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Irvine, CA Estate Planning Blog

Monday, April 27, 2015

Mediation: Is It Right For You?

Mediation is one form of alternative dispute resolution (ADR) that allows parties to seek a remedy for their conflict without a court trial. Parties work with a mediator, who is a neutral third party. Usually, mediators have received some training in negotiation or their professional background provides that practical experience.

Unlike a judge, a mediator does not decide who wins; rather, a mediator facilitates communication between the parties and helps identify issues and solutions. The goal is for parties to reach an acceptable agreement.

Mediation can be an appealing option because it is less adversarial. This might be important when the relationship between the parties has to continue in the future, such as between a divorcing couple with children. The process is also less formal than court proceedings.

Mediation often costs less than litigation, which is another benefit. Another advantage to using mediation is that it generally takes much less time than a traditional lawsuit. Litigation can drag on for years, but mediation can typically be completed within a few months. Court systems are embracing mediation and other forms of ADR in an effort to clear their clogged dockets. There are some programs that are voluntary, but in some jurisdictions, pursuing ADR is a mandatory step before a lawsuit can proceed.

Mediation can be used in a variety of cases, and it is sometimes required by a contract between the parties. Mediators can be found through referrals from courts or bar associations, and there are companies that specifically provide ADR services. Ideally, a mediator will have some training or background in the area of law related to your dispute.

Mediation is often a successful way to reach a settlement. If parties fail to resolve their conflict, information learned during mediation might be protected as confidential under state law.

Contact our law firm today to help determine if mediation would be a valuable tool to resolve your case.


Monday, April 20, 2015

Is There Anyway a Disinherited Child Could Receive an Inheritance From an Estate?

If your estate plan and related documents are properly and carefully drafted, it is highly unlikely that the court will disregard your wishes and award the excluded child an inheritance.  As unlikely as it may be, there are certain situations where this child could end up receiving an inheritance depending upon a variety of factors.

To understand how a disinherited child could benefit, you must understand how assets pass after death.  How a particular asset passes at death depends upon the type of asset and how it is titled. For example, a jointly titled asset will pass to the surviving joint owner regardless of what a will or a trust says. So, in the unlikely event that the disinherited child was a joint owner, that child would still inherit the asset because of how it was titled.

Similarly, if you left that disinherited child as a named beneficiary on a life insurance policy or retirement plan asset, such as an IRA or 401k, that child would still receive some of the benefits as the named beneficiary even if your will stated they were to take nothing. Another way such a "disinherited" child might receive a benefit is if all other named beneficiaries died before you.

So, assume you have three children and you wish to disinherit one of them and you state you want all of your assets to go to the other two, and if they are not alive, then to their descendants.  If those other two children die before you and do not have any descendants, there may be a provision that in such a case your "heirs at law" are to take your entire estate and that would include the child you intended to disinherit.

If you wish to disinherit a child, all of these issues can be addressed with proper and careful drafting by a qualified estate planning lawyer.  


Monday, April 13, 2015

Leaving a Timeshare to a Loved One

Many of us have been lucky enough to acquire timeshares for the purposes of vacationing on our time off.  Some of us would like to leave these assets to our loved ones.  If you have a time share, you might be able to leave it to your heirs in a number of different ways. 

One way of leaving your timeshare to a beneficiary after your death is to modify your will or revocable trust.  The modification should include a specific section in the document that describes the time share and makes a specific bequest to the designated heir or heirs. After your death, the executor or trustee will be the one that handles the documents needed to transfer title to your heir. If the time share is outside your state of residence and is an actual real estate interest, meaning that you have a deed giving you title to a certain number of weeks, a probate in the state where the time share is located, called ancillary probate, may be necessary. Whether ancillary probate is needed will depend upon the value of the time share and the state law.

