San Diego Estate Planning Lawyer Blog

Published on: October 8, 2010

Ancillary Probate Can Increase the Cost of Probate

Probate is the legal process instituted in the Probate Court to determine the beneficiaries of a person’s estate and distribute the probate assets to the person’s heirs or beneficiaries. Ancillary probate is an additional probate proceeding that is required in addition to the state where the decedent lived and died usually because the decedent owned property in another state. That property could be real property, a car, boat, farm, vacation home or timeshare. The laws of the state where the property is located will determine the costs of the ancillary probate and in some cases, who receives the property after the ancillary probate.

One of the disadvantages to having an ancillary probate in addition to the one in the home state is that it will add to the total cost of administering the probate estate because of additional filing fees, appraisal fees, and attorneys’ fees. Also if the probate estate is an intestate one, that is, a probate because there was no will or trust, the persons entitled to receive distributions could be different than those entitled to inherit in California.

For example, in California, the estate of a person dying with no will and leaving a spouse and one child would be distributed one-half of the community property to the spouse and one-half to the child. As to separate property, it would be distributed one-half to the surviving spouse and one-half to the person’s child. In New York, if a decedent is survived by a spouse and one child, the surviving spouse would receive $50,000 and one-half of the residue of the estate; the child would receive the balance.

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: September 30, 2010

What is a “Stale” Trust?

by Scott C. Soady

Many trusts created by married couples provide for the splitting of the trust into 2 subtrusts after the death of the first spouse. These types of trusts go by a variety of names: A/B trust, marital exemption trust, by pass trust, or disclaimer trusts. In these types of trusts, the joint assets must be allocated between the trust for the decedent and a trust for the surviving spouse or in the case of a disclaimer trust, a disclaimer must take place within nine months of the date of death.

Often the surviving spouse does not administer the trust after the death of his or her spouse for a variety of reasons. The surviving spouse may not want to go to the expense of paying attorney’s fees or it may be that the surviving spouse is not aware of the duty to do something after the first death. Whatever the reason, the delay in administering the trust can cause problems especially if the delay has been substantial.

Such a trust is called a “stale” trust. One of the problems that can occur with a “stale” trust is tax consequences. Often trusts that split into two trusts upon the death of the first spouse are created in order to take advantage of the federal tax exemption for estate taxes. Assets that are appreciating are usually allocated to the trust for the deceased spouse. If the trust is not split, there may be an important tax saving lost. Another problem with a “stale” trust may be the remainder beneficiaries instituting litigation because of the lack of funding of the decedent’s Trust at the time of the first death.

Published on: September 27, 2010

Probate and the Heggstad Petition

by Scott C. Soady

In many past blogs, we have emphasized the importance of transferring all assets that are trust assets into the name of your revocable living trust. This is important because if you pass away and there are assets in your estate that were not transferred into your trust, those assets will be subject to probate. Probate can be long and costly and avoiding probate was probably one of the reasons you created a trust.

When you create a trust with Scott C. Soady, A Professional Corporation, LLP, the assets that are being transferred into your trust will be listed on your Schedule of Assets. This would include any real property, bank accounts, mutual funds, stocks, bonds, business interests, and personal property. After your trust is in place, you may acquire additional assets, open a new bank account, buy a second home or a different home, or purchase other assets that should be transferred into the trust. All of these “new” assets should be titled in the name of your trust and your Schedule of Assets updated.

If an asset is not properly transferred into the name of your trust, there potentially may be a way to avoid probate proceedings. There is an action called a Heggstad petition, named after a 1993 case entitled Estate of Heggstad. With this petition, it may be possible for the Court to determine that an asset not actually titled in the trust at the time of death is in fact a trust asset. The court looks to the Schedule of Assets to see if the asset was listed and if so, infers there was an intent to transfer it. If the court grants the petition, the court orders that the asset is a trust asset. The Heggstad petition thus avoids the full probate of the estate.

Published on: September 23, 2010

Attorney’s Fees in Calfornia Probate

by Scott C. Soady

Attorney’s fees for probate in California are set forth in the Probate Code Section 10810. The maximum fees that can be charged by the probate attorney are:

4% of the first $100,000 3% of the next $100,000 2% of the next $800,000 1% of the next $9 million.

The value of the estate for purposes of attorney’s fees is the gross value of the estate, so that if the decedent owned a home valued at the time of death at $500,000 with a $300,000 mortgage, the $500,000 figure is used.

Published on: September 19, 2010

FAQs about the Operation of Your Revocable Living Trust

by Scott C. Soady

If you have a revocable living trust, there may be questions that you have about the funding and operation of your trust. Here are a few frequently asked questions about your trust once it is in place.

