San Diego Estate Planning Lawyer Blog

Published on: March 22, 2015

The Importance of Managing Trust Assets

A living trust can help provide for both you and your children. Married couples often establish a joint trust to manage their assets during their lifetimes, and when one spouse dies, the other spouse may continue to benefit from the trust. A trust may also make provisions for children or other descendants, but it is important to structure the trust so your priorities and intentions are clear.

While trusts generally help individuals avoid probate, there are unfortunately times where disagreements over a trust’s provisions may lead to litigation between family members. Here is a recent example from a California Court of Appeal decision regarding a trust. This case is provided simply as an illustration and should not be taken as a comprehensive statement of California law on the subject of trusts.

Cavagnaro v. Sapone

Published on: March 20, 2015

Addressing “Joint” and “Community” Property in Your Estate Plan

by Scott C. Soady

California is a “community property” state. This means any property acquired during a marriage belongs to the spouses equally. In the event of divorce, any community property must be divided between the spouses. Of course, a divorced couple can still own property together, but they would do so as joint tenants or tenants in common; there is no “community property” once the marriage is dissolved.

If you are recently divorced (or contemplating divorce), you should be aware of the estate planning implications. It is important to revise your will or living trust to reflect the end of your marriage. In the event your divorce settlement leaves any unresolved questions over the ownership of former community property, your estate plan should address these issues.

Schmidt v. Turner

Published on: March 15, 2015

Understanding Reverse Mortgages

by Scott C. Soady

Many elderly persons wish to remain in their own homes, but lack the financial means to do so. One option for such individuals is to take out what is known as a “home equity conversion mortgage,” commonly referred to as a “reverse mortgage.” Whereas a conventional mortgage requires the borrower to make monthly payments until the loan is repaid, with a reverse mortgage, all payments are deferred until the borrower dies or decides to sell the property.

Most reverse mortgages are regulated and insured by the U.S. Department of Housing and Urban Development (HUD). Under HUD rules, any person over 62 who resides in the house they own may qualify for a reverse mortgage. HUD maintains an online directory of qualified reverse mortgage counselors to advise individuals on the best way to obtain such loans.

Reverse Mortgages and Estate Planning

Published on: March 13, 2015

What is the Rule Against Perpetuities?

by Scott C. Soady

When you create a trust as part of your estate plan, you can effectively control the disposition of your property for years, even decades, into the future. This can prove useful if you want to limit the distribution of an inheritance until your chosen beneficiaries reach a certain age. But there is a limit to such control, as expressed through what is known in the law as the “rule against perpetuities.”

At common law, the rule against perpetuities dictates that a gift can last only until 21 years after the death of the last potential beneficiary alive at the time of the trust’s creation. A number of states, including California, have amended the rule of perpetuities. Under the California rule, a trust must terminate after 90 years. This does not replace the common law rule entirely, but rather complements it. The common law rule declares a trust gift valid if it vests within 21 years after the last surviving beneficiary’s death. This is still the case under the California rule, but it also declares the gift valid if it is completed within 90 years of the trust’s creation.

What About Your Great-Great-Great Grandchildren?

Published on: February 13, 2015

Using Age Provisions in a Will or Trust

by Scott C. Soady

Prince Harry, the younger son of Prince Charles, the Prince of Wales, and his former wife, the late Diana Spencer, turned 30 last year. This milestone means Prince Harry will receive more than $17 million from his late mother’s estate, according to the modified terms of a trust established as part of her estate plan.

Diana, Princess of Wales, made a last will and testament in 1993 and amended it in 1996. She left the bulk of her estate in trust for her two sons, Prince Harry and Prince William (now the Duke of Cambridge). Originally, the trust assets were to be paid to each prince when they turned 25. But the executors of the estate obtained a “variance” from an English probate court, modifying the terms to delay distribution until the children turned 30.

Age Provisions in Trusts

Published on: January 31, 2015

How a Conservatorship Can Protect You (and Your Assets)

by Scott C. Soady

During your lifetime, it may be necessary for a court to appoint a conservator to oversee your affairs when you are no longer able to do so. A conservatorship can apply to both a person-i.e., someone to make healthcare decisions for you-and to the property contained within your estate. While you can nominate a conservator as part of your estate plan, the final decision rests with a California probate court. You can also sign a power of attorney granting another person control over your financial affairs, without the need for a separate court order.

