Five Common Myths about Estate Planning

Posted January 27, 2010 in Estate Planning by Michael Lonich.


January 27, 2010
Five Common Myths about Estate Planning
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Myth #1: Estate Planning is only for Wealthy Fat Cats!

Fact: The reality is that estate planning can be just as important for people of lower or middle income as it can be for wealthy people.  Factors other than passing on great wealth to future generations affect the need for estate planning.  One such factor is transferring ownership of property in accordance with your desires.  If you don’t create a valid will, the state of California has a series of laws, known as intestate succession that will determine where your assets will go when you pass away.  Rather than distributing your assets to the people you want, such laws may distribute your assets to family members you have not spoken to in years or possibly to distant relatives you have never even met.  Another factor affecting the need for estate planning is providing future care for minor or disabled children.  Estate planning allows you to name a guardian for your children if something should happen to you.  Otherwise, a court will appoint a guardian, and it may not be an individual you would choose to raise your children.  Also, proper advance planning can allow you to name someone to manage money that you leave to your minor children or designate exactly how you want to care for disabled children.  Lastly, estate planning can provide you with a way of making health care and financial decisions for yourself in the event that you become incapacitated.  With estate planning, you can have a health care power of attorney in place to enable someone that you trust to make health care decisions for you in the event that you become ill or are in an accident and cannot make decisions for yourself.  Also, you could designate someone as a durable power of attorney to allow that person to manage your financial affairs if incapacitated.

Myth #2: In today’s world I can do my own estate plan, its easy!

Fact: Although estate planning do-it-yourself kits and software are available, they typically result in higher costs down the road for the friends and family you leave behind.  For example, trusts drafted and administered through kits or from internet forms are a leading cause of trust and probate litigation.  Spending the money now to secure good documents will save your family and friends a significant amount of money in the future by avoiding such costly litigation.  Another issue that can arise with do-it-yourself methods is that each state has its own requirements for each of the various legal documents.  So, if you create your own document and it doesn’t meet the specific requirements of the state in which you live, then your documents may not even be effective.  In the end, spending money in the short run on an attorney who can guide and advise you in developing a sound estate plan can end up saving you and your loved ones a lot of money in the long run.

Myth #3: I already planned my estate, I have a will and that is the only estate planning document I need.

Facts: A will only comes into effect at death.  As such, it does not help you manage your property in the event you become incapacitated.  A well drafted trust has provisions for how your property should be managed in the event you cannot manage the property yourself.  Also, dying with an outdated, incomplete or unsigned will can cause a number of problems for the loved ones that you leave behind.  So, even if you have a will, or an entire estate plan already written out, it is important to review your documents every couple of years.  In particular, it is important that you review your plan if any of the following events happen in your life: [1] the birth, death or disability of a child; [2] a change in marital status; [3] a significant change in the value or character of your financial assets; and/or [5] a change in state residence.

Myth #4: Who needs an estate plan when I can just hold all of my assets jointly with another person?

Fact: Although holding property in joint tenancy will avoid probate when you pass away, it is a terrible way to transfer property at death.  When you add another person to your bank account or to your real estate as a joint tenant, you are exposing that asset to every current and future creditor of that new joint tenant.  Therefore, if a parent puts a house in joint tenancy for a child, that house is subject to the child’s creditors and could be liquidated without the parent’s consent.   Also, executing a deed is a present gift to the joint tenant.  As a result, there may be significant gift tax consequences for that gift.  Furthermore, although holding property in a joint tenancy will avoid probate upon your death, it merely delays probate until the last joint tenant’s death.  Finally, unlike an estate plan which can be set up to be fully amendable and revocable, a gift of property into joint tenancy is not revocable without the cooperation of the donee.  Thus, if you have a falling out with the joint tenant you cannot just simply take back the property.

Myth #5: All trusts avoid estate tax.

Fact: Everything a person owns and controls at death will be included in his or her taxable estate.  This includes assets that pass under a will or revocable trust, assets held in joint tenancy with others, life insurance, retirement accounts, etc.  Nonetheless, once the value of the taxable estate has been determined, there are deductions, exemptions and exclusions to apply which may reduce or eliminate any estate tax liability.  Additionally, property in a revocable trust, also known as a “living trust,” may be subject to estate tax.  However, property in an irrevocable trust is generally not subject to estate tax because it cannot be modified by you, the trustor.

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Do I Need a Pre-Nup?

Posted January 25, 2010 in Estate Planning, Family Law by Julia Lemon.

As wedding season approaches, you may be wondering whether a pre-nup, or pre-marital agreement, is necessary or right for you.   A pre-marital agreement can provide many benefits, such as protecting your separate property, supporting your estate plan, and establishing rules for deciding future matters during marriage and handling issues such as spousal support and property division should you later divorce.

When considering whether a pre-marital agreement is right for you and your fiancé, consider the following questions.  If you and/or your fiancé answers yes to any of the following questions, you may benefit from a pre-marital agreement.

  • Do you own any real estate?
  • Do you own more than $50,000 worth of assets other than real estate?
  • Do you own all or part of a business?
  • Do you currently earn a salary of more than $100,000 per year?
  • Have you earned more than one year’s worth of retirement benefits or do you have other valuable employment benefits, such as profit sharing or stock options?
  • Does one of you plan to pursue an advanced degree while the other works?
  • Will all or part of your estate go to someone other than your spouse?

