LIVING TRUSTS

Published on: February 14, 2016

What Happens If My Heirs Die a Few Days After Me?

One scenario you need to consider as part of your estate planning is the possibility of you and your heirs dying at the same time. A common example of this would be a husband and wife killed in a car accident. If each spouse signed a will leaving their estate to the other, this could create a conundrum. This is why it is generally a good idea to include a survivorship clause in your will. Such a clause specifies a time period a person must survive you in order to inherit under your will. Any person who dies within the specified time period will be treated as if they died before you.

Twin Sisters Die Within Days, Litigation Ensues

A recent San Diego case illustrates how survivorship clauses work. This case is only an illustration and not a complete statement of California law on this subject. This case involves a pair of sisters—twin sisters, actually—who sadly died within five days of each other.

Published on: February 5, 2016

How the Estate Tax Will Work in 2016

by Scott C. Soady

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.

Published on: January 30, 2016

What Happens to My Estate Plan if My Child Dies Before Me?

by Scott C. Soady

No parent wants to contemplate losing a child. But from an estate planning perspective, you should anticipate how you wish to handle your own affairs in the event a child does not outlive you. Addressing these contingencies up front can help avoid misunderstandings after your death as to your wishes.

Per Stirpes Distribution

For example, suppose you are currently married and have three children. You sign a will that provides if you die and your spouse does not survive you, then your entire estate should be divided equally among your three children. Assuming all of your children are alive at the time of your death, it should be a relatively straightforward matter for the executor of your estate to gather your assets and divide them into three equal shares, one for each child.

Published on: December 14, 2015

Simpsons Co-Creator’s Trust Faces $140,000 Bill for Dog Care

by Scott C. Soady

Many people are animal lovers, but few could match the dedication of the late Hollywood comedy writer Sam Simon. Simon, best known as one of the original developers of “The Simpsons,” died in March of 2015. His trust, reportedly worth “several hundred million dollars,” according to a recent story in The Hollywood Reporter, is expected to benefit a host of animal welfare causes, including Simon’s own eponymous foundation that helps rescue dogs.

The couple charged with caring for Simon’s own dog told the Hollywood Reporter that the trust has balked at continuing to pay for his care. Simon reportedly spent over $140,000 per year on the dog’s care. While that sounds like a staggering amount to most people, the Reporter noted the dog has a host of aggression and behavior problems requiring an extensive “medical and therapeutic care regimen.”

Simon’s will named a longtime friend who is also an experienced “canine-aggression trainer” as the dog’s caregiver. The trainer said that several years before his death Simon verbally promised he was “taking care of everything” with respect to the dog’s care. The trainer understood this to mean the Simon trust would continue footing the $140,000 per year bill for ongoing care. Simon’s trustee told the Reporter the trainer demanded a “ludicrous” lump-sum payment of $1.7 million but said she was still looking into the matter.

Published on: November 23, 2015

California Court Upholds L.A. Clippers Sale in Trust Dispute

by Scott C. Soady

Two years ago, the Los Angeles Clippers made national headlines not for their on-the-court performance but because of an audio recording of the team’s owner, Donald Sterling, making remarks deemed “deeply offensive” to minorities by the National Basketball Association. After the recording became public, NBA Commissioner Adam Silver suspended Sterling and threatened to cancel his franchise if he did not immediately sell the team. Subsequently, Sterling authorized his wife to negotiate a sale of the Clippers. In May 2014, Sterling’s wife accepted an offer from former Microsoft CEO Steve Ballmer to purchase the team for $2 billion.

But that was not the end of the matter. After initially agreeing to the Ballmer sale, Sterling changed his mind and refused to sign a binding term sheet committing him to the deal. The team itself was part of Sterling’s revocable living trust, where Sterling and his wife served as co-trustees, so his approval was necessary. Sterling’s wife responded by filing a lawsuit seeking to remove her husband as co-trustee, citing his lack of mental capacity.

The trust itself required “certification by two physicians who regularly determine capacity” before removing Sterling as trustee. A neurologist diagnosed Sterling with cognitive impairment secondary to primary dementia Alzheimer’s disease.” A second physician confirmed this diagnosis, adding Sterling was “at risk of making potentially serious errors of judgment, impulse control, and recall in the management of his finances and his trust.”

Published on: November 8, 2015

Joint Estate Planning Can Still Lead to Complications

by Scott C. Soady

Many spouses choose to execute a joint estate plan. For example, they may sign wills at the same time and promise to distribute property a certain way after the first spouse dies. Such agreements may be enforceable under California law, but it is important to follow certain procedures in the event the surviving spouse deviates from the plan. Things can get especially complicated when different family members in different states are involved.

