trust Archives - Lonich Patton Ehrlich Policastri

Estate Planning for Special Needs Children

June 16, 2017/in Estate Planning /by Michael Lonich

Having a child with special needs brings countless challenges to overcome. Parents of these children, regardless of age, are their biggest advocates, providers, and caretakers. Life is unpredictable, but if parents have a well thought out plan they can take comfort in knowing their child will continue to be provided for. Therefore, it is essential that parents of a special needs child plan early regarding their estate.

Setting out an estate plan to provide for a child with special needs has its own unique hurdles. One is to design a plan that supplements a child’s government benefits while enhancing the quality of the child’s life. As a parent, if you leave your child too much outright this may risk them losing their public benefits. Another hurdle to overcome is to figure out how to provide for proper supervision, management, and distribution of the inheritance through a third party created and funded Special Needs Trust. The task of estate planning may feel daunting at times, but with a knowledgeable attorney and good organization parents can execute a successful estate plan.

The ultimate goal is to preserve public benefits for a disabled child. Parents will want the plan to provide a lifetime of money management for the child’s benefit, protect the child’s eligibility for public benefits, and ensure a pool of funds available for future use in the event public funding ceases or is restricted.

These goals can be accomplished by executing a Special Needs Trust. If properly drafted and administered, a Special Needs Trust will allow the child to continually qualify for public assisted programs even though their parents have left them an inheritance. This occurs since the assets are not directly available to the child and because this type of trust has strict limits on the trustee’s availability to give money to the child.

Parents who draft a Special Needs Trust will appoint a trustee to act as the child’s money manager. This is a very important decision because it will ensure the long-term success of the Special Needs Trust. Parents should closely counsel with their attorney before making this selection.

Parents may also wish to appoint a guardian or conservator. A conservatorship or guardianship are court proceedings that designate a person to handle certain affairs for an incapacitated person. Where a conservator cares for the estate and financial affairs, a guardian is responsible for personal affairs such as where the child lives or what doctor they see.

Parent’s planning will ensure their child is cared for in the best way possible. But it is important to plan now. If you are considering drafting an estate plan and would like more information about Special Needs Trusts or other options available, please contact the experienced estate law attorneys at Lonich Patton Erlich Policastri

Lastly, 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

Trust Administration: How a Trustee Can Collect Reasonable Fees

January 24, 2017/in Estate Planning /by Michael Lonich

Although trusts do avoid the complication and expense of probate proceedings, a trustee—the person given power to hold legal title to and to manage trust assets—is not necessarily spared the administrative burdens that can accompany estate management. Trustee responsibilities can include clearing title to property held in the decedent’s name, the preparation and filing of estate and income tax returns, and the collection of insurance proceeds—essentially any task necessary to administer the trust as the trust instrument instructs. Typically, the creator of the trust—the settlor—will appoint a trustee in the trust instrument and provide compensation from his or her estate for the trustee’s services. However, if the trust instrument does not specify any compensation, California Probate Code § 15681 allows a trustee to receive “reasonable compensation under the circumstances.”

In re McLaughlin’s Estate defines “reasonable.” First, the trial court has wide discretion when making a fee determination, but it should consider the following factors:

1) The gross income of the trust estate

2) The success or failure of the trustee’s estate administration

3) Any unusual skill or experience which the trustee may have brought to his/her work

4) The fidelity or disloyalty displayed by the trustee

5) The amount of risk and responsibility assumed by the trustee

6) The time spent by the trustee in carrying out the trust

7) Community customs as to fees allowed by settlors/courts or as to fees charged by trust companies and banks

8) The character of the administration work done

9) Whether the work was routine or involving skill and judgment

10) Any estimate which trustee has given of his/her own services.

In McLaughlin, the appeal court concluded, after considering the above factors, that the trial court justly allocated reasonable fees—the trustees had profitably and with special skill managed the trust property, had accurately summarized receipts and transactions, and had committed a large amount of time to the trust’s administration.

Estate of Nazro provides another example of the above factors in action: Here, although the trustee received dividend checks, made bank deposits, wrote checks, prepared quarterly accountings, and reviewed trust assets, the work did not consume much of the trustee’s time. Further, the court noted that corporate trustees in the area customarily charged management fees based on a schedule of percentages of the value of the various trust assets. Therefore, the court held that $2,500 was an appropriate amount of compensation for the trustee’s services.

