Tuesday, March 20, 2012 Estate Planning Emerges in the Entertainment Industry
You will hear the importance of estate planning from me over and over. That’s my job. Where you don’t expect to come across the message so frequently is in the entertainment industry.
ABC sitcom Modern Family aired an episode during their second season called “Someone to Watch Over Lily” which centered on the characters Mitchell and Cameron trying to choose who would best take care of their daughter should something happen to them and guardianship be needed. It displayed the struggle that many of us are familiar with, in deciding who we ultimately feel could best care for our children and provide our children with the upbringing we desire.
Comedy Central comedian Daniel Tosh recently asked his viewers to tweet what they think he should include in his last will and testament. While he of course put a comedic spin on this, it reminded viewers that you can express the gifts you want made after your death through an estate plan.
The Descendants, a movie released in 2011, starring George Clooney and winner of both Oscars and Golden Globes, focuses on a struggle of what to do with a vast fortune of Kauai land held in a trust that is nearing its termination. Many estate planning messages are portrayed through this movie. In particular, that inherited wealth can lead to conflict, there are legal limitations as to how long a trust can last, and joint ownership of land can be problematic.
If any of these messages near home for you, speak to an attorney to discuss how to plan for these situations that we can watch play out on television and in the movies, but could actually become a reality for us in our own lives as well.
Friday, January 27, 2012 Race Day, Super Bowl Sunday and Estate Planning??
My next race is quickly approaching and as most people are living and breathing Football, I will be running the Surf City half-marathon on Superbowl Sunday. So what does football and running have to do with estate planning? Well, it seems like just about nothing. The Super Bowl means a day of good football, good food, a celebrity half-time show, and hyped-up commercials. My race promises sunshine, a good time and a beer garden at the end. Estate planning means a well designed plan that helps people protect their families and their money.
Sports carry risks, and life itself carries risks. The head injuries suffered by professional football players have been publicly investigated over the past few years. A study commissioned by the NFL and conducted by the University of Michigan reported that former NFL players have been diagnosed with Alzheimer’s disease and other similar memory-related diseases at nineteen times the normal rate for men ages 30-49. The accuracy of statistics is always questionable; however it is apparent to any football fan that the players face injury when they are on the field. In reality, any sport or any career carries risk of injury, and the actions we take in our day to day life can always threaten us with injury as well. Forming an estate plan will guide you through selecting people to care for your estate and your family should you ever be faced with these circumstances and become incapacitated. Life is unpredictable; it is never too early to put a plan in place.
All this said, let’s hope for a well played and injury free game this year….and a better season for our Chargers next year!
Monday, December 26, 2011 A New Year, A New Plan
Are you setting new goals for yourself in 2012? The new year tends to get us all to stop and think about our life, and evaluate what we would like to change or better about it. These goals and changes may affect your estate plan if they involve family circumstances or relationships with those close to you. For example, do you hope to grow your family and have children this year? Or has your relationship with a friend or family member changed so they are (or are not) a very trusted and important person in your life now? Family and relationship changes may raise the need to update your estate plan to change the beneficiaries you have named, re-evaluate how you are providing for your children in your plan, and review the people you have named to serve as your agents for health care and financial decisions. To keep your estate plan aligned with your wishes, make it one of your new year’s resolutions to review your estate plan!
Monday, November 28, 2011 Can I use my estate plan to make sure my son marries a Christian woman?
Conditions in a will that restrain religious practice are usually permitted. The law provides that an effective provision in a will designed to prevent/permit a gift of property on account of adherence to or rejection of a certain religious belief or practice of the beneficiary is valid. Conditions on religious beliefs tend to be invalid only when they coincide with other invalid provisions. If you are concerned about preserving your religious faith and its transmission to future generations, you might want to give property to a child in your will only if he or she marries someone of a particular faith. Such a condition could be held invalid if it unreasonably limits your children’s opportunity to marry (are there enough potential mates in the city/surrounding area to give a realistic opportunity for marriage?)
Jumping to another area of law, there is a constitutional right to marry. Conditions such as above have not been found in violation; merely a restriction upon the inheritance of a testator’s children. Note that this same theory arises when a restraint on marriage applies to only one person whom the testator does not want his beneficiary to marry ( i.e. My daughter will not receive her inheritance should she marry Bill). Just keep in mind, as California holds, there is a constitutional right to marry the person of one's choice and a disposition trying to restrain this right could be found to be a violation in the future. Whether a limitation is reasonable or not is a factual matter, determined on a case by case basis.