Stepchildren Unsuccessfully Challenge Stepmother’s Trust

Here is a recent example. This case involves the application of California law to a complaint made before a federal court in New York. A husband and wife executed a joint estate plan in 1995. They agreed the surviving spouse would inherit all of the deceased spouse’s property, and upon the surviving spouse’s death, any remaining property would go to the husband’s two children from his first marriage. At the time of this agreement, the husband’s property included two apartments in New York City.

The husband died in 1998. The wife probated her husband’s will and, according to its terms, received all of his property, including the two apartments. Four years later, the wife created a revocable trust under New York law and transferred both apartments into it. She served as co-trustee together with her attorney. Unlike her will, which left her probate estate to her stepchildren, the trust provided a university located in New York would receive all of the trust assets upon her death.

Published on: September 17, 2015

Why Is It Important to Make Your Estate Plan As Soon as Possible?

by Scott C. Soady

It is never advisable to wait until you are on your deathbed to finish (or start) your estate planning. This is especially true if there are potential complications with your estate, such as a pending bankruptcy, divorce or other issues that might affect the distribution of your property. By waiting until the last minute, your estate plan may lead to confusion-and litigation-among your heirs.

Bankruptcy, Last Minute Estate Planning Leads to Litigation

Here is a recent example from here in California. This case involves a man who suffered a stroke in July 2011 and died in the hospital a few weeks later. While hospitalized, the deceased signed a will and revocable trust, as well as a quitclaim deed purporting to transfer 22.5 acres of land to the trust, with his sister serving as trustee. The will, meanwhile, named the deceased’s daughter as executor. Complicating matters somewhat was the decedent’s Chapter 13 bankruptcy petition, which was still pending at the time of his death but later discharged at the daughter’s request.

Following the bankruptcy discharge, the decedent’s son recorded the quitclaim deed transferring the land to the trust. The daughter, acting as executor of the probate estate, asked the probate court to determine whether the deed was valid; if it was not, the land would pass to the estate and not the trust. She further argued the quitclaim deed did not accurately reflect her father’s wishes and conflicted with the terms of his bankruptcy discharge.

Published on: September 16, 2015

How Multiple Trusts May Complicate an Estate Plan

by Scott C. Soady

Although living trusts are a common estate planning tool, they can be quite complex. In fact, many estate plans include several trusts. Some of these trusts help with tax planning. Others keep a married couple’s individual and community property separate. It is therefore important when creating multiple trusts to understand what each one involves and the appropriate use of any assets contained therein.

Judge Cites Spouse for Mismanaging Community Property Trust

Here is a recent California case that illustrates the difficulties which can arise when administering multiple trusts as part of a single estate plan. The case revolves around a man who passed away in 2014. While married to his first wife, they executed an estate plan which included no fewer than five separate trusts. Things became more complicated after the wife died in 1999 and the husband remarried. This added two more trusts to the estate plan-one for the second wife’s separate property and another including the new couple’s community property.

By 2005, the husband was diagnosed with Alzheimer’s disease. The following year, the second wife told a California probate court her husband could no longer take care of himself or make financial decisions. At some point in 2007, the second wife took over as sole trustee of the couple’s community property trust. Wells Fargo assumed control of the husband’s other trusts.

Published on: August 7, 2015

What Happens to My Business When I Die?

by Scott C. Soady

People often look at their estate plan in terms of purely personal assets-their house, bank accounts, etc. But your estate also includes any businesses you own or co-own. So what happens to these assets after you die? The answer to this question largely depends on how you choose to organize your business.

Sole Proprietorship

If you run a one-person business out of your house, it is likely a sole proprietorship. This means the business has no legal existence separate and apart from you. If you have a will, this means your sole proprietorship becomes the responsibility of your personal representative (executor), who may keep the business going for up to six months under California law. A probate judge may subsequently order the personal representative to continue the business for a longer period of time or wind it down.

Published on: June 17, 2015

Distinguishing Marital and Separate Assets in Estate Planning

by Scott C. Soady

In making an estate plan, it is important to make a complete list of all assets you own. This is especially helpful to your future executor or trustee, who will be responsible for marshaling your assets after your death and distributing them as you direct. Confusion over the ownership of assets can lead to litigation, as this recent California case illustrates.

Estate of Quon

A married couple had three children. In 1968, the father purchased a 5% interest in a company whose sole asset is an apartment complex in Glendale, California. The company’s majority owner previously worked as the couple’s accountant. In 1972, the majority owner issued formal stock certificates to the husband alone, who made all the financial decisions for the couple.