ESTATE PLANNING

Published on: December 22, 2008

Season’s Greetings to All from the Law Office of Scott C. Soady

We, at Law Office of Scott C. Soady, A Professional Corporation extend to all of you, our clients, friends, and visitors to our web site, our best wishes for a wonderful and joyous holiday season and a happy and prosperous New Year.

Thank you to all our past and present clients for your patronage. We look forward to assisting you, as well as our new clients, in achieving your legal goals and objectives in the New Year. We hope you continue to enjoy this estate planning blog and our articles about various topics in estate planning and family law.

Again, Happy Holidays from all of us!

Published on: December 18, 2008

Business Succession Planning- Estate Planning for Your Business

by Scott C. Soady

Whether yours is a small business or a larger closely held corporation, have you thought about what will happen to it when you have passed away? Many people work years to build up a successful business or practice. Sometimes the family business is the most valuable asset in an estate. Business succession planning is a critical part of an estate plan for someone with a business.

If the business is to stay in the family, you need to decide which family member or members are going to own it and who is going to run it. If you have no family members capable of running the business, is it to be sold to a stranger or run by a non family member with the family retaining ownership? These are all decisions you need to make before it is too late to plan. Some business owners don’t plan ahead because they don’t want to give up control or they want to avoid family conflicts.

If you don’t plan for the succession of your business however and you become disabled, it is too late to decide who steps in and runs your business. You need a business succession plan in place before you become incapacitated. This may include buy-sell agreements or other methods to buy out a partner or shareholder or it could include LLC corporations or LLP partnerships. It may involve transferring some ownership or control to children or other family members before you retire. Income tax or estate tax issues may be other considerations. Read the full article about the points to consider in business succession planning.

Published on: December 15, 2008

Where Do Trusts Come From?

by Scott C. Soady

Many people in San Diego make revocable living trusts the primary feature of their estate plan. You may wonder where the idea of a trust came from. Trusts haven’t just been popular in the last century. Trusts are quite old. Plato back in 400 B.C. used a trust to finance his university in Greece. The Romans also used trusts. In England they were popular beginning in the 11th century in order to protect property from abusive noblemen and the King. A trust was used to vest title to real property in a trustee who would then give it to the wife, son, or daughter upon the husband’s death. Without such a trust, the property would go the lord or the King leaving the family poor and with no land to earn a living.

Trusts came to this country with the colonists. One of the first trusts was that of Governor Robert Morris of the Virginia colony. The trust was drafted in 1765 by Patrick Henry. Thereafter, William Bingham, a Senator from Pennsylvania, said to be the richest American when the colonies gained their independence, created a trust for his vast fortune.

Trusts are popular today as a way of avoiding not the King, but probate. With a living trust, you can avoid the cost of probate, the time of probate, and the lack of privacy of probate. You also can save on estate taxes if you have a sizeable estate by having the appropriate type of trust. If you are thinking about creating an estate plan, consult the experienced estate planning lawyers at Law Office of Scott C. Soady, A Professional Corporation to determine if a trust is right for you. The initial consultation is always free.

Published on: December 11, 2008

Inheritances Shrinking in This Century

by Scott C. Soady

Several years ago researchers felt that by mid century there would be a big inheritance boom, somewhere between 41 trillion and 136 trillion dollars handed down from parents to children. Now things are different and not solely because of the economy. Here are some reasons why you may receive a smaller than expected inheritance:

1. Your parents are spending it all. Not intentionally maybe, but with the high cost of living, medical care, and long term care, their nest eggs may not be what they used to be. Nursing home costs can run as high as $60,000 a year or higher in some areas and long term health care may be too expensive.

2. Seniors are living longer. The National Center for Health Statistics said in 2004 that males who are 65 could live to be 82, females to 85. As seniors live longer, they consume more of their wealth.

Published on: December 8, 2008

San Diego Conservatorships – Not Always the Only Alternative

by Scott C. Soady

The San Diego County Courts hear many cases where a conservatorship is sought of an individual’s estate or person. When an individual cannot take care of his or her financial or personal affairs, it may be necessary to have the probate court appoint a conservator of the estate or of the person. A conservator of the estate is responsible for handling the finances of the conservatee. The individual appointed has broad powers to manage assets, write checks, make investments, etc. A conservator of the person is an individual appointed to make decisions about the conservatee’s personal needs such as health care, residence, food, clothing, etc.

A conservatorship can be an expensive process and may not always be necessary. Before the court appoints a conservator for an individual, it must be shown that no other alternatives are available to the proposed conservatee. These alternatives are durable powers of attorney, trusts, or the voluntary acceptance of assistance.

1. A power of attorney is a written document whereby one person (the principal) appoints another ( the agent) to act on his behalf upon incapacity. Powers of attorney for finances and for health care may provide a viable alternative to a conservatorship.

