Articles Posted in ESTATE PLANNING

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A last will and testament allows you to specify the persons (or other entities, like charities) who will inherit your property after your death. If you fail to leave a valid will, California law provides for automatic inheritance by your heirs. But what happens if you do not have any heirs, or such heirs cannot be found after your death? In such situations, the State of California may claim—or escheat— your property for itself.

California Holds Billions in Unclaimed Assets

This is not just an issue that affects the estates of deceased individuals. All states have “unclaimed property” laws that allow government officials to seize private property if the rightful owner cannot be located for a certain period of time. In California that period is three years. So if you opened a checking account 10 years ago and have made no deposits or withdrawals since then, and had no contact with the bank, the state may seize the account as unclaimed property.

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When you create a revocable living trust as part of your estate plan, it is typical to name yourself as the initial trustee. This allows you to retain maximum control over the trust assets during your lifetime. But there may come a time when you are no longer physically or mentally capable of administering the trust yourself. This is why your trust should always contain a disability clause that provides a clear method for determining when and how you may be removed in favor of a successor trustee.

Father’s “Disability Panel” Conflicts With New Wife

A disability clause may be especially helpful in cases where the person making the trust is under the undue influence of someone else. A recent case from here in San Diego offers a useful illustration of this point. This case involves a still-living man who created a trust in 1998, which he revised in 2008. Under the 2008 revision, the man appointed his three children and one of their spouses as a “disability panel” to make a “final, binding, and controlling” determination should he become disabled and unable to continue as trustee. If and when the disability panel made such a finding, one of the man’s sons would take over as successor trustee.

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If you plan to leave money or other assets to a minor as part of your estate plan, you need to consider how such a gift will be administered. Minors—that is, anyone under the age of 18—generally cannot manage their own funds. Under California probate law, a court may appoint a guardian for the minor’s estate, which may include a gift left to him or her under someone else’s estate plan. But there are other alternatives to consider.

The California Uniform Transfer to Minors Act

Let us say you want to leave your niece, who is currently six years old, a gift of $10,000 in your will. Assuming you die before she turns 18, your will can specify this gift will be made to her father (your brother) under the California Uniform Transfer to Minors Act (CUTMA). This is a law that basically allows you to make a gift to a minor through an adult “custodian.” So in this scenario, your estate would give the $10,000 gift to your brother, who would serve as custodian of the funds for your niece. The custodian is largely free to invest and manage the money as he sees fit, provided he must turn whatever funds there are to the minor when she reaches the age of 18.

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Many couples sign a prenuptial (or antenuptial) agreement prior to marriage, which specifies the rights of each partner in the event of divorce or death. It is important to treat such agreements as part of your estate planning, as in many cases a prenup may amend or override a spouse’s potential inheritance rights under California law. Once the other partner has died, it is generally too late for the surviving spouse to do anything about it.

Court Finds Wife Waived Community Property, Inheritance Rights

Here is a recent example from a case in Merced County, California. This litigation involves a dispute between the wife of a deceased husband and her stepson (his child from a prior marriage). The husband and wife married in 1990. The day before their wedding the couple signed an antenuptial agreement drafted by the wife’s attorney.

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In California, like all states, a probate court may appoint a conservator to act on behalf of a people who are unable to care for themselves or their property. Once appointed, a conservator has broad power to provide for the “care, custody, control, and education” of the person under the conservatorship (the conservatee). But the California legislature recently clarified the conservator’s powers, and the conservatee’s rights, in one important area.

Legislature Clarifies Right to Visitation

The legislature was concerned that conservators may try to cut off a conservatee’s access to family or other loved ones. In a report, a California Assembly committee noted that as “divorce and remarriage become more prevalent in today’s society, there is a greater possibility of conflicts between a second spouse and children from a first marriage.” In such cases, a second spouse who is named conservator of the other spouse may ban the children from visiting or communicating with their parent.

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A good estate plan should provide clear directions regarding the disposition of your property after your death. If your estate plan includes a trust, it is important to transfer title to any any assets you wish to place in the trust. Even if you have a trust, you still need a properly executed will to ensure there are no “loose ends” when it comes to administering your estate.

Sons Fight Over Ownership of Deceased Father’s Property

Here is an illustration from a recent California case of what can happen if an estate plan is not completely in order. In 2001, a man with three adult sons created a living trust as part of his estate plan. He simultaneously signed a deed transferring a parcel of real property in Long Beach into the trust. The subsequently signed an amended trust in 2006 together with a will.

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If someone promises to include you in a will or estate plan, and do not for whatever reason, you generally have no legal recourse. An oral promise to take some future action is not, in and of itself, a legally binding commitment. However, if you have a written contract with someone regarding a future estate planning action, that may be enforceable in a California court. This is sometimes known a a “contract to make a will.” Like all contracts, there must be more than a unilateral promise: There must be an offer, acceptance, and consideration.

Handwritten Note Not Sufficient to Block New Will

Consider a recent California appeals court decision on this subject. This case is only an illustration and not a complete statement of California law. A father of five children signed a will in 2003. In 2004, following a dispute over the disposition of his late wife’s estate, three of the children met with their father, at which time he signed a handwritten document addressing the wife’s estate and further stating, “I am not revoking [my 2003 will] and the distribution to my children remain [sic] as written.” The 2003 will left the father’s estate to his five children in equal shares.

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A family business presents unique estate planning challenges. You may want your children to share equally in your overall estate, but at the same time, your children may not be equally capable or invested in your business. It is also important to make sure any child you groom to take over a family is business is capable of doing so. Failure to properly plan in this area can lead to a number of legal problems after your death.

Son Convicted of Stealing Assets From Father’s Estate

Sometimes those legal problems may even include criminal prosecution. Recently a San Diego appeals court upheld the criminal conviction of a man accused of stealing from his late father’s estate. Although this is case is not binding precedent, it does illustrate the types of problems that can arise when there is a lack of proper estate planning.

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A power of attorney is a document authorizing someone to act on your behalf with respect to financial and contractual matters. Among other acts, a person holding your power of attorney may sell your house, write checks from your bank account, or access your safe deposit box. A power of attorney is “durable,” meaning it continues in effect until you revoke it. Your death would also terminate any outstanding power of attorney.

Daughter Improperly Delegates Father’s Power of Attorney

There are limits to what a person may do under a power of attorney. Here is one illustration from a recent California appeals court decision. This is only an example and should not be construed as a complete statement of California law on the subject of powers of attorney.

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The new year is a good opportunity to reconsider your estate planning needs. You should periodically review, and if necessary revise, your will, trust, and other estate planning documents such as a durable power of attorney, to keep your affairs current. Among other things, changes in the law may alter your estate planning needs.

What is the Estate Tax?

One of the most important laws affecting estate planning is the estate tax. This is a federal tax levied against the total value of a person’s assets upon their death. A handful of states also levy their own estate tax, although California does not. However, if you own property in a state where such a tax is still assessed, you will need to account for that in your estate planning.

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