Estate Planning

We wrap holiday gifts in gleaming foil – contributions to our loved ones to celebrate the season. What did you choose for your partner or spouse? That slick little metal sculpture you found at the street fair? A gorgeous pinkie ring you discovered together in that West Hollywood back-alley jeweler’s? A cruise to the Bahamas to get out of Palm Springs’ or LA’s cruel winters? 

Let me suggest some more permanent and life changing gifts. These may not be as pretty as flashy, gift-wrapped boxes with fancy bows on top, but they will be with you and your loved ones in a much more dramatic way. You can share a gift with someone and both of you will be thrilled. 

Do you have a committed partner? Consider the gift of marriage! Huh, you say? What? Get out of here!  But think about it.

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Many of my LGBT clients have reached out to me in a panic wondering how the election of Donald Trump will impact their families, benefits, marriages, and other legal issues.  My advice….breathe, try to relax and let’s take a look at what the election MAY mean in the future.

In my opinion, the biggest issue is the future of the Supreme Court.    There is one vacancy that will now be filled by President-elect Trump.
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Food for Thought – Legal Punch

Every now and then, I need to stop and remind everyone about the perils of forgetting to create a Will or a Trust. Sometimes I meet people who say “Who cares about a Will? I’ll be gone! It won’t hurt me!”. I also know lots of people who nod their heads and say “Oh yes, I know I need a Will and I’m really, really going to do it…soon”. Folks who pass away or become seriously ill without estate plans are practically guaranteeing that lawyers will earn hefty fees to clean up the mess. Put some legal punch into your life, and prevent troubles and woes.
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The Art of Collecting Art – Under the Law

Most of us will never own a million dollar art or antique collection, but we always wonder if our own little treasures – 141 different vintage nutcrackers, a sketch by that street artist in Quebec, 17 stuffed pigs in all shapes and sizes, cocktail napkins from every major bar in Chicago - might someday be worth a tidy sum. Here are some interesting facts about art collections of all kinds:

Building your Collection - Art, antiques and collectibles are available from a wide range of sources. Established dealers and auction houses such as Bonham’s and Butterfields’, Sotheby’s and Christie’s have long handled direct sales, auctions and transfers of art. Now it is possible to buy or sell art online at all kinds of sites from amazon.com to ebay.
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Travel Forecast - Crossing the Line into a No-Comfort Zone

Crossing state lines and international borders is something millions of us do every day. As long as we pack what we need, have our maps, GPS, and our tickets or gas in the car, we are pretty much ready for anything when we hit the road. But for the LGBT community, travel requires careful planning and an extra layer of protection. Both the journey and the destination determine our level of comfort on the trip. Using same-sex marriage equality and other non-discrimination laws as a guide, here are some of the things you should consider when you decide to travel for business or pleasure, or move to a new location:

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Can You Predict the Future? A Good Life Plan Needs Good Estate Planning

Most of us like to bring some order and predictability to our lives by planning ahead. We think about where we are now, and where we would like to be. We figure out how to get there, and how to avoid as many pitfalls along the way as we can. Moving through life, we accumulate things - our possessions, our estate – which are integrated into our lives. As an estate planning attorney, it is my job to help everyone plan for the care of their possessions as they move through life now, and after they die.

Here are a few of the issues that should make you think and do something about estate planning:

Do you have a live-in partner and you aren’t married or registered?

The 2013 U.S. Census Bureau Survey listed around 107,000 California same-sex couples living together. Of these, about 37% were spouses, and the rest were not. In California, community property rules mean that possessions (assets), and what happens to them, are clearly defined for spouses, but not for others. Although you and your partner may have a long-term relationship, your possessions can become a serious issue if you drift apart, become ill, or die. A plan for the care and keeping of your assets is essential to avoid the pitfalls that can upset your lives. If you have a car, bank account, savings or retirement funds, or a home, you have assets to plan for. What will happen to them if something happens to you or your partner?

Do you have children?

Many in the LGBT community have children from a previous or current relationship. If they are minors (under age 18 in California), they are usually under the legal control of one or both parents. But what happens if a parent becomes incapacitated or dies? That is where planning is essential to the child’s welfare. Care of children can’t be transferred to just anyone. A legal guardian will be required, and if there are no other plans in place, the state will appoint one and maintain jurisdiction until the children reach adulthood. It is always possible that the guardian will not be one that the parent would choose. Planning ahead can make the process predictable and greatly reduce the stress on the children.

Do you own a home?