What if you don’t like the idea of your wife/husband remarrying after you are gone?
Conditions on marriage are almost always void. But, this does not affect provisions of limitation where your intent is not to forbid marriage, but merely to provide support and protection for your spouse until remarriage occurs. If you wish to reduce the amount your spouse gets once they remarry, the provision is valid where your intent is simply to provide until your spouse forms another relationship. Language in your will becomes very important here; if you had said you wanted to provide for her, but if she remarries the support ends, then this would not be valid. But providing for her until she remarries is valid.
Keep in mind that marriage is not the only way to form a relationship. With enough money at stake, two people may just decide to live together for the rest of their lives, collecting the support money, and not violating any of the carefully constructed provisions.
What will happen if you include an invalid provision in your will?
If you include or try to slip in one of these conditions and it is invalid, they will be disregarded by the court (that’s if your lawyer doesn’t stop you first). And the gift will go to the beneficiary regardless of the provision you tried to tack on. The Civil Code also states that if any condition requires the performance of an illegal or wrongful act of itself (such as X can only have their inheritance if they steal a car or murder Y etc.) the provision including it is void and cannot exist.
Sunday, November 27, 2011 Can I leave money to my daughter, only if she leaves her husband?
In the American Legal system, the right to pass on one’s property, to family in particular, has been in existence since the feudal times. Testamentary freedom is a benchmark of American tradition which allows testators to pass on land at their deaths to individuals of their choosing. The law is broad in scope as is evident from the allowance of individuals to disinherit minor children “for any reason or no reason” as long as it is not against public policy. Conditions on a provision in a will are usually allowed as long as they are “reasonably definite” and not contrary to public policy. However, the mere fact that freedom of testation is important does not mean that it is unlimited and absolute. So what does it mean?
In general, provisions in your will that are made directly to induce your kids to separate from their spouse without just cause and in a lawful manner are against public policy and void under the law. However, some of these gifts have been upheld when they are conditioned on a lawful dissolution (meaning they were going to get a divorce whether or not an inheritance depended on it) or where it is shown that your intent was to provide for the support of your daughter if her husband died or divorced her. The true test is that the provision can’t be an inducement to get a divorce, because that is contrary to public policy, but if you put such a provision in your will because you anticipate that the death of your daughter’s husband or a divorce would end the husband’s support of her, then you are justified in providing other support. This is a complex issue that certainly requires individual counseling with an attorney to ensure your goals are met.
Monday, November 14, 2011 Be Prepared for a Medical Emergency with Easy Access to Your Health Care Documents
A thorough estate plan will include health care documents, such as documents that authorize your physicians to speak to those individuals who you designate as your health care agents, and that designate those individuals whom you would like to make decisions for you, should you not be able to make your own health care decisions. When these documents are drafted, careful thought is put into the selection of agents and particular health care or end of life decisions; however they are often viewed as something that won’t be needed for a long time. While we hope that is the case, it is not always the reality.
Most of us have had an experience at the ER, and realize that visit was not something that could have been predicted. Because of the unpredictability of an emergency, your loved ones may not be with you when it arises. They will want to call or visit the hospital to find out the details of your condition, and they will be able to do so if you have executed a document known as a HIPAA Authorization, allowing your physicians to speak to them. But do they know you’ve given them such authorization, and do they know where the document giving this authorization is located? If the existence of the document is unknown to the authorized agents, cannot be located by them, or even worse, cannot be accessed because it is locked up in your personal safe deposit box which can only be accessed by you during banking hours, then it is essentially ineffective.
This problem can be avoided by providing your agents and family members with copies of your documents, or even better, by creating secure online 24/7 emergency access to the documents. To be best prepared for any emergency situation and to be able to access your documents at anytime, please contact our firm for alternative safekeeping solutions.
Tuesday, October 04, 2011 Are You Planning for Your Child’s College Education? Take One More Step by Planning for Your Estate!
It is nearing college application time and college is on many people’s minds right now, especially for those who have to finance it! College tuition is continuously rising, both at public and private schools, and is projected to continue to rise over the years. Despite these increasing costs, higher education remains valued in our society and is a cost that many of us will face either as a parent or as a student ourselves. One tool used to help save for this future expense is a 529 college savings plan.
