ESTATE PLANNING

Published on: May 20, 2013

Why Your Estate Planning Must Include Intellectual Property

If you’re an author, musician, painter or anyone who engages in creative activity for profit, then your California estate planning should include disposition of any intellectual property rights attached to your works. While most copyrights, patents and trademarks are governed by federal law, they remain intangible personal property subject to the jurisdiction of California probate. Therefore, it’s important to understand the scope of your intellectual property rights and how they can affect the value of your estate.

Distinguishing Copyrights, Patents, Trademarks & Publicity Rights

Copyrights are the most common form of intellectual property recognized in the United States. For most works created on or after January 1, 1978, copyright exists from the moment of creation and lasts until 70 years after the author’s death. So if a person dies in 2013, any post-1978 copyrights she holds as author will not expire until 2083. It is not necessary to formally register a copyright, but doing so creates a public record that can be helpful if there is subsequent litigation. All copyrights are registered with the United States Copyright Office, a department of the Library of Congress.

Published on: May 17, 2013

Understanding the Legal Relationships in a Revocable Living Trust

by Scott C. Soady

A revocable living trust is a common estate planning device where a person, called a settlor, transfers his or her assets to a trustee, usually themselves. The settlor can amend or revoke the trust at any point during his or her lifetime. At the settlor’s death, a designated successor trustee distributes the trust’s assets as directed.

Unlike a last will and testament, which only deals with the disposition of assets after death, a living trust may operate for years, even decades, while the settlor is still alive. If another person serves as trustee during the settlor’s lifetime, there is a fiduciary relationship similar to that of an attorney and client. But what about the relationship between a trustee and the future beneficiaries of the trust? The California Supreme Court recently had to address that issue in a long-running dispute among the family of the late William Giraldin.

Can Beneficiaries Sue a Trustee for Misconduct?

Published on: May 11, 2013

Who Can Access Your Social Media Accounts After Your Death?

by Scott C. Soady

Traditionally, California estate planning addresses distribution of real and tangible personal property. But in the Internet age, intangible personal assets such as social media accounts are an essential part of many estates. Google, Facebook and Twitter may all contain personal data that you might want to dispose of in a particular manner after your death. Media companies have implemented different policies to deal with deceased users, and it’s critical to understand these protocols as part of your own “digital” estate planning.

Google

Mountain View-based Google is one of the world’s most popular online service providers. Millions of people use Google Mail, the Google + social network and the storage service Google Drive. Recently, Google announced the addition of an “Inactive Account Manager” feature that allows a user to give the company specific instructions on how to handle any personal data stored on the company’s servers.

Published on: May 10, 2013

Estate Planning Complications of Divorce

by Scott C. Soady

Divorce entails not only dividing a couple’s assets but undoing potentially complex estate planning entered into during the marriage. In the case of trusts, where asset titles are legally transferred to trustees, things can get even more complicated. That’s why it’s important to work with an experienced San Diego estate planning attorney to revise your will, trust and other documents as part of the divorce process.

A recent decision by a California Court of Appeals panel in San Jose demonstrates the problems that may arise from a divorce where the couple previously created a revocable living trust as part of their estate planning. Please note, this decision is only applicable to the parties in the case and will not be considered binding precedent in future cases. The description provided here is purely for informational purposes.

Dividing Trusts During a Divorce

Published on: April 11, 2013

U.S. Supreme Court Hears Challenge to California Same-Sex Marriage Ban

by Scott C. Soady

The political and legal debate over California’s policy towards same-sex marriage reached the Supreme Court on March 26 when the justices heard arguments in Hollingsworth v. Perry. This is the first of two cases where the Court may address the federal constitutional rules governing same-sex marriage. The Hollingsworth decision in particular may finally provide some California estate planning guidance for same-sex couples, and their families, trapped in legal limbo.

The Hollingsworth case deals with California Proposition 8, a voter initiative adopted in November 2008 amending the state constitution to define a marriage between and a man and a woman as legally valid. This overturned a May 2008 by the California Supreme Court declaring a statutory ban on same-sex marriage unconstitutional. After Proposition 8 passed, opponents filed a federal lawsuit seeking its invalidation under the “due process” and “equal protection” clauses of the Fourteenth Amendment to the United States Constitution.

The San Francisco-based Ninth Circuit U.S. Court of Appeals agreed with Proposition 8 opponents that limiting marriage to opposite-sex couples violated the federal Constitution. However, the appeals court stayed its decision pending a final decision from the Supreme Court, meaning no same-sex marriages may be performed until and unless the justices affirm the Ninth Circuit’s order. The Supreme Court is expected to issue its decision in Hollingsworth sometime in late June.