If you own or are buying a house, it is an asset that is part of your estate. What will happen to that house if you become incapacitated or die? It all depends on how the property is titled on the deed. If you own it alone, you can create a Will that gives the house to a partner, a spouse, or another person if you die. The Will must be probated in court, and it may take a year or more to actually transfer the property to the beneficiary. As a better option, you can create a Trust, and transfer the property into the name of the Trust. Your Trust names who will manage the property if you become incapacitated, and who will inherit the property when you die. The Trust does not need to be probated in court.

What if you own the house jointly with a partner, and you aren’t married? There are several serious problems with this strategy. What happens if one of you becomes incapacitated and you need to sell the house? A joint tenant has no right to act alone on any house issues. What happens if one of you has a tax problem, or is in an accident, and a lien is placed on the house? What is the tax bite if your partner dies and you now own the whole house? There are much better ways of holding title to property, and a little planning will avoid lots of pitfalls.

Are you covered for illness or incapacity?

I am not a medical professional, so my concern with these issues is not about your health care plan, but with the plan for care of your possessions when something happens to you. And I say “when” very seriously. As our population ages, a majority of us will, at some point, require assisted living, long-term care or hospice. What happens to your estate when you can no longer manage it? Who will pay your bills, keep up your house or sell it, make sure your finances are in order? If you have a Will, it won’t help at all. A Will is effective only when you die. If you are a single person, or partners who are unmarried or registered, you need to plan very carefully for your own protection.

A Durable Power of Attorney will provide for a personal agent of your choosing to handle financial matters for you. An Advance Health Care Directive will give your instructions to your agent for handling medical and end-of-life issues with the medical professionals who care for you. A Trust will provide the instructions for handling all of your affairs when you are incapacitated, and after you die.

I have never been able to predict the future, so good estate planning is the very best I can do to help you keep your life plans on track.

Should your home, bank accounts or other property be held in joint tenancy with your partner or other family member? Many people comment to me that they don’t need an estate planning attorney because they own all their property as Joint Tenants with Rights of Survivorship. If they die, the property will automatically belong to the other joint tenant. No need for a Will or a Trust. No need for Probate. No need for an attorney’s services. 

Unfortunately, life is rarely that simple. There are numerous pitfalls in joint tenancy: 

         *   Joint property is exposed to the liabilities of either or both owners. If one

              owner gets a judgment against him or her, the entire property may be taken         

              to satisfy that judgment. If one is a doctor, lawyer or sole proprietor of a business

              in a highly litigious field, or if one is found at fault in an accident, or if one owner

              has a tax lien placed against the property, this may be the worst way to hold title.

          *  Joint owners lose individual control over the property. For example, with real

              property, one owner has no right to act alone in selling, making improvements,

              or refinancing the property.

          *  If one joint owner becomes mentally incapacitated, the property is in legal limbo.

              The owner can no longer convey legal title or sign ownership papers. This can

              prevent property such as a home from being sold or rented. It usually requires

              the healthy owner to go through a lengthy and expensive conservatorship

              process in Probate Court.

          *  When property passes to another owner through joint tenancy, that property

              is left outright, meaning there are no strings attached. The danger is that the

              surviving owner can then leave that asset to his new partner, or anyone else he

             chooses, and the first owner’s share of the estate never makes it to his own

             heirs. The last owner to die wins everything.

         *  When the first owner doesn’t do any estate planning, usually the second owner

             doesn’t either. Although probate may be avoided at the first one’s death, it will

             not be avoided upon the second owner’s death. In the event of simultaneous

             death, all assets held in joint tenancy must go through probate since both owners

             of record are no longer living.

         *  Even if the joint tenants do have Wills or Trusts, the surviving partner will receive

             the deceased joint tenant’s interest in the property, regardless of what that

             owner’s Will or Trust says. Wills and Trusts have no control over jointly owned

             property.

          *  Finally, transferring property into joint tenancy may have tax consequences. If

              you place another person on your bank account or a deed as a joint tenant, you

              have just given that person a gift. If the value is less than your annual gift

              exemption of $14,000.00, there may be no problem. If it exceeds that figure, you

              must file a gift tax return with the IRS. You may or may not owe taxes on the gift,

              depending upon your financial situation.

 

I hope you will give the joint tenancy risks careful consideration before you try to use it as a do-it-yourself estate planning tool. For very small estates such as those having only moderate sums in a bank account and no real property, joint tenancy can work to avoid probate and smooth the transition when a joint owner passes on. For most other estates, there are various planning tools that reduce or eliminate the risks of joint tenancy, and make far more sense.

