San Diego Estate Planning Lawyer Blog

Published on: May 7, 2010

Troubles With Joint Tenancy

Joint tenancy is a type of ownership where two or more people share an interest in personal property or real estate, usually with a right of survivorship. Three brothers, for example, may decide to purchase a hunting cabin together and own it in joint tenancy. The last surviving brother will eventually own the cabin. Couples who purchased homes 10 or 20 years ago were often advised to hold the property in joint tenancy with a right of survivorship so that when one spouse died, the other received the property. There are occasions where joint tenancy may be the correct way to hold title, however, there are also many potential problems with joint tenancy which you should realize before holding assets in that manner.

Loss of Control – When you own property with other individuals, you give up unilateral control such as the right to sell, make improvements, or refinance. In the example above, one of the three brothers who own the cabin jointly, wants to sell it. He needs the consent of the other 2 to sell and he cannot sell his interest without their consent.

Problems with Creditors – Creditors of a joint owner can come after the property to satisfy the debts of one of the joint owners. If a joint owner has a judgment rendered against him, the creditor can seek to satisy the judgment by forcing a sale of the property.

Published on: May 3, 2010

“Feng Shui” Will of Asia’s Richest Woman Declared Invalid

by Scott C. Soady

Will and trust contests continue to produce interesting stories, whether among the rich or the ordinary. This past February, a judge in Hong Kong ruled that the estate of billionaire Nina Wang will not go to her feng shui consultant but to the charitable foundation she and her husband Teddy created in 1988.

Nina’s life and death reads like a soap opera. Nina was born in Shanghai and married her childhood friend Teddy Wang who grew rich owning and operating the Chinachem Group, one of Hong Kong’s largest and most powerful companies. Teddy Wang was kidnapped in 1983 and his wife paid a $33 million ransom for his return. He was kidnapped again in 1990 and never found. He was declared dead in 1991 and Nina took over the company. There were numerous court battles over his wills but eventually it was Nina who inherited his estate.

Nina drew up a will in 2002 leaving her multi-billion dollar estate to the Chinachem Foundation she and her husband founded. After her death, another will surfaced, dated 2006 and leaving her estimated $4 – $13 billion estate to her fung shui consultant, reported also to be her lover. “Feng shui” is the ancient Chinese system of aesthetics using laws of Heaven (astronomy) and Earth (geography) to help improve life and create peace and harmony. The court ruled however that the will presented by Tony Chan, the feng shui consultant, had been forged. He was later arrested and charged with forgery.

Published on: April 30, 2010

No Estate Tax in 2010 Could Cost the IRS Billions

by Scott C. Soady

Previous blog posts have discussed the fact that in 2010 there is no federal estate tax imposed on a person’s estate, no matter how large the estate. In 2009, the federal estate tax was levied on estates over $3.5 million. In 2010 there is no estate tax because Congress failed to approve the bill to keep the estate tax at the 2009 level with a maximum 45% tax rate.

No one expected that the 74th richest man in the world would die in 2010. Texas gas pipeline tycoon Dan Duncan suddenly died in March at the age of 77 with an estimated $9 billion estate. No one knows the details of his estate plan but his death has caused many to wonder if Congress would now reinstate the 2009 estate tax and make it retroactive to the begining of the year so that the government could receive much needed revenue from his estate, maybe in the billions. Mr. Duncan was a noted philanthropist, so he may have provided for a number of charitable gifts which pass to the beneficiaries free of estate tax.

If Congress fails to act before the end of the year, the estate tax exemption is set to return to $1 million with a maximum tax rate of 50%. Such inaction by Congress will potentially affect many peope who are not billionaires. In California especially, where real property values are high, many upper middle class individuals would be subject to estate tax with estates over $1 million.

Published on: April 26, 2010

Choosing a Successor Trustee

by Scott C. Soady

Choosing a successor trustee for your revocable living trust is an important decision. The choice of the individual or entity who will manage your assets, possibly invest your assets, ensure that the provisions of your trust are carried out after your death with the appropriate distributions to your beneficiaries is arguably one of the most important estate planning decisions you will make. Choosing a successor trustee that is not right for the job can lead to tension between the trustee and beneficiaries, breach of trust by the trustee, or costly trust litigation.

There are several options for a successor trustee. Probably the most common choice is a member of your family. Usually parents make their children the successor trustees of their trust. One thing to keep in mind is the relationship between the proposed trustee and the beneficiaries. Is there already discord or strained relationships among your children that could worsen if one were chosen over the others? Are some of your children better equipped to handle trust administration than others? Think carefully about making your children co-trustees, particulary if you have more than 2 children. For example, 4 children having to agree on aspects of trust administration because they are all trustees could be a recipe for disaster. In some families, 2 co-trustees or even more would be fine. The main consideration is whether the individual has the skills, experience, time, and demeanor to carry out your wishes. It goes without saying that trustworthiness and honesty is also important, maybe even more so than any particular experience with managing money.

Another choice is to name a trusted friend or financial advisor to be your successor trustee. Maybe your children have busy lives and you want to reduce the burden on them or avoid family discord. A trusted friend might be a good choice, however there are also circumstances where friends or a financial advisor or even a family member does not carry out his fiducariary duty of being a trustee and utilizes trust assets for their own benefit.

Published on: April 23, 2010

Options for Cremation in San Diego

by Scott C. Soady

Today many people are choosing cremation over a traditional burial. Many of our clients at Scott C. Soady, A Professional Corporation ask that we include in their advance health care directive provisions that they prefer cremation and want their ashes scattered at a designated location or at the discretion of their agent.