Ultimately, managing a trust estate is not always a walk in the park—if not otherwise provided, trustees should not be afraid to ask for compensation for their services. However, keep in mind that compensation must reasonable and proportional to the work done on behalf of the trust.

If you have recently been named or appointed as a trustee or you are interested in creating a trust, please contact the experienced attorneys at Lonich Patton Erlich Policastri. We can help you understand what being a trustee entails, and if you want to create a trust, how you can properly compensate your chosen trustee.

Lastly, 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.

Sources:

California Probate Code § 15681

In re McLaughlin’s Estate (1954) 43 Cal.2d 462

Estate of Nazro (1971) 15 Cal.App.2d. 218

Estate Planning for Millennials

September 28, 2016/in Estate Planning /by Gina Policastri

While estate planning may sound like an activity reserved for the baby boomer generation, even Millennials can get in on the fun! Further, estate planning is not only for people with ample assets—planning for your future can extend to healthcare decisions and even your Facebook account. Of course, thinking about death—especially one’s own—is hard, but there are many benefits to be reaped from laying out a few guidelines for your loved ones.

To begin, estate planning at a young age may not involve complex financial considerations, but there are two key areas to focus on: healthcare and personal property.

First, once you turn 18 years old, family members no longer have the legal right to access your medical records, and should you become incapacitated, your family would not be able to speak to your doctors or make medical decisions on your behalf. Estate planning ensures that in the event of your incapacitation, your health is taken care of according to your wishes and by people you trust—

1) Advanced Healthcare Directive: A legal document in which you detail what medical actions should be taken if you are incapacitated or unable to make decisions on your own. This document can be used to record your preference (or not) for a “do not resuscitate” order.

2) Durable Power of Attorney: A legal document which, should you become incapacitated, gives power to a person of your choosing to make medical or financial decisions on your behalf. A durable power of attorney works in conjunction with an advanced healthcare directive to ensure that your health preferences are understood and heeded.

3) HIPPA Release Form: This form allows people listed on your advanced healthcare directive to access your medical records. Access to your records makes it easier for your designated caregivers to make informed decisions regarding your health.

Second, you may not have a lot of assets, but most likely, you do have some treasured possessions. To prevent your assets from being waylaid by intestacy (in which state laws determine how your property is distributed), consider making a will or trust—

4) Wills and Trusts: A will and/or trust details to where and to whom your assets will go after your death. While you may be content to let intestacy laws distribute your estate, creating a will or trust can streamline the process and assure your relatives that they are honoring your true wishes. Importantly, besides money, you should consider other cherished aspects of your estate. First, your pet—who will take care of your beloved fur friend? Second, consider family heirlooms passed down to you through grandma and grandpa—a will or trust ensures that those items fall into the right hands. Third, do you want to allocate any assets to a significant other? If you and your partner are not married, he or she is not entitled to any of your assets and will likely receive nothing through intestacy either. Whether you want to leave money or possessions—valuable or sentimental—a will or trust ensures your significant other receives a piece of your estate.

5) Digital Assets: Social media accounts and digital files need postmortem management, especially if you would like your family to shut down your various online accounts. Federal law does not require that websites permanently delete the account of a deceased user. Therefore, designating a digital “executor” and creating an inventory (with updated usernames and passwords) of your online accounts that details what you would like done with them can ensure your online presence is handled according to your wishes.

Death is a difficult subject, but estate planning ensures that your family is not left without direction for how your final wishes should be carried out. Therefore, if you are interested in learning more about estate planning, please contact the experienced attorneys at Lonich Patton Erlich Policastri. We can help determine what documents would best safeguard your assets and/or your medical wishes.

Lastly, 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.

Transferring The Family Business, But To Which Child?

July 27, 2015/in Business Law, Estate Planning /by Michael Lonich

After years spend building up a successful family business, many want to pass on their success to their next generation of family members. Unfortunately, conflicts in family businesses are likely to occur when the owner and other family members begin to consider and examine the transfer of the ownership and control of the business. One of the largest conflicts to result often rises in situations where there are two or more children in line to take charge and sibling rivalry erupts. However, in planning the succession of a business, the transition may go smoother with the creation of a trust outlining the steps to be taken in the succession.

