Estate Planning Practice Blog

Celebrities Die Just Like the Rest of Us.

Three very notable celebrities have died. Ed McMahon, Farrah Fawcett and now Michael Jackson. Each had families. Each had loved ones. Each had assets. And each had potential contestants to their estate. Did each have an estate plan in place that was updated and reflected their wishes?

Time will soon find out. The media will report if their estate administration turns out to be a mess like Anna Nicole Smith's was.

Ed was survived by his wife so his estate is likely to be less burdensome whether he had an estate plan in place or not. A surviving spouse generally has an easier time on formal estate administration than children or other loved ones.

If you are not married like Farrah or Michael were -- having an estate plan in place is very important especially if you want to provide for your partner or other loved one despite not being married.  Both Farrah and Michael had children that should be provided for. And Michael is survived by three young children. The mother of two of the children relinquished her parental rights so their guardianship and care may very well wind up being a contested matter.

You need to outline your wishes for disposition of your assets, nominate a successor trustee or executor to handle your affairs and otherwise make your wishes known.  Where there are minor children in place, it is very important to nominate guardians and have a trust in place in the event of your passing.

It simply does not matter who you are. An estate plan carefully drafted and funded in conjunction with your professional advisors, such as your attorney, accountant and financial advisors, is important. Important for everyone including celebrities.

May Ed, Farrah and Michael RIP.

Is It Worth It?

Is it worth it to hire an attorney to draw up a will, trust or other estate planning documents?

Kiplinger.com on personal finance and business says it is worth it. They posted a fun 10 question quiz about is it worth it -- questions like is it worth it to pay more for name brand prescription medications or will generics suffice? One of the questions is about wills: is it worth it to hire an attorney to draw up a will? Kiplinger.com says yes, it is worth it to hire an attorney. Take the quiz yourself and find out!

Of course, as attornies, we think it is worth it.

In fact, the other day I counseled a potential client regarding selling real property owned by her recently departed mother. The house wasn't in a trust so probate is required at first glance. After more discussion, I discovered that the mother did a trust on her own about 6 months before she died, but she failed to complete a Schedule A or a trust transfer deed to transfer the home to the Trust. If there was a Schedule A, the court may order the home to be transferred to the Trust, but there was no written evidence showing the settlor's intent to transfer that real property to her newly created Trust. (So for the other legal practioners out there, I am not sure that Heggstad Petition would have worked in Los Angeles County, but of course, if we were retained, we could try if the client so directed us.)

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Estate Planning, Probate and Trusts involve complex areas of law. Individual circumstances must be considered before any advice can be given.  The general information above is not to be construed as legal advice, which can only be given after consideration of the unique facts of each matter. Please seek the advice or counsel of your attorney, financial advisor or CPA as it may be appropriate.

Standard of Care: Quick Analysis for Estate Planning Attorneys

Estate planning attorneys must always be cognizant of issues surrounding capacity and incapacity of their cilents when preparing and executing estate plans at their client's direction. Here are some recent thoughts about standard of care required by an estate planning attorney for review and consideration. It's also a good reminder to get your estate planning accomplished sooner than later. You never know what the future may hold for your own capacity. You may suffer from an illness, be in an accident or otherwise have dimished capacity that would prohibit you from executing your estate plan in accordance to your wishes.

To begin, an estate planning attorney is required to perform legal services with the same degree of skill and diligence that other members of the profession display when determining whether his or her client has capacity to execute estate planning documents.  Unfortunately, there is no bright line test to determine the mental capacity of a client.  

In California, the Probate Code establishes a rebuttable presumption that all persons have the capacity to make decisions and to be responsible for their acts and decisions. (See Cal. Prob. Code §810).   Thus, a person who has a mental or physical disorder may nevertheless be capable of executing a will or trust.  An attorney must look to Cal. Probate Code § 811 to determine whether a client has a mental deficit, which would result in a lack of capacity to execute a will, trust or other estate planning document.