San Diego has a lot of wonderful options because of our beautiful setting near the ocean. Many people prefer their ashes scattered in the ocean. California law requires that cremated remains must be scattered at least 500 yards from the shore. There are many boats for hire in San Diego from boats as small as rowboats to speedboats to 65 foot private luxury yachts complete with refreshments. You can choose to view a scattering from shore or conduct a ceremony out in the water, with video or digital pictures.

Also popular in San Diego is the paddle-out for surfers. The paddle-out came from the Polynesian tradition of paddling out into the ocean, forming a circle, and remembering the loved one with flowers or leis.

Published on: April 19, 2010

Who Can File For Guardianship?

by Scott C. Soady

Guardianship in California is the court process by which a person other than a parent is given custody of a minor child or given the authority to manage a child’s estate. The petition for guardianship can be filed by a relative or “any other person on behalf of the minor.” Usually we see family members petitioning to become the guardians of their grandchildren, nieces or nephews or maybe siblings.

In the recent case of “Octomom” Nadya Suleman who gave birth to octoplets in January 2009, it was not a relative but a “stranger” who petitioned the court for a guardian of the estate to be appointed for the children, claiming that an independent person should oversee the children’s finances if they were going to earn money from reality TV shows and sellling photos.

The Court in Orange County first ruled in favor of the “stranger” who was a self-professed child advocate, who filed the guardianship petition through his attorney Gloria Allred. The Court appointed a guardian ad litem to investigate the matter and report back to the Court. Recently though a Court of Appeals Court has ruled that although the California Probate Code does legally allow a “stranger” to file a petition for guardianship, he or she must show evidence of actual financial mismanagement by the parent. The Court dismissed the petition because there was no evidence that Octomom was mismanaging the childrens’ money.

Published on: April 16, 2010

Is a Disinheritance Clause Requiring Adherence to a Particular Faith Valid?

by Scott C. Soady

The Illinois Supreme Court recently held that a Jewish couple’s wish to disinherit any of their grandchildren that married outside their faith was lawful. The particular will had provided that upon the death of the surviving Trustor, if any grandchild had married outside the Jewish faith, their non-Jewish spouse had a year to convert to Judaism. If they did not, the gift would lapse. The Illinois Supreme Court held that the clause was valid as long as the method of disinheritance did not encourage divorce. One of the Justices wrote that the Trustors were “free to distribute their bounty as they saw fit and to favor those grandchildren whose life choices they approved of.”

Restraints on marriage contained in wills or trusts are generally held by the Courts to be void as against public policy. In California, Civil Code section 710 provides that conditions imposing restraints on marriage…. are void. Althought there doesn’t seem to be as yet a case in California involving a clause such as in the Illinois case, it seems logical that the California courts would rule similarly and uphold a clause that provided for disinheritance of a beneficiary who married outside of a particular faith.

Including a provision to disinherit a particular beneficiary because of religion, or on grounds of substance abuse or other conditions, is a tricky area of estate planning. You should consult an experienced estate planning lawyer if you want to create such provisions. At Law Office of Scott C. Soady, A Professional Corporation, we can help you create an estate plan that will contain such provisions. Call us to schedule a complimentary consultation.

Published on: April 12, 2010

Special Needs Trusts Becoming More Prevalent

by Scott C. Soady

The use of special needs trusts in estate planning is becoming more common than in generations gone by. A Special Needs Trust, also known as a Protective Trust, Medicaid Trust, or Supplemental Needs Trust is one created specifically for a disabled beneficiary. Often disabled children and adults are receiving government benefits such as social security and Medi-Cal. If a family member leaves money to the disabled beneficiary outright, the beneficiary could be disqualified from receiving those benefits. Anyone receiving social security disability benefits, for example, cannot have more than $2,000 in his or her name without losing their benefits.

In the past, families with disabled children would disinherit the child and leave assets to another family member who promises to use the inheritance to take care of the disabled child. The problem with that approach is that those inherited assets could be subject to creditor’s claims, lawsuits, bankruptcy, divorce settlements, and tax liens of the individual who inherited the assets. That individual could also change their mind or predecease the special needs beneficiary.

With some 5 million children in American today who have physical, emotional, and mental impairment, parents and other family members are planning ahead to create a special needs trust that will supplement, not replace, the benefits the child is already receiving. Such supplemental needs can include such things as computers, books, music lessons, camp, concert and sporting event tickets, and vacations. Assets can also be used to remodel a home or purchase a handcapped equipped vehicle.

Published on: April 8, 2010

Do It Yourself Trust Administration?

by Scott C. Soady

Trust administration is the work that has to be done after the death of a Trustor. The person or entity that is named as successor trustee has certain duties and obligations they have to perform to wind up the Trustor’s financial affairs and make distributions to the beneficiaries. If any of the beneficiaries are minors who are receiving distributions at various intervals, the administration of the trust can last years.

Your basic duties as a successor trustee involve the collection, management, investment, and distribution of the trust assets. One of your duties to the beneficiaries is to keep them informed of the trust administration so you need to keep careful records of all the transactions that you perform as trustee. Here is an example of some of the tasks you need to do when you become successor trustee of a trust. Some are time sensitive and lead to consequences if not done in a timely manner.

1. Obtain a taxpayer ID number for the trust.

Published on: April 3, 2010

Why Wills & Trusts May be Found Invalid

by Scott C. Soady

There are many reasons why a will or a trust may be challenged and set aside as invalid. Here are some of the more common grounds to contest someone’s will or trust.

1. Coercion – If someone coerces the testator (the person creating the will or trust) to make changes in a will or a trust or forces them either physically or emotionally to do something that is not what they truly wish to do, the document can be challenged on the basis of coercion.

2. Duress – If someone exerts pressure upon he testator to change their will or trust or make dispositions they don’t want to do, the document could be held invalid on the basis of duress.