San Diego Estate Planning Lawyer Blog

Published on: August 1, 2014

Bernard Madoff ran one of the largest Ponzi schemes in history. Madoff ran his own brokerage firm for nearly 50 years, claiming unusually high returns on investments. In reality, Madoff’s company stopped trading in stocks in the early 1990s. Instead, he s

Bernard Madoff ran one of the largest Ponzi schemes in history. Madoff ran his own brokerage firm for nearly 50 years, claiming unusually high returns on investments. In reality, Madoff’s company stopped trading in stocks in the early 1990s. Instead, he simply used money provided by new clients to pay off fabricated returns to existing customers. In late 2008, in the midst of a credit crunch, Madoff’s scheme collapsed, leaving roughly 4,800 clients holding $65 billion in phantom assets.

The estates of some of these now-deceased former clients now face unusual probate issues. An estate must always take inventory of a deceased person’s assets and determine the date-of-death value for tax and probate purposes. But how does one value an investment based on a lie? The Internal Revenue Service and several estates are presently struggling to answer that question.

Estate of Kessel

Published on: July 22, 2014

Who Owns Your Blog Posts After You Die?

by Scott C. Soady

Copyrights are a unique form of intellectual property recognized by the federal government. A copyright exists in an “original work of authorship” fixed in any form. Copyright is not the same thing as ownership of a material object. Under federal law, a copyright can be transferred by will (or intestate succession) like any other item of personal property. It is important to understand that copyright exists separately from the actual object that is the subject of the copyright. For example, if you write a novel, and your will leaves “all copies of the novel in my possession” to someone, that does not transfer the copyright as well. This is because, as the term implies, copyright refers to your right as the author to decide who may or may not make copies of your work in the future.

You may not think copyright will matter much after you’re gone. But U.S. copyrights continue for 70 years after an author’s death. So if you anticipate future royalties from your artistic or literary works, it is essential to make the appropriate provisions for your copyrights as part of your will or living trust.

An Unusual Situation

Published on: July 22, 2014

Using a Trust to Control Your Assets After Your Death

by Scott C. Soady

One benefit to using a trust as part of your estate plan is that it allows you to exercise greater control over the distribution of your assets even after you’re gone. As the name implies, a trust exists when you transfer assets to the control of a trustee, who is then bound to follow your instructions in managing and distributing those assets. A trust may last for many years after the maker’s death, depending on the conditions specified in the original trust instrument.

It is not uncommon for a trust to make conditional bequests to beneficiaries. For example, a person making a trust (a grantor) may want certain assets used for the benefit of his children, but for one reason or another, he may decide it is not advisable to simply give the children everything upon his death. One solution would be to structure the trust distributions based on age: the children get one-third of their share upon turning 21, another third upon turning 25, and the remainder upon turning 30. In this way, the grantor of the trust has some assurance his children will not receive a large sum of money before they are mature enough to handle it.

Another example of a conditional bequest is a trust established to defray certain types of expenses. A grantor may decide she wants to set aside funds to pay for her grandchildren’s college education or the medical expenses of a child with ongoing special needs. In these circumstances, the trust should instruct the trustee on how and when to distribute trust assets to fulfill these specific purposes. The trust should also contain clear provisions on when to terminate the trust, and who to distribute any remaining assets to; otherwise the trust may continue indefinitely, which may not be the grantor’s intent. There is, in common law, a “rule against perpetuities,” which holds a trust should terminate no later than 21 years after the death of the last person identified as a beneficiary at the time the trust was made, but this rule may be overruled by the express terms of the trust.

Published on: July 20, 2014

Can a Tenant Object to the Probate of a Landlord’s Estate?

by Scott C. Soady

In preparing a last will and testament, you need to be conscious of the location of any property you own. In the United States, wills and estates are handled on a state-by-state basis. If, for instance, you live in California but own a second home in Arizona, your will must be admitted to a secondary (or ancillary) probate in Arizona to dispose of any property located in that state. And if you own property in another country, your will may have to comply with foreign laws.

You must also be aware of any other persons who may be affected by the disposition of property in your will. This can include creditors or persons renting a property you own. A recent case from the California Court of Appeals illustrates the type of dispute that may arise when probating a will in more than one jurisdiction.