Under the ABA Model Rules 1.14, (ABA is the American Bar Association), an attorney owes the client a duty to be reasonably alert to indications that the client is incompetent or is subject to undue influence, and where indicated, to make reasonable inquiry and reasonable determination in that regard.  If the attorney reasonably believes that the client cannot adequately act in his or her own interest, the lawyer may seek the appointment of a guardian or take other protective action.  The evaluation of the client's best interest is simply a matter of professional judgment on the lawyer's part.    California, however, does not have a statute or rule that corresponds to MR 1.14. Instead, California ethics opinions state that a lawyer must not petition the court to have a conservator appointed because it would violate the lawyer's duties of confidentiality and loyalty, thus violating the duty in Business and Professional Code §6068(e) to maintain the confidences and secrets of the client. 

California law does acknowledge that the degree to which a lawyer may use his or her judgment in making a decision on behalf of the client appears to depend on the degree of incapacity of the client, and on the specific legal context in which a decision is to be made.  Specifically, counsel has a duty to ensure that a client is competent to understand the nature of the proceedings and at times will have to assist in the client's defense despite the defense being at odds with the client's asserted interest.

For counsel to determine the client's testamentary capacity, they should evaluate the client at the exact time of the execution of the will. However, some authorities take the view that counsel should determine testamentary capacity when the instructions for the will were given.  If the client has testamentary capacity at the time of the instructions for the will, then the measure of capacity required at the time of execution may be altered.  An important way to determine the client's testamentary capacity is to know the condition of his or her mind a reasonable length of time before and after the execution of the will, because a client's mental state typically degrades slowly with the passing of time.

The capacity is lacking if the testator is not able to understand the nature of the testamentary act, understand and recollect the nature and situation of the individual's property, or remember and understand the individual's relations to living descendants, spouse and parents, and those whose interests are affected by the will. (See Cal. Prob. Code § 6100.5).  In addition, if the testator suffers from a mental disorder with symptoms, including delusions or hallucinations that result in the testator's devising property in a way that he or she would not have done, there is no testamentary capacity. (See Cal. Prob. Code § 6100.5).

Finally, the attorney should also be aware of third parties.  It is not unusual for a third party, usually a sibling or an adult child of the client, to bring the client in and also to have spoken to the attorney prior to the attorney meeting the client.  In this situation, the task for the attorney is to judge the mental capacity of the client independent of the opinions of others.  The attorney should also discuss the intentions of the client alone without the presence of the third party.  Even when the client insists on the presence of another individual during meetings, the attorney should insist on frequent, periodic meeting time alone with the client to verify that what is transpiring is the dependent intention of the client, and not the substituted desires of others. The client must be able to provide independent thought as to testamentary intentions. 

Of course, this is only a synopsis of the standard of care to be exercised by estate planning attorneys and only applies to California and should be supplemented with case law research and analysis. At no time, does this blog post on this issue be construted as legal advice or applicable to your situation, whatever it may be. It is being posted to provide an exploration of the standard of care for estate planning attorneys. 

A Day In Conservatorship Court

Probate courts typically hear certain types of matters on certain days. This is true for especially larger courts that serve a larger population. Take for example, Orange County Superior Court's probate department located at the Betty Lou Lamoreaux Justice Center (Lamoreaux for the veterans). Lamoreaux is the location of the juvenile courts and also houses the county's only probate court.

Yesterday afternoon was the general Conservatorship calendar at Lamoreaux. A Conservatorship is the same as a guardianship of an adult. Guardians are appointed for minors and Conservators are appointed for incapacitated adults whether disabled or elderly or anywhere in between where they have no capacity to manage themselves and/or their financial affairs.

The courtroom was crowded with over 50 matters on calendar. I was item number 40. And I had to sit not in the galley, but up front as there were no more seats in the galley. From my vantage point, I could see the judge and also the faces of the attorneys and the parties. Lots happened yesterday and it was very nerve wracking and painful for the parties. More so from seeing their faces than just hearing them. If you sit in the galley, you can only hear what is going on and only see the judge's face.

There were a few young adults there who appeared to have mental disabilities and their parents were there to obtain a court order for Conservatorship so that they could continue to manage their young adult children's financial and medical affairs. Remember when you turn 18, as parents, you no longer have legal control over your children. If you have a child with special needs or a mental disability, many parents find it either necessary or prudent to obtain a Conservatorship over their young adult children.

