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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.

I’m Officially Divorced, Now What?

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You’re officially divorced and positive that everything in your life is settled (legally, anyway). Unfortunately, that might not be the case if your estate planning documents still reflect your old marital status. Fortunately, any provisions in your existing Will that leave assets to your ex-spouse will be revoked by law after divorce. Nevertheless, it is imperative that you actively take steps to create a new will and generally update your estate plan to ensure that the appropriate individuals in your life will control your legal rights and property when you die or become incapacitated. That is, unless you still wish to bequeath property to your ex-spouse at death. Since that is probably not the case, here are some estate planning changes to consider after divorce:

  1. Close any joint accounts like credit cards or savings accounts that you shared with your ex.
  2. Create a fresh Will and update any Guardianship provisions regarding what will happen to your children in the event that something happens to both you and your ex-spouse.
  3. Update any Trusts and reevaluate who your beneficiaries should be and how much property you’d like them to receive and when.
  4. Update all insurance policies, IRA’s, 401k’s, or any other retirement accounts that may name your ex as a beneficiary. These will not automatically change after divorce.
  5. Destroy or revoke your previous Durable Power of Attorney if it named your ex-spouse and create a new one.
  6. Destroy or revoke your previous Advance Health Care Directive if it authorized your ex-spouse to make future health care decisions on your behalf.

It is important to remember that at death, according to the court, whatever your legal document says goes. So, if you do not want your ex-spouse to receive certain property or benefits, you should see a licensed attorney to revoke your old estate plan and incorporate your current wishes into a new one. Hopefully, an updated estate plan can give you some peace of mind as you begin your new life after divorce.

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 experienced estate planning attorneys at Lonich Patton Erlich Policastri for further information and a free half-hour 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.

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

Costs of a Conservatorship

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There are approximately 1,500 elderly and incapacitated adults whose lives and finances are overseen by Santa  Clara County’s probate court. A recently concluded six-month Mercury News investigation found a  small group of the county’s court-appointed personal and estate managers are  handing out costly and questionable bills — and charging even more if they are  challenged. (Full article: http://bit.ly/QJIURm)

Reportedly, Santa Clara County judges are taking this investigation seriously, and will be making changes within a matter of weeks. To help you understand how a conservatorship can get costly, we included a chart below, which was graciously provided to us by Karen de Sá and Doug Griswold at the Mercury News. You can click on the chart to make it larger.

 If you are interested in learning more about creating a conservatorship or estate planning in general, contact the experienced 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.

 

Estate of Thomas Kinkade: The Handwritten Wills

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First, the cause of death. Then, the arbitration clause. Now, the mysterious handwritten wills. The unraveling of Thomas Kinkade’s estate has been like a daytime drama, with his wife of 30 years and his girlfriend of 18 months pitched against each other.

The “Painter of Light” apparently kept his family in the dark about two handwritten wills. The wills bequeath girlfriend Amy Pinto-Walsh a Monte Sereno home and $10 million cash “for her security” or to establish a Thomas Kinkade museum.* A hearing will be held in court to determine the validity of these handwritten wills, a.k.a. holographic wills. The following questions will need to be answered by the court, which are applicable to all holographic wills:

  1. Did he write the wills?
  2. Did he sign and date them?
  3. Was he coerced?
  4. Was he of sound mind?

Purported holographic wills include: a tractor fender, a cigarette carton, a bedroom wall, a napkin, a nurse’s petticoat, and an eggshell. Needless to say, this is not the ideal method of creating a legally secure document. The most troubling part about creating a holographic will without legal guidance is that this type of will is more susceptible to being denied probate.

You should to be able to rely on the document that guides the distribution of your estate. 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 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.

* The second will appears to modify the first will. See copy of “wills” with translations here: http://bit.ly/NbaLty.

Transfers from Parents & Grandparents to Children: Avoid an Increase in Property Tax

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 Do you know how to shield your  intra-family property transfers from being reassessed for property tax purposes? Understanding the law about exclusions from reappraisal is the first step towards avoiding an increase in property tax.