Published on: April 10, 2013

The Basics of Tax-Exempt Charitable Organizations

by Scott C. Soady

Charitable giving is a common part of estate planning. In addition to supporting organizations you deem worthwhile, charitable gifts can reduce the taxable value of your estate. Just as charitable gifts are deductible from personal income taxes while you’re alive, similar gifts made after death are deductible from the gross estate subject to federal gift and estate taxes.

The important thing to remember is not all charitable donations qualify as tax-deductible. The Internal Revenue Code recognizes 28 different types of “nonprofit” organizations that do not have to pay any income taxes. Only one of these classifications-known as a 501(c)(3)-

is considered “charitable” whereby a donor may deduct contributions from his or her taxable income or estate.

Published on: April 8, 2013

The Basics of the Federal Estate Tax

by Scott C. Soady

The estate tax-also known as the “death tax”-is often misunderstood. Despite its prominent place in the political debate over tax policies, the estate tax only affects a small number of estates each year. According to Internal Revenue Service records, there were 4,588 estate tax returns filed nationwide in 2011, including 806 estates in California. That represents an infinitesimal fraction of the estimated 233,000 annual deaths in the state.

Nonetheless, it’s still useful to understand when and how the estate tax applies. Unlike the federal income tax we’re all familiar with, the estate tax is a levy against the property of a deceased individual. The assessment is based on the gross estate of the decedent’s property as of the day of his or her death. (If the decedent’s property earned any income after death, a separate income tax return must be filed by the estate.) The executor or personal representative of the decedent’s estate is responsible for assessing the date-of-death value of all property and, if necessary, reporting it on the federal estate tax return.

Probate Estate vs. Gross Estate

Published on: April 5, 2013

Estate Planning When Your Spouse Is Not a U.S. Citizen

by Scott C. Soady

Spouses receive a special exemption under federal estate tax law known as the marital deduction. When the first spouse dies, any portion of his or her estate that passes to the surviving spouse is not subject to estate tax. No tax is assessed until the second spouse dies.

The marital deduction does not apply, however, when the surviving spouse is not a U.S. citizen. Any property left to a non-citizen spouse is subject to the estate tax. For estates of persons who die in 2013, that’s a maximum tax rate of 40% on gross assets exceeding $5.25 million.

If either or both spouses are non-citizens, there are two options to avoid estate taxes upon the first spouse’s death. The non-citizen spouse can obtain U.S. citizenship, making him or her eligible for the marital deduction. Alternatively, the spouse that plans to leave property to a non-citizen spouse may create a qualified domestic trust (or QDOT) as part of his or her estate plan. If both citizens are non-spouses residing in the United States, each spouse may create a QDOT for the benefit of the other.

Published on: March 29, 2013

How a Life Estate Can Help (or Hurt) Your Estate Planning

by Scott C. Soady

In addition to a Last Will and Testament or Living Trust, an often overlooked estate planning tool is the life estate. A life estate is like a trust except that it’s created by executing a deed giving a person the right to use a particular piece of land for life. After that person’s death, ownership automatically reverts to one or more remaindermen, the heirs specified in the life estate.

As an example, let’s say you own your house and wish to leave it to your only daughter upon your death. You might create a life estate entitling you to continue living in the house until your death, at which point your daughter inherits as remainderman. Unlike leaving the house to your daughter through a Last Will and Testament, under a life estate the property never passes into probate, because your ownership terminates at the moment of your death. In this respect a life estate functions much like a trust-property passes to your designated heirs outside of probate.

As the holder of a life estate, you would continue to exercise full ownership of the house during your lifetime. In theory you could even sell the house, provided the buyer surrenders the property to your daughter upon your death. And just like a tenant of a rental property, you also cannot take any action that might devalue the property or prevent the remaindermen from later enjoying full use of the property.

Published on: March 28, 2013

How Should I Amend My Will?

by Scott C. Soady

A last will and testament is not carved into stone. As you experience major life events, you will likely need to revise or update your will many times. If you get married, you’ll want to name your spouse as an executor or beneficiary. Conversely, if you get divorced (or you outlive your spouse) you may want to remove your former spouse from your will. You may have additional children after you sign your will or come into a specific item of property–even a business–that you wish to leave to a specific person not mentioned in your original will. All of these cases require a means of changing your existing will to reflect new circumstances.

The traditional method for amending a will is a codicil. This is a written amendment executed in much the same form as the original will. For instance, the “First Codicil to the Last Will and Testament of Mary Smith” might delete a specific bequest to a sister whom Mary is no longer on speaking terms with. Mary would sign a codicil noting the deletion while reaffirming all other provisions of her original will. And like the will, Mary must sign the codicil in the presence of two witnesses who can attest she has the capacity to execute such a document. The will and the codicil then effectively become one document.

In theory, Mary could execute as many codicils as she wanted, changing the terms of her will every year or even every month. But she can just as easily skip the codicil and sign a new will.