Estate Planning Practice Blog

New Cal Tax Law Gives Equal Treatment to Domestic Partners.

Here's a piece of useful information about registered domestic partners and their tax filing status:

[Remember that registered domestic partners in California can either be a committed same sex couple or a committed opposite sex couple where one partner is 62 years or older.]

California State Controller and Franchise Tax Board (FTB) Chair Steve Westly announced new changes in California tax law ( L. 2006, S1827 (c. 802), eff. 01/01/2007) that gives registered domestic partners the same tax filing status as married couples, starting with tax year 2007. Click here for the press release.

Under current state and federal law, domestic partners use the single or head of household filing status.  (California FTB News Release PR06:061, 10/24/2006.)

“California has recognized domestic partnerships since 2003, but State tax laws have not,” Controller Westly said. “This new law will ensure that domestic partners are given fair treatment by getting the same filing status as their married counterparts.” L. 2006, S1827 (c. 802), eff. 01/01/2007 allows registered domestic partners to file their state tax returns using either the “married filing jointly” status or “married filing separate.”

The new law takes effect for tax year 2007, which taxpayers will begin filing in January 2008, and does not impact federal tax law.

When Your Parents Die Broke.

Here's a very interesting article that addresses what happens if your parents die broke.  I think this is something that we all wonder from time to time how situations like these are handled when it comes to settling a loved one's estate.

The author writes: "[l]egally, you're probably not on the hook for their debts. But anything they owned could be. Here's what you need to pay, in what order."

Click here to read more.

Suze Orman Says Get a Living Trust.

In O Magazine (O for Oprah), Suze Orman gives excellent financial advice each month. This month she addressed Financial 'I Dos' and Don'ts and explained how a Living Trust can help blended families with their estate planning.

A reader wrote a question about being "remarried for two years ... how can I protect my children's right to inherit what's mine?"

Suze's answer was, "First, set up a revocable living trust that spells out how you want your property disbursed at your death. " She went on to explain how living trusts work and how it can be beneficial in a blended family.

Remember, whatever assets you bring into a marriage are considered your separate property assets so long as you keep them separate. These separate property assets can be devised to someone other than your spouse like your kids.

So set up a Living Trust for these separate property assets. And set up another Living Trust for your community property assets.

That said, if you have more wealth that you think a Living Trust isn't enough or suitable for you, talk to an estate planning attorney to explore advanced estate planning options.

Umbrella Insurance Policies.

With the news about Jeffrey K. Skilling's sentencing regarding Enron, it brought up an interesting discussion between me and Delia Fernandez. Delia posts often under Financial Advisories by Delia on this blog.  She's terrific, by the way.

We started talking about umbrella liability insurance policies and whether I knew that those policies paid for the legal defense of OJ Simpson and President Clinton. I've posted about umbrella insurance policies before. Read them here and here. I hate to use this word, but "clearly" these policies are a bargain.
 
Here are two links for interesting reading about umbrella liability insurance policies:  Businessweek and Court TV.

As Delia says, "what a hoot of a topic!"

Local Long Beach Telephone Numbers.

For those of you in the Long Beach area, you may find these numbers useful:

• Non-emergency Police: (562) 435-6711
  
• Non-emergency Fire: (562) 570-2500
  
• Gas Emergency: (562) 570-2140
  
• Long Beach Water Dept.: (562) 570-2390
  
• Graffiti Hotline: (562) 570-2773
  
• Trash Collection: (562) 570-2876

Note about the Non-Emergency Police number: consider programming this into your cell phone as 911 calls from a mobile phone are routed to CHP. The emergency response may be delayed. In the alternative, after calling 911, you can also call the Non-Emergency Police number as a back-up and find yourself getting a quicker response in the event of an emergency. However, always call 911 first.

Four Miles North As The Crow Flies.

From my surprise post announcing my move to Tredway, Lumsdaine & Doyle last week, I wanted to share a bit more about how the firm operates.

It operates pretty much the same way my former practice did. I feel like I just literally moved my office 4 miles (as the crow flies) North. I sit facing the same way. I sit at the same office furniture. 

I have the same freedoms to continue blogging, meeting with potential clients and servicing existing and new clients in the same manner as before.

What's new is the tremendous support staff and infrastructure at TLD. There are two very competent and professional assistants in the Long Beach office. [The downtown Long Beach office is cozy. There are 3 attorneys in this office, 2 legal assistants and 1 paralegal.] They are here to help clients make appointments and deal with smaller matters like giving excellent directions to the office.

Before I had no staff. I was using voice-mail to take messages if I was in court or in a meeting with clients. Now you can be assured that your messages to be are personally taken and delivered to me.

You can also be assured that I will have the resources within TLD to respond to all of my client's needs in other legal areas.

• TLD services clients in three offices: Long Beach, Downey and Irvine. If it is more convenient, I can meet you at the office closest to you.
  
• TLD represents individuals and families in estate planning, probate, trust administration, family law and personal injury practices.
  
• TLD also has extensive experience representing small and medium sized companies in business, real estate, employment and litigation practices.

If you have other legal matters that need attention, please let me know. I would be more than happy to introduce you to TLD.

It’s Fire Season: Are You Adequately Insured?

If there’s one weakness I find in most people’s finances, it’s that they don’t have sufficient homeowner’s and auto insurance coverage. Yet it’s the insurance we’re most likely to use, and so inexpensive for what it offers.

