San Diego Estate Planning Lawyer Blog

Our San Diego probate court hears litigation arising out of probate and trust disputes but nothing like the billions of dollars which are at stake in a probate court dispute over comic book characters. You've no doubt heard of such comic book icons are Iron-Man, X-Man, Spider Man, the Incredible Hulk, and the Fantastic Four. They were created by comic book artist Jack Kirby who was responsible for 45 of Marvel Entertainnent's most popular characters.There has been an ongoing attempt by the estate of comic book artist Jack Kirby to terminate a copyright grant over his work. The children of Kirby, after his death, sent notices to terminate the copyrights. Marvel Entertainment then sued the estate in New York District Court alleging that the creation of such comic book characters were "works-made-for-hire and not eligible for termination.

Last week the Judge found in favor of the estate on an important issue which could mean she will issue a future ruling favoring the estate. There is a chance that an unfavorable ruing against Marvel could cost them control over the characters. Marvel was successful on another issue however, in avoiding an accounting on how much money is involved, at least until the issue is decided as to whether the Kirby children can terminate the copyrights.

Interestingly, the impact of the judge's ruling will also impact Disney, since Disney purchased Marvel for $4 billion last year.

From time to time it is fun to look back on what are some of the strangest bequests people have put in their estate planning documents.

1. An eccentric lawyer named Charles Vance Miller, a resident of Canada, was noted for his practical jokes. He left a large sum of money from his estate to the woman who could produce the most children in the ten year period after his death. The contest which became known as the Great Stork Derby resulted in 4 women each receiving $125,000 (Canadian money) for each bearing 9 children.

2. Harold West thought he might become a vampire after his death in 1972 so he left instructions in his will that his doctor drive a stake into his heart just to be sure he was properly dead. Who knows if the doctor carried out his wishes.

3. Samuel Bratt wanted revenge on his wife who would never let him smoke. He left her 330,000 English pounds, a large sum of money in 1960, as long as she smoked 5 cigars a day. How would that be enforced?

4. An American, John Bowman, was predeceased by his wife and 2 daughters. He believed in reincarnation so when in died in 1891, he left a trust fund for the maintenance of his 21-room mansion including a provision that the servants cook dinner each night in case the reincarnated family was hungry when they came back.

5. Gene Roddenberry, creator of Star Trek TV series, had his ashes blasted into space on a satellite. So did actor James Doohan (who played Scottie on the series) and astronaut Gordon Cooper.

At Scott C. Soady, A Professional Corporation, we have been asked to make some unique bequests or provisions but not like these. As part of your revocable living trust, we can draft custom provisions to fulfill your wishes, hopefully not as wacky as these examples.

After the death of a loved one, the individual named in the decedent’s trust who will administer the trust and distribute the trust assets is the successor trustee. A successor trustee has a number of fiduciary duties. Some of these duties are the duty of loyalty, duty to avoid conflicts of interest, and duty to preserve trust assets. These are just a few duties; there are many more however, this blog is not so much about the legal responsibilities and duties of a successor trustee but rather practical information to make trust administration go smoothly and avoid any difficulties with the beneficiaries.

One thing that is so important is to keep impeccable records. Make sure you maintain accurate records and document all transactions. Keep all receipts. Detailed records are imiportant because it may become necessary to prepare an accounting of all the deposits and income going into the trust and all the disbursements and distributions.

Keeping beneficiaries informed is also really important. As a successor trustee, you do have a duty to keep beneficiaries informed, but even for items that are not subject to this duty, it is a good ideal to keep in touch with the beneficiaries, answer any questions they have, and maintain a friendly relationship. Many cases of trust litigation arise because beneficiaries become disgruntled about not being kept informed or not feeling like they are "in the loop."

If necessary, hire experts of advisors to help you. You may find that it is helpful to use the services of an accountant or a financial advisor. You also may want to hire an attorney experienced in trust administration to assist you. This can be helpful when there are many beneficiaries, charitable beneficiaries, or assets that need to be sold or businesses that need to be operated. Know that if you do need to hire advisors, the trust estate will pay for those expenses.

For help with trust administration or trust litigation, give us a call. Some trust administrations are best done by experienced estate planning attorneys to insulate the trustee from potential liability. If you are the successor trustee of a difficult trust administration, the money is well spent to get expert assistance.

There are a number of legislative proposals affecting probate and trust law suggested by the California State Bar for possible introduction in the California legislature next year.

One proposal is to broaden who has the right to control the disposition of remains. This proposal would add the conservator of the person and the conservator of the estate to the list of persons who may control the disposition of a decedent’s remains. This proposal would amend section 7100 of the Health and Safety Code.

