Advanced Health Care Directive: Are You Prepared for the Unthinkable?

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No one likes to be powerless, but isn’t it inevitable? Unfortunately, old age, illness, or tragedy will surely reveal itself in each of our futures in some way or another. Instead of waiting helplessly, hoping that you will never live a day in your life incapacitated, you can create a legal document that will ensure that your rights, dignity, and wishes will be protected if you ever become incapable of making or communicating decisions regarding medical care.

An advanced health care directive is a durable power of attorney and performs much like a living will. A power of attorney is a legal document used to appoint another person to make property and/or health care decisions on your behalf. It allows you (the principal) to grant authority to your appointed agent (also called your attorney in fact) to manage your financial matters or health care needs. This durable power of attorney for health care appoints an attorney-in-fact to make health care decisions based upon your specific and spelled-out wishes in the event that you become incapacitated. For example, a health care power of attorney allows you to express your wishes regarding life-sustaining treatment should the need for such treatment arise. It is important to provide detailed guidance for your health care agent in the power of attorney. Perhaps you want to donate your body to science or donate your organs to needy patients? If something like this, or any other particular request, speaks to you, it should be in writing.

So, what are you waiting for? Tragic accidents and heart attacks don’t come with warnings. In the end, having a plan in place is a compassionate step—no one should want their family to agonize over whether to let you live in a vegetative state or pull the plug. By carefully outlining your wishes, you can take some of the weight off of your loved ones’ shoulders during such a trying time.  Furthermore, you can even save your family money on hospital fees, ensuring that your spouse will not get saddled with astronomical medical bills on top of funeral expenses.

Talking about death is never easy, but if you are ready to discuss pulling together an advanced health care directive, please contact the experienced estate planning attorneys at Lonich Patton Erlich Policastri for further information. The attorneys at Lonich Patton Erlich Policastri have years of experience handling complex estate planning matters, including wills and living trusts, and we are happy to offer you a free consultation.

Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

Estate and Tax Planning for Same-Sex Couples

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Yesterday morning, the U.S. Supreme Court delivered a landmark decision: the Defense of Marriage Act (DOMA), a federal law that offered federal marriage benefits to only opposite-sex marriages in the United States, was struck down. With the overturning of the statute, same-sex couples challenging DOMA have achieved a clear victory: DOMA had impacted over 1,100 federal laws – from veterans’ benefits and family medical leave to Social Security and tax benefits – all of which are now available to married same-sex couples just as they are to married opposite-sex couples.

Yesterday’s ruling will have widespread estate and tax planning implications for the nearly 130,000 married same-sex couples in the United States because they will now have access to, amongst a host of other benefits, the following*:

  • Immigration rights, including eligibility for benefits;
  • Social Security retirement and disability benefits;
  • Veterans’ benefits, including pensions, nursing home care, educational assistance, and housing;
  • Equal income and estate and gift taxes as opposite-sex couples; and
  • Employment benefits, including employer-sponsored health benefits and the right to unpaid leave to care for a seriously-ill spouse.

Additionally, as a result of yesterday’s decision, California will likely become the 13th state to legalize same-sex marriage – boosting the incentive to properly create and execute an estate plan consistent with updated laws. Also, for legally married same-sex couples who have moved or now live in a state that does not yet recognize same-sex marriage, there are still obstacles towards accessing federal marital protection.

If you have any questions regarding your estate plan and the legal consequences that current changing laws have on your rights and your partner’s rights, please contact the experienced estate planning attorneys at Lonich Patton Erlich Policastri for further information. The attorneys at Lonich Patton Erlich Policastri have decades of experience handling complex estate planning matters, including  same-sex estate plans, and we are happy to offer you a free consultation.

Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

 

*U.S General Accounting Office, Defense of Marriage Act, GAO-04-353R (Washington, D.C.: January 23, 2004) (listing federal statutory provisions involving marital status).

 

You Say Estate Planning is Terrifying: We Say, Meet the BDIT

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In theory, setting up a trust and reaping its many benefits sounds great. In practice, however, giving up all control of your assets can be downright frightening. Well, now you can avoid “Estate Planning FOMO” (Fear Of Missing Out) and cozy up to the Beneficiary Defective Irrevocable Trust without fear.

When used correctly, the BDIT is as sensible as it is beneficial, offering substantial asset protection and tax planning benefits. So how does it work?

