NEWS AND COMMENTARY

Published on: December 19, 2010

Communication Techniques for Alzheimers Patients

Scientists are studying how caregivers deal with people who have dementia, focusing on what they can do rather than what they’ve lost. A study by a speech professor at Ohio State University, who is studying communication with dementia patients, showed that making memory flashcards helps Alzheimer patients remember. A caregiver can put photographs of family members on flash cards with the name of the person in the photograph written underneath the picture. This professor, Michelle S. Bourgeois, developed some of the first memory books using picture and sentences to help people with memory problems recall past events.

Alzheimer’s disease affects the hippocampus, the part of the brain that is critical for learning and memory processes. Less affected are long term memory and skills like reading. Even when dementia causes patients to lose their ability to speak, they can read the flashcards and smile or nod when they recognize the concept on the flashcard. The technique has also been used to deal with anger and anxiety in dementia patients. Bourgeois has taught thousands of caregivers her methods and says it seems to help them feel happier and content.

It is so important when you have a family member or loved one that you suspect has a form of dementia, to not only have them physically evaluated but also see that they create an estate plan before they become unable to execute such documents. If a conservator has to be appointed through the court system, it is costly, time-consuming, and may not result in a distribution of assets after death that the individual would have choosen. As an example, Ann is a single woman who has no children, and wants her niece to receive her asset after she dies. She can provide for her niece in her trust as long as she still has capacity. If she fails to create a trust before she becomes incapacitated, the conservator who is appointed by the Probate Court, can petition the court under what is called a petition for substituted judgment (Probate Code sections 2580-2586)and execute a trust on behalf of the conservatee. However, the conservator can only execute a trust which will leave the assets to the conservatee’s heirs at law. Since Ann was survived by 2 siblings, her estate would be distributed to them and nothing to the niece.

Published on: December 3, 2010

Congress Working on the Federal Estate Tax Issue

by Scott C. Soady

As we draw closer to the end of the year, Congress is working to resolve the issue of tax cuts and the federal estate tax exemption. Within the last few days, President Obama announced that the administration and the Republicans had arrived at a proposal for a bipartisan agreement that would extend the Bush-era tax cuts and give workers a 2% reduction in Social Secuirry Tax for 2011.

Although details have not yet been made public, it is believed that the bill will reinstate the federal estate tax with a $5 million exemption amount and a top tax rate of 35%. What this means in laymen terms is that estates over $5 million will be taxed at a rate of 35%. Other aspects of the agreement would allow businesses to write off 100% of their equipment and machinery purchases during 2011, extending unemployment benefits for 13 months, and retaining “key tax cuts” for working families.

What Congress does will determine how estate planners address their clients’ estate plans. As past blogs have reported, 2010 was a year when there was no estate tax at all. Without action by Congress, the federal estate tax exemption is due to return to a level of $1 million. Many California residents have a gross estate of $1 million and need to be concerned about estate taxes if Congress doesn’t act and they should happen to pass away in 2011.

Published on: November 30, 2010

Legal Fight for Spider Man, Iron Man and X-Men

by Scott C. Soady

Our San Diego probate court hears litigation arising out of probate and trust disputes but nothing like the billions of dollars which are at stake in a probate court dispute over comic book characters. You’ve no doubt heard of such comic book icons are Iron-Man, X-Man, Spider Man, the Incredible Hulk, and the Fantastic Four. They were created by comic book artist Jack Kirby who was responsible for 45 of Marvel Entertainnent’s most popular characters.There has been an ongoing attempt by the estate of comic book artist Jack Kirby to terminate a copyright grant over his work. The children of Kirby, after his death, sent notices to terminate the copyrights. Marvel Entertainment then sued the estate in New York District Court alleging that the creation of such comic book characters were “works-made-for-hire and not eligible for termination.

Last week the Judge found in favor of the estate on an important issue which could mean she will issue a future ruling favoring the estate. There is a chance that an unfavorable ruing against Marvel could cost them control over the characters. Marvel was successful on another issue however, in avoiding an accounting on how much money is involved, at least until the issue is decided as to whether the Kirby children can terminate the copyrights.

Interestingly, the impact of the judge’s ruling will also impact Disney, since Disney purchased Marvel for $4 billion last year.

Published on: November 20, 2010

California State Bar’s Legislative Proposals for 2011

by Scott C. Soady

There are a number of legislative proposals affecting probate and trust law suggested by the California State Bar for possible introduction in the California legislature next year.

