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Recent Posts in Inheritances Category
| October 11, 2010 |
| Our Disso is Final But We Never Changed the JOINT TENANCY DEEDS. My Ex Just DIED. |
| Posted By Thurman Arnold |
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Q. I just found out that my ex-partner passed away last week. Our partnership disso became final six months ago. We had agreed to hold some commercial property jointly until the real estate market improved, and then to sell it and divide what we netted. They were held in "joint tenancy" and that was never changed. Does this mean I now inherit his share?
A. Probably not, but read on. I talk about this in my last blog about title to property held as "Community Property" and describe "rights of survivorship". But this raises a point that might be useful for you or someone out there - it is not all that uncommon, especially these days, that people agree to continue to jointly own real estate hoping the market is better down the road when they will finally sell. Sometimes they'd actually prefer that their former domestic partner or spouse inherit their share if they die first, before the property is sold especially when there are no children or when adult children have been disinherited.
However, it is not enough that a Judgment, Stipulated Judgment, or Settlement or Termination Agreement say "we will continue to hold the property jointly after the divorce is final and will agree to sell it later (or maybe after a specific time period)" to preserve a joint tenancy interest and its chief attribute - a right of survivorship. This is because without more once the domestic partner (or marital) status is terminated, all joint tenancies that existed prior to that point become tenancies in common as a matter of law. California Probate Code section 5601. Tenancies in common do not contain any survivorship rights.
There is a big "however", however. Section 5601(b) has two exceptions that might help you: (1) Where the joint tenancy is not subject to severence at the time of death, possibly where a written agreement specifically says so (as in a settlement agreement filed with the Court or (2) there is "clear and convincing" evidence that the person who died intended the preserve the joint tenancy in favor of the former partner or spouse.
Hence, where anybody intends to preserve joint tenancy status they should specifically say so in a written document, preferably as part of the Judgment. I always reference the Probate Code section itself. Or, there may be something else that is sufficient to cause the Probate Court to find no severence was intended. My bet is that if there were no other heirs at law for the deceased party, the court would be more easily convinced to find in your favor then if there are surviving children or other family left.
Notice that under the statute the outcome would be different if the Judgment was a decree of legal separation instead.
T.W. Arnold
http://www.DesertFamilyMediationServices.com
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| April 23, 2010 |
| Do I need a COHABITATION AGREEMENT? |
| Posted By Thurman Arnold |
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Q. I am thinking about asking my girlfriend to move in with me. Should I be considering a Cohabitation Agreement and what would it say?
A. A lawyer's job is to give conservative advice that protects clients from both seen and unseen potential legal consequences relative to the circumstances that are unique to these client's lives. Family law attorneys are reminded every day that most nonlawyers never consider that their new (or old) relationship might one day breakup or dissolve and if so what the fallout might be in terms of property, debts, or even support obligations. People are particularly vulnerable for setting themselves up for future legal difficulties in the early stages of relationship. This is the time when they are least likely to seek family law legal advice but when they need it most.
I commonly encounter several sets of circumstances that justify executing cohabitation agreements, and which affect how they are written and what provisions to include:
1)
Protecting assets, income, and wealth of one party:
Where one partner brings into the relationship assets, debts, or an income stream which is proportionately greater than that of the other partner, the partner in the financially superior position may reasonably be concerned about protecting what they have. I call these "limiting agreements" because their aim is primarily to ensure that the other partner acquires no interest (or only specified interests) in property which is already owned or that is acquired during the relationship - typically through the use of joint bank accounts, joint borrowing, inheritances, or by just plain inadvertence.
Often one partner in these situations has a near zero net worth. The economic reality in our culture is that this is usually the woman, who may also be a custodial parent of a minor child and under economic pressure. The fact is that our culture values the contributions of partners quite differently depending upon whether that contribution is in the form of money, property, or services. People joke about being called 'domestic engineers' and we may talk about women not being employed 'outside the home.' Families are not merely emotional and social units, they are also economic units. Coupling enables people to specialize between themselves so that one person can devote a greater percentage of attention to the job marketplace, for instance, while the other can invest their energies in establishing and maintaining a stable and supportive home environment.
We act as though money is the more valuable contribution to relationship when this may not at all be true. Any sociologist will tell you that if we were to count the hours that most women spend taking care of the home (and especially children), which frees the man up to work for money, and then value this time at a reasonable rate, the economic worth of the non cash contributions by domestic engineers often exceeds the value of the wages earned outside the home by the working partner in most low to middle-high income partnerships (illustrated if you consider what it would cost some outside worker to perform these tasks).
Whether the monetarily disadvantaged partner is a man or a woman, this person's interest lies in avoiding limiting agreements or in having them crafted so that some level of financial protection exists. There are compromise solutions that can be achieved which afford these persons protections they would not otherwise have, which is good reason for obtaining guidance from a qualified attorney.
If partner A earns $50,000/year and partner B works part-time outside the home or not at all, such that his efforts at home help to free up partner A's time so she can devote her attention to competing successfully within the job marketplace, the partners' respective contributions in terms of hours may be the same. If it is similar on a fairness scale, then is it really appropriate that partner A should be solely entitled to a $10,000 savings account she accumulated during the cohabitation when partner B worked only in the home and so did not have access to the dollar wages that could be tucked away?