California courts will look at whether a potential conservator exercised “undue influence” over a person. For example, an unscrupulous individual might use a conservatorship as a means of using an elderly relative’s assets for their personal gain. Similarly, other persons or groups with an interest in a person’s estate might use the conservatorship process to manipulate the situation for their own advantage.

In re Conservatorship of Person and Estate of Melanson

Published on: January 30, 2015

California Appeals Court Expands Protections Against Elder Financial Abuse

by Scott C. Soady

On September 3, a California appeals court issued a landmark decision on the subject of financial abuse of the elderly. California maintains strict laws designed to protect persons aged 65 and above, who are more susceptible to fraud. In this case, the appeals court found the law could apply to potentially harmful financial transactions not yet completed.

Bounds v. Superior Court of Los Angeles County

This case involves an unusual legal remedy known as a writ of mandamus. In California, a mandamus proceeding is brought by a petitioner against a lower court, and the defendant or respondent is designated the “real party in interest.” If granted, the writ is a command issued by the appellate court to the superior court.

Published on: January 14, 2015

Dealing With People to Whom You Owe Money – After You Die

by Scott C. Soady

The administration of an estate includes not just distributing a person’s property, but collecting any debts owed to the deceased. This is why it is important to make a will naming an executor who can act in your name after you are gone. The executor stands in your place and can take any legal action to collect what is owed to you-and, by extension, the designated beneficiaries of your estate.

Here is an illustration from a recent California case of a situation where an executor must act to protect a deceased individual’s property interests. This case is discussed for information only and should not be taken as a statement of the law in California. The deceased in this case passed away in 2010. Sometime prior to his death, he and his wife divorced. In the course of divorce proceedings, the couple’s marital residence was sold. The husband’s share was deposited into a client trust account maintained by his divorce attorney. For some reason, the attorney never released the funds to his client.

After the man’s death, his executor sought payment of the funds, totaling more than $300,000. The executor obtained a court order directing the attorney to pay over the funds and provide a full accounting of his trust account. The attorney did not comply. Instead, he filed for bankruptcy.

Published on: December 14, 2014

Dealing With Real Property During Probate

by Scott C. Soady

It is common practice in estate planning for an individual to make specific gifts of property. Perhaps you wish to leave your house to your children or a particular family heirloom to a sibling. But what happens if the property described in your will is no longer part of your estate at the time of your death? In such cases, the gift is moot; your executor cannot distribute property that is not there.

A more complicated question may arise if your will specifies a distribution of property that conflicts with actions taken during your lifetime. A Connecticut court recently addressed such a situation. A woman left a piece of real estate in her will to a local church. However, shortly before her death, she entered into a contract to sell the property to another person. The woman’s executor wished to proceed with the sale. The church sued to enforce the gift made in the will.

A Connecticut appeals court ultimately ruled for the church. Although the woman signed a contract to sell the house, the terms of the agreement were not fulfilled by the time of her death. Specifically, the putative buyer failed to secure mortgage financing. This meant the woman still owned the property on the day of her death, and Connecticut law required it be distributed in accordance with the terms of her will. The executor could only sell the property with the consent of the church, which was the designated beneficiary.

Published on: December 12, 2014

Winding Down Your Business Through Estate Planning

by Scott C. Soady

A comprehensive estate plan can address the disposal of your personal assets, such as your home or retirement accounts, and any business interests you may hold. Many Americans are self-employed or participate in a business partnership. Winding down these business arrangements is a critical component of the estate planning process.

As with property, you may transfer your ownership of a business to another through a will or trust. In some cases, however, this may not be practicable. If you are a self-employed professional, such as an attorney or physician, and you do not have a surviving partner or successor, it is essential that you leave your executor or trustee with instructions on how to terminate your business-informing clients, disposing of confidential files, et cetera. If you are in a partnership or similar arrangement, such as a multi-member limited liability company, you should also make sure any agreements governing such businesses contain appropriate language dealing with your or a partner’s death.

A Family Legal Dispute