or not) for a “do not resuscitate” order.

2) Durable Power of Attorney: A legal document which, should you become incapacitated, gives power to a person of your choosing to make medical or financial decisions on your behalf.  A durable power of attorney works in conjunction with an advanced healthcare directive to ensure that your health preferences are understood and heeded.

3) HIPPA Release Form: This form allows people listed on your advanced healthcare directive to access your medical records.  Access to your records makes it easier for your designated caregivers to make informed decisions regarding your health.

Second, you may not have a lot of assets, but most likely, you do have some treasured possessions.  To prevent your assets from being waylaid by intestacy (in which state laws determine how your property is distributed), consider making a will or trust—

4) Wills and Trusts:  A will and/or trust details to where and to whom your assets will go after your death.  While you may be content to let intestacy laws distribute your estate, creating a will or trust can streamline the process and assure your relatives that they are honoring your true wishes.  Importantly, besides money, you should consider other cherished aspects of your estate.  First, your pet—who will take care of your beloved fur friend?  Second, consider family heirlooms passed down to you through grandma and grandpa—a will or trust ensures that those items fall into the right hands.  Third, do you want to allocate any assets to a significant other?  If you and your partner are not married, he or she is not entitled to any of your assets and will likely receive nothing through intestacy either.  Whether you want to leave money or possessions—valuable or sentimental—a will or trust ensures your significant other receives a piece of your estate.

5) Digital Assets:  Social media accounts and digital files need postmortem management, especially if you would like your family to shut down your various online accounts.  Federal law does not require that websites permanently delete the account of a deceased user.  Therefore, designating a digital “executor” and creating an inventory (with updated usernames and passwords) of your online accounts that details what you would like done with them can ensure your online presence is handled according to your wishes.

Death is a difficult subject, but estate planning ensures that your family is not left without direction for how your final wishes should be carried out.  Therefore, if you are interested in learning more about estate planning, please contact the experienced attorneys at Lonich & Patton.  We can help determine what documents would best safeguard your assets and/or your medical wishes.

Lastly, 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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Understanding the Spousal Fiduciary Duty

Posted September 9, 2016 in Family Law by Michael Lonich.

Marriage prompts a lot of change—last names, bank accounts, estate plans, housing—but one of the most important changes that arrives once you say “I do” is a fiduciary duty to your new spouse. Fiduciary duty may sound like a term reserved for the boardroom, but a broad fiduciary relationship exists between married spouses as well.

At the most basic level and as prescribed by California Family Code § 721, spouses possess a duty of “the highest good faith and fair dealing,” and “neither spouse shall take any unfair advantage of the other.”  Further, the spousal fiduciary duty includes “the same rights and duties of nonmarital business partners” as outlined in the California Corporations Code.  Although the Corporations Code uses business-centric language, the Family Code incorporates partner-based duties and applies them to spouses.  Thus, spousal fiduciary duties include:  1) allowing access to transaction books, 2) providing full and true information about any community property, and 3) an accounting of any benefit derived from any community property transaction by one spouse without consent of the other spouse.  Additionally, spouses owe each other a duty of loyalty—spouses must refrain from dealing with each other as an adverse interest and must refrain from competing with each other—and a duty of care.

Returning to the Family Code, Section 1100 details the fiduciary duties that accompany the control and management of community property.  Of note is subsection (b): “a spouse may not make a gift of community personal property for less than fair and reasonable valuable, without the written consent of the other spouse.”  In other words, even when giving a community fund-purchased gift to his/her children, a spouse needs the written consent of the non-purchasing spouse.  Typically, a nonconsenting spouse is unlikely to challenge holiday and birthday gifts given to his/her own children, but that spouse does have the legal ability to void the gift and receive compensation for its value—an issue usually raised during a separation or divorce proceeding.

Importantly, even after spouses separate or file for divorce, they still owe a fiduciary duty to one another—until all assets and liabilities have been officially divided, spouses must act with respect to each other and fully disclose all material facts and information regarding community property or debts.

Ultimately, most spouses don’t actually keep (or legally, even have to keep) detailed transaction books in the manner expected of business partners, nor do most spouses actually ask for formal consent before making routine purchases, but it is important to note that unilateral transactions could be used as ammunition in a separation or divorce proceeding.  Therefore, if you are pondering a large purchase or gift, it is wise to document the process, seek the written consent of your spouse, and/or use your own separate property to make the purchase.

If you would like more information about the fiduciary duty you owe to your spouse, please contact the experienced family law attorneys at Lonich & Patton.  From pre-nuptial agreements to divorce proceedings, we can help you understand how the spousal fiduciary duty plays a role in your marriage.

Lastly, 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.

Sources:

California Family Code § 721

California Family Code § 1100

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How SB 1255 (the “anti-Davis legislation”) Will Impact Your “Date of Separation”

Posted August 29, 2016 in Family Law by Michael Lonich.