Another proposal is to repeal the Rule Against Perpetuities and clarify the rule against restraints on the power of a trustee to sell or transfer trust property. The Rule Against Perpetuities came from common law rule against vesting interests in property which do not vest within a life in being at the creation of the interest plus 21 years. The Rule prevents a person from putting provisions in their will or trust that will continue to control or affect the distriibution of assets long after he or she has died. Some states have already abolished the Rule Against Perpetuities.

An addition to the Probate Code permitting Elective Administration of a decedent’s estate rather than the formal probate administration, which currently is the only choice is another important proposal. Elective administration would allow a personal representative to administer a probate estate with a minimum of court supervision. Elective administration would be available in five circumstances:
1. Estates in which the Petitioner is an individual and is the sole devisee of the decedent’s will entitled to distribution.
2. Estates in which the Petitioner is a trustee and is the sole residuary devisee of the decedent’s will entitled to distribution.
3. Estates in which the Petitioner is the sole residuary devisee of the decedent’s will and the decedent’s will is a pour over will.
4. Intestate estates in which the Petitioner is the decedent’s sole heir.
5. Estates in which all devisees of the decedent’s will entitled to distribution are adult who have consent in writing to the elective administration.

This proposal for Elective Administration would permit eligible beneficiaries to choose between elective administration and formal probate. The elective administration would be faster and less costly than formal probate. For more specific details on this proposed addition to the Probate Code, look for a future blog.

If you need help with probate or any other aspect of California estate planning, call us at Scott C. Soady, A Professional Corporation.

As we approach the holidays, estate planning is probably the last thing on your mind. The end of the year is actually a great time to think about your estate plan. Here are some tips for year end planning.

1. Consider making gifts before year end. Gifting to your children or grandchildren is a basic and powerful estate planning tool. The annual gift tax exclusion is the amount an individual can gift to any number of donees without a gift tax consequence. In 2010, you can gift $13,000 ($26,000 for married couples) per donee and there will be no gift tax. A married couple could for example, give $26,000 to their 3 children and $26,000 to their 3 grandchildren for a total of $156,000 . Gifting takes those assets of $156,000 out of their estate, thus potentially reducing any estate tax due if they should die in 2011. The gift tax exemption does not carry over into the next year so if you do not use it before the end of the year, you lose it.

2. Pay education tuition and medical expenses. Payments for education and medical expenses are not considered taxable gifts and are not included in the annual exclusion of $13,000 or the lifetime exclusion limits of $1,000,000. The payments have to be made directly to the school or the medical provider to qualify for exemption.

3. Fund a 529 Plan. Section 529 of the Internal Revenue Code permits a taxpayer to establish a special account to pay college expenses. Investmenst in a 529 plan accumulate income tax free and later distributions used for qualified educational expenses are not subject to federal income tax.

4. Consider irrevocable trusts. Given that the federal estate tax exemption is set to revert back to $1,000,000 on January 1, 2011, if you are worried about passing away with a taxable estate, there are trusts that you can create in an effort to eliminate or reduce estate taxes. A Grantor Retained Annuity Trust (“GRAT”) is an irrevocable trust where you transfer assets into the trust but retain the right to receive annual payments of a fixed dollar amount for a specific period of time. At the end of that period of time, the remaining trust assets can go to your beneficiaries. Other types of irrevocable trusts which can reduce the size of your taxable estate are Irrevocable Life Insurance Trusts (“ILITs”) and Qualified Personal Residence Trusts ("QPRTs").

5. Create or review your estate plan. As you think about the upcoming year and reflect about your life (where you are going personally and financially) now is a good time to create an estate plan if you don’t have one, or review the one you have to make sure it still carries out your wishes and goals. Maybe you had a child in 2010, got a divorce, inherited some money, got remarried, started a business, plan to retire soon, etc. These are all good reasons to review what you have in place in the way of estate planning documents and update them if necessary.

The estate planning attorneys at Scott C. Soady, A Professional Corporation can help you with your year end estate planning. It only takes an hour or so to get started on your estate plan and then you can go back to the holiday festivities with peace of mind.

Since the recent election, there is speculation that the Republicans may try to address the estate tax issue with the lame duck Congress. It was a Republican controlled Congress that enacted the law in 2001. The law called for an increase in the estate tax exemption until 2010 when the tax would disappear altogether, only to reappear in 2011 at the lower exemption level of $1 million at a tax rate of .

