San Diego Estate Planning Lawyer Blog
Published on:

The new year is a good opportunity to reconsider your estate planning needs. You should periodically review, and if necessary revise, your will, trust, and other estate planning documents such as a durable power of attorney, to keep your affairs current. Among other things, changes in the law may alter your estate planning needs.

What is the Estate Tax?

One of the most important laws affecting estate planning is the estate tax. This is a federal tax levied against the total value of a person’s assets upon their death. A handful of states also levy their own estate tax, although California does not. However, if you own property in a state where such a tax is still assessed, you will need to account for that in your estate planning.

The estate tax is also more accurately described as a “gift and estate tax.” The idea here is the federal government does not want people simply giving their property away just before they die in order to avoid the estate tax. So gifts you make to persons over a certain amount may also be taxable.

Do I Need to Worry About the Estate Tax?

In reality, most of us will never have estates large enough to qualify for the estate tax. The federal government exempts a certain portion of every estate from the tax. For 2016, this exemption amount is a generous $5.45 million. This means if you pass away in 2016 and the total assessed value of your estate and any taxable gifts is less than $5.45 million, your estate will owe no federal estate tax. Any amount above the $5.45 million exemption, however, will be taxed at a rate of 40%. And as noted above, some states assess their own estate tax, which may have exemptions lower than the federal amount.

How Would the Estate Tax Affect My Spouse?

On top of the $5.45 million deduction for all estates, the government also provides an unlimited exemption for property left by one spouse to another. This “marital deduction” means even the wealthiest estate may pass to a surviving spouse tax-free. Of course, once the surviving spouse dies, his or her estate may then owe a significant estate tax bill.

On the other hand, a 2011 federal law allows a surviving spouse to take advantage of any unused portion of the deceased spouse’s exemption. For example, say a couple jointly owns $7 million in assets. The first spouse dies and leaves everything to the survivor, so thanks to the marital deduction there is no estate tax due. When the surviving spouse dies, she is entitled to not only use his or her own $5.45 million deduction, but also the other spouse’s unused $5.45 million deduction, meaning the $7 million estate is still exempt from tax. In other words, portability can effectively double a married couple’s total exemption.

What About Gift Taxes?

Under federal law, you can make annual gifts of $14,000 to as many individuals as you wish without incurring any gift tax liability. The $14,000 limit is per person, so if you have three children, you could give each of them that amount every year. And as with your estate, you can make unlimited gifts to your spouse. Any gifts you make beyond these (and a few other) exclusions are counted against your $5.45 million estate tax exemption.

Need Advice on Estate Planning?

Even if you are not worried about the estate tax, you no doubt have many other estate planning questions. An experienced San Diego estate planning attorney can help answer these questions. Contact the Law Office of Scott C. Soady today if you would like to speak with someone about your estate planning needs.

Published on:

Normally when we talk about estate planning, we assume there will be an estate with sufficient assets to provide for a person’s heirs. What happens if you die with more debts than assets? In legal terms, this is known as an “insolvent estate,” and California law establishes certain rules to deal with such a situation.

California’s Order of Priority for Estate Creditors

First of all, even if you have a will, you cannot use it to avoid paying certain obligations. For example, you cannot direct the executor of your estate to give all of your money to your children and not pay your creditors. California law sets an order of priority for paying any debts from the assets of an estate. Some debts are given higher priority than others, and much like a bankruptcy case, the lower priority creditors may receive nothing from an insolvent estate.

The highest priority debts are those for “expenses of administration” related to the estate or its property. So if you own a house, the expenses necessary to keep the house running, or sell the property, would be considered an expense of administration. This category also includes such things as court costs and attorney fees.

The second-highest priority is for secured creditors. This most commonly refers to a mortgage on a property. Any such mortgage must be paid off before any lower-priority debts are paid.

The third-highest priority is for funeral expenses. This is followed by expenses of the deceased person’s final illness, i.e. medical bills.

The fifth-highest priority is for what is known as a “family allowance.” This refers to any amounts needed for a spouse or dependent child’s ongoing maintenance while the estate remains open. The specific amount of any such allowance is determined by court order.

