Estate Planning Practice Blog

Legal Developments for Same Sex Couples.

The American Bar Association has many divisions. One of their divisions is the General Practice, Solo Division.

Their last newsletter contains many useful articles that are of interest to same sex couples and domestic partners as it relates to:

1.  Estate Planning for Same-Sex Couples by Joan M. Burda

2.  Tax Issues Affecting Same-Sex Couples by Tamara E. Kolz

3. Domestic Partnership AgreementsBy Laurie Kadair Redman

WSJ: Using 529 Plans To Save On Estate Taxes.

The Wall Street Journal, Personal Finance/Money & Investing Section over the weekend included a neat article by Ron Lieber, Green Thumb columnist, titled, "A New Trick For Avoiding Estate Taxes."

If you have WSJ online subscription access, you can click here to view the article.

The gist is this: you may be able to use a 529 plan for college education to shelter money from your estate. It might be a good strategy for grandparents. Ron wrote that you can give multiple individuals $60,000 each in a single year to a 529 plan set up for that individual.

As Ron wrote, if you have lots of grandchildren, nieces or nephews, that's alot of money you could "give" to the 529 plans.

Without going into further detail, 529 plans are flexible for many reasons. Talk to your financial advisor about using a 529 plan in this manner. Be sure to invite your estate planning attorney in these conversations as well if you plan to use 529 plans to minimize estate taxes.

And in the meantime, read Ron's article in the WSJ if you can get access it.

Pour-Over Will Provision.

A pour-over Will is a companion or a back-up to a Living Trust.  If you have property outside of your Living Trust when you die and it should be in your Living Trust, the pour-over Will will transfer this property into your Living Trust.

If a pour-over Will must be used, a probate estate must be opened so that the title of the assets can transfer into the Living Trust. A pour-over Will cannot be used without a probate proceeding.

A pour-over Will will be used if the property outside of your trust exceeds $100,000 in value in the aggregate. Say you have a small credit union savings account worth $5,000 -- a small estate affidavit procedure can be used to transfer this account in lieu of probate. But if this savings account along with other assets exceed $100,000, probate must be opened to transfer title of all of these assets.

How to tell if your Will is a pour-over, read the sample provision below where the Will gifts the entire estate to the Living Trust.  [Note that this Will does not give the property outright to whoever is the trustee of the trust. It gives it to the trustee of the trust to distribute in accordance with the trust provisions.]

2.1. Gift of Entire Estate

    I give all of my property to the trustee of the JOHN SMITH REVOCABLE TRUST dated July 1, 2006, created under the declaration of trust executed on the same date as, but immediately before, the execution of this will, by JOHN SMITH as settlor and trustee. The trustee of that trust shall add the property disposed of under this will to the trust principal and hold, administer, and distribute the property in accordance with the provisions of that declaration of trust, including any amendments of that declaration of trust that have been made before or after execution of this will.

Original Estate Planning Documents and Non-Citizen Spouses.

Funny thing about situations ... every few weeks or so I run into very similar situations in a short period of time.  It's like playing poker; here's s a three of a kind or a two pair!

Two and half situations worth posting about:

1. Keep Your Original Estate Planning Documents. Be sure that if you hire an attorney to prepare your estate plan that you have your original estate planning documents for safekeeping. A reputable attorney will not keep your original estate planning documents without asking for your permission. In fact, most attorneys these days do not keep any original documents and instead provide instructions to clients on where and how to store their documents. That said, however, a reputable attorney may keep copies of your estate planning documents.

1.1. Don't Lose Your Original Estate Planning Documents. Please be sure you know where your documents are located in the event your loved ones need them or you wish to update them. There's nothing more frustrating than hunting down missing estate planning documents where it is obvious that they existed at some point. The most tattle-tale way of knowing that a trust exists is to have real estate titled into a trust.

2. Planning for a Non-citizen Spouse. If you are married to someone who is not a U.S. citizen, there are major tax issues involving a non-citizen spouse receiving an inheritance. Citizen spouses are allowed unlimited tax-free transfers of property between spouses where the spouse receiving the property is a U.S. citizen. If the receiving spouse is not a U.S. citizen, the property may be subject to U.S. gift and estate taxes. The way to avoid this is proper estate planning and establishing a special trust for the non-citizen spouse's benefit. This trust is called a qualified domestic trust or QDOT. Ask your estate planning attorney for more details.

Anna Nicole's Will Should Have Been Updated.

The headlines in the news for the past week focused on the untimely death of Anna Nicole Smith. One major topic of discussion was her Last Will and Testament and how it disinherited after born children.

Without picking apart what is wrong with the Will from a drafting standpoint ... she violated one of the tenets of estate planning -- make sure your estate plan is up-to-date.  Any changes in your family structure as it relates to your estate plan should be incorporated as soon as possible. This includes death, marriage, birth or divorce in your family.

