ESTATE PLANNING

Published on: August 15, 2009

New Rules in 2010 Concerning “No Contest” Clauses

Many wills and trusts include language to deter future disputes or contests over the provisions of the will or trust. These “no contest” clauses typically provide that if someone challenges the validity of a will or trust, they take nothing under the instrument.

As an example, suppose a parent has two daughters and creates a trust leaving her estate equally to her two children. Just before her death, she changes her trust to leave the bulk of her estate to the younger dauhter with whom she lives. If the trust contains a “no contest” clause, the daughter who wants to challenge the validity of the trust as amended, faces a court holding that her objection constitutes a “contest” and therefore, the objecting child takes nothing under the trust.

Beginning in 2010, Probate Code Sections 21300-21322 will be repealed. New Probate Code Section 21310(6) will define a “contest” as one that alleges the validity of an instrument based on either (1) forgery, (2) lack of capacity (3) fraud, duress, or undue influence (4) revocation or (5) disqualification of a beneficiary under Probate Code Sections 6112 or 21350 (care custodians, drafters, etc.)

Published on: August 14, 2009

California Budget Crisis Affects San Diego Courts

by Scott C. Soady

San Diego County as you may know has a number of superior courts available to its residents. At Law Office of Scott C. Soady, A Professional Corporation we file our will and trust matters either in the downtown branch of the Probate Court located at 1409 Fourth Avenue or at the North County branch in Vista.

The State has recently announced that it will close all state courts one day per month through the remainder of this fiscal year. The San Diego Superior Courts will be closed to the public on the third Wednesday of each month through June 2010. The closures will begin on Wednesday, September 16, 2009. If you had a matter scheduled for one of these dates, the court will reschedule your matter to another date. It remains to be seen whether court employees will be furloughed one day a montn to further cut expenses. San Diego has the second largest superior court bench with 130 judges and 24 magistrates.

While many businesses and corporations and state and county employees have been asked to take a furlough, Law Office of Scott C. Soady, A Professional Corporation is still open Monday through Friday from 8 am to 5 pm to address your estate planning needs. Our estate planning attorneys practice in the areas of trust administration, probate, wills, trusts, conservatorships, guardianships, will and trust litigation, special needs trusts, charitable trusts and other areas. Feel free to call us for a complimentary and confidential consultation about your estate planning matter.

Published on: August 10, 2009

Revocable Living Trusts in This Economy

by Scott C. Soady

Most people agree we are in the middle of an economic recession in this country. Unemployment is high and the stock market is like a roller coaster. How does the recession affect your need for a trust or affect your exisiting trust you already have?

If you do not have a trust and have assets of over $100,000, you do need a revocable living trust even in this economy, and some people would say, even more so. If you have real property out of state, a trust will avoid probate in both California and the state where the property is located. Many people have young children and need a trust with guardians set up in case something happens to them. Death is inevitable, recession or not, but a trust will enable your estate to be distributed faster and less costly than with a will or with no estate plan at all.

If you already have a trust, the recession may also affect you. In a recession, some investors try to recession-proof their portfolios by switching their IRAs, 401(ks) or other investments into different funds or CDs. Have you remembered to always title new investments in the name of your trust and made up to date beneficiary designations? Changing accounts, sales of real property, refinancing, etc. all increase in times of rescession, leaving open the possibility that assets are not properly titled in the name of the trust.

Published on: August 7, 2009

Planning for Long-Term Health Care

by Scott C. Soady

We applaud clients that have had the foresight to get an estate plan in place, before they need it. It makes it much easier on your family if you have taken the time to prepare an estate plan ( a will or a trust), specifically setting forth who you want to inherit your estate, who you want to pay your final bills and distribute your estate, how you want your personal effects divided, etc. Sometimes however, doing estate planning can be just the beginning of your planning. Some people discover that on down the road they also need financial planning, long-term health care planning, or Medi-Cal planning.

Especially long term planning and Medi-Cal planning are subjects that most people know little about. You may have questions about how to pay for long-term care? How do I know if I need it? Can I plan now for the possibility I will need it in the future?

AARP (American Association of Retired Peersons has a great article tthat discusses some of these issues. According to AARP, about 60% of people over the age of 65 will require some type of long-term care during their lifetime. There are many choices for long-term care from having your family members care for you to long-term health insurance and Medi-Cal. Sometimes you need a combination of services.

Published on: August 3, 2009

Adding Your Children on Title Can Create More Problems Than It Solves

by Scott C. Soady

Some clients think that a good way to avoid probate is to put their adult children on the title to their home. While it is true that putting your child on the deed to your home will avoid probate, it can create all kinds of headaches not anticipated or desired. Here are some reasons:

1. Creditors of your child or the IRS (to enforce a tax lien) can go after the property that you hold jointly with your child and try to force a sale against your wishes.

2. If your child files for bankruptcy, the court could determine that the property should be part of the bankruptcy proceeding and creditors may seek to have it sold.

Published on: July 31, 2009

Avoiding Probate

by Scott C. Soady

Aa you have learned from the recent series of blogs on probate, if you can avoid a probate after your death, your heirs will have an easier time settling your estate.

