San Diego Estate Planning Lawyer Blog

Published on: July 29, 2013

Survivor & Exemption Trusts Can Shield a Married Couple’s Assets from Estate Taxes

Living trusts are a common estate planning device that can shield a person’s assets from the probate process. For married couples in California holding substantial assets, a more complex form of trust planning is available. Known as survivor and exemption trusts, or sometimes as A/B trusts, these special trusts can reduce the potential impact of federal estate taxes.

As of 2013, the federal estate tax exempts the first $5.25 million of a person’s estate. The law also provides an unlimited marital deduction for assets transferred from a deceased spouse to a surviving spouse. This means that when the first spouse dies, his or her entire estate-including any share of community property-may be transferred to the second spouse and no estate tax will be due, as the first spouse’s estate is considered empty. When the second spouse dies, his or her estate can then claim the $5.25 million exemption, owing federal estate tax on the surplus.

The A/B trust, however, provides a mechanism so that both spouses estates may benefit from the $5.25 million exemption. A couple initially creates a living trust to hold their assets. When the first spouse dies, this trust is then subdivided into a survivor’s trust and an exemption trust. The survivor’s (or “A”) trust represents the surviving spouse’s half of the property initially placed in trust. The surviving spouse can still modify or revoke this trust at any time. The exemption (or “B”) trust contains the deceased spouse’s share. The surviving spouse still has access to assets in the B trust, but title to the property remains with the exemption trust. This allows the exemption trust to claim the $5.25 million exemption for the deceased spouse, while allowing the surviving spouse’s future estate to keep its own exemption, thus effectively doubling the exemption on the couple’s assets to $10.5 million.

Published on: July 26, 2013

Can “Tony Soprano” Instruct His Children From Beyond the Grave?

by Scott C. Soady

James Gandolfini, the film and television actor best known for his starring role in the HBO series The Sopranos, died on June 19 while vacationing in Italy. The New York Post reported on July 3 that Gandolfini, a New York City resident, left an estate valued at nearly $70 million. According to the terms of Gandolfini’s last will and testament, filed in New York County Surrogate’s Court, most of the late actor’s estate will go to his two children.

Gandolfini’s will identified two principal real properties, a New York City condominium and a house in Italy. Gandolfini directed his executors to grant the first option to purchase his New York condo to a trust created for the benefit of his son. His Italian home, and the surrounding land, will be held in trust until his children reach 25 years of age, at which point they will each receive a 50% interest in the property.

Precatory Language & Beneficiaries

Published on: July 24, 2013

Brothers Fight in Court When Mother’s Will Fails to Name an Executor

by Scott C. Soady

A key element of a well-drafted last will and testament is the appointment of an executor to manage the affairs of your estate. If you fail to name an executor, or the person or persons you name are unable to serve, a probate court must intervene and appoint a person to run your estate based on the provisions of California law. This can lead to prolonged litigation between interested who may compete for the right to manage your estate.

A recent California appeals case highlights the dangers of failing to name an executor in your will. This case is discussed here purely for informational purposes and should not be treated as legal advice or a binding statement of California law. The facts are unique to this case.

Estelle Manwill died in March 2011. Shortly before her death she executed a holographic (hand-written) will in the presence of several witnesses. The will divided Manwill’s real property among her five children. Unfortunately, Manwill failed to name an executor in her will. Two of her sons, David G. Manwill and Mark Manwill, each filed petitions to be named personal representative of their mother’s estate. (In this context, executor and personal representative both refer to a person who manages an estate, with the former referring to a person specifically named in a last will and testament.) Their siblings objected.

Published on: July 22, 2013

Utah Woman’s Disappearance Highlights Importance of Estate Planning

by Scott C. Soady

Susan Cox Powell disappeared in December 2009. The former West Valley City, Utah, mother of two was last seen attending church with her family. Police and West Valley City residents long suspected Powell’s husband was responsible for her disappearance (and presumed death). Tragically, the husband killed himself and his children by exploding his home in Washington State in 2012. Another suspect, the husband’s brother, killed himself this past February. On May 21, West Valley City police formally closed its investigation into Powell’s death, citing a lack of evidence and living suspects.

Police disclosed several hundred pages of documents related to the Powell investigation, including a handwritten four-page note labeled “Last Will & Testament for Susan M. Powell.” The document was not a traditional will. It made no distribution of Powell’s property or affairs, aside from a request that her parents be “very involved & in charge of” her children’s lives. Mostly, Powell’s will is a statement for the benefit of police regarding her decaying marriage and the fear that her husband might try to kill her. “If I die,” Powell wrote, “it may not be an accident, even if it looks like one.”

Are Handwritten Wills Valid (or Advisable)?

Published on: July 19, 2013

How Making an Estate Plan Can Prove Your Mental Competency

by Scott C. Soady

The purpose of estate planning is to prepare for a time when you can no longer make decisions for yourself, either because of death or incapacity. And while ascertaining a person’s death is usually a straightforward task, determining incapacity-more precisely, the lack of capacity to make certain types of decisions-is often complicated. California law establishes varying competency thresholds for different legal decisions, as illustrated by a recent decision from a state court of appeals panel in Santa Ana. This case is only used for illustrative purpose and cannot be relied on as a statement of the law.

