ESTATE PLANNING

Published on: June 25, 2016

What Happens if the Beneficiaries Named in My Will Die Before I Do?

When making a last will and testament, you may assume that the beneficiaries you name will outlive you. Of course, that is not always the case. So what happens, for example, if you leave your brother $10,000 in your will and he dies before you?

The Anti-Lapse Statute

Like many states, California has what is known as an “anti-lapse” statute. Under California’s version, if a named beneficiary is dead at the time a will is probated, the “issue of the deceased transferee” may inherit the gift in his place. So, to apply the anti-lapse statute to the above hypothetical, your brother’s children would receive the $10,000 gift you left him in your will.

Published on: June 24, 2016

Using Your Bank Account to Avoid Probate

by Scott C. Soady

Estate planning can seem like an unnecessarily complicated process. But there are ways to simplify matters. After all, the whole point of estate planning is to facilitate the transfer of assets from the deceased person to the chosen beneficiaries—and this does not always require a will or formal trust document.

Totten Trust vs. Payable-on-Death Account

In the early 20th century, courts began to recognize something known as a “Totten trust.” Also called a “bank account trust” or sometimes a “poor man’s trust,” a Totten trust is nothing more than a bank account opened by a depositor in his or her own name as trustee for a beneficiary. The depositor is free to withdraw funds or even close the account during his or her lifetime. Any funds remaining in the account at the time of the depositor’s death are then paid over to the beneficiary.

Published on: June 19, 2016

Who Pays for a Lawsuit Contesting My Trust?

by Scott C. Soady

When you create a trust as part of your estate plan, the trustee is obligated by California law to be “impartial” with any beneficiaries you name. In other words, if you specify the trust assets should be divided equally among your children after your death, your trustee cannot favor one child over another. This requirement of impartiality is especially important if your trustee is also a beneficiary. You do not want the beneficiary-trustee misusing trust assets to benefit themselves at the expense of the other beneficiaries.

One consequence of this impartiality rule is that when someone challenges or contests your trust, the trustee may normally not use trust assets to defend against such a challenge unless it touches upon the validity or assets of the trust itself. So if someone files a lawsuit claiming they are a rightful beneficiary of the trust—or someone else is not a rightful beneficiary—the trustee should not get involved. Of course, California law only establishes a default position. In making a trust, you are free to instruct the trustee to defend against any and all lawsuits at the trust’s expense.

Daughter Contests No-Contest Clause in Mother’s Trust

Published on: June 8, 2016

How Creditor Claims Can Affect Your Estate

by Scott C. Soady

Estate planning is not just about taking care of your family. It is also about taking care of your creditors. Your death does not magically make your debts disappear. The personal representative of your estate has a legal obligation to pay your valid debts from the assets in your probate estate before distributing the remainder to your heirs or the beneficiaries named in your will.

Death of NBA Team Co-Owner Raises Creditor Concerns Over Potential Sale

Creditor claims can significantly complicate the administration of a probate estate. An ongoing high-profile probate case in Oklahoma offers a useful illustration. In March of this year, Aubrey McLendon, a well-known natural gas company executive, died in a single-car crash. Among his many assets, McLendon owned approximately 20% of the NBA’s Oklahoma City Thunder franchise. McLendon was part of a group that purchased and relocated the former Seattle Sonics to Oklahoma City in 2008.

Published on: June 7, 2016

What Happens When a Family Member Compromises My Estate Plan?

by Scott C. Soady

Selecting a personal representative or executor for your estate is often the most important estate planning decision you will make. In most cases a spouse or family member is named as executor. But there may be situations in which you may wish to consider someone from outside the family, such as a professional fiduciary, to oversee the distribution of your assets after your death.

Daughter Ordered to Return Funds Illegally Diverted from Father’s Estate

For example, there may be times when you do not trust a family member to deal honestly and equitably with other family members. A recent case from here in California offers a useful illustration. This case involves an estate asset that was located nearly 20 years after the estate was opened. The deceased was a man with three children. He did not name any of the children as executor, but rather appointed an outside person to the role.