Another way you could accomplish this goal is to execute what is called a "transfer on death" deed. However, not all states have legislation that permits this so it is imperative that you check state law or consult with an attorney in the state where the time share is located. A transfer on death deed is basically like a beneficiary designation for a piece of real estate. Your beneficiary would submit a survivorship affidavit after your death to prove that you have died. Once this document is recorded the beneficiary would become the title owner.

It is also important to investigate what documents the time share company requires in order to leave your interest to a third party. They may require that additional forms be completed so that they can bill the beneficiary for the annual maintenance fees or other charges once you have died.

If you want to do your best to ensure that your loved ones inherit your time share, you should consult with an experienced estate planning attorney today. 

 


Monday, March 23, 2015

Executors Fees

An executor's fee is the amount charged by the person who has been appointed as the executor of the probate estate for handling all of the necessary steps in the probate administration. Therefore, if you have been appointed an executor of someone’s estate, you might be entitled to a fee for your services.  This fee could be based upon a variety of factors and some of those factors may be dependent upon state, or even local, law.

General Duties of an Executor

  1. Securing the decedent's home (changing locks, etc.)
  2. Identifying and collecting all bank accounts, investment accounts, stocks, bonds and mutual funds
  3. Having all real estate appraised; having all tangible personal property appraised
  4. Paying all of the decedent’s debts and final expenses
  5. Making sure all income and estate tax returns are prepared, filed and any taxes paid
  6. Collecting all life insurance proceeds and retirement account assets
  7. Accounting for all actions; and making distributions of the estate to the beneficiaries or heirs.

This list is not all-inclusive and depending upon the particular estate more, or less, steps may be needed.

As you can see, there is a lot of work (and legal liability) involved in being the executor of an estate.  Typically the executor would keep track of his or her time and a reasonable hourly rate would be used. Other times, an executor could charge based upon some percent of the value of the estate assets. What an executor may charge, and how an executor can charge, may be governed by state law or even a local court's rules. You also asked whether the deceased can make you agree not to take a fee. The decedent can put in his or her will that the executor should serve without compensation but the named executor is not obligated to take the job. He or she could simply decline to serve. If no one will serve without taking a fee, and if the decedents will states the executor must serve without a fee, a petition could be filed with the court asking them to approve a fee even if the will says otherwise. Notice should be given to all interested parties such as all beneficiaries.

If you have been appointed an executor or have any other probate or estate planning issues, contact us for a consultation today.


Monday, March 16, 2015

Choosing a Guardian for Minor Children

If you are a parent and you are considering estate planning, one of the most difficult decisions you will have to make is choosing a guardian for your minor children.  It is not easy to think of anyone else, no matter how loving, raising your child. Yet, you can make a tremendous difference in your child’s life by planning ahead. 

The younger your child, the more crucial this choice is, because very young children cannot form or express their own preferences about caregivers. Yet young children are not the only ones who benefit from careful parental attention to guardianship. Children close to 18 years old will be legal adults soon, but, as you well know, may still need assistance of a parental figure after the fact.

By naming and talking about your choice of guardian, you can encourage a lifelong bond with a caring family. The nomination of guardians is a straightforward aspect of any family’s estate plan. It can be as basic or detailed as you want. You can simply name the guardian who would act if both you and your spouse were unable to or you can provide detailed guidance about your children and the sort of experiences and family environment you would like for them. Your state court, then, can give strong weight to your expressed wishes.

There are essentially four steps to this process. First, make a list of anyone you know that might be a candidate for guardian of your children.  It is important to think beyond your sisters and brothers and consider cousins, aunts and uncles, grandparents, child-care providers and business partners. You might also want to consider long-time friends and those you’ve gotten to know at parenting groups as they may share similar philosophies about child-rearing. Second, make a list of factors that are most important to you. Here are some to consider:

  • Maturity
  • Patience
  • Stamina
  • Age
  • Child-rearing philosophy
  • Presence of children in the home already
  • Interest in and relationship with your children
  • Integrity
  • Stability
  • Ability to meet the physical demands of child care
  • Presence of enough “free” time to raise children
  • Religion or spirituality
  • Marital or family status
  • Potential conflicts of interest with your children
  • Willingness to serve
  • Social and moral habits and values
  • Willingness to adopt your children

You might find that all or none of these factors are important to you or that there are others that make more sense in your particular situation.  The third step is to, match people with priorities. Use the factors you chose in step two to narrow your list of candidates to a handful.