The sixth-highest priority is for any claim for unpaid wages. In other words, if the deceased person hired someone as an employee and failed to pay wages for whatever reason, that employee would have a claim at this priority level. Finally, all remaining “general debts” share the lowest priority. This includes any unsecured debts such as credit card balances or money owed on a promissory note. General debts also include any unsecured portion of an otherwise

It should be noted that as a general rule, there is no priority within a given class. However, all debs within a given class must be paid before any debts of a lower priority. So, for instance, if a person dies and leaves two unpaid credit card bills, neither has priority over the other. If there is not enough money to pay both, the law requires each creditor be paid a “proportionate share” from the available assets.

Get Advice from an Estate Planning Attorney

Insolvent estates still require a good deal of administration. That is why you should not ignore estate planning even if you expect to have an insolvent estate. If you need assistance from a qualified California estate planning attorney, contact the Law Office of Scott C. Soady in San Diego today.

Published on:

After your death, your will provides an estate planning roadmap for distributing your property to your chosen beneficiaries. You may be wondering how a probate court will know whether or not a particular document is actually your will. In other words, how does one go about proving a will is valid?

California, like all states, requires a will to be signed in the presence of at least two witnesses. The reason for this is to maximize the chance that at least one person—one of the witnesses—will be available to authenticate the will as valid should a dispute arise. Of course, since you may sign your will years (or decades) before your death, what happens if the witnesses are difficult to locate or unavailable?

One solution is to incorporate a “self-proving affidavit” into the will. This is a notarized document signed by the person making the will, together with the witnesses, in which they all affirm, under penalty of perjury, that the accompanying will is genuine. Most states will accept such an affidavit as proof of a will’s validity without the need for live witness testimony.

California does not necessarily require such an affidavit: the will itself may contain an “attestation” clause where the witnesses affirm the will was signed in their presence on the date specified. This attestation clause does not need to be notarized, although it can be.

Notarization is Not a Substitute for Two Witnesses

It is important to understand, however, that notarizing a will is not sufficient on its own to make it valid or self-proving. A notary can only authenticate an affidavit or declaration, not a will. And as explained above, a will requires at least two witnesses.

And if you do choose to have your will notarized, make sure the notary is not also one of the witnesses. A number of states have said held a person can be a notary or a witness, but not both. (A notary, after all, cannot authenticate his or her own signature.) Just recently the Wyoming Supreme Court addressed such a case. A will submitted for probate was witnessed by two people, including a notary who also notarized the document. Neither witness could recall actually signing the will. The Wyoming court said the will could not be “self-proving” in this case because the notary improperly authenticated her own signature. The will itself may still be proven valid, however, based on other evidence of its “due execution.”

Likewise, California law provides a will can be proven even without an affidavit or attestation clause. For example, a probate court can still admit a will if one of the witnesses is available to testify as to its authenticity. The court may also look at “proof of the handwriting” of the person making the will or an “affidavit of a person with personal knowledge of the circumstances of the execution.”

Need Advice from an Estate Planning Lawyer?

While the requirements for proving a will are not onerous, they must be followed to the letter in order to avoid potential problems down the road. That is why you should never make a will without consulting a qualified San Diego estate planning attorney. Contact the Law Office of Scott C. Soady today if you would like to speak with an attorney about your estate planning needs.

Published on:

No parent wants to contemplate losing a child. But from an estate planning perspective, you should anticipate how you wish to handle your own affairs in the event a child does not outlive you. Addressing these contingencies up front can help avoid misunderstandings after your death as to your wishes.

Per Stirpes Distribution

For example, suppose you are currently married and have three children. You sign a will that provides if you die and your spouse does not survive you, then your entire estate should be divided equally among your three children. Assuming all of your children are alive at the time of your death, it should be a relatively straightforward matter for the executor of your estate to gather your assets and divide them into three equal shares, one for each child.

But what if one of your children passes away unexpectedly and you do not revise your will to reflect this tragic event? What happens to that one-third share of your estate designated for the deceased child? The answer to this question depends on the precise language of your will.