One proposal is to broaden who has the right to control the disposition of remains. This proposal would add the conservator of the person and the conservator of the estate to the list of persons who may control the disposition of a decedent’s remains. This proposal would amend section 7100 of the Health and Safety Code.

Another proposal is to repeal the Rule Against Perpetuities and clarify the rule against restraints on the power of a trustee to sell or transfer trust property. The Rule Against Perpetuities came from common law rule against vesting interests in property which do not vest within a life in being at the creation of the interest plus 21 years. The Rule prevents a person from putting provisions in their will or trust that will continue to control or affect the distriibution of assets long after he or she has died. Some states have already abolished the Rule Against Perpetuities.

Published on: October 4, 2010

What Happens When Your Lawyer Dies?

by Scott C. Soady

If you are a client of a lawyer who dies, what happens to your file and the money that you may have in the attorney’s client trust account? Many attorneys keep their client’s original estate planning documents in their fireproof safe at their office. Maybe you are in the middle of having your matter handled and the attorney suddenly passes away. What do you do?

Currently what happens is that if a lawyer dies or becomes incapacitated and hasn’t made any arrangement for someone else to take over his or her practice, the State Bar can seek an order from the Superior Court to take over the lawyer’s files and return the files to the clients along with any funds that were being held in the clients’ trust account.

The State Bar has recently drafted a sample agreement available to all lawyers which allows a lawyer to designate a successor and sets out the responsibilities of the primary attorney and the successor attorney to take over the practice. The agreement provides that the successor attorney will go to court to be designated as the successor who can take over the practice. The responsibilities include the power to open mail, become a signatory on bank accounts, notify clients, transfer files, handle client trust accounts, and sell the practice. The agreement also provides that clients be notified by mail that a successor attorney has been designated.

Published on: August 28, 2010

Jury Sides with Billionaire on Child Support

by Scott C. Soady

A previous post mentioned that this is the year for billionaires to die without their estate being responsible for any estate taxes. One of this country’s billionaires is Donald Bren of the Irvine Company in California. Estate taxes were far from his mind when this week in Orange county, a jury decided the interesting case of whether he owed his biological children by a mistress approximately $130 million in back child support. The causes of action brought by the mistress and the two children, now 22 and 18, were based on fraud and breach of contract on the premise that Bren had not given enough emotional and financial support to the children. At one point Bren was giving each child $18,000 a month. The children claimed that he was required to pay them support according to his “circumstances and station in life,” arguing that he should be required to pay them $400,000 per month applied retroactively.

Bren, now 78, has an estimated net worth of $12 billion dollars and is married with a 7 year old child. The jury decided in favor of Bren and ruled that the children were not entitled to additional support. So now Bren’s billions are intact and he can plan for how best to leave his billions without paying billions in estate taxes. Next year unless the Legislature acts before the end of the year, the federal estate tax exemption is set to return to a level of $1 million. Millions of Californians will then have estate tax issues just like Donald Bren. There are ways to minimize estate taxes including irrevocable life insurance trusts, gifting, and other advanced estate planning techniques.

If you have questions or want to consult with an experienced estate planning attorney about your estate and how to minimize estate taxes, call us at Scott C. Soady, A Professional Corporation for a free consultation. Also go to our family law website where you can read articles about child support and other family law issues. Consultation for family law are also available.

Published on: August 16, 2010

Re-run of Leona Helmsley’s Estate

by Scott C. Soady

Remember when hotel magnate Leona Helmsley left $12 million to her dog Trouble? It’s happened again! The late Miami heiress Gail Posner who recently died in Miami left $3 million to her dog Conchita and 2 other dogs who will live in her 7 bedroom $8.3 million mansion cared for by housekeepers, bodyguards, and other staff members who themselves were left a total of $26 million. Mrs. Posner’s son Bret received a mere $1 million. He has challenged the trust alleging undue influence and fraud on the part of the staff memers and the attorney who drafted the trust.

If you want to provide for your pet after your death, there are several ways you can do it with a lot less money. The most common way is to leave a designated amount to a friend or family member to care for your pet. This would be a non-enforceable bequest so you need to be sure that the person you choose will follow through. You could also leave a monetary gift to a charity that will keep your pet for a fixed fee. Apet trust is another way to provide for a pet and it is enforceable by the court. You leave a certain amount of money or percentage of your estate to fund a pet trust for your pet(s). The trust is enforceable by a person named in the trust or by a person appointed by the probate court, any other person interested in the welfare of animals, or a nonprofit charity who cares for animals. The pet’s care is taken care of and after the pet dies, there are remainder beneficiaries who inherit the balance of your estate.