In one proceeding where the young lady clearly looked like both her mother and father -- a young man jumped up and stated, that's my child! "I want to object!" The mother almost fainted. The father looked at the mother. And the poor young adult lady was befuddled. It turned out that the man who wanted to object did not speak English and had the wrong matter! In fact, he was in the wrong courtroom! The judge was soon able to control the chaos and laughter soon ensued. But imagine how nervous that family already was and to have this happen? The court soon ordered that the young lady's mother and father can become her Conservators.

There was another proceeding where both mom and dad were in wheelchairs. They both were unable to care for their affairs. They were given a court appointed attorney, called a PVP (Probate Volunteer Panel) attorney. They had 3 kids from what I could tell. Each child was represented by an attorney. And each child wanted complete control over managing mom and dad's affairs. It was very sad. The court finally continued the matter so written objections could be filed. Later after I left the courtroom about an hour later, I saw the mom in the hallway sobbing. I saw the attorneys at table close by seemingly trying to work out a settlement. Dispersed around the hallway where angry camps of kids and their families all glaring at each other. It was a true nightmare for that family.

I also heard a matter involving a man and a woman who had been married for 25 years, but it was a second marriage. She suffered from a heart attack and was in a rehab facility for some time. Her husband was increasingly becoming incapacitated. So his family obtained a Conservatorship over him and moved him out of the marital home. The wife showed up today ... and when she saw her husband, they kissed and hugged very lovingly as they approached the bench. The wife was understandably upset as she wanted to continue to care for her husband and be able to see him now that she fully recovered. His family didn't see it that way and would not allow the wife to visit her husband. It was yet another matter for the judge to decide.

There was also a matter involving hospice care and end of life decision making. There was a Conservatee (the person under the Conservatorship) who appeared to be at the final stages of his life from the arguments heard. His Conservator wanted court permission to withhold life support and the county objected saying that there was not enough evidence that this Conservatee was terminal. They reviewed the Advance Health Care Directive. The judge finally said he could not make a decision without more information from the Conservatee's doctors. Going by the Conservator's wishes was not enough. So it was continued.

It went on and on... remember, I was number 40 on the calendar.

How do you prevent this? Well, for the young adults with mental disabilities, it can't be. But for those older and not doing well -- a well executed estate plan will avoid most of these battles. Do your estate plan while you are young and continue to make changes as you age. You want to show a pattern and strong preferences for how you feel. You don't want to lose control over who can manage your affairs even when you longer have control over your own self or finances.

If you are in the Southern California area, email me directly for more information about setting up your own estate plan. I can be reached at jsawday(at)tldlaw.com.

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Estate Planning, Probate and Trusts involve complex areas of law. Individual circumstances must be considered before any advice can be given.  The general information above is not to be construed as legal advice, which can only be given after consideration of the unique facts of each matter. Please seek the advice or counsel of your attorney, financial advisor or CPA as it may be appropriate.

Your Children and Their Inheirtance.

When you set up a living trust -- you will be faced with some choices on how to handle or set up your children's potential future inheritance. (I say potential because you could die broke.) This is where a good life insurance policy may come into play and be designed to leave an inheritance. You will want to discuss your life insurance policies with your attorney as well.

For children who are under the age of 18, you should consider having their share placed into a trust with income distributions while a minor to their guardian and distributions of principal once they reach a certain age. Say at age 25 they will get the rest. Or maybe you say half at age 25 and the balance at 30. The trust will allow for the successor trustee to make distributions to your child for education among other needs. A wedding could be paid for. A car could be paid for. And a haircut could be paid for from the trust. It all depends on how it is worded.

Generally, things to consider in making these kinds of drafting decisions depends on the age of your children, the amount of money involved and your level of concern.  There are three options (generally speaking):

1.    A distribution outright and free of trust if at least age 18;
2.    A distribution to a trust for that child with specific provisions and a termination at a certain age; or
3.    A trust for that child's life time.

If, for example,  the children are over 30 and have no tax, liability, health or marital issues, you may prefer an immediate outright distribution combined with trusts for grandchildren to an age if a child predeceases.

Here is one mother's take on this:  "I am the mother of a 20 year old and a 14 year old. My observation is that the average 22 year old college graduate may be mature in his or her personal conduct, but has limited experience in personal money management. For this reason, I would feel comfortable that money be held in a trust until at least age 25.  And then get the rest of the funds at age 25."