In many wills, the testator will specify any distribution to his or her descendants should be made “per stirpes.” This is also known as “right of representation distribution.” Basically, a per stirpes distribution preserves the share of a deceased heir’s inheritance for his or her own heirs.

Put another way, if the deceased child in the hypothetical above had children of her own, the one-third share of your estate would be divided equally among those children. So if at the time of your death you have two living children—and one pre-deceased child with two living children—then your two surviving children each receive one-third of your estate, while your two grandchildren would receive one-sixth apiece.

Alternatives to Per Stirpes

You are certainly not required to use a per stirpes distribution in your own will. You could, for instance, specify a distribution to your “then living children, per capita.” The use of “per capita” means your estate will only be divided into as a many shares as there are surviving children. So if one of your hypothetical three children dies before you, your estate will only be divided among the surviving two children.

A per capita distribution may also refer to a broader class than simply your children. You could specify all of your descendants—children and grandchildren alike—should each receive an equal share of your estate under a per capita distribution. This may prove to be too complicated (and raise significant tax problems) to be practical. That is why you should always speak with an experienced California estate planning attorney before making a will or trust of any kind.

You should also consider revising your existing will or trust if there has been an unfortunate death in the family. If you need to speak with an attorney as soon as possible, contact the Law Office of Scott C. Soady in San Diego today.

Published on:

Clarity is important when drafting a last will and testament. Your executor must be able to understand your intentions with respect to the disposition of your estate. Likewise, the beneficiaries named in your will have a right to know what they are entitled to. When imprecise terminology is employed, it may lead to confusion, which in turn can lead to litigation.

Wife Ordered to Honor Husband’s Charitable Gifts

Here is a recent example from here in California. This case is only an illustration and not a definitive statement of the law. The deceased in this case made a last will and testament several months before his death in late 2010. The will named the decedent’s second wife as executor and directed she would receive the residue of his estate, including mutual funds, checking accounts, stocks, and so forth. The will also made gifts of “up to” certain specified amounts to the decedent’s first wife and various charitable organizations. For example, the will directed the executor to “leave up to $150,000 from the proceeds from my mutual funds, stocks, cash, and bonds to the [U]niversity of [C]olorado [S]chool of [B]usiness in [B]oulder.”

The second wife, acting as executor, argued these “up to” charitable gifts were in conflict with the provision leaving the residue of the estate to her. She proposed to only honor the gift of “up to” $800,000 to her late husband’s first wife, while keeping the remainder of the estate for herself. The second wife petitioned a California probate court for an order confirming this interpretation of the will. The named charitable beneficiaries understandably objected.

The court denied the petition and ruled in favor of the charities. The executor appealed, but the California Court of Appeal affirmed the probate court in a December 2015 decision. As the appeals court explained, the use of the words “up to” in describing the charitable gifts did not mean the executor had the choice of not honoring those bequests. Under that construction of the will, the court observed, “the provisions concerning the objectors would be effectively inoperative.” And as a matter of law, California courts must “give every expression” in a will “some effect.”

Had the decedent’s gifts to the charities merely been suggestions to the executor, he could have used language such as “I desire” or “I wish,” the court noted. As for the use of the words “up to,” the appeals court agreed with the charities and the probate judge this was most likely a reflection of the fact that much of the decedent’s estate consisted of mutual funds and other securities which “can go down in value.” In other words, the decedent’s gifts were only contingent on there being sufficient funds in the estate, not the executor’s discretion.

Need Help from an Estate Planning Lawyer?

Drafting a will is an important legal act that you should not attempt by yourself. An experienced San Diego estate planning attorney can advise you on preparing a will and other important legal documents. Contact the Law Office of Scott C. Soady today if you need to speak with an attorney right away.

Published on:

Estate planning and tax planning often go hand in hand. There are many estate planning devices which allow you to (legally) obtain tax benefits. One example is a charitable remainder trust, which is a special type of estate planning trust that can provide an immediate tax benefit for you while guaranteeing future income for your family and, ultimately, a favorite charity.