The case itself involved divorce, not estate planning. Lyle B. Greenway wanted to end his 48-year marriage to Joann Greenway. In 2009, Lyle Greenway moved out of his marital home and into a retirement community. The following year, he filed a petition for legal separation, citing irreconcilable differences with his wife. Joann Greenway opposed the petition.

Lyle Greenway was recovering from an operation and convalescing in a nursing home in mid-2010. Because of this, the couple agreed to have their case heard by Thomas J. Murphy, a former San Diego County Superior Court judge who now works for JARS, an alternative dispute resolution company. Judge Murphy performed essentially the same function as a trial court in this case.

Published on: July 11, 2013

Sibling Rivalry Spills Over Into Probate Court

by Scott C. Soady

Estate planning requires you to appoint one or more people to act as your agent or fiduciary under a number of conditions. A power of attorney designates an agent to act in your name while you’re still alive. If you create a revocable trust, a trustee manages those properties you choose to transfer into the trust. And after you’ve passed away, a personal representative or executor supervises your probate estate.

You may have cause to change the appointments and designations of these agents during your lifetime. When, as is often the case, your intended agents are family members, bad blood can lead to significant conflict that may be exasperated by your death. A recent California case illustrates this. Please note this example is provided purely for informational purposes and should not be construed as a binding statement of California law.

Sisters Fight Over Fate of Their Mother’s House

Published on: July 9, 2013

Providing for Charity in Your Estate Planning

by Scott C. Soady

ESPN recently conducted an investigation of over 100 charities founded by professional athletes and found that nearly three-quarters of them failed to meet nonprofit industry standards. In some cases these “charities” failed to distribute any funds for their stated charitable purpose. Indeed, many athlete charities were barely funded and ran no programs whatsoever.

There’s no point to starting a charity if you don’t (or can’t) provide the means for its organization. If you’re looking to include charitable giving as part of your estate planning, there are many options to consider. You could start your own charity, either during your lifetime or as part of your estate, but as the ESPN report demonstrated, creating a functional charitable organization involves more than making a vague promise of future funding. It almost always makes more sense to work with an established, reputable charitable organization that shares your goals and values.

Specific Bequests

Published on: July 5, 2013

Dealing With Social Security and Final Benefits & Expenses

by Scott C. Soady

In May the Inspector General of the Social Security Administration reported that the government continued to pay benefits to over 182,000 people previously reported as deceased. It’s only a small percentage of the estimated 2.5 million deaths reported to the SSA each year, but it shows how even death can become lost in the bureaucracy. If you’re on the other end–as the executor or administrator of a deceased loved one’s estate–it’s equally important you understand the law as it relates to “last” benefits.

Social Security and Pension Benefits After Death

Let’s say your widowed, elderly mother recently died. She was receiving Social Security and her monthly check came in a few days after her death. Can you cash the check? No. Under the Social Security Act, the federal law governing benefits, a person must be alive for the entire month covered by the check. So if you’re mother normally received her check on the 15th of the month and she died on the 12th, you must return the check. Likewise, if Social Security direct deposited your mother’s benefit into her bank account, the government will instruct the bank to debit her account to reverse the transaction.

Published on: July 3, 2013

Estate Planning and Songwriting Royalties

by Scott C. Soady

In 1974, R&B legend Barry White released one of his greatest hits, “You’re the First, the Last, My Everything.” The song itself travelled a lengthy path. Originally written as a country song two decades earlier by Peter Radcliffe, White and his songwriting partner, Anthony Sepe, rewrote the lyrics to make it an early disco track.

Sepe was entitled to 20% of the song’s royalties. Anthony subsequently sold half of his royalties (or 10%) to his brother, William Sepe, for $10,000. Warner/Chappell Music, Inc., and the American Society of Composers, Authors & Publishers (ASCAP) paid the royalties to Anthony Sepe, who in turn gave half to his brother. This arrangement continued for about 30 years. The brothers never registered their agreement with Warner or ASCAP. For many years they simply relied on their original oral agreement, although they did make a written agreement in 2004.

Anthony Sepe died in 2009 without leaving a will. His wife and children created a trust to receive his ASCAP royalties. The trustee, Sepe’s widow, refused to continue paying her brother-in-law his half of the song royalties. She claimed Anthony Sepe signed a written revocation of the original assignment just before his death. William Sepe also learned that in 2008, Anthony Sepe improperly assigned his brother’s half of the royalties to another company.

Published on: July 1, 2013

How Far Can an Attorney-in-Fact Act On My Behalf?

by Scott C. Soady

A general durable power of attorney is an important estate planning document that grants your agent-the attorney-in-fact-the authority to act on your behalf in any contractual matter. Unless limited by your power of attorney or California law, your attorney-in-fact is you for all legal intents and purposes. Sometimes, however, even courts fail to properly understand the role of the attorney-in-fact.

A California appeals court panel in Los Angeles recently reminded a lower court of this role in a case that involved not just a power of attorney, but also the proper interpretation of a trust used for estate planning purposes. The case is discussed here for informational purposes only and should not be treated as a binding statement of California law.

Trustees Dispute the Attorney-in-Fact’s Authority