In California, real property is reassessed at the market value if it is sold or transferred, and property taxes can sometimes increase dramatically as a result. However, if the sale or transfer is between parents and their children, or from grandparents to their grandchildren, the property will not be reassessed if certain conditions are met and the proper application is timely filed.

Transfers of real property are excluded from reassessment if either (1) the transfer is a primary residence (no value limit); or (2) the transfer is of the first $1 million of real property other than the primary residence. The $1 million exclusion applies separately to each eligible transferor. For example, a grandchild may exclude $1 million of property transferred from her father and his parents (paternal grandparents); and $1 million of property transferred from her mother and her parents (maternal grandparents) for a total of $2 million.

It is important to note that claiming this exclusion is not always beneficial. The attorneys at Lonich Patton Erlich Policastri have decades of experience handling complex property matters. If you are interested in developing a property transfer strategy tailored to your family’s needs or learning more about estate planning, 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.

How a Charitable Remainder Trust Might be Right for You

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A charitable remainder trust (CRT) provides the ability to control income flow as needed, which is very helpful when it comes to retirement planning.  Given the current economy’s uncertainty, many may be reluctant to make donations to charity in case they encounter cash-flow problems in the future.  However, many charities are also facing financial setbacks and need more support now than ever before.  A CRT may be the answer for those who are charitably inclined but concerned about having sufficient income for the future.

A CRT has the ability to fund the charity of your choice while potentially boosting cash flow, shrinking the taxable estate, reducing or deferring income taxes, and providing investment planning advantages.  CRTs are irrevocable trusts which provide you, and potentially your spouse, with an income stream for life or a term of up to twenty years.  Upon termination of the trust term, the remaining trust assets are distributed to the charity, or charities, of your choice.

Among other advantages, CRTs helps to facilitate tax-efficient investment strategies.  For example, rebalancing your portfolio typically generates taxable income; however, contributing those assets to a tax-exempt CRT allows investors to freely reallocate assets without undue concern about immediate tax consequences.  CRTs are also helpful in selling highly appreciated assets that would generate substantial immediate capital gain and capital gain taxes.  Rather than selling those assets, contributing them to a CRT and allowing the trustee to sell them allows for reinvestment of the proceeds in more diversified assets with greater returns unburdened by capital gains taxes.

While CRTs offer a great deal of flexibility and retirement planning advantages, they require careful planning and solid investment guidance to ensure proper structure and funding.  If you are interested in learning more about retirement and estate planning, please 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 include legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

When it Might be Appropriate to Have Your Parent Conserved

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Your parents have always been put together and independent.  However, as time passes and you notice them becoming forgetful or unable to handle their day-to-day affairs, you are unsure of how to proceed as their mental states begin to deteriorate.  Should they be conserved?

Generally, the legal definition of capacity is the mental ability to adequately function.  In California, the Probate Code allows a court to appoint a conservator of the person for a person who is unable to provide properly for his or her personal needs for physical health, food, clothing, or shelter; a conservator of the estate for a person who is substantially unable to manage his or her own financial resources or resist fraud or undue influence; or a conservator of the person and estate for a person described in both of the previous categories.

If a conservator is appointed, he will be responsible for managing your parent’s affairs.  The conservator does not have to be a family member, although it often is.  Once appointed, the conservator will owe a duty of care to your parent and will be held accountable by the court.

There are other options, however, if conservatorship is too extreme.  Sometimes, elderly parents realize they need assistance and ask for it.  In this scenario, families can avoid the expense and emotional turmoil of having a parent conserved and family members can assist parents with their finances or hire a professional.  Other options include creating a durable power of attorney for property or a living trust.  These documents generally appoint an agent or trustee to manage your parent’s financial affairs.

If you are interested in learning more about ensuring your parents are able to manage their day-to-day lives as they grow older, please 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 include legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

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LONICH PATTON EHRLICH POLICASTRI

1871 The Alameda, Suite 400, San Jose, CA 95126
Phone: (408) 553-0801 | Fax: (408) 553-0807 | Email: contact@lpeplaw.com

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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