In setting up a 529 plan you may have designated a successor to the account, perhaps your spouse or a family member. However, this does not ensure that your account will smoothly transition into your estate if both you and your successor pass away. If the beneficiary of the 529 plan is a minor, a guardian will have to be appointed by the court to own the plan, and a separate account will have to be established for the minor. This ultimately results in more hassle and costs for your estate, and could disrupt contributions that your surviving family members may wish to continue to make to the 529 plan after your death. If you have already taken a step towards planning for your child/beneficiary’s future by setting up a 529 college savings plan, or any other college savings plan, we encourage you to go one step further and talk to our office about estate planning. We will integrate the two, to help ensure the proper succession of your 529 plan so that your child/beneficiary can receive the utmost benefit from your planning. Monday, September 05, 2011 How Does Divorce Impact My Estate Plan?
In California, a surviving spouse receives preferential treatment when the death of their husband/wife occurs. Under the law, a surviving spouse is entitled to one-half of the couple’s community property and if there was no will, would also receive a portion of the deceased’s separate property. But what happens if you die while in the process of a divorce? Does your spouse still inherit that same one-half of the couple's community property?
A dissolution of marriage in California is not final until at least six months (more realistically one year) after divorce papers are served. Until that six month period is over and a final judgment is given, the spouses are still legally married and each party retains their rights as a surviving spouse if the other were to die. So yes, a spouse would still inherit that same one-half of the couple's community property and a portion of the deceased's separate property. This means that if you are headed towards a divorce and do not want your spouse to have legal rights to your property in the event of an untimely demise, your estate plan and other documents should be reviewed and altered as early as possible during the divorce proceedings. There are some very specific rules that must be followed, so this should only be done with the help of an attorney.
It is also important to note that a judgment of marital dissolution (divorce) may have an effect on existing wills and other estate planning documents. Before choosing to ignore the risk of an untimely death consider your personal situation including your age, health, size of your estate, nature of your assets, income, and likelihood that your divorce will be resolved promptly.
Saturday, August 27, 2011 Improving the Quality of Life for the DisabledI am currently training for a 10 mile run as part of the San Diego Triathlon Challenge in support of the Challenged Athletes Foundation. I feel very fortunate to physically be able to take on such a challenge and to support those with physical disabilities, particularly because protecting the needs of the disabled is an integral part of my estate planning practice.
If you or a loved one is physically or mentally disabled supplemental needs planning should be considered when doing your estate plan. A Supplemental Needs Trust, which may also be referred to as a Special Needs Trust, is used to improve the quality of life of a disabled child or adult. It is a vehicle to supplement and preserve any benefits received through or from various governmental assistance programs.
A Supplemental Needs Trust may either be “Self Settled” or a “Third Party” Trust. A Self Settled Supplemental Needs Trust is established by the disabled beneficiary with his or her own funds for the purpose of retaining benefits. Such planning may be necessary should the beneficiary come into possession of funds such as a large sum received through an inheritance or a settlement in a lawsuit. A Third Party Supplemental Needs Trust is one established by the non-disabled person, often by a parent for his or her disabled child, with funds to be used by and for the benefit of the disabled beneficiary.
Our firm can help you set up a Supplemental Needs Trust to meet the goal of providing assets to the person with the disability while preserving government benefit eligibility. Our firm is also familiar with local programs and benefits available to families with special needs children and would be happy to help you and your family with our many resources. Friday, June 17, 2011 Protect Your Home with a Living Trust
It is no secret that our economy has suffered. In the past few years many of us have been personally affected by the economic downturn and housing crisis. However, the American Dream of home ownership has not been lost. Many view this as the time to buy because home prices are at a low.
If you are buying a new home, there are likely many factors you are considering during the purchase, but have you stopped to think about how you want to take title to your home? What may seem like a minor detail is actually a decision that much thought should be put into.
For example, one way a couple may choose to take title to their home is as joint tenants with the right of survivorship. This seems great at first glance, for if anything happens to one of them the home passes to the other. But what happens after the death of the surviving joint tenant; do you desire for your home to be inherited according to the state’s default laws and for your estate to have to pay the accompanying probate fees? Or what if a creditor of one of the tenants goes after that tenant’s interest and the court orders the property sold?
