This is the outline of my California estate planning seminar presentation at the December 12-13, 2013 NBI Seminar in San Francisco on” Estate Planning from A to Z.” It will be delivered to estate planning professionals, but the information should be helpful to everyone.
NBI ESTATE PLANNING FROM A TO Z
December 12-13, 2013
KEY ELEMENTS OF EFFECTIVE WILLS, by Andrew Dósa
Law Offices of Andrew Dósa, 1516 Oak Street, Suite 310, Alameda, CA 94501. 510-865-1600.
A. Establishing Statutory Framework
B. Types of Wills
C. Testator’s Competency – Verifying and Documenting
D. Beneficiary Designations and Distributions in Retirement Plans and Life Insurance
E. Titling Assets
F. Sample Will Provisions
G. Updating Will Documents
A. Establishing Statutory Framework
1. Testamentary Intent
Generally, a Will is understood to be a writing controlling the disposition of the testator’s property at death. But let’s start with the central characteristic of a Will. The testator must intend the document to be his Will; he must have testamentary intent. Any document directing the distribution of the testator’s property must have been written with the author intending it to be his Will.
There are no magic words, formulaic structures, and no statutory mandated phrases. The document does not even have to be called a “Will” and that word need not be used.
The basic test of testamentary intent is not the testator’s realization that he was making a will, but whether he intended by the particular instrument offered for probate to create a revocable disposition of his property to take effect only upon his death. [Citations.] No particular words are necessary to show testamentary intent but it must satisfactorily appear from the proffered document that the decedent intended by the very paper itself to make a disposition of his property after his death.
Estate of Geffene (1969) 1 Cal.App.3d 506, 512.
2. What the Probate Code Says (Prob. C. Sec. 6110)
(a) Except as provided in this part, a will shall be in writing and satisfy the requirements of this section.
(b) The will shall be signed by one of the following:
(1) By the testator.
(2) In the testator’s name by some other person in the testator’s presence and by the testator’s direction.
(3) By a conservator pursuant to a court order to make a will under Section 2580.
(c) (1) Except as provided in paragraph (2), the will shall be witnessed by being signed, during the testator’s lifetime, by at least two persons each of whom (A) being present at the same time, witnessed either the signing of the will or the testator’s acknowledgment of the signature or of the will and (B) understand that the instrument they sign is the testator’s will.
(2) If a will was not executed in compliance with paragraph (1), the will shall be treated as if it was executed in compliance with that paragraph if the proponent of the will establishes by clear and convincing evidence that, at the time the testator signed the will, the testator intended the will to constitute the testator’s will.
The particular things you will want to include in your will, generally, are:
1. The testator–the person who creates the will,
2. The testator who has capacity
3. Statement of intent
4. Beneficiaries (including successor beneficiaries or contingent beneficiaries),
5. Assets to be distributed and adequately described and that characterized (specific gifts and residual distributions,
6. Representatives and successor representatives,
7. Ways of resolving conflicts (setting out specific instructions or giving the successor executor discretion),
8. Instructions for amending or revoking (or the statutory rules and case law control),
9. Strict adherence to rules regarding formation of the particular type of Will, such as witnesses for the traditional Will, and the attestation clause.
The two core requirements of a valid Will are meeting the legal formalities of the particular Will and the competent testator acting with testamentary intent. The formatting of the Will is not significant. You can have almost any format and any order in your Will. The courts place paramount focus and emphasis on the intent of the testator. That controls everything. Substance controls form.
However, having said that, there is a basic structure to an organized Will, and drafting according to this general pattern or format will reflect on you. Your product will be better if it is well organized. Also, the better the document is, the less likely you will face a contest later, when you would have to testify and cover your product.