  • First, a third party such as a grandparent or parent, creates a trust and names you as beneficiary and trustee to that trust.
    •  This gives you management rights over the trust.
  •  Second, the trust should name an independent trustee to choreograph the trust and make strategic decisions regarding things like trust-owned life insurance, discretionary distributions, and tax matters.
    • Since you (the client) didn’t set up the trust on your own or initially fund the trust with your own money, you can benefit from all the wonders the trust world has to offer.
  •  Third, you can sell large appreciated assets to the trust in return for a promissory note for the purchase price, without triggering capital gains tax implications.
    • By doing this, you essentially “freeze” the value of your taxable estate.
    • For example, if you sell your family business to the BDIT, any growth of income and assets within the BDIT can benefit you and your family without being touched by estate taxes.

If it isn’t clear already, why is a BDIT a good idea? It’s not—it’s a GREAT idea. If executed properly, the BDIT can shield your assets inside the trust from claims against creditors. Also, you will receive a multitude of rights as trustee and beneficiary of the trust. For example, you’ll be able to:

  • Receive income from the trust;
  •  Make withdrawals from the trust assets (usually limited items related to health, education, or support);
  • Remove and replace the independent trustee;
  •  Use trust property rent-free;
  •  Generally manage the trust assets, and;
  •  Have the power to rewrite the trust under special circumstances.

Notably, a BDIT is “income tax defective,” which means that as the grantor and trustee, you are “granted” with withdrawal powers and other benefits, but you are required to pay the trust’s income taxes. “Hmm…well, why would I want to pay more income taxes?” With grantor trusts like the BDIT, paying the income tax is a big trade-off, allowing the trust’s income to grow outside of your estate, allowing you to use the income as you wish, let it grow inside the trust, and reducing your taxable estate by the amount of taxes you have paid. Over time, you and your descendants will be thrilled with your prudent choice to embrace the BDIT.

This is complicated, of course, but the extra effort can really pay off in the end. If you have any questions regarding your estate or are interested in creating a BDIT, please contact the experienced estate planning attorneys at Lonich Patton Erlich Policastri for further information. The attorneys at Lonich Patton Erlich Policastri have decades of experience handling complex estate planning matters, including wills and living trusts, and we are happy to offer you a free consultation.

Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

Estate Planning is Important for Women Too

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In fact, it’s arguably more important for women than men. Though a 2011 survey shows that women are more concerned with maintaining their weight than protecting their financial assets, there are several reasons why it would be wise to reconsider and rearrange those two priorities. For example:

  • Women live longer on average
    • By age 65, women are nearly 3 times as likely as men to be widowed, and as the surviving spouse, they will decide where the couple’s wealth goes after her death.
  • Women tend to survive their spouses
    • Retirement planning is a major issue – to ensure that their standard of living during later years does not decline, women need to make informed decisions about where to allocate their assets in order to protect their future.
  • Women often have custody of their children
    • In 2009, approximately 82% of custodial parents were women, making estate planning crucial to ensure that their children are cared for if unexpected circumstances arise.
  • Women are often the caregivers
    • Advanced estate planning will protect dependent grandchildren and aging parents – and even beloved pets – in the event of incapacity.
  • Women are often professionals
    • Although prior to 1975, men had the sole legal authority to control and manage community property*, that simply is not the case anymore – today, women are often professionals with significant businesses, careers, and assets to protect.
  • Women today often choose to remain unmarried
    • Without a proper estate plan in place, the state will determine who receives an unmarried woman’s assets and property – rather than her particularly close friend or a long-time partner.

At the very least, women should be as equally active in seeking estate planning tools as men – if not more. Whether you are single, married, divorced, or widowed, you will benefit from seeking out the various options you have to protect yourself. Estate planning can be overwhelming, but being educated and prepared will allow you to provide the best possible future for yourself, your family, and your loved ones.

If you have any questions regarding your estate or are interested in creating a new estate plan, please contact the experienced estate planning attorneys at Lonich Patton Erlich Policastri for further information. The attorneys at Lonich Patton Erlich Policastri have decades of experience handling complex estate planning matters, including wills and living trusts, and we are happy to offer you a free consultation.

Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

*Married Woman’s Special Presumption, Cal. Fam. Code Section 803.

Cheaters Never Prosper: Tortious Interference with Inheritance in California

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Personal injury, otherwise known as “tort,” claims are typically successful only if the complaining individual has suffered an injury-in-fact. Essentially this means that courts will only award damages to persons who have truly been injured—be it physically, financially or, in rare cases, psychologically. In tort law, if you think you will suffer an injury next week an attorney will tell you to call them after you suffer your misfortune, but not before. In many ways this can be unfair, but this policy keeps the courts from being overrun with people suing for injuries that could/might/maybe/we think will happen and never do.