A living trust may be a better way to own property to eliminate such risks. By creating a living trust, you are able to name whomever you want as beneficiary for the home. Whether you are purchasing a new home, or currently own a home, please contact our office to discuss your estate planning goals and the protections a living trust can provide for your home. Sunday, November 14, 2010 November Is Child Safety Awareness Month
For many people, November stands for Thanksgiving and colder weather as we all start to feel the hustle and bustle of the holidays. However, November also holds the key to protecting future generations, because it is National Child Safety and Protection month! Accident prevention and the physical well being of your children are a natural worry for any parent. Parents should be concerned with dangers around the home and hazards on the play ground. However, what about hidden dangers? What about things that may not be physical and obvious?
Mothers, fathers, and guardians are the greatest protectors of our children; but what would happen if they were not there to safeguard our youth? Unfortunately, many children face such situations when their parents pass away or are no longer able to care for them. These children, left to the hands of unknown government actors, suffer the sad loss of a parent as well as the loss of their protectors. Parents often fail to put their wishes regarding their children in writing, leaving their wishes unknown.
The law does provide an option to protect your children. This is accomplished through comprehensive estate planning; by drafting documents that are intended to carry out a person’s wishes when they can no longer make them known. Estate Planning includes provisions to make sure that trusted individuals that you choose can take over safeguarding children. Estate Planning also provides for children in other ways such as making sure there is enough money for their care and upbringing.
Naturally, people react to the physical world and take every measure possible to protect those little ones. It is less obvious to ensure the legal protection of children. Estate Planning is often stereotyped as something the elderly need, but it is actually needed at many ages, especially when you are a parent. As a parent, if you should happen to pass away earlier than expected, will your wishes regarding your children be protected? A comprehensive Estate Plan can protect what is most valuable, and ensure the continued success of your children. Please seek the professional skills of an estate planning attorney to help you protect your children. Monday, May 31, 2010 Why Do Parents Need an Estate Plan?
How many times have you heard someone tell you that you need an estate plan? Many people are quick to tell you how much it is needed, but there are many who aren’t even sure what that means, so I am going to give you an overview of why a parent needs an estate plan.
Think of the last time you headed out for a child-free evening. Remember writing down details of your child’s schedule, routine and other needs? I bet you couldn’t imagine leaving your home without a comprehensive set of babysitting instructions. An estate plan is a long term set of those instructions. It usually includes naming a person to raise your child in case something happens to you. It also can ensure your values are passed down to your child and that the right person makes the financial decisions for him or her.
An estate plan allows you to leave your assets to the people you want, when you want and how you want. If you don’t go through this important exercise, the default rules of the State of California will apply to you, and your family will likely not get the end result you had envisioned. An estate plan usually includes a will and/or trust which passes assets to those you want, and names guardians for your children; a power of attorney allows someone you trust to stand in your shoes financially if you are unable to do so; and health care directives name someone to make health care decisions for you if needed. An estate plan is a living document that should be reviewed and updated as your life circumstances change. Most importantly, it is something every parent should have. Friday, February 26, 2010 Do I Need a Will?
I've written often about the need for young individuals to make sure they have an estate plan in place, but since this topic is so important, I wanted to also post this on my blog.
I often find that many people mistakenly believe that only wealthy individuals need to create Wills. The truth is that everyone can benefit from a Will. While Wills are used to determine how, when and to whom assets pass to at death, they perform other vital functions as well. Most importantly, Wills allow parents to appoint guardians to surviving minor children. Although it can be unpleasant to think about, it is necessary to plan for the care of your children in the event of your death. Directions regarding the rearing of your children can be specified in your Will, including the management of any assets left to minor children. The awful truth is that if you die without a Will, the state has its own plan for you, and you are powerless over decisions made by a judge regarding the future of your loved ones.
Creating a Will can not only give you peace of mind during your life but can also be beneficial to your family after you are gone. Making your wishes known can help to avoid unpleasant and unnecessary disputes between well-meaning family members over guardianship of children and distribution of assets. If you would like to further discuss the benefits of creating your Will, our office would be pleased to help. Monday, January 25, 2010 Is Spot Named In Your Will?According to a 2009 National Pet Owner Survey, over 62% of American households contain pets. Many of these households consider their pets to be bona fide family members. Adoring pet owners have been known to purchase Christmas presents for their furry companions and celebrate their pet’s birthdays. Traditional estate planning allows individuals to determine how personal assets will be distributed and who will care for surviving minor children upon death or incapacity. But who will care for surviving pets if their owners become unable to?
Responsible owners would never leave on a vacation without making detailed arrangements for their pet’s care; caring for them when you are gone should be no different. Make sure you tell your attorney that you want to make provisions for your pet in your estate plan. Even though pets cannot inherit property or money, there are planning techniques that will allow you to provide for your pet.