If you would like to discuss the benefits and procedural requirements of a pre-marital agreement, please contact Lonich & Patton, LLP for a free 30 minute consultation.  Consider issues that you may want to address in your pre-marital agreement, such as separate property identification, decisions about how you will handle money and property while you are married, whether spousal support (alimony) will be paid or waived in the event of divorce, retirement benefit agreements, and agreements about how you want to leave property at your death.


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The Elkins Family Law Task Force

Posted January 20, 2010 in Family Law by Gina Policastri.

The Elkins Family Law Task Force was appointed in response to an August 2007 California Supreme Court opinion, Elkins v. Superior Court (2007) 41 Cal.4th 1337, which held that marital dissolution trials should “proceed under the same general rules of procedure that govern other civil trials.”  The charge of the task force is to propose measures to improve efficiency and fairness in family law proceedings and ensure access to justice for all family law litigants.  At its initial meeting in June 2008, the task force defined values that have guided its work and will inform proposed recommendations:

Ensuring justice, fairness, and due process in family law;

Ensuring meaningful access for all litigants;

Using innovative techniques to promote effectiveness and efficiency;

Improving the status of, and respect for, family law litigants and the family law process and

Securing adequate resources, including existing, reallocated, and new resources.

As of October 1, 2009 the Elkins Family Law Task Force had released over 100 draft recommendations for a two-month public comment period that ended on December 4, 2009.  The task force will convene in a two-day meeting from February 1-2, 2010 in the Judicial Council Conference Center of the Administrative Office of the Courts in San Francisco.

Adapted from

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Commonly Used Terms in Family Law

Posted January 11, 2010 in Family Law by Michael Lonich.

Child Support – Money paid by a parent to help support a child or children.

Spousal Support-the money paid to the divorced spouse or to the spouse with whom divorces proceedings are initiated, as compensation ordered by the court, for their support. In no-fault divorce it is also called as alimony.

Child Custody- used in the court of law in cases where the court has to decide on which parents, in case of divorce cases, and who be the guardian in any other case, of a child who is not yet 18 years of age regarding the social upbringing, education and health matters. The court has to make a decision on such cases very carefully as its a question of child’s future and present upbringing. Incase its found that both the parents are unfit of not of sound mind, the custody of the child goes relatives and orphanages.

Arrears – Money owed because a parent or spouse did not make a court ordered child or spousal support payment on time.

Prenuptial Agreement –  a written contract between two people who are about to marry, setting out the terms of possession of assets, treatment of future earnings, control of the property of each, and potential division if the marriage is later dissolved. These agreements are fairly common if either or both parties have substantial assets, children from a prior marriage, potential inheritances, high incomes, or have been “taken” by a previous spouse.

Postnuptial Agreement – a voluntary marriage contract between spouses that is created after their wedding. It is important that each party has their own legal counsel before signing a postnuptial agreement.

Qualified Domestic Relations Order – Any decree, judgment, or order that recognizes the right of one person (the alternate payee) to participate either totally or partially in the pension of another (the participant). The alternate payee must be a dependent child, spouse, or former spouse of the participant. This is an exception to the ERISA rule, proscribing the assignment of plan benefits. Abbreviated QDRO.

With help from the following sources:

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Commonly Used Terms in Probate and Estate Planning

Posted January 6, 2010 in Business Law, Estate Planning by Michael Lonich.

Beneficiary - Someone who gets something from a trust. A person who gets money from a trust is called an income beneficiary. A person who gets property from a trust is called a remainder beneficiary.

Will – A legal paper that says what a person wants to happen to his or her personal property after s/he dies.  The person who controls the Will can change or cancel it at any time before they die.

Probate Estate – All the assets in an estate that are subject to probate. This does not include all property. For example, property in joint tenancy, or an IRA account are not part of the probate estate.

Conservatorship – A court proceeding where a judge picks someone (a conservator) to take care of an adult’s personal needs (Conservatorship of the person) and/or his or her finances (Conservatorship of the estate).

Guardianship – A court proceeding where a judge chooses someone to care for a person under age 18 or to manage his or her property, or both. Guardianship of the person gives someone who is not the child’s parent custody and control of the child. Guardianship of the estate gives someone (parent or not) the right to manage the minor’s property until the child is 18.

Trust – A trust is when one person (trustee) holds title to property for the benefit of another person (the beneficiary). A person called the settlor (or trustor) creates the trust and puts the property in the trust. The settlor, trustee, and beneficiary can be different people. But, one single person could be the settlor, trustee and beneficiary.

Joint Tenancy – When 2 or more people own something and have rights of survivorship. This means that if 1 tenant dies, his or her share goes to the other tenants.

Totten Trust Account – A type of savings or checking account. The money that’s left in the account when the owner dies goes to the person the owner chose. It is not subject to probate. The same as P.O.D. (payable on death) accounts. P.O.D. accounts are more common.

Litigation - A case, or lawsuit. The people in a lawsuit cannot agree, so they present evidence and let the court decide.

Will Contest – When you challenge the validity of a Will in probate court. You can challenge a Will because: it was not executed properly; it was cancelled or revoked; the testator was not capable of writing it.

Executor – The person or company named in a Will to carry out the Will’s instructions. Usually, the probate court supervises the executor.

Letters Testamentary – Court papers that let someone be the personal representative of a probate estate.

Fiduciary – A person who acts for another person’s benefit, like a trustee, guardian, or personal representative. It also means something that is based on a trust or confidence.

Intestate – To die without a valid Will. Or, a person who dies without a Will.

Intestate Succession – State laws that say who gets a person’s property when s/he dies without a Will. Or, what happens if the Will does not say what to do with the property.

With help from the Superior Court of California, County of Santa Clara website.

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