San Diego Estate Planning Lawyer Blog

Published on: June 4, 2014

Understanding Death and Taxes

Benjamin Franklin famously wrote, “in this world nothing can be said to be certain, except death and taxes.” And the latter does not cease upon the former. Death introduces a number of tax issues that must be dealt with as part of your estate. Proper estate planning can help ease the burden, however, and minimize tax difficulties arising from an uncertain world.

Income Taxes

Your estate must still file a final individual income tax return-the common federal Form 1040 or California Form 540-for the tax year you die. This return should only reflect the income and deductions accrued through the date of death. Any income or losses earned after your death are credited to your estate.

Published on: June 2, 2014

Who Can Be Held Responsible for an Estate’s Debts?

by Scott C. Soady

The Washington Post reported recently the Internal Revenue Service has “intercepted” hundreds of tax refunds to repay decades-old debts. What is disturbing is that these are not debts owed by the taxpayers, but by their long-deceased parents. The IRS claims that in the past, families of deceased Social Security beneficiaries received overpayments from the government.

Even more shocking, the government now claims the right to collect those “overpayments” without having to prove the validity of the debt. According to the Post, the IRS makes no effort to determine who actually benefited from the alleged overpayment; instead “the policy is to seek compensation from the oldest sibling and work down through the family until the debt is paid.” After public outcry over the Post report, the IRS subsequently announced it would suspend its collection program.

Not the Normal Way to Satisfy Debts

Published on: May 23, 2014

Estate Planning and Tax Issues for Heirs

by Scott C. Soady

Taxes are an important part of estate planning. While most people associate estate planning with the desire to minimize federal estate taxes, this will not actually be an issue for most individuals, as the estate tax presently applies only to those estates with more than $5.34 million in assets. But there are other tax issues even smaller estates must consider.

For example, if you plan to leave significant assets to family members, you should consider how it will affect their taxes going forward. A qualified California estate planning attorney can advise not only you, but your potential heirs, on the best way to minimize total tax liability and avoid pitfalls that may prove costly years after your death.

Zampella v. Commissioner of Internal Revenue

Published on: May 22, 2014

Failing to Leave a Will Can Cause Confusion Among (Alleged) Heirs

by Scott C. Soady

Many people fail to make a last will and testament because they simply assume their heirs, such as a spouse or child, automatically inherit their property under the law. While it is true the law provides for persons who die intestate-that is, without a will-it is never a good idea to rely on this process, as it may produce outcomes you do not intend. This is especially true when dealing with atypical family situations.

Jones v. Brown

Here is a recent illustration from the California Court of Appeals. Lonza Jones died in 2009 at the age of 81. Jones had one surviving sibling, Mathis Jones. Another sibling died several decades earlier; Lonza Jones raised that sibling’s children, including Elinda G. Edwards.

Published on: May 18, 2014

Florida Justices Warn of the Dangers of Estate Planning Without an Attorney

by Scott C. Soady

Many people think they will save time and expense by using pre-printed forms to meet their legal needs such as a last will and testament. But pre-printed forms carry significant risks, especially when individuals fill them out without obtaining the advice of an experienced California estate planning attorney. In fact, the Florida Supreme Court recently warned people of the risks of using pre-printed wills in a decision that illustrates the perils of relying on commercial forms.

Basile v. Aldrich

In April 2004, Ann Aldrich purchased a commercial pre-printed last will and testament form. She prepared the form herself, apparently without any legal advice. Under a section marked “Bequests,” Aldrich identified several specific items of real and personal property. She left all of the listed property to her sister, Mary Jane Eaton. Aldrich named her brother, James Aldrich, as alternate beneficiary of those particular assets if her sister did not survive her. Aldrich apparently had no children or heirs aside from her two siblings.

Published on: May 16, 2014

Disposing of a Sole Proprietorship in Your Will

by Scott C. Soady

An often overlooked part of estate planning is business succession. If you own and operate your own business, it is essential your estate plan make provisions to either wind-up the business upon your death or transfer those assets to a designated successor. This is especially true if your business is not incorporated-that is, you operate a sole proprietorship or even a one-member limited liability company.

Separating Business and Personal Assets

A recent case from the Georgia Supreme Court is instructive. Robert Haege died in 2006. Haege operated an art business under the name Traditional Fine Art, Ltd. In his will, Haege left his “personal assets” to his siblings and his “business assets” to his siblings and two of his employees.

Published on: May 2, 2014

The Importance of Separating “Separate” and “Community” Property

by Scott C. Soady

California estate planning must take into account the state’s community property laws. California is one of nine states that recognize community property, which is a legal system that governs property held by married couples. In general, each spouse enters the marriage with their separate property. Property subsequently acquired during the marriage is community property, with each spouse retaining a one-half interest. Upon a spouse’s death, his or her estate plan may only dispose of that one-half interest.

In making a will or trust, it is therefore essential to distinguish separate and community property. If you intend to make provisions for one or the either, you should do so explicitly. Ambiguity may lead to litigation between your heirs, as one recent decision from the California Court of Appeals illustrates. This case is cited only for illustrative purposes and is not meant to be taken as a statement of the law.

Pakula v. Klein

Published on: May 1, 2014

The Importance of Funding a Living Trust

by Scott C. Soady

A living trust is a useful estate planning tool that can help avoid extended probate proceedings after your death. Basically, a living trust is an entity you create and transfer property into through a declaration of trust. This declaration specifies how the property within the trust should be distributed after your death. Unlike a last will and testament, trust declarations are not submitted to a probate court. The declaration simply appoints a successor trustee to carry out your wishes.

During your lifetime, you can still control all of the property transferred into the living trust. In most cases, the trust is not even considered a separate legal entity for tax purposes, so your Social Security number remains tied to trust assets like bank accounts. You can revoke or amend a living trust at any point during your lifetime. After your death, however, the trust generally becomes irrevocable, meaning your successor trustee is bound by the declaration of trust.

Always Fund a Trust Properly

Published on: April 11, 2014

Never Wait Until the Last Minute to Make a Will

by Scott C. Soady

Ideally, estate planning is something you do long before it becomes necessary. It is never a good idea to wait until you are on your deathbed to make a will. You may run out of time before you can execute a will that meets with the legal requirements of California or another state where you reside.

Piper v. Dimmers

A recent Michigan case illustrates the perils of last-minute or incomplete estate planning. Grace Reid died in 2011 at the age of 69. Reid was unmarried and had no children. Absent a will, Michigan law would distribute her estate-which consisted primarily of some land-to her siblings. After she was diagnosed with heart disease, Reid met with an estate planning attorney to discuss her will. For some reason, she never followed up with the attorney prior to her death.

Published on: April 10, 2014

What You Need to Know about Estate Planning and “The Cloud”

by Scott C. Soady

In the Internet age, your estate no longer includes just physical property but digital assets like social media accounts, cloud storage and even computer-based currency. Taking stock of your digital assets is therefore an essential part of California estate planning. Here are a few issues to consider with respect to your “online estate.”

Online Devices and Cloud Storage

Recently the BBC reported on the story of Anthea Grant, a woman who passed away from cancer. Grant’s will directed her estate be divided equally among her five children. The children decided among themselves how to allocate individual pieces of property. Grant’s son Joshua received her iPad, manufactured by California-based Apple Inc.