There are two aspects to the estate tax law. One is the amount of an estate that will be subject to estate tax. The second is the rate at which an estate is taxed. Back in 2001, if a single person had an estate in excess of $675,000, estate tax would be due. For a married couple, the exemption was twice that, or $1,350,000. The tax rate was 55%. The exemption gradually increased over the years so that in 2009, the exemption for a couple was $7 million for a married couple at a tax rate of 45%. This year we have had no tax at all, a year in which several billionaires died, leaving their estates tax free.

Congress has a number of options:

1. Do nothing. If Congress fails to address the issue, on January 1, 2011 the exemption amount will go to $1 million for single people and $ 2 million for married couples. This change will not only affect the rich, but also affect the middle class, as many Americans today are in the category of having a gross estate of $1 million.

2. Reinstate the rates and exemption amount from 2009 and make it permanent. It has been estimated that when the $7 million exemption was in place, only 3 estates out of 1,000 had to pay any tax. This approach would result in some revenue, but not the huge revenue that would result from option 1.

3. Come up with an exemption amount and rate for 2011 and index it for inflation. This approach is similar to option 2 but would increase the exemption amount from year to year.

4. Do away with the federal estate tax. The Congressional Joint Committee on Taxation estimates that eliminating the estate tax would cost about $500 billion over the next decade.

We are already in mid-November, so we should know if Congress will address this issue soon. Look for future articles as to how their action or inaction will affect your estate planning.

Many clients have questions about leaving a distribution from their estate to a beneficiary who has an addiction. Leaving money or assets to an individual who has an alcohol, gambling, or drug addiction can be concerning so they want to make sure that the individual will not squander their inheritance because of their addiction.

The experienced estate planners at Scott C. Soady, A Professional Corporation can include custom provisions in your revocable living trust to keep an addicted beneficiary from receiving a distribution. Such provisions can be tailored to fit your specific situation. You can provide that the beneficiary submit to drug or alcohol testing, be sober for a specific period of time, be employed for a certain period of time or other specific conditions before they can receive a distribution. You can keep the inherited assets in trust for such a beneficiary and only have it distributed by a trustee at various intervals if he or she remains sober. You can provide that the beneficiary may use trust funds to receive treatment or rehabilitation. There are many options to provide for a loved one but also insure that the money will be used wisely by the beneficiary.

Also consider the drug or alcohol addiction of a person you are considering acting as your agent under a power of attorney. The agent under a durable power of attorney for finances would be the individual handling your finances should you become disabled. An adult child who has a gambling, alcohol, or drug addiction may not be the best choice to be your agent under a power of attorney.

One of the benefits of a trust is that they can be drafted to include custom provisions to cover a myriad of situations. They can also be amended at any time while the trustor is still alive if a beneficiary’s situation changes and the trustor wants to make different provisions.

At Scott C. Soady, A Professional Corporation, our goal is to draft an estate plan that will meet your needs whatever your particular situation. Call us for a complimentary consultation.

As of November 1, 2010, the cost to file for probate is increasing to $395. This fee is set by the Court and the size of the estate is not considered. What other costs are involved in probate?

The person petitioning the Court to be appointed administrator or executor will also have to publish a notice in the local newspaper, showing the decedent's date of death, who is petitioning to administer the estate, and the contact information of the executor/ administrator so that creditors and other interested persons can contact them. The cost of publication is approximately $350 - $500.

Once the assets have been inventoried, they need to be appraised. Usually this is done by the probate referee who charges approximately 1/10 of 1% of the appraised value of the asset. If there are multiple real properties or items of personal property that have to be appraised, there may be several appraisals, adding to the cost of probate.

Sometimes a bond is required which insures against administrator or executor misconduct which causes a monetary loss. Obtaining a bond can be another cost and is in the discretion of the court if there is no will which waives bond. Bonds can cost anywhere from hundreds of dollars to thousands of dollars depending on the size of the estate.

Attorney's fees also add significantly to the cost of probate. Attorney's fees are set by the Probate Code: 4% of the first $100,000, 3% of the next $100,000, 2% of the next $800,000. Also keep in mind that the attorney's fees are computed on the gross value of the asset. For example if the decedent left a $500,000 house with a $400,000 mortgage, you might think the fees are based on $100,000 but that is not the case. Fees will be calculated on the $500,000 value.

Administrators and executors are entitled to claim the same amount of money for administering the probate estate as the attorney. As an example, with a $1 million estate, attorney's fees will be $23,000 and administrator/executor fees will also be $23,000 for a total of $46,000.

Probate can be a costly and time consuming process, which can be eliminated or substantially reduced by using a revocable living trust as your estate plan. Contact us if you have a probate matter or would like to prepare a trust to avoid probate.