Published on: June 4, 2016

Can My Ex-Spouse Claim My Estate After I Die?

by Scott C. Soady

Divorce often alters a person’s estate planning priorities. After all, if you previously signed a will leaving your entire estate to your spouse, you probably want to reconsider that arrangement after your divorce becomes final. California law assumes that any gift you make to an ex-spouse under a pre-divorce will is revoked unless you expressly state otherwise. This assumes that the divorce itself becomes final before one of the spouses dies.

Court Fines Man $15,000 for Trying to Void Divorce After Ex-Wife’s Death

In a recent case, a California appeals court sanctioned a man who attempted to declare his earlier divorce void so that he could inherit from his deceased ex-wife’s estate. According to court records, the couple legally separated in 2009. In November 2010, following extended mediation, the parties filed a stipulated judgment—a divorce settlement—with a California Superior Court judge. A copy of the judgment signed by both spouses and stamped with the judge’s signature was then filed with the court clerk’s office.

Published on: June 3, 2016

Can I Limit the Scope of a Power of Attorney?

by Scott C. Soady

A power of attorney names someone to act as your agent. The agent may only take those actions expressly provided for in the power of attorney. For instance, you might sign a power of attorney authorizing your agent to sell your house. This does not mean the agent can also access your brokerage accounts or amend your will. You have the right to limit the powers that your agent may exercise on your behalf.

Marriage Alone Does Not Create a Power of Attorney

California courts are required to strictly apply the terms of a power of attorney. A recent case decided by a state appeals court in Santa Ana helps illustrate this point. This case sadly involves a man who died while under the care of a hospital. The widow sued the hospital for negligence and wrongful death. The hospital then moved to force the widow to submit her case to binding arbitration.

Published on: May 29, 2016

How and When to Create a Spendthrift Trust

by Scott C. Soady

Parents often want to leave an inheritance for their children. But what if your children are not the most financially responsible people? A trust can provide a flexible means for managing your money after your death so that a “wild child” won’t squander your life’s work.

It is common for a will or living trust to contain special provisions for children. Such a children’s trust leaves your estate to a trustee, who can then make distributions to your children for their health, education and maintenance, while reserving outright distributions until they reach a specified age, such as 21 or 25. But if your children are already adults at the time you are making an estate plan, you might consider a living trust with what is usually known as a “spendthrift” clause.

Basically, a spendthrift trust is where one person is named as beneficiary and another serves as the trustee. It is up to the trustee to make sure the beneficiary does not simply squander the principal assets in the trust. You can establish the spendthrift trust to give the trustee specific instructions and authority. For example, you might direct the trustee to give the beneficiary a fixed amount of income from the trust or each month. Or you might limit it further, saying the trustee will only make payments for the beneficiary’s rent or education. You may even allow the trustee to cut off the beneficiary entirely and redirect the trust’s principal to an alternate beneficiary.

Published on: May 28, 2016

Taxi Medallion Sale Highlights Importance of Making a Will

by Scott C. Soady

It is always a good idea to make a will. Although the law of intestacy provides for the distribution of your assets if you die without leaving a will, making a will (or trust) allows you to decide who should inherit from your estate. This can be especially important if you are married but have children from a prior marriage. In California, the law of community property can result in those children receiving little or nothing if you fail to leave a will.

Stewart-Williams v. Williams

Here is a recent example from a California Court of Appeal decision. This should not be construed as legal advice or a complete statement of California law on this subject. This is merely a case illustrating how the probate courts deal with community property of a deceased individual who does not have a will.

Published on: May 27, 2016

Can I Transfer Ownership of My Stocks Without a Will?

by Scott C. Soady

While real estate and cash are the first assets you might think about in connection with estate planning, you should not neglect your stock portfolio. According to a 2015 Gallup poll, approximately 55% of Americans have money invested in the stock market. The law in California and many other states offers a process for transferring your stock without having to go through a formal probate process.

What is a TOD Registration?

Although stock offerings are regulated by the federal government through the U.S. Securities and Exchange Commission, the actual registration of stock ownership is handled under state law. And just about every state has adopted the Uniform TOD Security Registration Act. The “TOD” stands for “transfer on death.”