Consider:
o Include pets in durable powers of attorney to allow payments for pet care if you are unable to care for your pet.
o If using a will as your primary after death estate planning tool, designate a caregiver and at least one alternate caregiver. Include detailed instructions and sufficient funds to provide for your pet’s care. Additionally, make sure your will is updated regularly.
o Currently 39 states, including California, have enacted “pet trust” laws. These statutes enable a person to create a trust for the care of a designated pet for the life of the animal.
o Consider a pet care organization that offers pet care or placement programs, as an alternative to giving your pet to an individual caregiver. These organizations generally offer services for a per-animal fee or in exchange for a gift stated in a will. It is important to thoroughly research any facility before entrusting your pet to their care.
Many pets will outlive their owners, and it is important to ensure their care after you are gone. If you need assistance, our office is happy to help. Monday, January 18, 2010 Should the Fox Guard the Henhouse?So now you have decided who to nominate as a guardian for your minor children should something happen to you. Now, let’s explore who should be the custodian (or person in charge) of the money you left them. Because your children are minors, you realize that you can’t leave money or property to them outright. If you do, that is a sure way to ask for court involvement.
Let’s call this custodian a trustee. The trustee’s job is to invest and manage the money for your children, and make distributions according to the terms of the trust or the will. Commonly distributions can be made for the child’s health, education, maintenance and support. Deciding who should be the trustee can be a difficult job. Many people automatically assume that the trustee should be the same person who is going to be the guardian of the children. While this may seem simpler, this is something that should only be done with careful consideration. You want a trustee that can be objective and realize that the money needs to last through college, or last to carry out your goals. You do not want someone who will give in to the child’s demands for that fancy new car, a pony, or whatever they may want. You also don't want to end up with someone who might not use the money just for the children, the old fox guarding the henhouse example. Since the trustee will have some discretion in deciding if certain expenses are necessary and fall under the category of support, for example, you want someone who can use that discretion wisely. Look outside the family if necessary. There are many people that do this for a living, and can take an objective view. Make sure you think this decision through with your attorney to ensure that you make the best decision for your circumstances, and for your children. Tuesday, August 25, 2009 How is a Premarital Agreement Similar to an Estate Plan?A premarital agreement, or a “prenup,” is an important document that allows a couple to define how they want the assets that they acquire during marriage to be treated. The default rules in California dictate that if a couple gets a divorce, all assets acquired during marriage will be split equally among the spouses. If a couple contemplating marriage doesn’t like those default rules, however, they can opt-out and draft their own rules through a premarital agreement or even a post-marital agreement.
An estate plan is very similar. There are default rules in place in California to deal with the inheritance of assets at someone’s death. If someone doesn’t particularly like the default rules, which involve costly court and probate fees, they can opt-out and create an estate plan that defines what happens to their assets in the event of their death.
So, as a responsible couple may define what happens in the event of divorce through a premarital agreement, a responsible couple will also define what happens in the event of death. In California, 50% of marriages end in divorce, but 100% of lives end in death. Take charge of the way your assets are distributed at your death and create your own estate plan. If you don’t, the state has a plan for you. Wednesday, August 05, 2009 Estate Planning Considerations in the LGBT Community
Estate planning allows you to pass your assets to who you want, when you want and how you want. Estate Planning often consists of living or revocable trusts, wills, powers of attorney and advance directives. It provides planning in the event of incapacity, and allows you to customize the way your estate will be passed on after your death.
The most common danger in planning for the LGBT community is failing to plan altogether. Many people pass away without having any type of plan in place, but California has made provisions for this, and has a default set of rules in place. If you pass away without a will or a living trust, the probate courts will pass your assets according to the intestacy rules in California that define your heirs for you. If the people you want to inherit your assets do not follow this traditional line, you need to document your alternate wishes in writing. Without this, you could end up leaving assets to someone that you have had no contact with in years, and excluding someone because you did not have a legal relationship with them.
Another danger is planning for a same sex couple in the same way that one would plan for an opposite sex married couple. Even if you and your partner are registered as a domestic partnership in California, this does not afford you the marital deduction tax planning by the IRS, since the IRS only defines a spouse as someone of the opposite sex. While this may be unfair, we need to ensure that we plan according to the current rules, while we work to amend them.