Published on: December 5, 2008

New Law in 2009 Will Protect Pet Trusts

by Scott C. Soady

This summer Governor Schwarzenegger signed a bill which will protect pet trusts. The bill (SB 685) makes pet trusts enforceable. The bill was supported by the SPCA (Society for the Prevention of Cruelty to Animals) which estimates that over half of American families have at least one pet. The bill removes the discretion of the trustee in carrying out the trust and allows the court to appoint a caregiver if the trustee doesn’t want to act. The bill actually repeals a section of the Probate Code ( Section 15212) which made pet trusts honorary and not enforceable by law.

You may ask what types of pets are affected by this bill? The new legislation provides that for purposes of this code section, an “animal” means a domestic or pet animal for the benefit of which a trust has been established. Cats, dogs, birds, and horses would be covered. If an owner wanted to establish a trust for some other domestic pet such as a python snake (which can live 40 years) or a pot bellied pig, presumably they would be covered also. It is hoped that the new law which goes into effect in January 2009 will reduce the burden on pet shelters, protect defenseless animals, and guarantee that the wishes of pet owners are carried out.

To incorporate pet trust provisions into your estate plan, call us or e mail us at Law Office of Scott C. Soady, A Professional Corporation to schedule a complimentary consultation. We can also amend existing trusts or create a revocable living trust with “pet” provisions.

Published on: December 2, 2008

Minors Should Not Be Beneficiaries of Life Insurance Policies

by Scott C. Soady

A big mistake some people make is to name their minor children the beneficiary of a life insurance policy or other account with a beneficiary designation. If you die and your children are not 18, the minor won’t have the authority to take control of the proceeds. The probate court will have to appoint someone as a guardian of the estate. (This is different from the guardian of the person who is the individual who physically cares for the child.) Setting up a guardianship of the estate will take time and money and probably require the services of an attorney. The Court will apppoint an adult to take over the management and control of the minor’s inheritance until the minor becomes an adult. The Court has no authority however to spread the inheritance out over a number of years so this may result in a child receiving substantial money at an earlier age than the parents may have wanted.

If you have minor children and want to make them beneficiaries of life insurance policies, you should have a revocable living trust set up and make the trust the beneficiary of the proceeds. With a trust, the insurance company can transfer the proceeds directly into a trust account to be distributed to your minor children according to the terms of your trust. In this way you can insure that your minor beneficiaries will not have to have a guardian of the estate appointed and you can spread the distributions out over whatever intervals you want.

Also review your life insurance designations every few years to be sure you have the primary and secondary beneficiaries up to date. Changed circumstances in your life such as marriage, divorce, deaths, etc. may require that you make a change in beneficiaries.

Published on: November 30, 2008

Gifting Before Year End

by Scott C. Soady

If you have substantial assets, you may want to consider making a gift before the end of the year. The annual gift exclusion does not carry over into the next year, so you will lose your annual exclusion if you don’t use it before the end of 2008.

In 2008 you can make gifts up to $12,000 per person to as many people as you want with no gift tax. A single person could make a $12,000 gift to as many individuals as he or she wants. A married couple together could give $24,000 to any one individual. So for example, a married couple could each give gifts of $12,000 to their 3 children ($72,000 in total) or to their 2 grandchildren ($48,000 total), etc. You can give cash, stocks, bonds, real property, partnership interests; just make sure the gift is of a “present interest”, i.e. one they can use now as opposed to sometime in the future.

In addition to the annual gift tax exclusion, you can make tax-free gifts by paying the tuition and medical expenses for relatives or even friends. Gifts such as these have no monetary limitation. Send the money for tuition directly to the school. Payments for books or room and board do not qualify nor does giving the money directly to the student to pass on to the school.

Published on: November 27, 2008

Avoiding Will and Trust Litigation

by Scott C. Soady

The San Diego Probate Court has many cases involving will and trust litigation. Wills and trusts can become the subject of litigation even when prepared by an experienced estate planning attorney. Issues which can become the subject of a will contest or trust litigation can be issues relating to the successor trustee or executor, codicils or amendments, the distribution provisions, or the management of the estate assets.

Here are some red flags which tend to trigger litigation that should be addressed at the time you draft your will or trust:

1. An “unnatural” disposition of an estate. Clients obviously have the right to leave their assets to anyone they wish however an unusual or unnatural disposition is more likely to be challenged. A “natural” disposition would be leaving your estate to your wife and then to your children. What is not “natural” is disinheriting a child, leaving substantial assets to a non-family member or to someone who has provided care to you, or leaving your entire estate to a new spouse, charity, or a pet to the exclusion of other heirs.

Published on: November 24, 2008

Could You be the Victim of Identity Theft?

by Scott C. Soady

The holiday season in San Diego has many people going to the local malls and retail stores. Identity theft is on the rise and occurs more frequently over the holidays. Identity theft occurs when someone uses your name, social security number or other personal information to commit fraud. It is estimated by the Federal Trade Commission that as many as 9 million Americans have their identity stolen each year. The San Diego based Identity Theft Resource Center estimates 15 million Americans have their identity stolen each year and California is one of the top states for identity theft. Identity theft is committed in a variety of ways such as stealing your purse or wallet, going through your trash, phishing, skimming, or using false pretenses to obtain your personal information.

Here are some signs that you might be at risk to have your identity stolen:

1. You carry your social security card in your purse or wallet.