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California trust and estate disputes often involve allegations that a surviving spouse took advantage of a deceased spouse so as to get more of the latter’s assets.  Often the “spousal financial abuse” charges are leveled by the deceased spouse’s biological children against their step-parent, as discussed in a prior post.  Sometimes care custodians who are hired to care for vulnerable elders marry them to achieve financial gain, much to the surprise and consternation of surviving family members.

Assembly Bill 327 and Assembly Bill 328, passed by the California Legislature last year and effective on January 1, 2020, adjust the statutory presumptions of undue influence that apply to spouses with respect to estate planning.  The legislation was sponsored by the Trusts and Estates Section of the California Lawyers Association.  On March 24, 2020, attorney Ellen McKissock explained AB 327 and 328 in a webinar entitled “Care Custodians and Spouses: New Legislation Affecting Their Rights.”  Ms. McKissock is Vice Chair of the Executive Committee of the Trusts and Estates Section.

AB 327: No Undue Influence Presumption for At-Death Transfers Under Family Code Section 721

We previously blogged about Lintz v. Lintz, a California case from 2014 that imperiled estate plans favoring one spouse over the other.  We wrote: “The Lintz case casts a shadow over millions of ‘honey I love you’ wills and trusts in the Golden State.  Until the California Legislature or Supreme Court resolves this question, step-children will invoke Lintz in an effort to gain the upper hand over step-parents.”

The Lintz court held that Family Code section 721 must be applied to a testamentary instrument that advantages one spouse over the other.  Section 721 imposes “a duty of the highest good faith and fair dealing on each spouse,” precluding one from taking “any unfair advantage” of the other.

Hence, for example, if one spouse had substantial separate property, a will or trust leaving that property to the survivor presumptively would be the result of undue influence.

To overcome the adverse presumption recognized in Lintz, the benefiting spouse would have to prove that the deceased spouse acted freely and voluntarily, with full knowledge of all the facts, and with a complete understanding of the effect of the transaction.  That can be a tall order years after the fact, especially when the deceased spouse may have had health issues and the estate planning attorney may not have left a detailed record of the estate planning process.

Following Lintz, surviving spouses were in a weaker position than other family members when accused of undue influence.  For example, if Son is accused of unduly influencing Mother to obtain a larger share of her estate, Son’s upset siblings generally have to prove that he exercised undue influence upon her.

However, under California common law, the siblings can shift the burden to Son to prove the absence of undue influence if they show that he (1) had a “confidential relationship” with Mother, (2) actively procured the questioned will or trust, and (3) received an “undue benefit.”

On the other hand, if Mother shows generosity to Second Husband in her estate plan, he (under Lintz) would be presumed guilty and would have to prove that he did not unduly influence her.

Why should spouses be treated with more suspicion than other close family members who are also in positions of influence with respect to elders?  As Ms. McKissock explained, the Executive Committee of the Trusts and Estates Section considered this asymmetry in the five-year period after Lintz, eventually recommending a fix in AB 327.

The statute improves the position of surviving spouses by removing the asymmetry.  New Probate Code section 21385 provides that an at-death asset transfer between spouses, whether by will, trust, beneficiary form, or other instrument, is not subject to the presumption of undue influence in Family Code section 721, effectively overriding the Lintz case.  Family Code section 721, as amended, includes a cross-reference to Probate Code section 21385.

AB 328: Care Custodians Who Marry Elders Cannot Easily Avoid Undue Influence Presumptions

While AB 327 treats surviving spouses favorably, AB 328 takes the opposite approach with respect to “care custodians” who marry elders.

Before AB 328, California law (in Probate Code sections 21360-21392) generally applied a presumption of undue influence to paid caregivers who received substantial benefits from elders by means of donative transfers from them, including wills, trusts and beneficiary designations.

An opportunistic caregiver, however, could bypass this adverse presumption by marriage.  Probate Code section 21382 exempted spouses and domestic partners (as well as other family members of the elder) from the undue influence presumption.

A caregiver, once married to the elder, is in a preferential inheritance position.  If the elder has no estate plan, the surviving spouse is entitled by California’s rules of intestacy to the elder’s share of their community property and to at least a half share of the elder’s separate property.  If the elder has a will or trust, but does not revise it after marriage, the surviving spouse is entitled to a share of the elder’s estate as an “omitted spouse.”  Thus, the caregiver might arrange a secret marriage with the elder and then simply sit back and wait until the elder’s passing before coming forward to claim a share of the estate.

Alternatively, the newlywed caregiver might arrange for the elder to sign documents, such as a trust amendment, that substantially benefit the caregiver and avoid the presumption of undue influence that otherwise applies to caregivers.

Ms. McKissock describes this type of exploitation as “marrying into elder abuse.”  Marriage is easy to accomplish, difficult for a third party to challenge, and confers automatic rewards on surviving spouses.

AB 328 takes a relatively narrow approach to the problem given the need to balance a person’s fundamental right to marry with the goal of protecting elders and other dependent adults from financial exploitation.  The law targets paid “care custodians” as they are defined in Probate Code section 21362.

The statute, at Probate Code section 21380(a)(4), creates a presumption of fraud or undue influence with respect to donative transfers to care custodians who commenced a marriage, cohabitation, or domestic partnership with a dependent adult while providing services to that dependent adult, or within 90 days after those services were last provided to the dependent adult, if the transfer occurred, or the instrument was executed, less than six months after the marriage, cohabitation, or domestic partnership commenced.  To overcome the presumption and obtain the benefit of the donative transfer, the care custodian must prove the absence of fraud or undue influence by clear and convincing evidence.

AB 328 also narrows “omitted spouse” eligibility.  Under new Probate Code section 21611(d), if a care custodian marries a dependent adult and the latter dies within six months of the marriage, the care custodian is not an omitted spouse unless he or she can prove by clear and convincing evidence that the marriage was not the product of fraud or undue influence.

Assume, for example, that Chad (age 45) provides paid caregiving services to Betty (age 85) at her home in Sacramento.  Betty has dementia that has eroded her short term memory and otherwise impaired her thinking.  After a few months, he persuades her to marry him at a secret bedside ceremony.  She already has a will and trust that leave her assets equally to her two children and she does not update her documents after marrying Chad.

Under the old law, if Betty dies shortly after the marriage occurs, Chad as the “omitted spouse” would receive one-third of all of Betty’s separate property, leaving Betty’s children with the remainder.  Under AB 328, Chad would have to prove with highly compelling evidence that Betty knowingly and voluntarily entered into the marriage with him, which will be difficult for him to do.

According to Ms. McKissock, both AB 327 and 328 might be deemed retroactive to events occurring before January 1, 2020 by operation of Probate Code section 3(c).