Procrastination Has Its Problems

March 29, 2009

We know that many Americans procrastinate about getting a will or a trust done. Especially in this economy where people have a lot of challenges, an estate plan, even if desired, sometimes doesn’t work itself up to the top of one’s To Do List. What happens if you procrastinate about getting an estate plan?

Probate - Without a trust or a will, your estate will wind up in the probate court. Statutory fees will have to be paid to the probate attorney and the administrator of your estate. Probate is not private - anyone can view probate records - and the distributions to your heirs can be delayed for as much as a year and in some cases, longer.

Without a will or a trust, your surviving spouse may not inherit your entire estate. Your spouse will inherit all the community property but will only get 1/2 to 1/3 of your separate property. The remaining property will go to the children.

Minor children will not have guardians appointed. Without a designation of guardians for your minor children, the Court will have to appoint a guardian without any guidance from you as to your preference for the guardian or guidelines for raising the children.

Children may receive money outright and not be equipped to handle it. Without a trust setting forth increments for the distribution at various ages, children who are 18 will receive their money outright, all at once, which may not be a good idea for some young beneficiaries.

Special Needs Beneficiaries may lose their public assistance. If you have a child or other beneficiary who is on public assistance, inheriting money outright rather than into a special needs trust, may cause them to be disqualified from receiving those benefits.

Higher Estate Taxes - For those high net worth individuals, not having a trust can result in your heirs having to pay more estate taxes than necessary. Estate planning strategies like an A/B or A/B/C trust, irrevocable life insurance trusts, or other advanced techniques can avoid or reduce estate taxes.

Don't procrastinate any longer. Contact us at Law Office of Scott C. Soady, A Professional Corporation for a complimentary consultation to discuss your will or trust.

Can Killers Inherit from Their Victims?

March 22, 2009

Have you ever wondered whether someone who murders another person can inherit from their estate? In years past, there have been several California cases where children have murdered their parents, sometimes for money, as was alleged in the famous Menendez case in Los Angeles. Two brothers, Eric and Lyle Menendez, were tried and convicted of murdering their parents in 1989 to inherit what they thought was a $14 million estate. As it turned out, after taxes, loans, and costs of defense, they each would have inherited only about $ 2 million each. They were prevented from inheriting their parents' estate.

The California Probate Code Section 250 has a section that provides that a person who “feloniously and intentionally kills the decedent” is not entitled to “any property, interest, or benefit under a will of the decedent or a trust...” This would also include life insurance proceeds or assets left to the killer as a designated beneficiary. You may remember Scott Peterson who was convicted of killing his wife. He was prevented from receiving benefits from his wife’s insurance policy.

All states in this country have similar laws to prevent someone who kills another from inheriting from the victim of their crime. In addition many states have adopted laws to make it difficult for convicted killers to sell their story and keep the money for themselves. These so-called “Son of Sam” laws came from the case where serial killer David Berkowitz, nicknamed the Son of Sam, was planning to profit from the sale of his story. California passed a “Son of Sam” law in 1986 prohibiting felons from profiting from their crimes. This law was struck down in 2002 as being unconstitutional. Today “Son of Sam” laws are sometimes put into plea bargains to provide that any profits from book deal or movies will go to the U. S. Treasury. Another remedy for victims is that they can sue their perpetrators in civil court, as in the O.J.Simpson case, and obtain a judgment which would be satisfied by book and movie profits.

Families Need to Greive Before Tackling Estate Issues

March 17, 2009

Sometimes we get calls within a day or two of a loved one’s passing away by family members who wonder what they should do. The first thing that should be done is to handle the bereavement process. Spend time with family and friends and begin the grieving process before anything else.

There are many resources on line and in San Diego for information on the grieving process.
The National Hospice and Palliative Care Organization is the largest nonprofit organization representing hospice and palliative care programs. In San Diego we have the Elizabeth Hospice, San Diego Hospice, and Hospice by the Sea to name just a few. For people dealing with the death of a child there is the Empty Cradle and the Jenna Druck Foundation.

Coping with the loss of a loved one is a process. In addition to the grief and bereavement resources listed here, there are many grief support groups at local churches or through professional counselors. Most support groups also can recommend books and articles on the subject.

We always tell our clients and potential clients that the first thing to do is to begin the healing process. In most cases, contacting us in several weeks will be fine to determine what needs to be done as far as estate and trust issues are concerned. Sometimes there are immediate issues that have to be addressed and the experienced estate planning attorneys at Law Office of Scott C. Soady, A Professional Corporation would be happy to assist with those if necessary. Feel free to contact us by phone or email if you have questions.

Extension for Filing and Paying Tax Returns

March 12, 2009

Some people need extra time to file a personal tax return or an estate tax return. On your personal income taxes, you can apply for an automatic extension to file but it doesn't extend the time to pay. You will have to pay a .5% per month penalty for late payment.

With the payment of estate taxes, you can also apply to receive a 6 month extension. The extension provided for in IRS Form 4768 is automatic. You will automatically receive an extension to file for 6 months however be aware that an extension of time to file is not an extension of time to pay the taxes. An extension of time to pay is discretionary.

