Children & Adults with Special Needs Now Have Their Own Theme Park

October 31, 2010

A very special theme park opened in San Antonio, Texas this past spring. It is called Morgan's Wonderland and is a 25 acre theme park designed for kids and adults with special needs. Gordon and Maggie Hartrman found out 13 years ago that their only child Morgan had severe cognitive delays and this park was their dream. The park is free to visitors with special needs and features wheelchair accessible rides including a carousel and off-road jeep as well as sensory-stimulating activies and an interactive garden.

Children and adults with special needs also need "special" estate planning. If you have a child or other beneficiary that is developmentally disabled, they usually will be receiving public benefits at some point in their life. This could be SSI (supplemental security income) or Medi-Cal. If you leave such beneficiaries a distribution from your estate outright, it can affect their eligibility for these benefits. When you create your estate plan, you can provide for distributions to go instead to a Special Needs Trust, a trust designed to keep the beneficiary eligible for public benefits. Such trusts can be part of your own trust or they can be a stand alone special needs trust.

A properly drafted Special Needs Trust will hold the cash or other assets in trust, not under the control of the disabled individual, and thereby allow the beneficiary to continue to receive government benefits. In addition, the trust may pay for some special needs of the beneficiary at the discretion of the trustee. Such items as medical, dental, personal services, and handicapped-equipped vehicles may be paid for by the trust without jeopardizing benefits. It is important that the trustee adhere to certain standards for maintaining the trust and investing the trust assets. The trustee needs to be aware that the assets of the trust can only be used to purchase supplemental items or services which are not provided by public benefits.

We frequently prepare estate plans for families that have a disabled beneficiary and can include a special needs trust in the plan. Call us for more information or to set up a complimentary appointment.

Check Those Beneficiary Designations After Divorce!

October 28, 2010

Frequently we have clients who come in after the death of a spouse and have learned that their spouse failed to update a beneficiary designation of a life insurance or an IRA or some other retirement account after a divorce. They want to know if there is anyway to prove that their spouse simply forgot to change the designation and would have wanted their current spouse or their children to be the beneficiaries. The short answer sadly is no.

A recent case in the U.S. Supreme Court, Kennedy v. Plan Administrator for DuPont Savings Plan, shows how important it is to update your beneficiary designations after a divorce. Kennedy was an employee of Du Pont and invested in the company's Savings & Investment Plan (SIP). After his marriage he designated his wife as the beneficiary of the SIP account. When the couple divorced a few years later, the divorce decree divested his wife of all interest in the SIP account, however Mr. Kennedy did not sign a new beneficiary designation removing his ex-wife and designating his children. When Mr. Kennedy died, Du Pont paid the proceeds of the SIP, which was about $400,000 to his ex-wife.

The case went all the way to the U.S. Supreme Court which held that the payment to the ex-wife was proper. The Court based its decision on ERISA (Employee Retirement Income Security Act of 1974) which requires that plan administrators follow the beneficiary designation. Even though the divorce decree had divested the wife of her interest in the account, the husband had to change the beneficiary by signing a new designation.

This case highlights how important it is to check the titling of assets and the beneficiaries of all life insurance policies and retirement plans after a divorce. Updating your estate plan is also necessary. If you had a living trust with an ex-spouse, you need to create your own living trust. Scott C. Soady, A Professional Corporation can help you with a new revocable living trust package and changing your beneficiary designations if necessary.

Who Pays a Decedent's Debts?

October 24, 2010

Many people ask whether as family members they can be responsible for a loved one's debts. Often debts can rapidly accumulate especially if a decedent has had a long illness.

If the decedent left an estate that is solvent, the estate will pay the expenses of a last illness and any debt. The personal representative (trustee, executor, or administrator) will be the one to pay off the debts from the assets of the estate before any distributions are made to beneficiaries. A solvent estate is one where the value of the assets is more than the debts. The personal representative if the decedent had a trust will be the successor trustee. The personal representative if the decedent had a will is the executor. If the decedent had no will or trust, the personal representative will be the administrator.

If the estate is not solvent, it means there are not sufficient assets to pay all the debts of the decedent. If there are sufficient assets to pay some of the bills, the bills will be paid in a certain order. That order of payment is as follows:

1. Expenses of administration
2. Secured obligations such as mortgages and judgment liens
3. Funeral expenses
4. Expenses of last illness
5. Family allowance
6. Wage claims
7. General debts.

If there are insufficient assets to pay all the bills, the beneficiaries will not get a distribution and they will not be responsible for paying any of the debts unless other circumstances exist. For example, if a beneficiary or some other individual co-signed on a loan with the decedent or was a guarantor, that is a contractual obligation which will make the co-signer or guarantor liable for the debt. Without some contractual obligation however, family members are not liable for their loved one's debts. Even spouses are not liable for a debt that was solely their spouse's.