Matthew Bender & Co., offers a reasonable and detailed format and organization:
DECLARATION CLAUSE
Declaration
Revocation of Prior Wills
ARTICLE 1: Introductory Provisions
Marital Status Declaration
Identity of Spouse, Children and Other Beneficiaries
Definitions of Children and Issue
Property Included in Will
Existence or Nonexistence of Contract to Make Will
ARTICLE 2: Particular Gifts
ARTICLE 3: Residuary Provisions
Gift of Residue
ARTICLE 4: Trust Distributions
ARTICLE 5: Executor
Nomination of Executor
Executor’s Bond
Compensation of Executor
Powers and Duties of Executor
ARTICLE 6: Trustee (if testamentary trust)
Nomination of Trustee and Alternative Trustees
Trustee’s Bond
Compensation of Trustee
Powers and Duties of Trustee
ARTICLE 7: Guardian
Nomination of Guardian
Powers and Duties of Guardian
ARTICLE 8: Concluding Provisions
Apportionment of Death Taxes
Payment of Debts
Simultaneous Death Provisions
This inheritance and No-Contest Provisions
Funeral and Burial Directions
Miscellaneous Provisions
SIGNATURE AND ATTESTATION CLAUSE
Signature Clause
Attestation of Witnesses
B. Types of Wills
Four Forms of Wills/Four Types of Wills
California law requires that every Will be written, but it can be in one of four forms, a typewritten instrument, a handwritten document, called a holographic Will (Probate Code Sec. 6111), a printed form (Prob. C. Secs. 6200-6243), or a letter.
However, the Probate Code controls, and a document that does not comply with California’s statutory requirements regarding any of the four types of Wills, is not a Will. The Probate Code recognizes a witnessed Will (Prob. C. Sec. 6110), a holographic Will (Probate C. Sec. 6111), the California statutory Will (Prob. C. Secs. 6200-6243), or an international Will (Prob. C. Secs. 6113, 6380-6390).
C. Testamentary Capacity–Verifying And Documenting
1. Age
Probate Code Section 6100 states a person ordinarily must be 18 years of age to make a Will. The three exceptions are a person under 18 who has a valid marriage, is on active duty in the military, or has received a judicial declaration of emancipation (Family Code section 7122).
2. Mental Competence/Capacity
a. A Sound (Beautiful) Mind (Probe. C. Sec. 6100)
When the Will was executed, the person must have been of sound mind. Evidence of the unsound mind before or after does not control.
b. The Statutory Standard for Determining Mental Competence (Probe. It C. Sect. 6100.5)
If there was a Will Contest, challengers of the Will have two chances to show the person was not mentally competent at the time he made the Will.
First, the contestants would prevail if they can show the person did not have sufficient mental capacity to
1) understand the nature of testamentary,
2) understand and recollect the nature and situation of his or her property, or
3) remember and understand his relations to his living descendants, spouse, and parents, and those whose interests are affected by the Will.
Second, the contestants would prevail if they can show the person suffers from a mental disorder with symptoms including delusions or hallucinations, and these delusions or hallucinations result in the person devising her property in a way she would not otherwise have done.
c. Probate Code Rules–Evidence of Mental Deficit
Probate code sections 810 – 813 contain special rules for evidence of person’s lack of capacity. The determination is based on evidence of a “deficit” in mental functioning rather than on a diagnosis of a mental or physical disorder.
There is a rebuttable presumption that all persons have the capacity to make decisions and to be responsible for their acts or decisions. Prob. C. Sec. 810. This presumption shifts the burden of proof to the contestants. The next two sections, 811 and 812, prescribe a minimum level of evidence of the testator’s unsound mind or lack of capacity. The sections do not directly amend or revise the standard under Probate Code Sections 6100 and 6100.5 for determining when a person is not competent to make a Will.
Probate Code Section 812 specifically addresses the ability a person must have to communicate a decision and to understand and appreciate all of the following:
(a) The rights, duties, and responsibilities created by, or affected by the decision.
(b) The probable consequences for the decisionmaker and, where appropriate, the persons affected by the decision.
(c) The significant risks, benefits, and reasonable alternatives involved in the decision.
Probate Code Sec. 811 provides that a determination a person is of unsound mind and lacks capacity to made a decision or do an act “shall be supported by evidence of a deficit in at least one of the following mental functions, subject to subdivision (b), and evidence of a correlation between the deficit or deficits and the decision or acts in question:
(1) Alertness and attention, including, but not limited to, the following:
(A) Level of arousal or consciousness.