The best way to avoid probate is to have a revocable living trust into which you transfer all of your assets to yourself as the trustee during your lifetime. Upon your death, the successor trustee you have chosen will have immediate authority to administer your trust without a probate. It is critical however that you in fact transfer your assets into your trust by deed, changing title to accounts, etc. Other advantages of a trust are privacy and that if properly drafted, the trust will also have provisions for someone to manage your assets if you become unable to do that for yourself.

Other ways to hold title to avoid probate are:

Published on: July 11, 2009

Guardianship Issues Brought To Light By the Michael Jackson Case

by Scott C. Soady

The San Diego Probate Courts hear many guardianship cases each week, in the North County Branch or the downtown branch.

A probate guardianship is the appointment by the Court of an adult or adults who will have legal guardianship over a minor child. There are two types of guardianships: (1) guardianship of the person and (2) guardianship of the estate. A child’s guardian will be legally accountable for taking care of the child’s education, shelter, food, clothing, and health care. This is a huge responsibility which lasts until the child is 18. A guardian of a minor’s estate is responsible for handling the assets of the minor.

The Michael Jackson case has caused many people to ask why the Los Angeles Probate Court is involved in determining who should be the guardians of his three children. After all Jackson did nominate his mother Katherine Jackson as the guardian of his children and that is the point of having an estate plan that incorporates a nomination of guardian(s) for minor children. However some people may not realize that the individual you name in your will or trust is just a nomination; it is not etched in concrete. The nomination sets worth your wishes but if other individuals want to file for guardianship, it will be a probate judge who will determine whether your wishes are in the best interest of the children. Hence the Court in the Jackson matter will have to weigh the interests of the children together with the wishes of Michael Jackson and the qualifications of both Katherine Jackson and the biological mom, Debbie Rowe.

Published on: June 29, 2009

Settling Michael Jackson’s Estate Could Be a Real Life “Thriller”

by Scott C. Soady

Newspapers and magazines are already commenting that Michael Jackson’s estate will be a real nightmare. No one seems to know at this point whether Jackson had a will or a trust. Some people think there is no way he would have failed to provide for his children. In the absence of a will or a trust, his children would inherit the estate equally.

Whether Jackson created an estate plan or not, his estate will have to be settled, either in the probate court, or through trust administration. There are many creditors already lining up to be included. Although Jackson sold millions of records, he reportedly was in serious debt, perhaps as much as $400 million.

One of the assets in his estate that is going to be fascinating is the publishing rights Jackson had to millions of songs. Jackson outbid Sir Paul McCartney for a 50% interest in a music publishing catalog that includes rights to the Beatles hits as well as publishing rights to other hits by major artists, Jackson apparently paid $48 million for the rights, now estimated to be worth $500 million.

Published on: June 27, 2009

Challenging Wills or Trusts

by Scott C. Soady

Part of our estate planning caseload at Law Office of Scott C. Soady, A Professional Corporation are cases in which a will or a trust is being questioned or challenged. Typical factual scenarios are where an heir or a beneficiary has been disinherited or their share reduced because of “death bed” changes which may have resulted from undue influence, fraud, or duress. Most wills or trusts contain a clause known as a “no contest clause.” “No contest” clauses are commonly found in wills and trusts to discourage someone from challenging the will or trust. Typically, the language is that if anyone contests the will or trust, that individual will take nothing.

Existing law however, allows a beneficiary or other individual to file a petition with the court (called a Safe Harbor petition) asking the court to determine whether a particular challenge fits within the definition of a “contest.” If the court rules that it doesn’t constitute a contest, then the will or trust can be challenged in spite of the “no contest” clause.

Last Year the California legislature passed a bill which was signed by Governor Schwarzenegger that will change the law regarding “no contest” clauses. Under the new law which will take effect in January 2010, the applicability of the “no contest” clauses will be limited to specific circumstances. The new law will eliminate Safe Harbor petitions and will also provide that a “no contest” clause will only be enforceable to defeat a will or a trust contest if brought without probable cause.

Published on: June 24, 2009

Estate Planning is One Step in Financial Health

by Scott C. Soady

What is financial Health? Financial health is the state of your finances. If you have good financial health, you are managing your assets, paying your debts, and saving for retirement. You also are planning for your spouse and children should something happen to you. CNN Money.com. has a nine step approach to test your financial health to see if you are on track to reach your retirement goals despite this economy. The nine steps have to do with saving for retirement, diversifying your investments, staying out of debt, maintaining an emergency fund, etc. Several of the steps involve estate planning.

The fifth step for example asks whether your estate plan is in order. Do you have a document to designate a guardian for your minor children? Have you named beneficiaries for your 401(k)s, IRAs, and insurance policies, and are they up to date? Do you have a durable power of attorney for health care? Have you set up a trust so that your children will not receive an inheritance upon turning 18? These are all important issues that are part of being financially healthy.

The seventh step asks whether you have or will be receiving an inheritance. This is important because inheriting from your parents or others can affect your own estate and require the drafting of a different kind of trust than the one you have. Inheriting a retirement account such as a 401(k) or an IRA can be tricky so you should seek professional advice if you are the beneficiary of one of these. Tax concerns may be another area that should be addressed.