The Basics of a Charitable Remainder Trust

In any trust you transfer assets to a trustee. Most estate planning trusts are revocable, meaning you can amend or even revoke the trust outright at any point during your lifetime. But some estate planning trusts must be irrevocable—that is, you must surrender all control over the assets to the trustee—in order to receive certain tax benefits. A charitable remainder trust is such an irrevocable trust.

The basic idea behind a charitable remainder trust is that after you transfer your assets to the trustee, you or another designated beneficiary will then receive part of the trust’s principal each year as income. Upon the beneficiary’s death, whatever is left over in the trust—the “remainder”—must be paid over to a tax-exempt charitable organization. In effect, a charitable remainder trust is a delayed gift to charity, one which provides the donor with an immediate tax deduction while still allowing them (or their family) to benefit from the income produced by the donated assets.

Courts Still Sorting out 1967 Charitable Remainder Trust

Keep in mind, a charitable remainder trust is a complex undertaking which can take decades to fully administer depending on how it is structured. Consider a recent decision by a California appeals court involving a charitable remainder trust funded nearly 50 years ago. The donor in this case used her sizable estate to fund a charitable remainder trust with her nieces and nephews as income beneficiaries.

The trust took effect with the donor’s death in 1967. Subsequently, each niece or nephew received $25,000 per year from the trust. Upon each of their deaths, their respective heirs continue to receive this income distribution, up to the point where all descendants living at the time of the original donor’s death have themselves passed away. There are currently three groups of descendants still receiving distributions. Several charities were named as the remainder beneficiaries.

Over the years, there have been at least half a dozen lawsuits related to the administration of the trust. The most recent case involved a claim by the charitable remainder beneficiaries against the trustee (a bank) over the size of their distributions. Several years earlier, the charities and the donor’s relatives reached an agreement allowing most of the trust’s principal—which was in excess of $70 million—to be distributed without having to wait for the last relatives to die. But even after that settlement was reached, the trustee had to wait for an IRS ruling on certain tax issues. By the time that was dealt with, the value of the trust’s assets had declined by about $11 million due to the downturn in the securities markets. The charities accused the trustee of waiting too long to distribute the remainder assets, but in a January 2016 decision, the California Court of Appeals for the Second District held it “could not rule as a matter of law that [the trustee] committed a per se fiduciary duty breach.”

Get Help from an Estate Planning Attorney

While you may not be looking to set up your relatives for the next 50 years with a guaranteed income, a charitable remainder trust might still be a useful part of your tax and estate planning. A qualified San Diego estate planning attorney can advise you on the best type of trust for your situation. Contact the Law Office of Scott C. Soady if you would like to speak with someone as soon as possible.

Published on:

You might think the most difficult part of estate planning would be figuring out how to transfer title to your house or administering a living trust. But for a British Columbia widow, one of the biggest hassles she faced following her husband’s death was gaining access to his Apple account. The California-based technology giant reportedly demanded a court order before it would release the password to the couple’s joint online account.

According to report from the Canadian Broadcasting Company, the widow noticed a game had stopped working on her iPad. It turned out she needed to login to her Apple account, but her husband was the only one who knew the password. The widow’s daughter contacted Apple, but she said customer support gave her the runaround. Nearly two months later, after providing copies of the husband’s death certificate and other personal identifying information, the daughter said Apple told her she needed to get a court order. The family declined to do so due to the cost, but the family told their story to the CBC, Apple acknowledged there was a “misunderstanding” and promised to resolve the issue.

Taking Inventory of Your Digital Assets

This story emphasizes the complications that can arise when dealing with “digital assets” as part of a person’s estate. Many of us keep videos, photos, and other data through online or “cloud” services. Your family may lose access to this data if they are unable to locate your passwords after your death.

In many cases, you also may not own what you think you do. When you purchase a movie through Apple, for example, you actually acquire a non-transferable license to watch the video on your registered devices. You cannot bequeath these digital rights to your heirs the way you could a DVD or other physical media. This is why you should always review the terms of service for any digital content you purchase so you clearly understand your rights.