For many families, it is as easy as it looks. For others, however, these three steps are fraught with conflict. One common source of difficulty is disagreement between spouses. But, consensus is important. Explore the disagreements to see what information about values and people is important to one another and use all of your strongest communications skills to understand each other’s position before you try to find a solution that you can both feel good about. Step four is to make it positive. For some parents, getting past this decision quickly is the best way to achieve peace of mind and happiness. For others, choosing a guardian can be the start of an intensive relationship-building process. An attorney who understands where you and your spouse fall on that spectrum can counsel you appropriately. 


Monday, March 9, 2015

Problems with Using Joint Accounts as a Vehicle for Inheritance

When deciding who will inherit your assets after you die, it is important to consider that you might outlive the beneficiary you choose.  If you have added someone to your financial accounts to ensure that he or she receives this asset after you die, you might be concerned about what will happen should you outlive this person.

What happens to a joint asset in this situation depends upon the specific circumstances. For example, if a co-owner that was meant to inherit dies first, the account will automatically become the property of the other co-owners and will not be included in the decedent’s estate.  However, whether it is somehow included in this person’s taxable estate, and is therefore subject to state death tax, also depends on state law. Assuming the other co-owners were the only ones to contribute to this account, and that the decedent did not put any of his or her money into the account, there may be state laws that provide that these funds are not taxed.  The other co-owners might have to sign an affidavit to that effect and submit it to the state department of revenue with the tax return. Also, if the decedent’s estate was large enough to require the filing of a federal estate tax return ($5,340,000 in 2014) the same thing may be needed in order to exclude this money from his or her taxable estate. You would generally state that this person’s name was placed on the account for convenience, and that the money was contributed by the other co-owners.

If you are considering adding someone to your financial accounts so that they inherit it when you die, you should contact an experienced estate planning attorney to discuss your options. 


Monday, February 23, 2015

Your Wishes in Your Words

During the estate planning process, your attorney will draft a number of legal documents such as a will, trust and power of attorney which will help you accomplish your goals. While these legal documents are required for effective planning, they may not sufficiently convey your thoughts and wishes to your loved ones in your own words. A letter of instruction is a great compliment to your “formal” estate plan, allowing you to outline your wishes with your own voice.

This letter of instruction is typically written by you, not your attorney. Some attorneys may, however, provide you with forms or other documents that can be helpful in composing your letter of instruction. Whether your call this a "letter of instruction" or something else, such a document is a non-binding document that will be helpful to your family or other loved ones.

There is no set format as to what to include in this document, though there are a number of common themes.

First, you may wish to explain, in your own words, the reasoning for your personal preferences for medical care especially near the end of life. For example, you might explain why you prefer to pass on at home, if that is possible. Although this could be included in a medical power of attorney, learning about these wishes in a personalized letter as opposed to a sterile legal document may give your loved ones greater peace of mind that they are doing the right thing when they are charged with making decisions on your behalf. You might also detail your preferences regarding a funeral, burial or cremation. These letters often include a list of friends to contact upon your death and may even have an outline of your own obituary.

You may also want to make note of the following in your letter to your loved ones:

  • an updated list of your financial accounts with account numbers;
  • a list of online accounts with passwords;
  • a list of important legal documents and where to find them;
  • a list of your life insurance and where the actual policies are located;
  • where you have any safe deposit boxes and the location of any keys;
  • where all car titles are located; the
  • names of your CPA, attorney, banker, insurance advisor and financial advisor;
  • your birth certificate, marriage license and military discharge papers;
  • your social security number and card;
  • any divorce papers; copies of real estate deeds and mortgages;
  • names, addresses, and phone numbers of all children, grandchildren, or other named beneficiaries.