You don't need to agree with this philosophical analysis, although it is the modern view, but perhaps these examples make it clear that cohabitation agreements include moral, ethical, and fairness considerations which deserve attention. These can be negotiated and compromised in an even handed manner that is respectful of and sensitive to the dignity and relative contribution of both cohabitants. Truly, if two partners enter a relationship where the underlying assumption is that only the partner who works for wages is bringing value into it, this is not an auspicious beginning.
2) Protecting assets, income, and wealth of both parties: Many people who utilize cohabitation agreements have previously been married and divorced, and have ongoing responsibilities for children or aging parents. They cannot afford the economic consequences of another break up and they want the companionship and benefits of a committed relationship.
In many cases the partners may have substantially equal assets and liabilities, or their relative net worths may not be too disproportionate. Two-earner households are more common today than ever before.
I call this variety of cohab contracts 'roadmap agreements.'
In California persons who cohabit who are not married or who are not domestic partners have no rights or obligations between themselves under the Family Code, assuming they have no children together. Their rights or obligations, if any, are determined solely by contract - and if there is no written contract it becomes very difficult to determine what people intended at the time they acquired what they acquired or did what they did. All kinds of claims can be made about verbal promises, and verbal agreements are enforceable when a Judge believes they exist.
Unmarried partners who have not been protected by a written agreement have no right to claim an interest in the other partner's property accumulated during the relationship, and they have no inheritance or survivorship rights absent an existing will or trust. Common law marriage is not recognized in California, unless it was first established in another state which does recognize it.
There are very good reasons to carefully draft and execute cohabitation agreements beyond trying to exclude the other partner from making a claim if the cohabitation ceases. It may be helpful to create a template for how the relationship can be disentangled in an orderly and equitable manner once it ends; however, it can be very useful to have a roadmap about how certain activities should be handled even in an intact relationship. Knowing one's rights in advance and having a formula for confirming them is always a smart thing which can positively affect decision-making.
3) Creating Nonmarital Partnerships: Just as a cohabitation agreement can be designed to protect against creating unintended rights in the other partner, so too it can be positively used to create protections that would otherwise not exist under the law. These are generally called "pooling agreements".
If you create a business partnership or joint venture you do it with the expectation of generating profits, including the coequal sharing of an increase in the value of the partnership and whatever money is spun off and distributed from the partnership. Some people wish to do the same thing with their nonmarital cohabitation partnerships.
Is it any more wise to enter into a nonmarital cohabitation without any form of agreement than it is to enter a business partnership on a handshake? In these times lawyers must shake our heads in dismay when people proudly tell us that their word is their bond and that they make their deals on a handshake. While such sentiment is admirable, it is not realistic.
A cohabitation agreement can be used to specify what property and assets becomes joint and under what circumstances, what the proportionate joint interests are, what to do with debt, and what property is to become or remain separate as to one partner alone. It can be used to protect the partners in the event of death as to property that may be jointly owned but not jointly titled. It can create a structure for valuing and dividing assets that avoids litigation and high legal fees, not to mention hostility and resentment, upon termination of the joint living arrangement.
It can also be used to create certain rights and obligations of support under specified settings.
Whether family attorneys counsel a particular client to utilize a cohabitation agreement, as with prenuptial or premarital agreements, often depends upon who has - or who over time is anticipated to have - the larger economic power and financial resources in the relationship.
The obvious situation is where the economically better off person wants the security of the protections. The common assumption is that the person with wealth should always insist upon a cohab agreement, and that view is probably correct - the agreement, however, can become something much larger and more creative than simple property waivers.
Ironically, people with some degree of economic advantage often don't avail themselves of a cohabitation agreement because they feel embarrassed, uneasy, or frightened to ask the other about it, on the belief the other partner may be offended. In my experience people are only offended when the agreement runs in one direction.
If a woman with zero assets and little income seeks advice about how to structure her economic relationship with the man or woman she is about to move in with, a cohabitation agreement may or may not be in her best interest depending upon the terms. It may come as a surprise, however, to learn that she will probably be far better off in all situations with one than without.
If one participant in a joint living arrangement is obsessed with acquiring and keeping all of the marbles, you are headed for trouble anyway. For me it is always best to admit that there is an elephant in the room. By placing these concerns on the table there is a huge potential freedom to address them in ways which are ignored when there is no agreement. People can be guided into thinking about consequences they otherwise block out of their minds. This can nurture a positive beginning, rather than a beginning by default with neither person is talking about a multitude of what-if's. It provides an opportunity to honor both persons, and is not at all mutually exclusive with reasonable legal protections.
People rarely seek marital counseling outside the church or education before marrying. Similarly they rarely give much thought to how to structure their lives when they undertake living together outside of marriage.
Cohabitation agreements provide an amazing opportunity to consciously and mindfully embark upon a new relationship.
If you intend to share a household with a romantic partner other than only temporarily, my recommendation is that you always consider entering into a cohabitation agreement.
