ESTATE PLANNING

Published on: June 15, 2010

Don’t Forget to Fund Your Trust

Once your revocable living trust has been created, you need to “fund” the trust with your assets. A trust that is not funded is useless as a vehicle to avoid probate. If you have gone to the time and expense of preparing a trust, you certainly don’t want your heirs to have to go through probate so it is very important that you “fund” your trust.

“Funding” your trust means that you transfer ownership of your assets into the name of your trust. In the case of real property, this means executing a new deed transferring the property from your name as an individual to your name as the trustee of your trust.

In the case of bank accounts, brokerage accounts, stocks, and bonds, you need to show the institution that your trust exists and you want the accounts to be in the name of your trust. Your estate planning attorney should have included a Certificate of Trust in your revocable living trust package, which is a simplified document showing the existence of the trust, the powers of the trustee, and other information about your trust without revealing the dispositive provisions.

Published on: June 11, 2010

Actor Gary Coleman’s Estate Will be Disputed

by Scott C. Soady

Celebrities are always providing estate planning lessons for the rest of us. Gary Coleman who died in Utah in May at age 42 is the latest celebrity whose estate planning was a disaster. There are at least 3 wills, maybe more, that have been found and the fight has already begun between his ex-wife Shannon Price, his estranged parents, and a woman who formerly lived with the actor and was the CEO of his corporation, Anna Gray.

Supposedly there is a will executed in 1999 leaving everything to his manager Dion Mial, a will executed in 2005 leaving everything to Anna Gray ,and a document purporting to be an addendum to a will executed in 2007, one week after he and Shannon Price were married, leaving everything to Price. The document is not witness or notarized. Price and Coleman divorced in 2008 although according to Price, continued to live together in a common law marriage. (Utah is one of a dozen states that recognize common law marriage.)

Friend and co-star Todd Bridges also has said he has a secret will expressing Coleman’s true wishes about his estate and his final wishes. The actor’s estranged parents also claim that since Coleman and Price were divorced, they have the legal rights to his remains. The court in Utah has already scheduled a hearing for July 2 to sort things out and appoint a personal representative of the estate.

Published on: June 3, 2010

Probate Estate, Non-Probate Estate, Gross Estate, & Net Estate

by Scott C. Soady

You hear the term “estate” used alot in the context of estate planning but there are many variations: gross estate, net estate, probate estate, non-probate estate, trust estate. How do all these terms differ?

The value of your estate at the time of death is called your “gross estate”. This includes cash, bonds, stocks, real property, IRAs, pension benefits, life insurance, other investments, personal property, business interests, and any other assets owned. It is without consideration of debt that may be owned or taxes that need to be paid. It is your gross estate that determines whether there will be any estate tax that has to be paid. 2010 is an interesting year however because during this year, there is no federal estate tax whatsoever, regardless of the value of your estate. Unless Congress acts before 2011 to change it, the estate tax is set to return to a level of $1 million in 2011. This means that estates valued in excess of $1 million will be subject to estate tax.

“Net estate” is the value of your estate once all the expenses have been deducted such as funeral expenses, trust or probate administration expenses, taxes, and debts. It is the “net estate” that is distributed to your heirs or beneficiaries.

Published on: May 31, 2010

Have You Ever Heard of an Ethical Will?

by Scott C. Soady

At Scott C. Soady, A Professional Corporation, we encourage families or individuals to create an estate plan, consisting of a will or a revocable living trust so your loved ones know how you want your assets distributed. An interesting off shoot from traditional estate planning is an ethical will. Have you ever heard of one?

An ethical will (also called a “legacy letter”) is a document designed to pass ethical values or life lessons from one generation to the next. They have been around for centuries and come from the Judeo-Christian tradition. Rabbis and Jewish laypeople wrote ethical wills during the 19th and 20th centuries.

Today, Dr. Andrew Weil, a noted author and doctor of integrative medicine who has written books on health and aging, promotes ethical wills as a gift of spiritual health to your family. Leaving such a document explains to your loved ones their family and cultural background, ethical and spiritual values, life lessons and experiences, and your hopes for future generations.They are becoming more prevalent. Even President Obama has written a legacy letter to his daughters.

Published on: May 19, 2010

Considerations When Choosing a Guardian for Your Children

by Scott C. Soady

As you prepare your estate plan, many of the decisions you have to make relate to your children. You may not have thought about how you would want your estate distributed to your minor children if something should happen to you. Would it go to your children equally? Should it be distributed outright or in trust? Should your estate be held in trust with distributions for health, education, and support and then distributed at various age intervals? Who would be an appropriate choice to be the trustee that manages your children’s assets

Another consideration is the choice of who will be the guardian for your minor children. Here are some questions to ask yourself as you think about who to nominate as the guardian of the person, ie. the individual or couple who will physically take care of your children: feed them, clothe them, educate them, etc.

1. Is the person you’ve chosen young enough to take on the responsibility? Often young couples will want to name the maternal or paternal grandparents. Raising children is a tough job and as much as you may want to name your parents, they may not be physically capable of raising your children to adulthood or they may not survive you. If you do choose individuals who are older than you, always name back up guardians.

Published on: May 15, 2010

Is Hiring an Estate Planning Lawyer Worth It?

by Scott C. Soady

It is true that in todays society, you can prepare your own will or trust using the internet or a book on estate planning. The question is whether you should!

Kiplinger magazine has a quiz to test your knowledge of what makes money savings sense and what doesn’t. Such questions as whether it is cost effective to join a warehouse club, change your oil every 3000 miles, and invest in “load” mutual funds. Question 4 asks whether it is worth it to hire a lawyer to prepare your will or trust. The answer is “yes”. Kiplinger says it makes sense to pay a competent lawyer a reasonable fee to prepare a will or a trust. In the long run, it is cheaper than a costly legal battle later.