In drafting your letter, you simply need to think about what information might be important to those that would be in charge of your affairs upon your death. This document should be consistent with your legal documents and updated from time to time.


Monday, February 16, 2015

Spendthrift Trusts

Unfortunately, not everyone in the world is responsible with money. Even those who are moneywise can run into bad luck in life which could cause them financial hardship. So when planning your estate, you should think twice about leaving a large sum of money to someone who can’t handle it. For those beneficiaries for whom you have concerns, a spendthrift trust may be an ideal solution.

If a person who is “bad with money”, or who is going through a rough time, gets a large inheritance, odds are that the inheritance will be gone in a matter of a few months or a year or two, with very little to show for it. A spendthrift trust is a trust that is designed to limit a beneficiary’s ability to waste the principal of a trust. The beneficiary of a spendthrift trust is a person who can’t handle money, or is addicted to drugs, alcohol, or another negative behavior. A spendthrift trust could even be used for someone in a destructive relationship.

In a spendthrift trust, a sum of money is set aside in a trust account. The beneficiary is never the trustee of a spendthrift trust. Instead, the trustee can be another family member, a family friend, or even a corporate trustee like a bank. The trustee will spend the money for the beneficiary’s needs or could make payments directly to the beneficiary, as the trust document allows. However, the beneficiary has no right to spend the principal of the trust. The beneficiary also doesn’t have the legal right to pledge the trust as security for a loan.

In some spendthrift trusts, the trustee could have the power to cut off benefits to a beneficiary who becomes self-destructive, such as with the use of drugs or alcohol. The money could then be accumulated for the beneficiary’s use later, or it could be paid to another beneficiary. Another option would be to give the trustee the option to only make payments on behalf of a beneficiary who has become self-destructive, but to withhold cash from that beneficiary.

Spendthrift trusts are a great tool to help potential beneficiaries who cannot handle money for various reasons. However, they aren’t perfect. They may be too strict in situations where the beneficiary may have a legitimate need for more money. If the spendthrift trust isn’t strict enough about what money is allowed to be spent on, that leaves a lot of control in the trustee’s hands, and he may find himself in the difficult position of standing between an erratic beneficiary and his or her money.

If you’re concerned about a particular beneficiary and his or her ability to manage money, be sure to consult with a qualified trust attorney to evaluate whether a spendthrift trust would be an effective tool for your estate plan.


Monday, February 9, 2015

What Does the Term "Funding the Trust" Mean in Estate Planning?

If you are about to begin the estate planning process, you have likely heard the term "funding the trust" thrown around a great deal. What does this mean? And what will happen if you fail to fund the trust?

The phrase, or term, "funding the trust" refers to the process of titling your assets into your revocable living trust. A revocable living trust is a common estate planning document and one which you may choose to incorporate into your own estate planning. Sometimes such a trust may be referred to as a "will substitute" because the dispositive terms of your estate plan will be contained within the trust instead of the will. A revocable living trust will allow you to have your affairs bypass the probate court upon your death, using a revocable living trust will help accomplish that goal.

Upon your death, only assets titled in your name alone will have to pass through the court probate process. Therefore, if you create a trust, and if you take the steps to title all of your assets in the name of the trust, there would be no need for a court probate because no assets would remain in your name. This step is generally referred to as "funding the trust" and is often overlooked. Many people create the trust but yet they fail to take the step of re-titling assets in the trust name. If you do not title your trust assets into the name of the trust, then your estate will still require a court probate.

A proper trust-based estate plan would still include a will that is sometimes referred to as a "pour-over" will. The will acts as a backstop to the trust so that any asset that is in your name upon your death (instead of the trust) will still get into the trust. The will names the trust as the beneficiary. It is not as efficient to do this because your estate will still require a probate, but all assets will then flow into the trust.