There are many more considerations that need to be discussed when planning your estate. We are aware of the special circumstances surrounding planning for same-sex couples and will ensure that your plan achieves your goals.
Wednesday, May 20, 2009 Agenda for Parent-Child Estate Planning CoversationI have recently been talking with families that do not know very many details about the Estate Planning that may or may not have been completed by their parent(s). When I hear this, I am often asked how to bring up such a difficult topic, or what types of questions should be asked. We have put together an agenda to guide you through this conversation. If they do not have an estate plan, we are happy to discuss how we can implement one for them today.
1. Do you have an estate plan, and if so, what type of plan?
Finding out whether your parents have an estate plan, and the type of plan they have is beneficial because you will be able to anticipate what will happen upon their death or incapacity. For example, if they don’t have an estate plan, you can anticipate that their assets may need to go through probate.
2. If your parents have a trust based plan, does the trust contain the appropriate property?
One of the main benefits of a trust is that trust assets avoid probate. However, the trust must own the assets in order to receive the protection of the trust. Many attorneys rely on their clients to fund their own trusts, but don’t instruct their clients on the disastrous results that could occur if they fail to do so. In order to take full advantage of your estate plan, it is important to know which assets should be put into the trust, which should not, and the appropriate means of holding title to all of these assets.
3. Who has been designated to take care of the financial decisions in the event that your parents cannot, and what financial decisions need to be taken care of?
It’s important to know who is responsible for taking care of your parents’ financial decisions upon incapacity or death. Identifying and notifying that person ahead of time will allow that person to step into your parents’ shoes quickly, should it be necessary. You may also suggest that your parents make a list of things that need to be taken care of, such as: paying the mortgage, paying medical bills, accessing bank accounts, picking up the mail, etc. It is easy to over look financial responsibilities when a loved one is incapacitated, and this will provide the Power of Attorney or Personal Representative with clear directions and ensure that nothing is overlooked.
4. Does the plan include health care documents? If yes, who has been selected to make the healthcare decisions for your parents upon incapacity and/or death, and what are their wishes?
Not all estate plans incorporate healthcare documents. Some of the documents you should be looking for are a HIPAA Authorization, Healthcare Power of Attorney or Advance Health Care Directive, and a Living Will. Combined these three should indicate who is to make the medical decisions upon incapacity or death, provide them with the power to make those decisions, allow disclosure of confidential medical records, and dictate the person’s wishes at incapacity or death.
5. Where is your estate plan located?
Having an estate plan is great, but if you don’t know where it’s located, then you will not be able to carry out your parents’ wishes. Also, you may want to recommend that your parents keep it in a place that is accessible, and confirm that the estate plan contains their attorney’s information in the event that there are questions or concerns. Many of the decisions need to happen quickly, and this will make the transition simpler.
Wednesday, March 25, 2009 Am I Too Young for an Estate Plan?While speaking with potential clients, I often hear young families tell me, “I’m too young for an estate plan”. I believe this statement comes from a misconception of what an estate plan is, and what benefits one provides.
An estate plan is a customized plan for dealing with minor children and assets upon someone’s death or incapacity. It includes instruments that will describe how, and by whom, your children will be provided for if you are unable to. Think about the preparation that goes into hiring a sitter for the evening so you and your spouse can enjoy a well deserved date night. You check their references, make sure that the sitter knows where the first aid kit is, has the name and number of the pediatrician, knows if your child has any allergies, and even where a favorite toy is located. You wouldn't leave your babysitter without a set of instructions telling them what to do in case of an emergency, yet without an estate plan in place, you are doing just that. The decision of who will be a guardian for your minor child until they are eighteen years old could be out of your hands.
An estate plan also addresses how assets are to be managed and distributed upon your death. Another important aspect of an estate plan is incapacity planning. You can avoid lengthy and expensive conservatorships by taking the time to put a comprehensive estate plan in place. So next time you are preparing your babysitter for a night out, make sure that there are instructions in place for more than just that night.
Monday, January 26, 2009 How Should I Hold Title?I often have a client come see me who tells me “I just want to add my son to my house now,” or “My daughter is going to get my home when I die, so I’ll just give it to her now.” I know when they ask this question that they are looking to avoid probate on their home.
Probate is the process where a judge will determine who gets your assets upon your death. In California, probate on a home that has a fair market value of $500,000 is approximately $26,000. This process also has an average turnaround time of 18 months. That is time and money that is taken out of their children’s inheritance, and it seems like a great idea to avoid that, right?