California’s policy against litigating future harm may be shifting, however. In Beckwith v. Dahl, an Orange County Court of Appeal recently determined that California courts can and will recognize the claim of Intentional Interference with an Expected Inheritance (IIEI). In order to recover damages, the claiming party has to prove five specific things:

  1. That there was an expectancy of an inheritance,
  2. There was reasonably certain proof that the will or trust that would benefit the claimant would have been in effect when the giver died if there had not been an interference,
  3. That the inter-meddling third party knew that the claimant expected the inheritance and deliberately interfered,
  4. That the third party’s interference was “independently tortious” (fraud is a good example), and
  5. Finally, that the claimant was damaged by the third party’s interference.

Although the elements look simple enough, the damaged party will recover if, and only if, each and every element is satisfied. Additionally, the jury has to be convinced that these elements exist and the jury must find that the deceased property owner didn’t change his mind at the last minute. Parties who have suffered or feel cheated out of their inheritance should rejoice that they have a new avenue to get what they rightfully deserve.

However, it should be noted that a party cannot successfully file a claim for IIEI in civil court if their issue could be remedied at probate court. This issue, like most estate planning issues, can be complicated and difficult to address without the aid of an attorney. If you have questions about your rights in an estate planning matter, the attorneys at Lonich Patton Erlich Policastri have years of experience handling complex estate planning matters including wills and living trusts. Or, if you are interested in developing your own estate plan or reviewing a currently-existing estate plan, contact the attorneys at Lonich Patton Erlich Policastri for further information or to set up a free consultation.

Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

 

*See Beckwith v. Dahl (2012) 205 Cal.App.4th 1039.

Covering the Bases: How to Plan for Unplanned Death

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The wonderful world of estate planning can be strange and morbid at times. For example, when making a will or creating a trust, you might pose questions to yourself such as, “what if our plane goes down on our next family trip to Hawaii and there are no survivors – who should get our home and my stock options, then?” Considering such possibilities does not make you sick or twisted, it actually means you are prudent with your property. It is hard to discuss the unfathomable, but it is definitely smart to have a plan.

Creating a will or trust isn’t necessarily difficult, but potential complications arise when you start to consider what would happen if the person you intended to leave your wealth to dies before, or at the same time as, you. Having a will or a detailed trust is a great first step when it comes to protecting your life’s work and resulting assets. Nonetheless, it is important that the language of your trust or will accommodates a wide array of possible outcomes in regard to your estate.

Without question, you should select a secondary beneficiary for your will or any trusts you create. Additionally, you may want to discuss the inclusion of a ‘simultaneous death’ provision or determine what is to come of your estate if your primary beneficiary dies within thirty days after you – do you still want that individual’s estate to receive his share? Maybe you’d prefer to donate your property to charity if the beneficiary of your choice is unable to accept your estate. There are numerous contingencies that should be addressed in your estate planning documents.

It can be difficult to address complicated issues if you create a will or trust without the aid of an attorney. An experienced estate planning attorney can help you cover your bases, prepare for the unthinkable, and insulate your family from conflict by making your estate easy to settle. The attorneys at Lonich Patton Erlich Policastri have years of experience handling complex estate planning matters including wills and living trusts. If you are interested in developing an estate plan or reviewing your current estate plan, contact the estate planning attorneys at Lonich Patton Erlich Policastri for further information or to set up a free consultation.

Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

Disinheritance: The Elephant in the Room

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Are you a bad person for wanting to disinherit a son, daughter, or family member who would otherwise have a stake in your property at your death? Definitely not. Disinheritance actually happens more often than you think. You can effectively disinherit an heir by clearly stating your intent to do so in your will or trust documents to ensure that your decision to disinherit won’t be misunderstood as a mistake.

The reasons for considering disinheritance may vary. Perhaps you have a strained relationship with a family member and wish to leave them nothing. On the kinder side of things, maybe you helped put your daughter through law school, but your son never asked for a dime. By disinheriting your daughter, you can “even the score” by ensuring your son receives all of your remaining assets.  No matter what your reason, disinheriting by will can give you an opportunity to control where your assets go—and do not go—after death. Additionally, in your will, you can state your reason for the disinheritance to assure there are no hard feelings if that is a concern.

Disinheritance is not an easy topic for discussion. Nevertheless, if you are interested in disinheriting a potential heir via your will, you should discuss the idea with your estate planning attorney. You may also wish to discuss the possibility of creating a living trust which will give you the opportunity to designate beneficiaries and determine how much (or how little) they will receive upon your death.

The attorneys at Lonich Patton Erlich Policastri have decades of experience handling complex estate planning matters including wills and living trusts. If you are interested in developing an estate plan or reviewing your current estate plan, contact the experienced estate planning attorneys at Lonich Patton Erlich Policastri for further information.

Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

Gift Taxes: How Much Your Generosity Could Cost You

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Should you liquidate your trust to take advantage of the new federal estate tax exemption? You may not need to. Not immediately, anyway. As 2012 came to a close, there was some worry that the generous federal tax gift exemption would fall off of the fiscal cliff, leaving many estates vulnerable to the 35% federal estate tax for gifts. To the delight of many taxpayers and estate planners alike, the federal tax provision allowing an individual to give tax-free gifts totaling up to $5 million over his or her lifetime, is now permanent.* This “unified credit” may also be applied to an individual’s estate at death if it is not utilized before death.

If your estate isn’t large enough to cover a gift of $5.12 million during your lifetime, you may be delighted to know that the annual gift tax exclusion has also survived. So, any taxpayer may make a tax-free gift of $13,000 a year per recipient. For example, in 2013, a father can give $13,000 to his daughter, $13,000 to his grandson, and $13,000 to his neighbor, all tax free. Slowly making these tax-free gifts is a great way to ensure that your taxable estate is worth less than the federal estate tax threshold of $5.25 million when you pass, effectively insulating your loved ones from an estate tax of 40% down the road.

No matter what the size of your estate, it is smart to have a plan for the future. The attorneys at Lonich Patton Erlich Policastri have decades of experience handling complex estate planning matters including wills and living trusts. If you are interested in developing an estate plan or reviewing your current estate plan, contact the experienced estate planning attorneys at Lonich Patton Erlich Policastri for further information.

Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

*See http://www.irs.gov/pub/irs-pdf/p950.pdf for a detailed explanation of the gift exemptions.

Protecting the Hand-Me-Down Business

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Big businesses routinely have succession plans in place. Do smaller family-owned businesses? Infrequently, which is surprising and unfortunate. Without well thought-out succession plans in place, many family-owned businesses cease to exist.

To be sure, many family business owners would love to eventually “pass the torch” to a son or daughter. But what will happen in the event of sudden death or disability before they are ready to accept the responsibility? It is in the best interest of all parties involved that a proper estate plan is in place to avoid probate of business assets. The probate process is expensive, may take upwards of two years, lacks privacy, and takes nearly all control out of your family’s hands. Additionally, a plan could eliminate potentially crippling estate taxes on the business.

A business is a sophisticated property interest. For an owner of a small family business, however, the business is more than just a source of income—it represents the history and livelihood of their clan. With adequate planning, the business and its value may be protected, perhaps by creating a family limited partnership or by placing the family’s assets into a living trust. There can be significant estate tax advantages to creating a limited partnership for your family business and transferring minority interests to future inheritors.

Estate planning is a complex field. Whether you are concerned with devising a plan for either a family estate or that of a business, it is important to get good advice. The attorneys at Lonich Patton Erlich Policastri have decades of experience handling complex estate planning matters including business succession plans, wills, and living trusts. If you are interested in developing an estate plan or reviewing your current estate plan, contact the experienced estate planning attorneys at Lonich Patton Erlich Policastri for further information.

Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

Allotting Trust Funds for Travel

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Concerned that your loved one will not be able to see the Seven Wonders of the World? Fortunately, with the flexibility of creating a customized estate plan, travel can become a part of your legacy. As reported by the San Jose Mercury News in Inheriting Travel: Trusts Can Fund Trips for Heirs,* there are many people thinking about how to influence the behavior of their descendants in a positive way.

Some people choose to specify a particular country or city in their trust, while others choose to bequeath money for the purpose of their offspring connecting with their heritage or for a philanthropic purpose. In one case, a father wanted to encourage family visits where his children lived far away from each other, so he included a yearly air travel budget in his estate plan.

There are many creative clauses that can be included in a trust to create an estate plan tailored to your needs. Additionally, including such provisions can work to shield the beneficiaries from creditors. The attorneys at Lonich Patton Erlich Policastri have decades of experience handling complex estate planning matters. If you are interested in developing an estate plan or modifying your current estate plan, contact the experienced estate planning attorneys at Lonich Patton Erlich Policastri for further information.

Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results. While this post may detail general legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

* Read article here: http://bit.ly/P0VTAN

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LONICH PATTON EHRLICH POLICASTRI

Phone: (408) 553-0801
Fax: (408) 553-0807
Email: contact@lpeplaw.com

1871 The Alameda, Suite 400
San Jose, CA 95126

Located in San Jose, Lonich Patton Ehrlich Policastri handles matters for clients in northern California, specifically San Jose and Silicon Valley. Our services are available to anyone within the following counties: Santa Clara, San Mateo, Contra Costa, Santa Cruz, Monterey, San Benito, and San Francisco. For a full listing of areas where we practice, please click here.

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