(B) Orientation to time, place, person, and situation.
(C) Ability to attend and concentrate.
(2) Information processing, including, but not limited to, the following:
(A) Short- and long-term memory, including immediate recall.
(B) Ability to understand or communicate with others, either verbally or otherwise.
(C) Recognition of familiar objects and familiar persons.
(D) Ability to understand and appreciate quantities.
(E) Ability to reason using abstract concepts.
(F) Ability to plan, organize, and carry out actions in one’s own rational self-interest.
(G) Ability to reason logically.
(3) Thought processes. Deficits in these functions may be demonstrated by the presence of the following:
(A) Severely disorganized thinking.
(B) Hallucinations.
(C) Delusions.
(D) Uncontrollable, repetitive, or intrusive thoughts.
(4) Ability to modulate mood and affect. Deficits in this ability may be demonstrated by the presence of a pervasive and persistent or recurrent state of euphoria, anger, anxiety, fear, panic, depression, hopelessness or despair, helplessness, apathy or indifference, that is inappropriate in degree to the individual’s circumstances.
The statute does not say every mental function deficit is enough. The deficit must be significant, and “impair the person’s ability to understand and appreciate the consequences of his
or her actions with regard to the type of act or decision in question.” The frequency, severity and duration of periods of impairment should be considered. A diagnosis of a mental or physical disorder, by itself, is not enough to meet this standard.
d. How Mental Illness Influences the Will
A lack of testamentary capacity is not proven by the mere fact the testator had a mental illness. It seems something akin to the concept of materiality is at play here. The disorder or illness directly influenced the terms of the Will. What would the person have done but for the disorder or illness. In other words, the Will had terms that were there because the illness affected the person to do something he would not have done.
e. A Conservatorship does not Eliminate Capacity
Being conserved is like having a mental illness or disorder regarding the capacity issue. By itself, it is not dispositive. A conserved person is presumed to have testamentary capacity. So it comes back to the evidence: does the person have capacity? What are the facts supporting the conservatorship? They may correlate to the facts showing capacity. Also, facts suggesting deficits may be negated by evidence showing the testator was of sound mind and the deficits do not directly affect the Will.
f. Eyewitnesses/Opinion Evidence
Lay and expert witnesses can offer opinions about the soundness of mind of the testator. The estate planning attorney, a prior attorney, witnesses to the Will (see language of the attestation clause), friends and acquaintances of the testator and physicians and other expert witnesses all have opinions and evidence to offer.
A common paragraph in an attestation clause is:
We are acquainted with [testator]. At this time she is over the age of eighteen (18), and to the best of our knowledge she is of sound mind and is not acting under duress, menace, fraud, misrepresentation or due influence.
Traditionally, drafters of Wills began with an introductory statement by the testator that he is of sound mind and knows the objects of his bounty. The more modern drafting practice does not include (or favor?) these statements, but at the same time, the attestation clause makes broad conclusory statements that, arguably, very few witnesses could make with certainty. How long will the typical witness see the testator and how much will they interact? How could the witnesses “know” the testator had a sound mind? The Probate Code does not require the strong language of the attestation clause. If there is a Will contest, the attestation clause is not evidence of the capacity of the testator–it is hearsay. Thus, you must fall back on the witnesses begin able to testify about what they knew about the testator, what they saw or heard at the signing.
I strongly recommend you have a signing ceremony. First, it is advisable to have witnesses who know the testator. Second, if you can’t get such a witness, take some reasonable amount of time and have the witnesses and testator interact. I like to introduce them and make some connection between them, so they have their own dialogue. Then, I announce that we are having a signing ceremony. This makes it “obvious” the testator has testamentary intent.
I have sometimes sent completed Wills to clients with the following instructions, which repeat my ceremony approach:
WILL SIGNING CEREMONY QUESTIONS
The Will should be signed by you in the presence of at least two competent adults who will serve as witnesses. The witnesses should watch you sign and then, in turn, sign in each other’s presence as they watch each other sign the attestation clause. Each of you can
initial the bottom right corner of each of the pages of the Will.