But with respect to digital content you do control, it is important to make a plan so your executor or other heirs can still access this data. You should keep a list of important passwords in a safe place. You might also consider keeping certain data with a file-sharing service that enables you to give access to other family members who have their own accounts. This way even if your personal account is inaccessible, the data will not be.

Get Advice from an Estate Planning Lawyer

The law will also continue to evolve with respect to digital assets. That is why you should consult with an experienced San Diego estate planning attorney who is apprised of the latest developments and can help guide you through the process of organizing your affairs. While you do not need to include a list of digital accounts and passwords in your will—and that generally would not be a good idea since wills tend to be updated infrequently—an attorney can still assist you with helping to identify an executor or other individuals who can be trusted with your sensitive information. Contact the Law Office of Scott C. Soady if you would like to speak with an attorney today.

Published on:

Your estate plan is designed to dispose of any property you own at the time of your death. Property can include not just financial assets, real estate, and tangible items, but also the legal rights to certain works you have created or invented. These intellectual property rights can be quite valuable, which is why it is important to include them in your will or trust.

How Intellectual Property Works

There are three broad categories of intellectual property protected under federal law: copyrights, patents, and trademarks. Each follows different rules and can impact your estate planning in varying ways.

A copyright refers to a person’s rights “in original works of authorship.” This includes not just traditional “literary works” like books, but also musical compositions, motion pictures, and even architectural designs. Basically, any original work that is in a fixed form and capable of reproduction may be under copyright. So, for example, if you produce a series of popular YouTube videos, that is subject to copyright the same as if you wrote a 400-page novel.

Unlike patents or trademarks, a copyright automatically exists once you produce your work in fixed form. Although there are benefits to registering a copyright with the federal government, it is not legally required. The copyright term is also quite generous. Any copyrighted work you author is protected, under current United States law, until 70 years after your death. So for a person dying in 2016, any copyrights they enjoy will continue in full force and effect until 2086.

You can bequeath a copyright in your will or trust like any other property. In some cases there may be financial reasons for doing so—for example, if you expect future royalties on a book. But even if your copyrights have little present commercial value, assigning them to someone else can help protect against unauthorized copying.

Patents

A patent is a limited property right granted to the inventor of an invention. Unlike copyrights, patents are not automatic. You must submit your invention to the U.S. Patent and Trademark Office (USPTO), which reviews your claim and decides whether patent protection applies. Once granted, a patent only lasts for 20 years. All patents are assigned a unique number by the USPTO, so if you decide to bequeath a patent in your will or trust it is a good idea to use this number to avoid any confusion.

Trademarks

A trademark is the right to use a particular word or mark in association with a commercial product or service. Most commercial brands—i.e., Coke, Microsoft—are trademarked. But even a small business owner may register a trademark to protect his or her own brand.

In contrast to copyrights and patents, trademarks may last indefinitely, so long as they are in continuous use and the holder files periodic registration forms with with the USPTO. So if you use a trademark in association with a business, it is not enough to simply leave it to someone in your will. You must also ensure the underlying business or product associated with the trademark continues.

Need Estate Planning Advice?

You may have many questions regarding the disposition of your intellectual property rights in your will or trust. An experienced San Diego estate planning attorney can help address those questions. Contact the Law Office of Scott C. Soady in San Diego if you need to speak with someone today.

Published on:

Although same-sex marriage has been legal in California since 2013, there remain a number of unresolved estate planning issues with respect to the rights of spouses in such relationships. For example, there are cases where the courts must still determine when a same-sex couple was legally married for purposes of determining entitlement to certain retirement benefits. A recent decision by a federal judge in Oakland illustrates how courts are dealing with such questions.

Widow May Pursue Pension Claim Against Spouse’s Employer

This case centers on the pension plan of a woman who passed away on June 20, 2013. This date is important because six days later the U.S. Supreme Court issued two decisions: The first held that the Defense of Marriage Act, a federal law restricting the definition of marriage to opposite-sex couples, was unconstitutional; the second decision overturned an initiative previously approved by California voters which similarly banned same-sex marriage.