Here, Anna Nicole's son died and her daughter was born -- these are two changes that should have been reflected in a codicil or a new Will. Of course, it may take anyone more than a few months or five months to see an attorney to update a Will after the death of a loved one, but she time to make a change in her Will to include her newborn child before giving birth.

It is also likely that if Anna Nicole had significant assets (no, I am not talking about those) then she may have had a trust. Trusts are private instruments not subject to public scrutiny unless it becomes part of a litigation matter.

If she had a trust, her Will could have been a "pour-over" Will. A pour-over Will is drafted so that any assets not already in her trust will be devised to her trust via a probate proceeding. Anna Nicole's Will is not a pour-over Will.

For a pdf version of Anna Nicole Smith's Will, click here.

Updated 2-27-2007, a pdf version of her Will is now being circulated with the last page indicating witnesses' signatures. Apparently one witness is Howard Stern's former colleague and another witness was an actress that appeared in Wasabi Tuna with Anna Nicole.

Avoiding Trust Litigation.

Please check out our featured article and cover story, "Estate Planning: Avoiding Trust Litigation," of the February issue of NAPFA Advisor.

Click here to get the article in pdf form:  Avoiding Trust Litigation

NAPFA refers to the National Association of Personal Financial Advisors.  It is an excellent organization composed of fee-only financial advisors.

Trust litigation is an emerging practice area for many attorneys. Our article takes a look at some of the trends and offers some suggestions for financial advisors to work with their clients to avoid trust litigation.

Do What You Want To Do.

Estate planning is one of those types of legal matters where clients should find the attorney you are most comfortable working with. You want your estate planning attorney to spend time with you, assist you with determining your wishes and be willing to draft documents in accordance to your wishes.

Sometimes you might hear an attorney say it is too time consuming or to complicated to draft a trust that has specific provisions for each of your 16 nieces and nephews. But if that's what you want, you should be able to have it drafted your way.

For the most part, if it is not illegal, unconscionable or violating any of the maxims of trust drafting, it can be done. You might have to pay more than the person who wants to give everything to only one person. That's to be expected as fees for estate planning documents should be calculated based on your needs and assets. Estate planning is not a one price fits all situation for anyone. 

Estate Planning Blog as "Blawg of the Day!"

On February 10, 2007, this blog was the "Blawg of the Day" on Tim Mighell's Inter Alia blog. Thanks Tom!

[Fun fact: some legal blogs call themselves "blawg" as it has the word "law" instead of blog.]

Probate is Not Always Necessary to Transfer Title.

How do you know when probate is required?  Here are some of the circumstances you may encounter:

Transfers of personal property under Probate Code §13100

If the decedent has personal property in his or her name alone valued at less than $100,000, a Declaration under Probate Code §13100 can be used. When determining the value of the estate, you would not use joint tenancy accounts, wages, etc. (see P.C. 13050 for excluded property). You must wait 40 days after the date of death. Attached is a sample Declaration. A certified copy of Death Certificate must be attached to the Declaration. The Declaration is provided to the bank, stock company, etc.

Transfer of real property under Petition to Determine Succession to Real Property

If the decedent’s main asset is real property valued at less than $100,000, a Petition to Determine Succession to Real Property can be filed under P.C. §13151. This is a “one time hearing” type of petition. The court grants it and the Order gets recorded to effectuate the transfer. Attached is a copy of the petition.

Transfer of Real Property of Small Value

If the gross value of all real property in decedent’s estate in California does not exceed $20,000, the Affidavit Re Real Property of Small Value can be used. Probate Code §13200.

Joint Tenancy Title

If title to real property is held as joint tenants, an Affidavit Death of Joint Tenant must be recorded, attaching a certified copy of the Death Certificate. If there is personal property held in joint tenancy, such as stock, the stock transfer agents will have their own forms (Affidavit of Domicile, etc.) to transfer stock.

Spousal Property Petition

If title to the decedent’s property (real and/or personal) is held as “community property”, you would use a Spousal Property Petition under P.C. §13650, which is a “one time hearing” type of petition. A copy of the petition is attached. The petition can be used to determine the property passing to the surviving spouse (i.e., the decedent’s interest), and also to confirm the surviving spouse’s own interest. The value of the estate is not a consideration with this type of petition. The petition must include certain allegations as to community property status (how long married, etc.) and they are outlined in the Probate Rules.

Under certain circumstances, this petition can also be used for decedent’s separate property. For instance, if the decedent has a Will specifically leaving everything to his or her spouse, separate property can be included in the petition.

Probate

A probate is almost always not necessary when there is a surviving spouse. If there is no surviving spouse and the decedent’s estate is worth more than $100,000, you will most likely need to file a probate.

Newsweek's Jane Bryant Quinn on "Wills and Other Ways"

This week's issue of Newsweek (February 12, 2007) features a timely piece by columnist and financial guru, Jane Bryant Quinn, on estate planning. It's an excellent piece... click here to read the column at newsweek.com.

Quinn says, "...get advice, not from a buddy but from a lawyer who specializes in estates."