Probate and trust administration are a large part of our estate planning practice. We assist trustees, administrators, and executors handle all aspects of administration including payment of debts and distributing assets. Call us if you need assistance with these issues or any other estate planning concerns.

Estate Planning for Registered Domestic Partners

October 20, 2010

Since 2007, California gives certain legal rights to same sex partners and opposite sex seniors (where one partner is at least 62 years old) who are not married but are registered domestic partners. In some cases, these rights may be very similar to married couples.

In order to become a domestic partner, the following are the criteria:
1. Both individuals must live in a common residence.
2. Both persons agree to be responsible for each other's living expenses.
3. Neither person can be married or a member of another domestic partnership.
4. Both persons must be over the age of 18.
5. Both persons must be of the same sex or if opposite sex, one partner must be over the age of 62.
6. The individuals must file a Declaration of Domestic Partnershiiip with the Secretary of State agreeing to submit to California jurisdiction should the couple decide to seek a dissolution or annulment.

Once individuals are registered domestic partners, California law gives them community property rights. All property acquired other than by inheritance or gift, and all assets obtained from earned income are equally owned. Upon death, a domestic partner may transfer only his or hers half of the community property through a will or a trust.

If a domestic partner dies without a will or a trust, the surviving partner has the same rights as a spouse and will inherit community and separate property according to the California laws of intestate succession. Also if a domestic partner is omitted from an estate plan of his or her partner, the omitted domestic partner has rights similar to an omitted spouse such as the right to file for a homestead.

Since registered domestic partners are not married, they do not qualify for the unlimited marital deduction for gift and estate taxes. There are however other estate planning mechanisms that can be utilized to reduce estate taxes.

If you are living in a committed relationship and are not married or registered domestic partners, you may want to at least prepare durable powers of attorney for finances and advance health care directives. The durable power of attorney for finances allows your partner to make financial decisions, pay your bills, etc if you become temporarily or permanently incapacitated. The advance health care directive together with a HIPAA authorization are documents which can name your partner to act for you in making health care decisions if you are unable to make them for yourself. The document can also give your partner authority to authorize an autopsy, donate organs, and handle burial or cremation.

We would be happy to meet with you to discuss your concerns and determine what estate planning documents best fit your needs. Contact us for a complimentary consultation.

Tips for Donating to Charity

October 16, 2010

It is estimated that 70% of Americans make charitable donations in some form. It could be yearly donations to their favorite charities or it could be in the form of making a charity the beneficiary of their trust. American Association of Retired Persons (AARP) has some tips for donating to charities:

1. Avoid scams. If you are called on the phone by a charity, ask that they send you printed material so you can authenticate their organization. Be cautious about email solicitations and be aware of names that may sound like charities but in fact are not. If you want a gift to be tax deductible, make sure the entity is a qualified charity you can claim as a tax deduction. Never provide a credit card over the phone unless you have initiated the call. Checks are preferable rather than a credit card and dont use cash.

2. You can get information about a charity such as how much of your donation will go to administrative and marketing costs and how much to the charity’s purpose. In general reputable charities spend less than 35% on administrative costs. Two websites that review charities are Guide Star and Charity Navigator. Charity Navigator evaluates the financial health of over 5500 charities according to organization efficiency and organizational capacity as well as listing their annual revenue and what they spend their donations on.

3. If you are including charities in your trust, make sure to specify whether you want the gift to be used for a specific purpose or for general use. You can also provide that the charity must be a qualified charity and if it doesn't qualify at the time your death as a 501(c) charity, an alternate charity is specificed or another non-charity beneficiary. Some charities are heavily donated to such as hospitals and universities. Harvard University, for example, has $25 billion dollars in endowments. A less known but still worthy charity may be worth looking into. There are over 1 million charities in the United States alone.

If you would like to incorporate charitable giving in your estate plan, call us. In addition to making charities the beneficiaries of your trust, we also can draft other charitable giving trusts such as a charitable remainder trust or a charitable lead trust or other ways to fulfil your charitable goals.

Prenuptial Agreements as Part of Your Estate Plannng

October 12, 2010

A prenuptial agreement is a written contract that is created by two people before marriage. Prenuptial agreements are on the rise according to divorce attorneys. 73% of divorce attorneys report that in the last 5 years, there has been a steady rise in prenuptial agreements. 52% of such attorneys founnd that there is a noticeable increase in women requesting a prenuptial agreement, not because of the woman wanting to protect her assets but because the woman wants to avoid her husband’s debt. With the recession leaving many people in debt, potential spouses want to avoid any possible financial obligation. There is also the issue of one of the spouses inheriting a large sum of money.

