By Judd Matsunaga, Esq.
If you like the old samurai movies, you’re probably familiar with an outdated Japanese tradition where the eldest son inherits titles and estates to keep wealth and power within one lineage.
Historically, this practice maintained family status, kept power consolidated, and prevented land fragmentation. However, modern-day Japan favors equal distribution among all heirs, similar to current laws in places like England and the U.S.
American inheritance rules are deeply rooted in English traditions, particularly the Statute of Distributions (1670), which established a system for dividing property among family members when a person dies without intestacy. Early American colonies adopted these common law principles, adapting them to their own societal structures. “Common law” pretty much favors “common sense,” e.g., children inherit equally.
The courts favor fairness and equality, applying the 14th Amendment’s Equal Protection Clause, striking down discriminatory practices based on gender. Gradually, each state developed its own unique laws, but most follow a similar hierarchy, ensuring close family members gets priority.
The core idea is to distribute property to the closest surviving relatives. Upon death of both parents, estates are typically distributed to children equally (adopted included, stepchildren usually excluded). These laws prevent assets from going to the state (escheat) if someone died without a will.
Of course, you have a right to divide your property upon your death any way you see fit — provided you execute a will or trust, i.e., a “writing,” and still have “testamentary capacity.” Testamentary capacity, a subset of legal capacity, is a specific and lower standard required only for the execution of a valid last will and testament. That means even if the doctor wrote a “letter of incapacity” stating that you shouldn’t enter binding legal contracts, that fact alone does not necessarily prevent you from making a will.
Trusts, however, require a higher level of capacity than a will. So, before you “lose your mind,” why not make creating or updating your trust your New Year’s resolution? If you own your own home, it needs to be in your revocable living trust to avoid the court process called probate.
If you’ve been “living under a rock” for the last 30 years, you might say, “But I have a valid will.” A will has to be probated. Probate is a legal nightmare, wasting tens of thousands of dollars that goes to attorneys and court fees, not to your heirs. A properly funded living trust avoids probate — “period.”
Few issues cause as much disagreement between family members as inheritances. Most parents, if not all, hope that their children will remain close, as “family,” even after they are gone. Unfortunately, that’s often not the case. The courts are full of brothers and sisters fighting over a parent’s estate. You might say, “My trust (or will) has a ‘no-contest clause.’” In California, no-contest clauses are enforceable, but only in very limited situations defined by statute (Probate Code § 21310 et seq.).
No-contest clauses are not a blanket ban on litigation in California; they are intended to deter “bad faith” challenges. Under current California law, a no-contest clause can be enforced against direct contests without probable cause. The clause is triggered only if the contestant loses and had no probable cause.
A “probable cause” means a reasonable person would believe the challenge has merit, i.e., challenging the validity of the trust (or will) based on forgery, fraud, undue influence, lack of capacity, or revocation.
Contests with probable cause, i.e., a beneficiary who has a reasonable belief in the merits of their case (e.g., clear signs of fraud or undue influence), generally do not result in forfeiture, even if the challenge is unsuccessful. If the validity of a trust (or will) is disputed, the court will consider relevant evidence and testimony to ultimately make a determination about whether to uphold the disputed will or trust, or invalidate it.
Wills and trusts do not always clearly convey the creators’ (parents’) true final intentions, nor do they necessarily reflect what their creators’ true final intentions were. Did someone apply excessive pressure on the decedent to compel them to change their will or trust? Contesting a will typically involves proving issues like undue influence, lack of capacity, or improper execution. Evidence such as medical records, witness statements, or expert testimony may be required.
Sadly, as parents get up in years and start relying more and more on one adult child, i.e., the primary care-giving child, opportunities arise where that one child might take advantage of a vulnerable parent, pressuring them to change their trust (or will) in their favor. This is called undue influence. Undue influence occurs when someone exerts overpowering pressure on Mom and/or Dad, regardless of full mental incapacity. To prove undue influence, you must show:
- The testator was vulnerable due to factors like age, illness, isolation or dependency.
- The influencer used manipulative tactics.
- The influencer had the apparent authority over the testator.
- The person was tricked into believing they were signing something else.
- The resulting will create an inequitable outcome.
For a challenge to be successful, you really have to be able to prove someone exercised some undue influence over Mom and/or Dad that (1) caused the parent to change a trust (or will); (2) or someone had it altered without parent’s knowledge; or (3) executed the document at a time when they lacked the mental capacity and competency at the time they executed their trust (or will). However, suspicion alone isn’t enough; clear and convincing evidence is required.