1. How do I re-title assets into the name of my trust? If you are single, you are the sole Trustor (also called a Settlor) and the sole Trustee. To transfer your assets into your trust, you need to re-title the assets into your name as Trustee of your trust. As an example, if your trust is called the John M. Smith Trust dated 2/25/10, you would transfer the assets into the name of the John M. Smith Trust dated 2/25/10. If you are married, your trust might be called the John M. and Sally S. Smith Trust or maybe the Smith Family Trust. You will re-title your assets to John M. Smith and Sally S. Smith, Trustees of the Smith Family Trust dated 2/25/10. With bank accounts, the easiest way to take care of transferring your accounts is to go personally to the bank and advise them that you have a trust and want your accounts in the name of your trust. Other assets such as mutual funds, stocks and bonds, etc. can be re-titled by contacting the company or your broker to complete the necessary paperwork. Real property that you owned at the time you created the trust should be transferred into your trust by the attorney creating your trust, but if you acquire additional real property, remember to transfer it into your trust by a deed recorded with the county recorder.

2. Do I have to transfer all of my assets into my trust? It is not necessary to title all of your assets in the name of the trust. Some examples of property that is not usually titled in the name of your trust are automobiles, life insurance policies, and retirement plans. You also might own real property or other assets in joint tenancy with other individuals which you want to keep titled in that manner.

Published on: September 15, 2010

How retirement planning is short-changing women

by Scott C. Soady

A recent article in the Wall Street Journal reported how retirement planning is short changing women. The article has a number of interesting points:

1. A survey by MassMutual found that women’s retirement accounts were, on the average, just 2/3 the size of men’s. That is unfortunate because since women live longer than men, they need more money than men do to have a comfortable retirement.

2. About 2/3 of women between the ages of 75 and 84 live alone, making it more important that they have saved enough to see them through.

Published on: September 11, 2010

Alternative to Conservatorships

by Scott C. Soady

A probate conservatorship often becomes necessary when an individual cannot take care of himself or handle his own finances. A petition has to be filed in the San Diego Probate Court, usually by a family member, seeking to become a conservator of the person or the estate. The conservator of a persons makes decisions about where the conservatee will live, health care, food and recreation. A conservator of the estate is the individual handling the financial affairs of the conservatee. Establishing a conservatorship is costly, sometimes contentious, and often not necessary.

There are several ways that a conservatorship can be avoided. One way a conservatorship can be avoided is to create a living trust. When you create a revocable living trust, you designate someone to act as successor trustee of your trust if you become incapacitated. You also execute a durable power of attorney and health care documents which designate someone you trust to act as your agent in case of incapacity. Even if you don’t have a trust, you should obtain a durable power of attorney and health care directive. Young adults, newly married individuals, and anyone else that can’t afford a trust or doesn’t have the assets to warrant a trust, should at least execute these two documents. These documents prepared in advance of any incapacity, can avoid court intervention.

If the only reason a conservator is needed is for a family member to have access to social security, disability benefits, etc. a family member can ask the agency to allow them to act as a representative payee and therefore a conservatorship is not needed. Federal agencies which allow this to be done are the Social Security Administration, VA, and Dept. of Defense. You must explain why a payee representative is necessary and provide a doctor’s statement explaining the incapacity.

Published on: September 7, 2010

Estate Planning Not Just for the Wealthy

by Scott C. Soady

Some people think they do not have enough assets to need estate planning. The truth is even with a small to moderate estate, you may need an estate plan (will or trust) just as much as a wealthy person. An estate plan is a program for the distribution of your assets upon your death as well as planning for any periods of incapacity. It is also about having individuals designated to take care of your minor children should something happen to you. Planning for end of life decisions and financial planning are also concerns of estate planning.

Here are some aspects of estate planning that are important regardless of the size of your estate:

1. Protecting minor beneficiaries. This is a critical aspect of estate planning if you have minor children. If your minor child inherits assets from you without a will or a trust, it will be necessary for someone to petition the probate court to be appointed guardian of the child’s estate and a guardian of the child’s person. By having a revocable living trust, you can specify who should manage the child’s inheritance and how distributions should be made. You can stretch out the distributions over a number of years rather than have the child receive their inheritance at age 18.

Published on: September 3, 2010

Life Insurance and Estate Planning

by Scott C. Soady

The Wall Street Journal recently reported that as many as 1/3 of American households have not taken out life insurance personally and are not covered at work. Life insurance can be an important tool in estate planning. There are several ways in which life insurance may play a role in your estate plan.

One of the ways life insurance can be used is to provide immediate cash so that the debts of the decedent can be paid; funeral or burial costs covered; and costs of administration paid. Insurance proceeds keep trust assets from having to be liquidated right away in order to pay these expenses.

If the decedent was in a partnership or small business, often special life insurance policies called “Key Man” or “Key Person”policies can be useful. Such insurance is insurance on the owners,partners, or other key people to cover such expenses as lost revenue, hiring a new person, or buying out the decedent’s interest in the company.