Not so fast. This is actually a very dangerous strategy that can have some serious complications down the line. Adding someone to the title of a house, is essentially giving them a part of your home. This can subject you to gift taxes, open your home up to the creditors of your child, and prevent you from taking out a loan on your home in the future. There are also some negative tax consequences down the line, which can prevent your child from receiving a step-up in basis.
Before you decide to change the title to a home, it is important to obtain legal and tax advice on this transaction. There are other ways to accomplish your goals, and an estate planning attorney can help you decide the best route for you. Wednesday, January 07, 2009 Life Insurance TrustsMany people say that life insurance benefits are tax free, but this not entirely true. There are a few levels of taxation to consider when speaking about taxes. Life insurance benefits are income tax free, but they are not estate tax free.
One strategy to pass a life insurance benefit estate tax free to one’s heirs is to place the life insurance policy into an irrevocable life insurance trust (ILIT). An irrevocable life insurance trust keeps the death benefits outside of a person’s estate so that they are not subject to estate settlement costs, income taxes, or estate taxes.
Since the trust is considered the owner of the life insurance upon death, the life insurance is excluded from the decedent’s gross estate unless death occurs within three years of the transfer. In that case, the entire value of the policy is brought back into the decedent’s estate for federal estate tax purposes. This three year look back period can be planned for by purchasing a new policy or a rider onto an existing policy if needed.
Whenever a trust is created, it must be determined whether the trust will be revocable or irrevocable. A revocable trust can be changed or even revoked by the Trustor (the person creating the trust) at any time. An irrevocable trust, however, cannot be changed. The assets placed into this type of trust must remain there. Beneficiaries cannot be added or deleted. And the only way to change the trustee is for that person to die or agree to resign.
Revocable trusts are flexible, but do not offer the tax benefits that an irrevocable trust can provide. In an irrevocable trust, the trust property is not calculated as part of the decedent’s estate, and is therefore not subject to estate taxes.
One disadvantage of an irrevocable trust is that it is well, irrevocable. Once the trust is established, it cannot be changed, except in a few specific circumstances, without court intervention.
When thinking about an irrevocable life insurance trust, there are many important considerations to make (i.e. who is an appropriate trustee, how are the insurance premiums to be paid, what type of policy is appropriate for an ILIT, should a Trust Protector be named, and how distributions after death should be made). Please discuss your estate planning objectives with an experienced attorney to decide if this method is right for your situation. Sunday, December 07, 2008 Strategies for Asset Protection“Asset Protection is not illegal and is honored by the law if done for a legitimate purpose.” In re Turner, 335 B.R. 140 (N.D. Cal 2005).
Asset Protection Planning is a term that is often misunderstood. It is not illegal, unethical, shady, or secretive. It is not dodging taxes or hiding assets. It is strategic planning that should be considered in certain circumstances, especially for those in particularly litigious types of business.
Asset protection planning is used to discourage lawsuits by lowering your personal financial profile. It makes you an undesirable defendant, and therefore less likely to be sued. This also leads to increased probability for a favorable settlement.
California has some very specific rules regarding fraudulent transfers, which is a transfer of assets that is intended to prevent its attachment by creditors. Fortunately, there are some bona fide estate planning strategies that can have the added benefit of preventing creditors from attaching your assets.
Some examples of these strategies are:
- Liability Insurance;
- Homestead Exemptions;
- Tax qualified retirement plans;
- Money paid into a §529 College Savings Plan;
- Life insurance held outside of your estate in an Irrevocable Life Insurance Trust;
- Formation of Limited Liability Company(ies) or Corporation(s);
- Continuing Trusts/Heritage Trusts – keeps property in an inheritance trust, preventing your money from being taken by creditors and predators;
- Domestic Asset Protection Trusts;
- Irrevocable Foreign Asset Protection Trusts – protects assts from even the most aggressive creditor.
Stay tuned for explanations of the above examples. Saturday, December 06, 2008 Welcome to my BlogThe Law Office of Danielle P. Barger is committed to providing my clients the best service possible through a wide range of estate planning strategies to avoid California probate, protect your children from creditors, predators, and themselves, minimize estate taxes, and ensure that your estate planning needs are met. As estate planning laws evolve and change, and as new innovations in the field become available, I will be using this blog to keep you up to date.
I will also use this forum to describe less common, but very valuable, estate planning strategies that may not be of general applicability, but can be very useful in specific cases. |