The decedent in this case lived with a same-sex partner for over 25 years. Although they had been registered as domestic partners under California law since 2001, they were unable to marry due to the federal and state bans. When the decedent learned at the beginning of June 2013 that she was dying from terminal cancer, she wanted to ensure her partner received surviving spouse’s benefits under her employer’s pension plan. The employer, citing DOMA and federal laws governing pension benefits, said only a “spouse” in an opposite-sex relationship could qualify for such benefits.

The decedent and her partner decided to marry in a civil ceremony on June 19, 2013, the day before her death. Although a county official presided over the ceremony, no marriage license could be issued since the California ban was still in effect. The ban was not lifted until June 26, 2013.

The employer declined to pay the surviving spouse’s benefits, arguing the decedent was not legally married on the day of her death. The surviving spouse sued the employer in federal court. On January 4, 2016, a judge issued a ruling dismissing some of the spouse’s arguments but allowing one to proceed.

The surviving argument centers on whether federal pension law mandates payment of the spousal benefit regardless of the language contained in the retirement plan itself. In brief, the spouse here claims the Supreme Court’s June 2013 decisions should be applied retroactively to hold her marriage “was valid as of the time of” the decedent’s death. The judge said he was not prepared to reject this retroactivity argument at this time. While the judge also did not rule in the spouse’s favor at this time, she noted judges in other states had accepted similar arguments with respect to pension plans and same-sex couples married before the Supreme Court’s decision.

Get Advice from an Estate Planning Attorney

Even if you are not in a same-sex relationship it is always a good idea to review your retirement and pension plans as part of your overall estate planning. You (and your spouse) should understand the terms and conditions of any such plans before a legal complication arises. An experienced California estate planning attorney can help you with such matters. Contact the Law Office of Scott C. Soady in San Diego if you would like to speak with someone today.

Published on:

Estate planning is important because it ensures you get to decide who inherits your property. Unfortunately, there are individuals who may take advantage of your death to wrongly claim your property for themselves. In some cases, people have gone so far as to forge a will in order to seize control of an estate.

Woman Sentenced to Two Years for Forging Landlord’s Will

Recently, a California appeals court upheld the conviction and two-year prison sentence of a woman convicted of will forgery. The case arose from the 2010 death of a 63-year-old woman living in the Tujunga neighborhood of Los Angeles. The defendant was renting an apartment in the deceased woman’s home. When the decedent’s brother came to the house and asked about her sister’s “final wishes,” the defendant claimed she was the sole beneficiary of the estate. To that end, the defendant filed a petition in California court to probate a will purportedly signed by the decedent in the presence of two witnesses.

The will turned out to be a forgery. One of the witnesses testified the defendant came to him after the decedent’s death and asked him to sign a will she had fabricated herself. The second witness confirmed this, noting he thought he was only signing a document that would allow the defendant to continue residing in the decedent’s home. This witness also confessed he knowingly signed a false affidavit stating he signed the bogus will in the decedent’s presence several months before her death.

At trial, the defendant denied any wrongdoing. She tried to argue one of the witnesses actually created the fake will and tricked her into filing it with the probate court. The jury disbelieved the defendant’s testimony and convicted her on two counts, one for “forgery committed by altering, corrupting, or falsifying a legal document,” and the other for perjury when she filed a petition, under oath, to probate the fake will. In December 2015, the California Court of Appeal rejected the defendant’s appeal of her convictions, saying there was “sufficient evidence” to support the jury’s verdict.

Protecting Against Will Forgery

Aside from actually making a will, the most important step you can take to prevent a scenario like the one described above is to inform your family members and other potential beneficiaries of your estate planning arrangements. Make sure someone you trust, preferably your nominated executor, will be able to access your original will as soon as possible after your death, in order to minimize the risk of anyone stepping forward with a forged will. You may even want to keep your original will for safe-keeping with your estate planning attorney.

While will forgery is uncommon, it does highlight the risk of dying without leaving a valid will. Even if you think you do not own enough property to justify making a will, or you just assume the law will make sure your family is taken care of, it is always a good idea to make your wishes explicit and in writing. If you need help from an experienced San Diego estate planning attorney in preparing a will, contact the Law Office of Scott C. Soady today.