Careful estate planning and correct property titling are especially important for same-sex couples. For partners who are not married or registered as domestic partners, it is essential to maintain as much individual control over property as possible. Couples can own homes together; have joint and individual bank and investment accounts; and own other property that they share equally, without the pitfalls of joint tenancy.

Many of my clients are same-sex couples who own various assets together. Often, we find that individual Revocable Living Trusts are the best way to maintain their property and allow each partner maximum flexibility and control over their shares. Each one creates the necessary documents to control how assets will be managed if incapacity or death should occur, and this allows each partner to pass his share on to whomever he names in the Trust. Each one has a plan that covers many of the risks in life, and gives partners greater peace of mind about the future.

The bankruptcy rate for Americans over age 55 is soaring. This age group now accounts for over 20% of all bankruptcies filed. Some analysts estimate that for every older person who files a bankruptcy petition, there are two more seniors who should, because of their dire financial straits.

What’s going on?  Retirees used to be seen as financially stable, kicking back on their savings and pensions, mortgages all paid off – enjoying their golden years. But not any more. Here are some of the major reasons why so many of our older generation have hit financial hard times:

 

          *  People are living longer, making seniors a much larger percentage of the

              population than in generations past.

          *  Retirement funds are inadequate to cover the living expenses of a longer life, and

              income has gone down in recent years – hit by the recession and lack of cost of

              living increases in social security and other pensions.

           * Property taxes and the cost of gas and ordinary consumer goods keep going up.

           * Medical expenses grow rapidly as the population ages. Medicare and other

              health care insurance plans do not begin to cover all costs of medical care for

              older people.

           * Seniors often have to rely on credit cards to pay their routine bills, burying them

              in debt they will never pay off.  This group now has more credit card debt

              than younger generations – debt that was often unthinkable for seniors only

              10 or 20 years ago.

           * Late payments on credit cards and other unsecured debts result in penalties and

              a huge increase in interest rates to over 30% interest in most cases. This makes

              even modest debts spiral rapidly out of control.

But wait…aren’t retirees “judgment proof?” Why should seniors worry about their debts, when, in most cases, creditors can’t touch their pensions or their homes during their lifetimes? If social security or IRA income each month can’t be levied by a creditor, grandma or grandpa can stop stressing, right? And if a creditor puts a lien on your aging mother’s home, what does it matter to her?  She will continue to live there until she dies, and after that, the creditor will get the money from the sale of her house.

“Judgment proof” is not the best way to describe the financial situation of many older Americans. The term is commonly used to mean that creditors can’t collect money from assets that are protected – pension, IRA, or social security income – or the home you live in, while you continue to live there. But a creditor can still file a lawsuit against you, and a court might agree that you owe the money and issue a judgment against you. So technically, virtually no one is “judgment proof.”

A better term is “collection proof” – because, even if you have a judgment against you, the creditor can’t collect it from your exempt assets. So if you have debts you can’t pay after you retire, or even if there is a judgment against you, why should you care? Here are two very important reasons:

 

       *  Creditors are shameless and relentless. They never give up trying to get money

           out of you. They call, send mail, and use every means to get your attention. To

           an older person who may be in declining health, or barely able to make ends

           meet every month, the constant harassment by creditors takes a heavy      emotional and physical toll.

       *  Creditors will often get judgments against you. You must respond to the Notice

           or Summons you receive from the court. If you do not take action, the court may

           very well authorize a levy or a freeze on your bank account. The county sheriff

           in your county is responsible for carrying out the levy, by ordering your bank to

           freeze your account and/or pay the debt out of your account. Neither the sheriff

          nor the bank may know that all of the funds in your account came from pensions

          or other exempt income. Once a freeze is in place, it can take weeks or months

         to get it reversed. In the meantime, your money is out of your reach.

Creditors can ruin a retiree’s life in ways that are far worse than their effect on younger people. Seniors have few chances to go back to work to pay off debt. There is little or no prospect of their paying off their debts in their lifetime. Credit card debt, in particular, grows rapidly, as retirees pay higher interest on interest over the years. A lien on a senior’s home to pay off that inflated debt after death often means there is little or nothing left to pass on to their children or grandchildren.

For retirees caught in the clutches of creditors, bankruptcy is often a good solution.

It usually wipes out credit card, medical and other unsecured debts, and makes it possible for most people to again manage their everyday living expenses within their income. A huge relief and peace of mind make a fresh start possible for seniors.