If your kids are different -- you can do different terms for each child or make the overall terms much more restrictive.

These kinds of things are best discussed with your estate planning attorney to find out what is best for your children and your wishes.

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Estate Planning, Probate and Trusts involve complex areas of law. Individual circumstances must be considered before any advice can be given.  The general information above is not to be construed as legal advice, which can only be given after consideration of the unique facts of each matter. Please seek the advice or counsel of your attorney, financial advisor or CPA as it may be appropriate.

A Few Probate Q&As

We handle probate cases as a routine part of our practice. Probate for an experienced attorney with no issues (meaning no contests or uncooperative beneficiaries) is very straightforward. That said, the act of opening probate and probate an estate is rarely straightforward for the family and loved ones of the person who died. Probate for the family and loved ones have a high emotional cost and take a long time. It's hard to go through probate as for many it prolongs the process of grieving and makes it harder to face the reality that their loved one has died.

Here are some common questions and answers:

1. How Long Does It Take?

On average, most probates take at least a year from start to finish. It takes at least 45 days to get an estate opened -- papers need to be completed, filed, a hearing date needs to be set, notices need to be given and then the court may continue a hearing for a defect. Then letters need to issue and bond needs to be posted. I could go on and on -- but there are lots to do to get an estate opened.

2. What About Creditors?

Notice must be given to all known creditors of the decedent after Letters have issued. The claim period must remain open for 120 days for creditors to file a claim against the estate.

3. How Much Does It Cost?

Probate has both costs and fees. The costs include the filing fee to open the estate. In Los Angeles County it is $350 just to file the petition. Then you have to pay for the cost to run the legal notice. That has a range, but the median cost is $500. Next the assets of the estate must be appraised by the court appointed probate referee and that has costs too.

Attorney fees are set by statute and are based on the inventoried value of the estate. Attorney fees are paid at the close of the estate and must be ordered by the court. Fees are calculated as follows: 4% of the first $100k, 3% of the next $100k, 2% of the next $100k to $800k and smaller percentages thereon up. A $200k estate would have statutory attorneys fees of at least $7,000.00. Extraordinary fees may also be awarded as well. Plus the fees that attorneys are awarded may also be awarded to the Personal Representative.

4. Executors and Administrators. What Is The Difference?

An executor is a person appointed by the court on behalf of the estate where there is a Will. An administrator is a person appointed by the court on behalf of the estate where there is no Will. A personal representative is either the executor or administrator and is the catch-all term to refer to both. Letters Testamentary are given to executors. Letters of Administration are given to administrators. Both Letters state the powers conferred by the court to that person on behalf of the estate.

5. Can Probate Be Avoided?

Yes. Assets with payable on death beneficiaries like life insurance, retirement accounts avoid probate. Assets like your bank accounts with transfer on death beneficiaries also avoid probate. Assets held jointly with another individual like a home or bank accounts also avoid probate when the first joint owner dies. More importantly, in California, assets held in a living trust also avoid probate. Having an estate plan with a living trust in place and your assets transferred to your trust will avoid probate. Of course, these are generalities and specific laws may apply to your specific situation.

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Estate Planning, Probate and Trusts involve complex areas of law. Individual circumstances must be considered before any advice can be given.  The general information above is not to be construed as legal advice, which can only be given after consideration of the unique facts of each matter. Please seek the advice or counsel of your attorney, financial advisor or CPA as it may be appropriate.

Alone? How about some EP documents as preventative medicine?

I made a court appearance regarding a conservatorship matter earlier this week. We represent a conservator who is a friend of the conservatee. What happened to the conservatee -- she's a nice lady in her late 60s and lives alone. Her family lives in Europe. Her friends and acquaintances are modest here in California. So modest that many might not know something happened to her. She retired so she doesn't go to work everyday. A few months ago she suffered a stroke. The stroke didn't incapacitated her permanently. She will likely make a strong recovery and be able to enjoy her life again. Certainly not the same as before, but still have an enjoyable life nonetheless.

She lived in an apartment. She drove a nice car. So when she had the stroke, she called the ambulance and was immediately transported to the hospital where she stayed for at least a month. She was later moved to a rehab facility. Currently she resides in a less restrictive facility, but still has not returned to her apartment.