If the court invalidates a trust (or will), or one or more of its amendments, the affected assets generally will pass in accordance with the decedent’s previous estate planning documents so long as they were valid. If none existed, the assets will pass to the decedent’s intestate heirs in accordance with the laws of intestate succession. That generally means to divide the estate amongst the children equally.
In court, fights can break out that have a lasting effect on family relationships. It’s not uncommon for siblings not to talk to each other anymore just because they’re so upset at what happened with the money after the parents died. Of course, the best way to keep your children from fighting is to spend all your money while you’re alive. That way, your kids will have nothing to fight over. However, most parents in the Rafu Shimpo community feel an obligation to leave their children an inheritance.
But, instead of dividing your family, what if there was a way to actually help bring them closer? I recently heard about a Nisei couple who left provisions in their trust that encourages their four children, their grandchildren and great-grandchildren to stay close as family for many years to come. The estate was divided among the four children equally (all doctors and lawyers) with a fifth share to be used to pay for annual family vacations to make sure the family stays close. I wish I’d thought of it. It’s brilliant!
The overwhelming majority of Nikkei parents will say, “I want to be fair, I love all my children equally.” The simplest definition of “fair” is equal. Therefore, if your goal is to reduce conflicts between your children, then you should probably divide your estate “equally.” For example, if you have three children, you should divide your estate into three equal shares, i.e., “I want my estate to be divided equally amongst my children.”
Sometimes, however, “fair” does not necessarily mean “equal.” “Say what?” you might ask. You might have given one child gifts during your life. For example, you might have an estranged child, or you might have provided the down payment for a child to buy their home. To be fair, you may want to reduce that child’s share by the amount of that gift. Or, you might want to give a larger share to a caretaker child who has provided most of the love, care, and support in your later years.
So depending on your circumstances, you don’t have to divide the estate “equally” to be fair. Start by identifying your estate and estimating its value. Then consider whether some beneficiaries should inherit more than others. For example, if you have a family business that one child is taking over, or you have a disabled child that requires more financial assistance, then you might want to leave your beneficiaries an unequal amount.
You have the right to leave your estate however you see fit. If it’s unequal, you need to put it in writing through a trust (or will). So the question is, how should I leave an unequal inheritance to my children without damaging and dividing them? Once you decide on a plan to divide your estate, that’s just part of the equation. The second part of the equation is sharing it with your children while you’re still alive and still of sound mind — that is what can make an unequal distribution work.
There are times where the worst thing you can do is “blindside” a child after death. The sad truth is that your children might judge how much you love them based on how much you leave them. If you are leaving unequal shares, you should have a family meeting where you can explain your reasoning why. This way they might not feel like you don’t love them or you’re not taking care of them. If they aren’t inheriting as much as they expect, it’s only fair to let them know the truth before you die.
Family meetings will lead to fewer fights on the back end after the parents are gone because the children understand what the parents are trying to accomplish. With that understanding, there will be less resentment, bitterness, family feuding. Children can “get on board” even if they don’t completely agree with it. In a family meeting, everyone can brainstorm creative ways to overcome and possibly even resolve potential problems.
If choosing one child to be the successor trustee could lead to problems, i.e., other children might think you are showing favoritism, you could name your attorney or a trust company as your trustee. If you’re using an outside professional trustee, let the children meet with him or her and develop a relationship. That way the administration process can go much smoother and your children can work as a team with your professionals. Make it as easy as possible for them.
Finally, during the family meeting, talk to them about your tangible personal property, e.g., all the stuff lying around your home. Put your instructions in writing. Tell your kids where you keep your important papers, accounts and passcodes. Tell your kids where to find your durable power of attorney in case of an emergency or accident. Tell your kids where to find your estate planning attorney, financial planner, CPA, and any other professionals that help you manage your estate.
Lastly, share how important it is for them to set up their own revocable living trust.
Judd Matsunaga, Esq., is the founding partner of the Law Offices of Matsunaga & Associates, specializing in estate/Medi-Cal planning, probate, personal injury and real estate law. With offices in Torrance, Hollywood, Sherman Oaks, Pasadena and Fountain Valley, he can be reached at (800) 411-0546. Opinions expressed in this column are not necessarily those of The Rafu Shimpo.