Estate of Dubs

Published on: July 18, 2014

How to Self-Prove a Will

by Scott C. Soady

A last will and testament is a legal document that must be filed with a probate court after your death. California law normally requires a will must be signed by the maker (testator) and at least two other persons as witnesses. The witnesses need not read or understand the contents of the will, but they must witness the testator’s signature and his declaration that the document is, in fact, intended to serve as a last will and testament.

In most cases, the witnesses play no further role once they have signed the testator’s will. But if a dispute emerges after the testator’s death, a probate judge may require one or all of the witnesses to testify as to the authenticity of the will. Since it may be difficult to locate witnesses what may be years after the fact, California and most states permit what are known as “self-proving” wills. A self-proving will includes an affidavit-that is, a declaration witnessed by a Notary Public-attesting to the authenticity of the document. In other words, the affidavit “proves” the will is authentic without the need to locate and produce the witnesses.

Dealing With Deceased Witnesses

Published on: July 16, 2014

What Is a “Small Estate”?

by Scott C. Soady

Not every estate requires a formal probate process. Most states, including California, have simplified procedures for administering “small” estates. The actual definition of a small estate varies from state to state. California law defines a small estate as one where the real and personal property owned by the deceased, valued as of the date of death, does not exceed $150,000. Some types of property are excluded from this $150,000 threshold, including unpaid salary or benefits owed the deceased (up to $15,000) and many types of vehicles.

In a regular estate, a probate court must appoint a personal representative or executor to gather the decedent’s assets and distribute them to the appropriate heirs or beneficiaries. In a small estate, by contrast, the person entitled to receive those assets may simply file an affidavit with the court acknowledging the transfer of ownership. There are separate processes for collecting personal and real property.

If the Small Estate Includes Only Personal Property

Published on: July 14, 2014

Does Your Will Contradict Your Prenuptial Agreement?

by Scott C. Soady

A last will and testament is just one document that may govern the disposition of property after your death. Many married couples sign a prenuptial (or antenuptial) agreement that can also affect estate planning. For example, spouses may agree to waive any future claim on each other’s estate. This may be useful in cases where a spouse wants to leave part of his or her estate to children from a prior marriage.

But if documents are poorly or incompletely drafted, legal confusion may frustrate your objectives. A recent decision by an appeals court in Mississippi illustrates what can go wrong when a will says one thing, but other documents say something else.

Dixon v. Jones

Published on: June 24, 2014

Transferring Corporate Shares Via Estate Planning

by Scott C. Soady

A family-owned business poses unique estate planning challenges. If the business is organized as a corporation, certain formalities must be observed with respect to the transfer of ownership upon a shareholder’s death. Under California corporations law, every shareholder, even if it is a family member, must receive a certificate specifying the number and type of shares owned. When a shareholder dies and transfers shares by will or trust to a beneficiary, the corporation must record this transaction and issue certificates to the new shareholder.

In theory this sounds simple enough. But in practice things can and do go wrong. A recent court case from Ohio illustrates this.

Graham v. Szuch

Published on: June 14, 2014

California Appeals Court Says Jilted Executor May Not Contest Will

by Scott C. Soady

A will or trust is not carved in stone-at least, not until you die. You may have cause to revise your estate plan on several occasions during your lifetime. In lieu of writing a new will, for instance, you might sign a codicil, a document amending only select parts of your will. The will and codicil must then be filed together with a California probate court.

Recently, a California Court of Appeals panel in Los Angeles upheld a probate judge’s dismissal of an effort to contest a codicil. The court said the persons filing the contest-the executors named in the original will and removed by the codicil-had no legal standing.

Rose v. Shaylin

Published on: June 13, 2014

Understanding the Difference Between Trust and Personal Assets

by Scott C. Soady

A living trust is an estate planning device whereby a person, known as the “settlor,” transfers his or her assets to the custody of a trustee. In most living trusts, the settlor and trustee are the same person. When the settlor dies, the trust instrument appoints a successor trustee, who then manages or distributes the trust assets as the settlor directed.

If you decide to create a living trust, it is essential that you and your successor trustee observe all appropriate formalities. That is, when dealing with trust assets, you must not refer to yourself as the owner, but rather the trust. Let’s say John Doe creates a living trust. He wishes to fund the trust with his home. In order for the house to be considered a trust asset, Doe must file a deed transferring the property from himself to “John Doe, Trustee of the John Doe Revocable Living Trust.” Failure to take this step means a court may decide the asset was never part of the trust.

Avoid Co-Mingling Trust Assets