Currently divorcing spouses or couples considering divorce better consult a lawyer soon—a newly enacted statute has changed the method by which California courts determine a married couple’s “date of separation.”  On July 25, 2016, the governor of California, Jerry Brown, signed SB 1255 (aka the “anti-Davis legislation”), a bill which amends California Family Code § 771 and adds section 70 to the Family Code.  As a result, the existing standard that governs a married couple’s “date of separation” has been changed.  Previously, Family Code § 771 instructed that spouses were not separated until they were “living separate and apart”—a phrase which courts interpreted to mean “living in separate residences.”  With the passing of SB 1255 though, spouses may now be considered “separated” even if they share a common residence.

A couple’s legal “date of separation” is important because it determines the point at which a spouse’s earnings and accumulations are no longer considered “community property” and instead, are considered a spouse’s own “separate property.”  In turn, the difference between community and separate property is important because absent a written agreement stating otherwise, all community property must be evenly divided between divorcing spouses.

SB 1255’s nickname—the “anti-Davis legislation”—came about because of the case its creation abrogates:  In re Marriage of Davis.  In July 2015, the Davis court held that “living in separate residences ‘is an indispensable threshold requirement’ for a finding that spouses are ‘living separate and apart,’” or in other words, for determining a “date of separation.”  However, the Davis court didn’t create new law—it merely affirmed what it believed was the California legislature’s intention when it coined the phrase “living separate and apart” many years ago.

To ascertain the legislature’s intent, the Davis court had to do go back 146 years to 1870 when the phrase was first used in a statute that protected the rights of married women.  Similarly to section 771, the 1870 Act did not define “living separate and apart.”  However, according to the Davis court, section four of the 1870 Act suggests that the legislature intended for the phrase to require separate residences: a wife, who was “living separate and apart” from her husband and wished to sell her real property without joining her husband, had to record a declaration that included a description of “her own place of residence” and a statement that “she is a married woman, living separate and apart from her husband.”

Additionally, when the California legislature repealed a number of Family Code sections in 1969, it created a new statute (section 5118) that reproduced the 1870 Act language.  Once again though, the legislature provided no specific definition of “living separate and apart.”  The Davis court reasoned that the legislature’s continued use of the phrase—without defining it—expressed its satisfaction with earlier judicial interpretation of the language.

Further, the Davis court also relied on a notable 2002 case—In re Marriage of Norviel—which concluded that “living apart physically is an indispensable threshold requirement to separation, whether or not it is sufficient, by itself, to establish separation.”  Therefore, relying on legislative history and case law, the Davis court affirmed the Norviel holding—spouses had to live in separate residences before they could be considered separated.

While the Norviel and Davis courts may have correctly discerned the original meaning of “living separate and apart,” our modern legislature took issue with their holdings and in response, passed SB 1255.  The bill expressly abrogates Norviel and Davis, and rather than provide a specific definition for “living separate and apart,” the legislature did away with the phrase all together.  Instead, section 771 (the modern statute that contained the disputed language) now uses the phrase “after the date of separation” to determine when a spouse’s accumulations and earnings transition from “community” to “separate” property.  In turn, newly added section 70 defines “date of separation” as a “complete and final break” that is evidenced by two factors: 1) a spouse has expressed his or her intent to end the marriage to the other spouse, and 2) the conduct of the spouse is consistent with his or her intent to end the marriage.  Further, section 70 requires that a court look at all “relevant evidence” when making the above determination.

This statutory change was spurred on by Senator John Moorlach (R-Costa Mesa), the author of SB 1255.  He believed it was necessary to change the Family Code language because many spouses wish to separate legally in order to protect their personal finances, but also, wish to continue sharing a residence in order to save costs during their divorce.  Thus, SB 1255 should better reflect the reality of modern divorce experiences.

While the amended Family Code sections do provide clarity and allow couples more post-separation flexibility, it is important to note that SB 1255 may not be the end of legal disputes about separation dates—in the coming years, case law will further refine section 70.  Additionally, couples in the process of a divorce should not let SB 1255 pass by them unnoticed because when the new law goes into effect on January 1, 2017, it may retroactively apply to any cases pending on that date, but this issue still needs to be resolved and addressed by the Family Courts in California. Look for another blog post on this topic specifically. However, consulting now with your attorney to develop a “date of separation” strategy is in your best interest.

If you are considering a legal separation or divorce, please contact the experienced family law attorneys at Lonich & Patton—we can help you navigate the effects of SB 1255 and answer any questions you may have about how the new law will impact your divorce.  The sooner you understand how SB 1255 will affect your current or impending legal plans, the better you can prepare for the new rule when it goes into to effect on January 1, 2017.

Lastly, 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.

Sources: 

2016 Cal. Legis. Serv. Ch. 114 (S.B. 1255)

In re Marriage of Davis (2015) 61 Cal.4th 846

In re Marriage of Norviel (2002) 102.Cal.App.4th 1152

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The More the Merrier?: When a Child Can Have More than Two Legal Parents

Posted August 5, 2016 in Family Law by Michael Lonich.