I handle estate planning for people who have a handful of assets, tons of assets, and everything in between. Other people have serious financial problems, and I help them file bankruptcy, so they can get a fresh start. And some folks are married or registered domestic partners and need me to file for a dissolution of the relationship. Whatever your fortune or misfortune, money and other assets are usually the focus of my work. Here are some notes and suggestions that can help protect what you already have, or regain a solid footing when you need it:

• Finding Money: You or a family member may have money waiting for you.

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A new year is ahead of us, and some of these real-life questions and answers may help you make and keep resolutions that will pay off in the future:

Question:

Joanne and Marie are planning to marry in January. They know they need a marriage license from the county clerk. Is any other paperwork required before they can have their wedding ceremony?

Answer:

No other paperwork is required by the state or county, but there are several important issues that should be reviewed by the couple before they marry. When their status changes from single to married, many of their rights and responsibilities will change, too. Ownership of assets like a home, bank and investment accounts, and beneficiaries of retirement funds, insurance policies and annuities may need to change.
Read more . . .

We help lots of clients with their estate plans, crafting Wills and Trusts and other documents that are designed to protect people and their assets. A revocable living trust is often a good choice because it provides for the smooth transfer of property if the owner becomes incapacitated or dies. It usually avoids handling the estate through a probate court, which is a public process that can be very costly and time-consuming.

 

For every trust, there must be a trustee  -  the person who is authorized to manage and control all the property in the trust. In a revocable living trust, the initial trustee is usually the person who created the trust (called the grantor or settlor) – the owner of the property transfers everything into the name of the trust, and then controls it as the trustee. A great advantage of a trust over just having a Will is that a successor trustee takes over if that person becomes incapacitated or passes away, and there is no need to go to probate court to have someone appointed. The successor trustee continues to manage the property in whatever way the terms of the trust require.  

 

For single individuals, or partners who are not married or registered domestic partners, the choice for a successor trustee is usually a relative, partner or friend. These people agree to be the trustee if and when something happens. Although the estate in a trust may not need to be probated, California has strict legal requirements for the performance of trustees and the management of trust property. It is very important that a successor trustee understand the role he or she will play, and the rules that must be followed.

 

Trusts can range in value from a few thousand to many millions of dollars. As you might expect, a successor trustee’s time and effort will be proportional to the complexity of the estate. But the legal requirements are the same, regardless of the value of the estate.

Most important is the responsibility of the trustee as a fiduciary – managing the assets in the trust for the benefit of others. Heirs and beneficiaries are usually named, and the trust states how the assets of the estate will be divided up among them after all bills are paid and other requirements met. The trustee is responsible for conserving the assets, growing them, if possible, and delivering the assets to the beneficiaries.

 

Most trustees are ordinary folks who have no experience with managing estates for other people, so they usually retain an attorney to help them administer the trust. Lots of details must be handled over a period of months or years. An estate planning attorney is familiar with all of the duties spelled out in the Trust Administration sections of the California Probate Code, and can assist the trustee with all of those administrative tasks.

 

Whether the trustee has an attorney or not, it is essential to document everything that happens. Notices of the trust administration and copies of the trust document must be sent to all beneficiaries and heirs. The estate must be valued on the date of death, which may require professional appraisals of personal and real property. Liquid assets such as cash, bank accounts and money market funds must be transferred into a trust account. All valid bills, invoices and other creditor claims must be paid out of this account, along with any expenses for maintaining property or administering the estate.

 

Account statements must be kept in order and reviewed regularly to track the continuing value of the estate. Investments need to be managed to avoid or minimize any losses. If there is real property, it may need to be sold and the proceeds deposited into the trust account, or be distributed directly to beneficiaries before the trust administration is closed.

 

Once all debts have been paid, and all assets are in the form required for distribution, there is usually a final accounting. This details everything that happened to estate assets from the first valuation on the date of death to the current date. Unless they waive it in writing, all beneficiaries and heirs are entitled to an accounting at least once a year. If the trust administration continues into additional years, an interim accounting must be sent out at the end of each year, and the final accounting is done just before distributions are made.

 

If the trustee does not have an attorney, it is strongly recommended that a CPA or other accounting professional be retained to prepare the accounting and handle the filing of required personal and estate tax returns. Failure to follow tax laws can result in serious losses to estate assets and to beneficiaries and heirs. 

 

Finally, distributions are made according to the terms of the trust. The trustee will write checks on the trust account for cash bequests, and transfer other personal and real property as required. At this point, the trustee may write a check to himself or herself for serving as trustee and administrator of the estate, if the trust terms permit it. The amount will be stated in the trust, or if not, will be determined by local customary fees based on the trustee’s detailed records of hours spent and tasks performed.