When I have clients sign a Will in my office, I usually describe the process as a “ceremony”.
I have the witnesses and the client with me and I ask a series of questions:
“You have asked me to prepare a Will for you. Is that correct?”
“I am handing you a document entitled Last Will and Testament. Have you read this document?”
“Is this your Will?”
“Does the Will have everything in it that you want in the Will?”
“Is there anything that has been left out?”
“Does it accurately state your intent and desire concerning your Will?”
“If so, then please sign the Will and initial the bottom right corner of each page.”
Then I request that the two or three witnesses watch the client sign the Will. I ask them
to sign as witnesses and initial the bottom right corner of each page of the Will.
You can follow the line of questions and simply make the statements, i.e., I have
had a Will prepared. This document is my Will. It contains everything
I want in the Will and leaves nothing out that I want to have in my Will.
When the client signs the Will, the witnesses then read the attestation clause. The clause reinforces the solemnity of the act of your client, and it makes them realize they have evaluated your client’s competence and capacity. If they are called as witnesses, they will either remember the moment, or you can refresh their recollection about the moment, or, at a minimum, get them to authenticate their signatures and also confirm they would never sign a document like that unless what they were declaring was true, or they believe it was true.
D. Beneficiary Designations and Distributions in Retirement Plans and Life Insurance
The general rule is that you do not put retirement plans or other retirement investments into trusts or Wills. The easy explanation is that retirement investments have limiting requirements which contrast the designed benefit(s) of the investments with what are essentially penalties or increased tax exposure for early withdrawal. There may be good reasons to go against the conventional wisdom. But it comes with a price.
When you have the client’s objectives in mind, you can then make an effort to coordinate the retirement benefits and life insurance proceeds with the Will and or Trust(s) in place.
Generally there is nothing tricky about designating beneficiaries of retirement accounts. The client, not the attorney makes the designations. Each retirement investment controls distributions to beneficiaries. Wills do not control any retirement investment. A mindful estate attorney will therefore know the client’s retirement investments and advise him accordingly, so that his distribution plan under the Will will not be undermined by the distribution of assets out of retirement investments.
“The estate planning attorney should also be aware of Probate Code Se 100(b), which allows spouses and registered domestic partners (See Family Code Sec. 297.5(a)) to agree in writing to divide their community property on the basis of a non-prorata division of its aggregate value. This can be a useful tool when, for example, sizeable retirement benefits would pass directly to the surviving spouse or registered domestic partner outside a community property trust, but the individual’s separate property and one-half of the value of the property held in the community property trust would be less than the deceased spouse’s remaining estate tax applicable exclusion amount. By reason to a non-pro rata allocation of their entire can income tax benefits of an rollover by the surviving spouse will property to fully utilize the deceased spouse’s estate tax applicable exclusion amount and [Generation Skipping Transfer] exemption.”
C.E.B. California Estate Planning, Ch. 1, §1.36, p25.
E. Titling Assets
Provisions in the Will do not really control the characteristic of an asset and you don’t change the title of an asset by a Will. Assets are controlled by the laws related to those assets, and not by the laws controlling Wills and probate. For example, if you had a client who owned a one third interest in property held in joint tenancy, the Will cannot change the title, but the Will can contain a statement that the executor calculate the value of that interest when making the overall calculation of an equal distribution of all assets owned/controlled by the testator. Thus, the testator can control what goes from the estate under the Will and coordinate it with other distributions of his other outside-of-the-Will assets.
Considering the overall estate plan, an attorney might advise the client to change title of some assets and beneficiary designations for life insurance policies and retirement plan benefits and payable-on-death accounts.
F. Sample Will Provisions
See Exhibits. Which “presentation” of these paragraphs do you prefer? Why?
How do you draft your estate planning documents? Do you use a software program?
G. Updating Will Documents
Codicils, which you know are amendments to Wills, have the same requirements for validity as do Wills. Would it be wiser to do a new Will or complete a codicil?