One executor and trustee of an estate found this out the hard way. In a court case entitled Baccei v. United States, a trustee of a revocable living trust hired an accountant to prepare the Federal estate tax return. The accountant filed Form 4768 requesting a 6 month extension of time to file the return. Part of the form contains a section for an explanation as to why the estate needs more time to pay the tax and the number of months requested, up to 12 months. The accountant did not fill out that part of the form. Within 6 months, the accountant filed the return and paid the estate tax. The IRS then assessed a late penalty on the estate tax paid which had been approximately $1 ½ million. The Trustee appealed.

The Court which heard the matter held that the estate had not requested an extension to pay, only to file, and therefore the late penalty was proper. The two extensions found in Form 4768 are separate extensions and have to be separately requested.

Filing and paying tax returns for an estate is one of the jobs of the executor of a will or the trustee of a trust. If you are the executor of an estate or the trustee of a trust, these are part of your fiduciary duties. Our office handles numerous probates and trust administrations in which we assist executors or trustees with these types of duties. If we can be of assistance, please contact us.

Update, Update, Update Your Estate Plan!

March 10, 2009

Accidental disinheritance is a growing problem, not only in San Diego, but across the country. We have seen it in the cases of Anna Nicole Smith and Heath Ledger. Failure to update estate planning documents or beneficiary designations can cause unintended disinheritance or unequal distributions that may not have been intended.

One of the ways people accidentally cause a disinheritance is in a stepparent situation. As an example, suppose a man has a will he created when married to the mother of his children. After she dies, he remarries and writes a new will leaving everything to his new wife. When he dies, the new wife inherits everything and then leaves her estate to her own children. The husband’s children (her stepchildren) are disinherited, which was probably not the father’s intent. The way to avoid this was to have a trust set up with the new wife which could have provided that his wife had the use of the assets during her lifetime but upon her death, the husband’s children participated in the distributions. This is a situation where an experienced estate planning lawyer would have been worth the expense to draft an appropriate will or trust to take into consideration possible future scenarios.

Another way that a failure to update can cause difficulties is where a child is born after the estate plan is created and the child has special needs. A trust, if drafted correctly, usually will provide for after born children without the necessity to update the trust, however, if a child born after the trust is created has special needs and is on public assistance, a special needs trust needs to be prepared so if the parents die, the child does not receive his inheritance outright and lose his public assistance.

Another potential unintended result can occur when upon death, there are outdated beneficiary designations. Suppose a wife has made her husband the beneficiary of her life insurance policy. They divorce but she fails to remove him as a beneficiary. When she dies, the ex-husband gets the proceeds which may not have been what the wife wanted. Also if someone names a beneficiary on their life insurance policy and the beneficiary dies before the insured, the life insurance proceeds will have to be distributed through probate as there are no alternate beneficiaries listed.

There are countless other ways that failure to update your will, trust, or beneficiary designation can thwart your wishes upon your death. It is always a good idea to review your estate planning documents periodically to make sure they are up to date. If you need assistance, contact us for a complimentary consultation.

Interesting Issue Over Health Ledger's Oscar

March 6, 2009

As San Diego estate planning attorneys, we at Law Office of Scott C. Soady, A Professional Corporation, have been following the story of Heath Ledger as it related to his estate plan. You may recall that he had a will leaving his estate to his parents and siblings and then later had a daughter Matilda. His family decided that even though the will made no mention of children, they would give his entire estate, estimated to be about $20 million, to Matilda. Now another interesting aspect:

At the recent Academy Awards, Heath Ledger posthumously received an Oscar for Best Supporting Actor for his role in the Dark Knight. There was some controversy before the Awards as to who would become “Oscar’s” owner. The director of the academy, Bruce Davis, said it was complicated because there was the issue of who would accept the award and then who would keep the statute. According to the Academy’s tradition, when an award is given posthumously it usually goes to the spouse or to the oldest child if there is not spouse. Health Ledger wasn’t married and his daughter is only 3 years old. Being 3, Matilda would not be able to sign the “winner’s agreement” which is a contract between the Academy and the winner that the winner will not sell the Oscar without first offering it back to the Academy for $1.00. The whole issue was resolved by deciding to give the statue to Matilda but her mother Michelle Williams will be the legal custodian. When Matilda turns 18, she can sign the agreement on her own behalf and then she will be legally bound not to sell the statue.

Conservatorship for Actor Peter Falk?

March 3, 2009

In December 2008, Peter Falk’s daughter petitioned the court in Los Angeles county to become the conservator of her father. Falk, noted for his role of Columbo on TV, has apparently been diagnosed with Alzheimer’s disease and dementia. His daughter Catherine claims her father requires full time custodial care for his health and safety and is unable to take care of his finances. The Los Angeles court appointed an attorney to evaluate Falk who has filed a report saying there is no grounds for a conservatorship. Falk’s wife of 32 years also opposes the conservatorship.

Conservatorships are probate proceedings where a judge appoints a responsible person called a conservator to care for another adult who cannot care for himself or herself or handle his or her finances. Any person who wants to be a conservator can petition the court to become the conservator. Usually it is the individual’s spouse or other relative although it can be a friend or even a state or local agency. The court will not grant a petition for conservatorship if there are other ways to meet an individual’s needs such as with a durable power of attorney, a spouse that can handle the care and finances, or a revocable living trust in place.

It will be interesting to see what the L.A. probate court does in the case of Peter Falk. Another hearing on the matter will be held soon. If you have questions about conservatorships or how to avoid them, call the experienced estate planning lawyers at Law Office of Scott C. Soady, A Professional Corporation for a complimentary consultation.