Trying to avoid a partner’s debt was not the case for actress Hilary Duff and her hockey player fiance Mike Comrie who signed a prenuptial agreement. Mike makes about $500,000 a year; Hilary is said to have a net worth of $25 million however Mike’s father, Bill Comrie, founder of The Brick, apparently is worth $500 million. Other celebrities who have prenuptial agreements are Nicole Kidman and Keith Urban whose agreement says Keith doesn't get a penny if he uses illegal drugs. Michael Douglas and Catherine Zeta Jones and Martin Sheen and Denise Richard's pre-nups both have provisions in case the husbands cheated.

Many financial planners advise that couples who have significant assets going into the marriage consider a prenuptial agreement as part of their estate plan. Such an agreement usually specifes the assets each person has coming into the marriage as well as what debt each are bringing into the marriage. In California everything that is earned or bought after marriage is presumed to be community property. A prenuptial agreement can provide for a different outcome. Other reasons to consider a prenuptial agreement can be to pass separate property to children from a prior marriage, to specify how debt should be handled, or to clarify what will occur in case of a divorce.

Drafting a prenuptial agreement can be complex and should be drafted by an attorney. The attorneys at Scott C. Soady, A Professional Corporation have experience with prenuptial agreements and can assist with drafting a prenuptial (or post nuptial) agreement that will fulfill your goals. They can also create an estate plan for couples which will act together with your prenuptial agreement.

Ancillary Probate Can Increase the Cost of Probate

October 8, 2010

Probate is the legal process instituted in the Probate Court to determine the beneficiaries of a person’s estate and distribute the probate assets to the person's heirs or beneficiaries. Ancillary probate is an additional probate proceeding that is required in addition to the state where the decedent lived and died usually because the decedent owned property in another state. That property could be real property, a car, boat, farm, vacation home or timeshare. The laws of the state where the property is located will determine the costs of the ancillary probate and in some cases, who receives the property after the ancillary probate.

One of the disadvantages to having an ancillary probate in addition to the one in the home state is that it will add to the total cost of administering the probate estate because of additional filing fees, appraisal fees, and attorneys’ fees. Also if the probate estate is an intestate one, that is, a probate because there was no will or trust, the persons entitled to receive distributions could be different than those entitled to inherit in California.

For example, in California, the estate of a person dying with no will and leaving a spouse and one child would be distributed one-half of the community property to the spouse and one-half to the child. As to separate property, it would be distributed one-half to the surviving spouse and one-half to the person’s child. In New York, if a decedent is survived by a spouse and one child, the surviving spouse would receive $50,000 and one-half of the residue of the estate; the child would receive the balance.

In addition, the costs for the ancillary probate could be different in the ancillary state. In California, attorneys’ fees are set by the California Probate Code. A $500,000 estate in California would result in $13,000 in attorney’s fees. In states such as Nevada and Arizona, attorneys usually work by the hour. In other states such as Florida, attorneys’ fees are to be “reasonable” according to the guidelines of the statute. In Florida the attorneys’ fees for a $500,000 estate presumed to be reasonable are $15,000. Costs for each probate proceeding for such things as filing fees, postage, and copying can also vary from state to state.

If you own property in more than one state, a living trust would avoid the costs of probate in California and ancillary probate in the state where you own property. A revocable living trust also allows you to designate who you want to inherit your assets. If you do no estate planning, then the state or states where your property is located will determine who receives your property. Contact us at Scott C. Soady, A Professional Corporation to see if a revocable living trust is for you or if you find yourself involved in the probate process in San Diego.

What Happens When Your Lawyer Dies?

October 4, 2010

If you are a client of a lawyer who dies, what happens to your file and the money that you may have in the attorney’s client trust account? Many attorneys keep their client’s original estate planning documents in their fireproof safe at their office. Maybe you are in the middle of having your matter handled and the attorney suddenly passes away. What do you do?

Currently what happens is that if a lawyer dies or becomes incapacitated and hasn’t made any arrangement for someone else to take over his or her practice, the State Bar can seek an order from the Superior Court to take over the lawyer’s files and return the files to the clients along with any funds that were being held in the clients’ trust account.

The State Bar has recently drafted a sample agreement available to all lawyers which allows a lawyer to designate a successor and sets out the responsibilities of the primary attorney and the successor attorney to take over the practice. The agreement provides that the successor attorney will go to court to be designated as the successor who can take over the practice. The responsibilities include the power to open mail, become a signatory on bank accounts, notify clients, transfer files, handle client trust accounts, and sell the practice. The agreement also provides that clients be notified by mail that a successor attorney has been designated.

The California Bar says that the agreement is aimed at solo practitioners who have not planned for the unforseen. The sample agreement is an effort to protect both clients and the law practice of the lawyer who becomes disabled or has died. Now attorneys can incorporate the succession of their law practice either in their own estate planning documents or utilize these agreements provided by the State Bar.