I think one reason people are so underinsured is that we are introduced to this kind of coverage when we start driving, a time when we’re young and don’t own anything. So we want the cheapest insurance we can find, and marketers oblige us by touting their product by price. So by the time we have accumulated assets, such as a home, and have something to lose, we’re still thinking like that broke young driver. 

Ideally, you’d have an insurance agent you trust, and you’d sit down with them once a year or so to review your coverage. But most people don’t. I encourage you to find one – ask friends for referrals – and then book that appointment. Take along a net worth statement and a list of special items you own, and be sure to ask the following: 

• If your home was completely destroyed, would the insurance be sufficient to rebuild it and replace all your possessions? I’ve had builders tell me that Southern California homes cost $200 - $250/square foot to rebuild. Apply that amount to the square footage of your own home and then check your coverage. With home prices appreciating over the past few years, most of my new clients are underinsured. The Wall Street Journal covered this in their August 26th issue, and suggested a replacement-cost calculator at www.accucoverage.com which for a $7.95 fee can help you assess the amount of coverage you need. 

• If you were sued for everything you’re worth, do you have sufficient personal liability coverage? This is where the net worth statement really comes in handy. It tells us how much you have to lose, and is a great starting point to discuss liability coverage. It may be difficult for a judgment creditor to tap your retirement funds in an employer’s plan (see my blog entry on Asset Protection and Retirement Plans), but all your other assets could be up for grabs. Once you max out the coverage offered under the individual auto and homeowner’s policies, your insurer can give you additional coverage through a personal umbrella policy, sold in million dollar increments. Don’t panic – it’s really inexpensive, about $200 per $1 million of coverage – and is one of the basic tools in a financial planner’s kit to protect middle class and wealthy clients. What’s more, it typically offers a wider range of coverage than the personal liability offered under your homeowner’s plan. 

• What about uninsured driver coverage? This is the coverage that protects you should you be involved in an accident with someone who does not have insurance. In the past few months I’ve seen a lot of clients with very low amounts of this coverage – say, $30,000 – when we know that auto accidents can cause much higher amounts of damages. Interestingly enough, these same clients have attachments to their policies from their agents, showing that they had to sign a form to acknowledge that they refused higher levels of coverage. Clearly, the industry is concerned about these lower coverage levels. And why would you want to be covered for less if hit by an uninsured motorist? 

Remember, now that you have something to lose, it’s wise to consider whether those things are adequately insured. Only buy the amount of insurance you need…but most people need more insurance than they have.

Delia Fernandez, MBA, PFP

Tough Competition Out There.

As an estate planning attorney, I keenly notice other estate planning attorney's attempts to advertise and market their services. Some attempts make me cringe and others make me say why didn't I think of that?

I rarely get mail at home about estate planning or from lawyers in general. Direct mail is expensive and hungry lawyers can't necessarily afford it.

Anyway, I received a rather nice piece in the mail today. It was addressed to me and my husband. They were offering free seminars at a local prestigious University. The letter explained the rationale for estate planning in a clear, concise and not too inflammatory manner.

My overall impression was that it is nice to know that other estate planning attorneys can solicit for business in a generally pleasing way.

3 Easy Grounds for Attacking a Trust.

Revocable Living Trusts and other estate planning documents can be attacked on three basic grounds:

1. Undue influence
2. Lack of formality
3. Lack of capacity

Undue influence refers to whether someone unduly influenced the person who created the trust in some fashion.

Lack of formality deals with the structure of the document itself. Was it properly prepared, notarized, etc.?

Lack of capacity is whether the person had a basic knowledge and understanding of the trust, knew what they were signing and knew the objects of their bounty among other factors.

Sure, I am explaining this at the simplest level, but you get the idea. So, don't accompany your mother to her lawyer's office, ask the lawyer to draft a trust giving you everything omitting your sisters and taking the document home and making handwritten changes on it. You'd be well on your way to a nice contest.

No Contest Clauses.

Trust litigation appears to be the new era. 

I was at a meeting today where the featured speaker spoke solely about no contest clauses. He started his presentation by stating that trust litigation was the last bastion to be kept safe from the reaches of litigation attorneys. He felt that the flood gates has opened with respects to trust litigation.

And so it began his discussion of no contest clauses. He said the following in a nice nutshell that I jotted down to pass along:

1. Don't cut anyone out completely. Even if you hate them, you'd hate them even more if they successfully contested your trust or other estate plan. I agree. Give them a gift.

2. All trust amendments must contain another no contest clause so that the existing no contest clause in the trust also applies to the amendment.

3. Protect collateral documents that are a part of your estate plan by including those in your no contest clause.

4. Mention the troublesome beneficiaries in your trust so the court can ascertain your intent and why you are cutting them off.

5. Make your intent clear as a settlor or the person who created the trust. Videos, letters, etc. can help your successor trustee fight your trust in court after you pass away.

6. Be creative with your no contest clause. Creativity can make it easier to enforce as the court will likely have never seen the language before and may rule in your favor especially if you are foreseeing a trust contest.

Don't be too alarmed though. Most families are pretty happy. Most parents want to leave everything to each of their children equally. If this is your case, there is no reason to have anything other than a straightforward no contest clause. But if you are concerned, talk to your attorney and make sure your attorney understands the issues.