Another option: You can also name your trust as beneficiary of life insurance and retirement assets. However, retirement assets are special in that there is an "income" tax issue. Be sure to seek competent tax and legal advice before deciding who to name as beneficiary on those retirement assets.


Monday, January 26, 2015

Role of the Successor Trustee

When creating a trust, it is common practice that the person doing the estate planning will name themselves as trustee and will appoint a successor trustee to handle matters once they pass on.  If you have been named successor trustee for a person that has died, it is important that you hire a wills, trusts and estates attorney to assist you in carrying out your duties. Although the attorney that originally created the estate plan would most likely be more familiar with the situation, you are not legally required to hire that same attorney. You can hire any attorney that you please in order to determine what your obligations are.

 If the decedent had a will it is common that the successor trustee is also named as the executor.  Although the role of executor is similar to that of trustee, there are technical differences. If there was a will, you should consult with an attorney to determine if a court probate process will be required to administer the estate. If all assets were titled in the trust prior to the person’s death, or passed by beneficiary designation, such as in the case of life insurance and retirement plan assets (such as 401ks, IRAs, etc.), then a court probate may not be needed. However, if there were accounts or real estate in the person’s name alone that were not covered by the trust, a court probate may be necessary.

During the probate process, all of the deceased person’s assets must be collected and accounted for. This includes all bank accounts, stocks, bonds, mutual funds, investment accounts, retirement assets, life insurance, cars, personal belongings and real estate. All of these assets should be valued and listed on one or more inventories. Depending upon the value of the assets, an estate tax return may be needed. You should be aware of any final expenses, the person’s final income tax returns, and any creditors. Although this process is lengthy, once all of the appropriate steps are taken, the assets will be distributed and the estate will come to a close. 

If you have been named a successor trustee, an experienced estate planning attorney can help you through this process and make sure you carry out your legal duties as required.  Contact us for a consultation today.


Monday, January 12, 2015

Refusing a Bequest

Most people develop an estate plan as a way to transfer wealth, property and their legacies on to loved ones upon their passing. This transfer, however, isn’t always as seamless as one may assume, even with all of the correct documents in place. What happens if your eldest son doesn’t want the family vacation home that you’ve gifted to him? Or your daughter decides that the classic car that was left to her isn’t worth the headache?

When a beneficiary rejects a bequest it is technically, or legally, referred to as a "disclaimer." This is the legal equivalent of simply saying "I don't want it." The person who rejects the bequest cannot direct where the bequest goes. Legally, it will pass as if the named beneficiary died before you. Thus, who it passes to depends upon what your estate planning documents, such as a will, trust, or beneficiary form, say will happen if the primary named beneficiary is not living.

Now you may be thinking why on earth would someone reject a generous sum of money or piece of real estate? There could be several reasons why a beneficiary might not want to accept such a bequest. Perhaps the beneficiary has a large and valuable estate of their own and they do not need the money. By rejecting or disclaiming the bequest it will not increase the size of their estate and thus, it may lessen the estate taxes due upon their later death.

Another reason may be that the beneficiary would prefer that the asset that was bequeathed pass to the next named beneficiary. Perhaps that is their own child and they decide they do not really need the asset but their child could make better use of it. Another possible reason might be that the asset needs a lot of upkeep or maintenance, as with a vacation home or classic car, and the person may decide taking on that responsibility is simply not something they want to do. By rejecting or disclaiming the asset, the named beneficiary will not inherit the "headache" of caring for, and being liable for, the property.

To avoid this scenario, you might consider sitting down with each one of your beneficiaries and discussing what you have in mind. This gives your loved ones the chance to voice their concerns and allows you to plan your gifts accordingly.


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Law Offices Of Michael J. Wittick, A Professional Law Corporation is located in Irvine, CA and serves clients with estate and wealth preservation matters throughout Irvine, Lake Forest, Laguna Woods, Laguna Hills, Foothill Ranch, Tustin, Aliso Viejo and the surrounding areas.



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