Traditionally, when multiple parties would claim to be a child’s parent, a court could only recognize two of those claims.  However, family matters are rarely so simple, and a recent California case has reaffirmed what subsection (c) of Family Code Section 7611 provides: “[i]n an appropriate action, a court may find that more than two persons with a claim to parentage under this division are parents if the court finds that recognizing only two parents would be detrimental to the child.”  “Detrimental to the child” is determined by (but not limited to) the “harm of removing child from stable placement with a parent who fulfills that child’s physical and emotional needs and has done so for a substantial period of time.”  Importantly, a finding of detriment does not require that a court find any other parentage claimant to be unfit.

In April 2016, the California Court of Appeal for the Sixth District elaborated on Section 7611.  In Martinez v. Vaziri, the petitioner was the child’s biological uncle, the respondent was the child’s mother, and the child’s father was the petitioner’s half-brother.  Petitioner and Mother had been in a long-term relationship when Mother conceived a child.  However, DNA testing revealed that the child was fathered by Petitioner’s half-brother.  Father abandoned Mother during her pregnancy, and since the child’s birth, he has been in-and-out of jail.

Aware that he was not the father, Petitioner raised the child as his own—he accompanied Mother to her doctor’s appointments, was present at the child’s birth, and lived with and cared for the child during her first six months of life.  Even after he moved out of Mother and Child’s home, Petitioner continued to see Child three days and two to three nights a week.  Eventually, Petitioner initiated proceedings to establish legal parentage.

Although the trial court denied Petitioner’s parentage claim, the Court of Appeal remanded the case for reconsideration of detriment to the child in light of its interpretation of “stable placement.”  The trial court had concluded that even though Petitioner established himself as the presumed parent of Child, there was no threat of Child’s “stable placement” being upended because Petitioner had already spent substantial time apart from Child while he attended a drug rehabilitation program.

The Court of Appeal found the trial court’s interpretation of “stable placement” to be lacking and remarked that the phrase is in reference to a parent’s physical and emotional attention to a child’s need.  Therefore, the critical distinction is not the living situation, but rather, whether a parent-child relationship has been established, and whether the claimant has demonstrated a commitment to the child.

Thus, as Martinez v. Vaziri demonstrates, a child is not limited to two parents.  If a third claimant can prove a sincere and stable commitment to a child (a still demanding standard), a court has the ability to protect the alternative parent-child relationship—without penalizing the child’s other biological or presumed parents.

Establishing parentage is important for both parents and children; however, multiple parentage claimants can complicate the process.  If you have questions about the parentage of your child or are interested in establishing legal parentage, please contact the experienced family law attorneys at Lonich & Patton to help you sort through your and your child’s rights.

Lastly, 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.

Sources:

1)  Cal. Fam. Code § 7612(d)

2)  Martinez v. Vaziri (2016) 246 Cal.App.4th

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Three Things to Know About Creating a Living Trust

Posted July 27, 2016 in Estate Planning, Probate by Michael Lonich.

First, one of the biggest advantages of creating a living trust is avoiding probate court.  Administering a will or trust through probate court takes time and money.  A living trust is a great estate planning vehicle because it can keep the entire administration process court-free.  When the settlor of the trust passes away, the terms of the trust dictate how the estate should be administered. In turn, probate court is avoided.

Second, make sure that the successor trustee is someone who is capable of administering the trust.  Often times, the oldest child is chosen to be the successor trustee.  However, the oldest child is not always the right choice.  A successful administration requires a trustee who is organized, diligent, and capable of administering the trust.  It is also beneficial to have someone with an understanding of accounting.  If your oldest child does not have any of these characteristics, consider appointing another child, relative, or friend.  If no one you know is capable of administering the estate, you may have to hire a third party. There are a number of trust companies and banks that administer trusts.  The biggest concern about hiring a third party is the administration fees, which can be substantial.  If your estate can handle the fees, a third party may be the right choice for you.  Lastly, a trust will never fail for lack of a trustee.  If the elected trustee refuses, another one will be appointed.

Finally, creating a trust avoids California’s intestacy laws.  A state’s intestacy laws provide the default estate plan for those who die without a will.  In California, the beneficiary of a decedent’s estate depends on whether the property was community property or separate property.  Assuming that decedent was married and had community property, the surviving spouse’s intestate share is the decedent’s one-half share of the community property.  On the other hand, if the decedent’s property was separate property, the intestate share of the surviving spouse depends on how many children the decedent had, if any.  While it is important to know a state’s intestacy laws, they should be avoided at all cost.  Thus, creating a trust is a way to avoid intestate succession and have your estate administered the way you want it.

If you are interested in creating a living trust or have any questions regarding your current estate plan, please contact the experienced estate planning attorneys at Lonich & Patton for further information.  The attorneys at Lonich & Patton have decades of experience handling complex estate planning matters, and we are happy to offer you a free consultation.  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.

Sources:

California Probate Codes § 6400-6414.

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