At Scott C. Soady, A Professional Corporation, we offer a complete revocable trust package for a reasonable flat fee. If you mention that you located our office through the internet, you also get a 25% discount. The documents you will receive with your trust package are a revocable living trust, pour over will,durable power of attorney for assets, advance health care directive, certificate of trust, assigments of personal property, and deeds recording your San Diego property. Our experiened estate planning lawyers will meet with you and advise you of the various types of trusts provisions that may be incorporated into your estate plan and help you make decisions on the choice of a trustee, guardian for your minor children, how to give to charities, and what assets to title in the name of your trust.

Published on: May 11, 2010

Is There a Will or a Trust? How Hard Should We Look?

by Scott C. Soady

When a person dies in San Diego, the Probate Court will determine to whom the assets of the decedent will be distributed based on the laws of “intestate” succession. “Intestate” means that the decedent died without a will or a trust. Before you decide to file a probate proceeding without a will, make sure that it is indeed the case that no will or trust can be found. It can make a difference.

Look for a will or a trust in the decedent’s home and business files, safety deposit box, or safe. Ask other family members if they recall the decedent mentioning that he or she executed a will or a trust. Find out if the decedent had a family lawyer who may have drafted an estate plan or referred the decedent to an estate planning lawyer. Often estate planning attorneys will keep the originals of clients’ estate plans in their fire proof safes. Look through the decedent’s collection of business cards to see if a lawyer is among them.

If no will or trust can be found, the steps in the probate process will be the same as for a probate with a will. The difference is in the distribution of the assets. A couple of examples will illustrate the difference:

Published on: May 7, 2010

Troubles With Joint Tenancy

by Scott C. Soady

Joint tenancy is a type of ownership where two or more people share an interest in personal property or real estate, usually with a right of survivorship. Three brothers, for example, may decide to purchase a hunting cabin together and own it in joint tenancy. The last surviving brother will eventually own the cabin. Couples who purchased homes 10 or 20 years ago were often advised to hold the property in joint tenancy with a right of survivorship so that when one spouse died, the other received the property. There are occasions where joint tenancy may be the correct way to hold title, however, there are also many potential problems with joint tenancy which you should realize before holding assets in that manner.

Loss of Control – When you own property with other individuals, you give up unilateral control such as the right to sell, make improvements, or refinance. In the example above, one of the three brothers who own the cabin jointly, wants to sell it. He needs the consent of the other 2 to sell and he cannot sell his interest without their consent.

Problems with Creditors – Creditors of a joint owner can come after the property to satisfy the debts of one of the joint owners. If a joint owner has a judgment rendered against him, the creditor can seek to satisy the judgment by forcing a sale of the property.

Published on: April 30, 2010

No Estate Tax in 2010 Could Cost the IRS Billions

by Scott C. Soady

Previous blog posts have discussed the fact that in 2010 there is no federal estate tax imposed on a person’s estate, no matter how large the estate. In 2009, the federal estate tax was levied on estates over $3.5 million. In 2010 there is no estate tax because Congress failed to approve the bill to keep the estate tax at the 2009 level with a maximum 45% tax rate.

No one expected that the 74th richest man in the world would die in 2010. Texas gas pipeline tycoon Dan Duncan suddenly died in March at the age of 77 with an estimated $9 billion estate. No one knows the details of his estate plan but his death has caused many to wonder if Congress would now reinstate the 2009 estate tax and make it retroactive to the begining of the year so that the government could receive much needed revenue from his estate, maybe in the billions. Mr. Duncan was a noted philanthropist, so he may have provided for a number of charitable gifts which pass to the beneficiaries free of estate tax.

If Congress fails to act before the end of the year, the estate tax exemption is set to return to $1 million with a maximum tax rate of 50%. Such inaction by Congress will potentially affect many peope who are not billionaires. In California especially, where real property values are high, many upper middle class individuals would be subject to estate tax with estates over $1 million.

Published on: April 26, 2010

Choosing a Successor Trustee

by Scott C. Soady

Choosing a successor trustee for your revocable living trust is an important decision. The choice of the individual or entity who will manage your assets, possibly invest your assets, ensure that the provisions of your trust are carried out after your death with the appropriate distributions to your beneficiaries is arguably one of the most important estate planning decisions you will make. Choosing a successor trustee that is not right for the job can lead to tension between the trustee and beneficiaries, breach of trust by the trustee, or costly trust litigation.

There are several options for a successor trustee. Probably the most common choice is a member of your family. Usually parents make their children the successor trustees of their trust. One thing to keep in mind is the relationship between the proposed trustee and the beneficiaries. Is there already discord or strained relationships among your children that could worsen if one were chosen over the others? Are some of your children better equipped to handle trust administration than others? Think carefully about making your children co-trustees, particulary if you have more than 2 children. For example, 4 children having to agree on aspects of trust administration because they are all trustees could be a recipe for disaster. In some families, 2 co-trustees or even more would be fine. The main consideration is whether the individual has the skills, experience, time, and demeanor to carry out your wishes. It goes without saying that trustworthiness and honesty is also important, maybe even more so than any particular experience with managing money.

Another choice is to name a trusted friend or financial advisor to be your successor trustee. Maybe your children have busy lives and you want to reduce the burden on them or avoid family discord. A trusted friend might be a good choice, however there are also circumstances where friends or a financial advisor or even a family member does not carry out his fiducariary duty of being a trustee and utilizes trust assets for their own benefit.