However, it is important that you locate counsel in your area who is not merely a traditional adversarial lawyer, because their resource toolbox for assisting you with all your issues tends to be relatively empty.
Thurman W. Arnold III
http://www.ThurmanArnold.com
4/23/10
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| January 07, 2010 |
| My wife she used her INHERITANCE to buy our home. We are getting divorced. |
| Posted By Thurman Arnold, III |
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Q. My wife and I separated in June 2009. When we purchased our home in March of 1998 (married December 1994), she used part of an inheritance from her grandmother to help with the down payment. I have been paying the mortgage since we bought it. Will she get her inheritance back in our divorce? What would I get?
A. Because I need more information and the answer to some questions and then to follow up questions, I can only give you a generalized response.
So long as your wife can trace the portion of her downpayment contribution to the inheritance, she is entitled to a Family Code section 2640 reimbursement in the amount that she proves by this tracing. She is not entitled to interest on grandma's gift to her, however, but only the principal. However, this assumes that the downpayment contribution always remained separate from any other money or bank assets that you had an interest in, or that the community had an interest in: If the inheritance monies were commingled with joint monies or your separate funds between the date she received them and the date they were used as part of the purchase price for the home, then a further tracing is required to establish that what money in the account at that time was her separate and what amount was something else.
Here is Blog that discusses tracing principles in more detail.
You don't report whether you were on title to the residence when escrow closed or at any later time. Whether or not you were on title when the property was purchased, it is presumed to be community property UNLESS you (a) deeded off when escrow closed or deeded off since that time or (b) consented to or are deemed to have consented to your Wife being the sole record title holder if at the close of escrow title issued in her name.
If you were on title at close of escrow and to the present day, the answer is easy - your Wife gets her traced inheritance money first, off the top, from any equity in the home. She does not get interest on the money. The remaining net equity, without other facts, belongs to the community so that each of you is entitled to one-half of what remains.
If you were not on title when escrow closed, and if you cannot rebut by clear and convincing evidence the legal presumption set forth in Evidence Code section 662 (based upon form of taking title in her name alone) that you consented to that outcome, then (a) your Wife still gets her downpayment back and (b) the community estate is entitled to be reimbursed for carrying the mortgage all those years and reducing the principal balance due the mortgage holder. It doesn't matter who paid the mortgage, so long as it was paid from community earnings during the marriage.
There is a very important reimbursement concept under California Law known as Moore-Marsden apportionment. It applies to a common situation where a home is acquired before marriage (or during marriage as separate property), title is in the name of the acquiring spouse alone, and during the marriage and up to separation or divorce and there is or was a mortgage that was paid during the marriage.
Where this occurs the community estate acquires a legal, reimbursable, interest in what would be otherwise be entirely the separate property of the titled spouse IF community funds (earnings of either spouse, for instance, or both) are used to make the mortgage payments. The idea is that joint funds are being used to benefit a separate property interest, i.e., the separate property equity. Many legal scholars consider this to be a breach of fiduciary duty - that whenever one or the other spouse's separate property interests are increased with community funds, or community time, skill, and efforts of either spouse during the marriage, the community is disadvantaged and that this disadvantage violates the statutory duties of the parties that place the party's joint interests above their separate interests.
The formula for apportionment is that the community acquires a pro tanto (dollar for dollar) interest in the ratio that principal payments on the purchase price made with community property bear to payments made with separate property. Hence, any increase in value (appreciation) must be apportioned accordingly between the separate property and the community property estates upon separation or dissolution.
Note that this only applies to separate property owned prior to marriage with a mortgage that was paid during marriage where an equity position has been increased. For instance, if a mortgage exists but it is an interest only, payments during marriage do not reduce principal. Therefore, the separate interest of the owner spouse is not improved because the debt remains exactly the same. As a general rule, the amounts paid for interest, taxes, and insurance on the house are disregarded since that portion does not to contribute to the capital investment.
Also, it assumes that the mortgage was paid with joint (community) funds, or that the funds used were so commingled that the "separatizer" is unable to trace them to a separate property source (meaning they don't have records showing where each payment was made or are unable to provide a recapitalization of the source of the funds). If your husband reduced the mortgage throughout the marriage but he did it with an account that was his separate property then the community would not have this reimbursement right.
The Moore Marsden formula requires a number of bits of information at important points in time to be properly calculated. These include: a) what was the original purchase price; b) what was the original mortgage and downpayment; c) what was the property worth at the date of marriage (DOM); d) what was owed to the lender at that time; e) what was the property worth at the date of separation; f) what was owed at that time; g) what is the property worth on the date of the calculation (i.e., the trial date); h) and what is the principal pay-off at that time?
This is agood example of why family law and divorce cases can become quite expensive. Obtaining these records, particularly if you are the 'out spouse' can be difficult, and sometimes a forensic accountant is the best option for calculating these apportionments. Find a local CPA with family law experience to help you trace the funds. You need an experienced family law attorney for these types of matters as well.
In your case, with a lengthy marriage and little owing, you have significant Moore Marsden entitlements.
T.W. Arnold |
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