When she was admitted to the hospital, she could not communicate. She could not tell anyone who to call. So the authorities stepped in after some time to locate a family member or friend. In the meantime, her apartment rent went unpaid. Her car payment went unpaid. Her other bills piled up. After three months of unpaid rent, eviction proceedings were initated against her. Remember no one knew what happened to her or that she was in the hospital. Her family lives in Europe.

Finally a local contact was found and now steps are being taken to ensure her affairs are properly managed, but she had already lost her apartment and her belongings wound up in storage for only a short time before they would be auctioned off. The local contact was able to obtain court authority to manage her affairs temporarily until her family could be finally located and things done accordingly.

I could go on and on, but the morale of this lady's plight is simple -- even when you think you have nothing to leave to anyone or even anyone to leave your things to -- you still need to worry about what happens to you. Having a will, power of attorney and advance health care directive would have made all the difference in the world. Put these executed documents in a normal place -- your office or a post it on your bulletin board near your phone -- say all of my estate planning documents can be found here. Write down a list of contacts for an emergency and get an attorney on board. If something happens and the authorities wind up searching your home for who to contact, they will discover an attorney's card, the list by the phone, the binder on your bookshelf that says Estate Planning documents. Having these things in place for this lady could have greatly affected what happened to her affairs while she was incapacitated.

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Estate Planning, Probate and Trusts involve complex areas of law. Individual circumstances must be considered before any advice can be given.  The general information above is not to be construed as legal advice, which can only be given after consideration of the unique facts of each matter. Please seek the advice or counsel of your attorney, financial advisor or CPA as it may be appropriate.

Trust Admin Process in a Nutshell.

The Trust Administration process after the settlor or settlors have died is usually thought of in four phases. This is assuming that for a single person trust that the person who created the Trust, the settlor, has died. This is also assuming that for a two person trust that both persons who created the Trust, the settlors, have died.

Below is a nutshell version of what the phases look like for California trust administration.

The first phase is intake. During the intake process the attorney handling the trust administration will discuss generally the following:

-- Review of the dispositive provisions of the Trust
-- A conversation about the family members, whether any one has been disinherited or if there will be any other potential problems with family members
-- Discussion of any potential problems immediately known
-- Discussion of the roles of the successor trustee(s)
-- Discussion of the scope of work by the attorney and signing an engagement agreement

If you have decided to hire the attorney, the attorney will assist you with second phase. The second phase is about getting the successor trustee in place and take possession of Trust assets. For real property, an Affidavit of Death of Trustee will be prepared, signed and recorded with the appropriate county recorder offices where the Trust owned real property. This clears title to the real estate so the sucessor trustee can manage the property. It will also include preparing and serving by mail a Trust Notification according to California Probate Code Section 16061.7 (which is very important to start and stop the claims cutoff period to contest the Trust).  A certification of trust will also be prepared to assist you with marshaling other assets like bank accounts. A federal tax identification number will also be obtained if needed.

If there are assets out there that are not in the Trust, you may have to resort to other legal procedures to get these assets into the Trust or otherwise handled. Some legal procedures could include a Probate Code Section 13100 Affidavit, Probate or even a Heggstad Petition. All of these are very fact dependent and depend on the nature of the asset, the Trust itself and other related facts like if there is a Schedule A or other evidence. Your attorney will assist you with the determination of the best legal procedure to gather non-Trust assets and how to get them vested in the Trust should that be the goal.

The third phase is about marshaling assets. This means identifying all assets, obtain date of death valuations where needed especially for tax purposes, obtaining current valuations where needed, and get an accountant on board to determine what tax returns are required. Federal estate tax returns (aka 706 returns named after the tax form number) are due within 9 months of date of death. If there are small cash gifts to be made in accordance with the Trust, then a preliminary distribution could be made.

Once all of the assets are identified, marshaled, valued and all tax returns have been filed (for the decedent, for the estate, for the trust and federal estate tax returns) then the trust is likely in a position to be terminated and all Trust assets distributed according to the Trust terms. This is the fourth phase. A trust distribution agreement is prepared and sent to the beneficiaries for review and signatures. And once everyone has agreed to how the Trust assets will be distributed, the trustee makes the final distributions. There may be resulting concerns like filing a final fiduciary tax return on behalf of the Trust even after the Trust has been terminated.