Often clients care as much about their pet as they do about the rest of their personal property. We can draft provisions for your pets in your own revocable living trust or we can create a “stand alone” trust for your pets. Contact us at Scott C. Soady, A Professional Corporation for a complimentary consultation.

Published on: August 12, 2010

Billionaires Pledge 150 Billion for Charity

by Scott C. Soady

Recently Warren Buffett and Bill Gates decided to begin a philanthropic campaign called the Giving Pledge Campaign. Buffet and Gates have each pledged to give half of their wealth to charity and have contacted a number of other billionaires world wide to make a similar pledge.

It is reported that there are approximately 403 billionaires in the United States. At www.givingpledge.org you can see which billionaires have pledged. In San Diego, Irwin and Joan Jacobs have pledged. Other notable billionaries who have agreed to give the majority of their wealth to philanthropic causes or charitable organizations are George Lucas (moviemaker), T. Boone Pickens (energy mogul), Barron Hilton (Hilton Hotels), Ted Turner (TV), and Larry Ellison (founder of Oracle). It is unknown how many billionaires there are world wide but India has the second largest number after the U.S.

You may not be a billionaire who can pledge half your wealth to charity, but many people with normal size estates make charitable donations to their favorite charities. Individuals who not have children or grandchildren frequently leave sizeable donations to charity. If you have considerable wealth, even if not in the millions or billions, you could pledge to leave half of it to charity. There are a number of ways you can do this in your estate plan. You can provide for a certain dollar amount to go to charity. You can provide that a certain percentage of your estate goes to a charity or charities. You can also create a charitable remainder trust, a charitable lead trust or leave an IRA or other asset to charity. Read about these different ways to implement charitable giving on our website and contact us if you want to incorporate these ideas in your estate plan.

Published on: July 19, 2010

Revisiting the Importance of Business Succession Planning

by Scott C. Soady

We are always learning from celebrities what not to do in estate planning. Business succession planning is so important for individuals who own a business and want that business to continue to operate after their death. Business succession planning can involve important issues such as who will have control of your business when you retire or die? Who will have ownership? It can also involve tax planning to minimize the taxes. Planning in advance can make the transition much easier.

Dale Earnhardt Sr,, famous race car driver who died in a crash at the 2001 Daytona is an example of how poor planning can have disastrous results.

Dale Earnhardt Sr. started Dale Earnhardt Inc., the company that ran his racing team. When Dale Sr. died, he left his business DEI to this third wife Theresa, not the mother of his children. Theresa became the owner of the racing team in which Dale Jr. was the principal driver. An interesting issue developed when Dale Jr. found himself not only not in control of the company but also not even having the rights to his own name. Apparently his father Dale Sr. had filed a trademark for his son’s name and Dale Jr. signed a consent to it. When Dale Sr, died, the rights to Dale Jr.’s name went to his estate and then to Theresa. Dale Jr. tried to negotiate with his step mother to gain some control of the company but nothing came of it and in 2007 Dale Jr. resigned to drive for another racing team.

Published on: July 11, 2010

New Developments in the Federal Estate Tax

by Scott C. Soady

For those following the federal estate tax controversy, last month three senators introduced the Responsible Estate Tax Act which if passed will return the federal estate tax exemption to the 2009 $3.5 million level. The current state of the law is that during this year, there is no estate tax at all which means multi million and multi billion dollar estates pass to the beneficiaries free of any federal tax. Without some legislation before the end of the year, the federal estate tax exemption will return to $1 million.

The new bill, if passed, will restore the 2009 exemption of $3.5 million. Estates over $3.5 million will pay federal estate tax. Estates over $3.5 million and under $9 million will be taxed at a 45% rate. Estates between $10 million and $49 million would be taxed at the rate of 50%. Estates over 50 million would pay estate taxes at a rate of 55%. The bill also imposes a 10% surtax on billionaires. (There are approximately 400 billionaires in the United States) It is estimated that passage of the bill would bring at least $264 billion into the economy.

If the federal estate tax issue is not addressed, returning to the $1 million level next year will affect many of our estate planning clients so it is important to keep informed as to the status of this bill. Many clients’ estates fall within the $1 million to $3.5 million range. If the tax reverts to $1 million in 2011, additional estate planning may be necessary to avoid estate tax liability. Different types of trusts and other tax saving techniques may become necessary. We will follow the status of legislation and post any developments here.