Trust administration is almost always easier than probate as court oversight and approval is not usually necessary. But, it is one of those things that is best done with the assistance and advice of counsel. So, as this blog always says, be sure to consult with your own attorney regarding trust administration.

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Estate Planning, Probate and Trusts involve complex areas of law. Individual circumstances must be considered before any advice can be given.  The general information above is not to be construed as legal advice, which can only be given after consideration of the unique facts of each matter. Please seek the advice or counsel of your attorney, financial advisor or CPA as it may be appropriate.

Tax Season -- Great Reminder to Consult with Professionals.

Tax season has fully descended upon all Americans. (Also, Girl Scout cookies as well. Girl Scout cookies are much more palatable!)

I received a complimentary copy of Roni Lynn Deutch's book, The Tax Lady's Guide to Beating the IRS and Saving Big Bucks on Your Taxes. For more information about Roni and her first book, you can check out Roni's blog here. It's a great book and very easy to read. Reading books like Roni's makes you aware of the value of hiring a tax professional to assist you with your taxes, tax planning and representation in case of an audit or other issues involving the IRS or local tax authorities.  It also brings home the point that you should consider consulting with and later hiring a professional to assist you with other endeavors as well.

Be sure to do your homework on any important issue facing your family whether it be taxes, estate planning, financial advice and other such matters. Do your reading, internet research and then consult with professionals as well to make sure you are taking the right steps to protect yourself and your loved ones.

When you decide to consult with a professional, ask at the outset if there will be a consultation fee and how much so you can be prepared. Some professionals do not charge a fee, will waive the fee or have  reasonable fee depending on the nature of the consultation. Professionals have nothing to give you other than their time and with their time comes their knowledge, insight and wisdom that is often invaluable.

Receiving Roni's book and reading it reminded me to share this important point with our blog readers.

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Estate Planning, Probate and Trusts involve complex areas of law. Individual circumstances must be considered before any advice can be given.  The general information above is not to be construed as legal advice, which can only be given after consideration of the unique facts of each matter. Please seek the advice or counsel of your attorney, financial advisor or CPA as it may be appropriate.

Filing Fees Continue to Increase.

Filing fees for the Superior Court of Los Angeles County went up for 2009. You don't always realize how much court fees are until you have to ask your client to pay them. Sometimes the fee are cost-prohibitive and that preparing an estate plan in the first place would have come to the cost of the filing fee!

For example, estate planning for most clients of our firm range from $1,000 to $3,000 depending on the status of the individual, couple, complexity of the wishes and extent of the assets and real estate holdings.

And filing fees to open probate are (in Los Angeles County): $350.00

To open a conservatorship of an adult: $350.00. And you will need to pay for information package for conservators for $20. Plus pay for the conservatorship investigator fee of $479. There are other fees that arise depending on the type of paper filed as well. But for a minimum, to open a conservatorship matter in Los Angeles County -- it costs a whopping $849.00.

And to open a guardianship of a minor: $350. You will also have to pay for guardianship investigation fee of $868. This comes to $1218.00.

If you are married, own a home and have a minor child -- the following could very well occur if no estate plan is in place:

1. Probate of the home;
2. Possible opening of guardianship of the minor to receive life insurance proceeds; and
3. Possible opening of guardianship of the minor's person to determine custody of the child in accordance to the court's discretion if you haven't left your wishes in writing.

So, in that scenario -- it would cost at least $350 to open probate plus another $1218.00 to establish a guardianship.

Of course estate planning is not without its costs either after someone dies, but at least your wishes are in writing and you have avoided some of the attendant costs of having to immediately proceed straight to court. You may also want to consider the emotional cost of having your wishes in writing.

And yes, if you are no longer alive, you won't have to pay these filing fees yourself, but ultimately your estate will.

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Estate Planning, Probate and Trusts involve complex areas of law. Individual circumstances must be considered before any advice can be given.  The general information above is not to be construed as legal advice, which can only be given after consideration of the unique facts of each matter. Please seek the advice or counsel of your attorney, financial advisor or CPA as it may be appropriate.