The advantage of a business trust is that a plan would have been put in place in the case of an unexpected death. However, there is still a problem with choosing which child to take charge of the family business. One of the greatest challenges in choosing which child to take over is their lack of experience, though this issue can be addressed with the following tips.

First Option: Trial Run
- You can give each child about six months or so to be in charge.
- Objectively list the qualities that you are looking for before the trial begins.
- Also, make sure to let the other employees know that the child is in charge.

Second Option: Test and Interview the Candidates
- Put the siblings through a series of written tests.
- Also, interview each candidate in order to determine who would be the best choice for taking over the business

Third Option: Leave It Up to the Children
- If there are several children, a good option may be to allow them to set up a board and let them choose who they believe would be the best successor.
- This can even include outside advisors.

Fourth Option: Have a Trustee in Place
- Put a Trust in place with a trustee running the business until he or she believes the children are ready to take over

The options above are just a few possibilities that a family business owner can try. Nevertheless, they may be able to help family business owners who are troubled by the fear that a child cannot develop the leadership qualities necessary to run the family business. But after getting through this first hurdle and putting these details in a trust, the owner will no longer have to worry about succession of the family business as they will be in capable hands.

Estate planning is a highly complex area of law. If you are interested in creating a trust for your family business or have any questions regarding your current 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 family business 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.

Source: Charles D. Fox, Keeping It In The Family: Business Succession Planning, SS039 ALI-ABA (2011)

Special Needs Trusts: What Are They?

July 20, 2015/in Estate Planning /by Michael Lonich

Special Needs Trusts are imperative for beneficiaries who are disabled and receive some form of government benefits. The beneficiaries of Special Needs Trusts may be either a developmentally or physically disabled minor or adult.

A standard Family Trust may not be appropriate for a Special Needs person because they do not address the specific necessities of the disabled beneficiary, such as governmental programs and benefits. In California, a Special Needs Trust is generally an irrevocable trust that “gives the trustee discretion to supplement… whatever is provided by government programs to the trust’s beneficiary.” Most commonly, Special Needs Trusts allow for an individual with disabilities to benefit from funds in the trust without the funds counting as a financial asset and interfering with the government benefits that the beneficiary may be receiving. Even in rare cases where a beneficiary never needs Federal or State public benefits and services, Special Needs Trusts may still be a valuable tool and can be used as part of a comprehensive plan to meet the special life management needs of the beneficiary.

While the trustee of the Special Needs Trust cannot give money directly to the beneficiary (as it will interfere with eligibility for Medicaid, subsidized housing, Social Security Income and other government services), the trustee may spend the trust assets on a wide variety of goods and services for the benefit of the beneficiary. Typically, trust assets are used to pay for personal care attendants, vacations, physical rehabilitation, and recreation.

Concerned families and people with disabilities no longer need to worry about limited options regarding estate planning. In the past few years, there has been increasing public awareness of the estate planning options available for families with loved ones with disabilities. There has also been an increase in professional advisors who are able to render competent advice and provide their clients with numerous estate planning options, including Special Needs Trusts.

Estate planning is a highly complex area of law. If you are interested in creating a Special Needs Trust or have any questions regarding your current 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 Special Needs 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.

Source: http://www.nolo.com/legal-encyclopedia/special-needs-trusts-30315.html

Source:.http://www2.nami.org/Content/NavigationMenu/Find_Support/Legal_Support/Special_Needs_Estate_Planning/Special_Needs_Trust_Primer.htm

Source: Purpose of Special Needs Trust, 3 Cal. Transactions Forms- Est. Planning § 17:1 (2015)

Source:.http://www.americanbar.org/newsletter/publications/law_trends_news_practice_area_e_newsletter_home/0501_estate_financialplanning.html

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

June 18, 2013/1 Comment/in Estate Planning /by Michael Lonich

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.

Disinheritance: The Elephant in the Room

April 9, 2013/in Estate Planning /by Michael Lonich

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

February 20, 2013/in Estate Planning /by Michael Lonich

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

February 12, 2013/in Business Law, Estate Planning /by Michael Lonich

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.

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

June 4, 2012/1 Comment/in Estate Planning /by Michael Lonich

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.

Posts

Estate Planning for Special Needs Children

Trust Administration: How a Trustee Can Collect Reasonable Fees

Estate Planning for Millennials

Transferring The Family Business, But To Which Child?

Special Needs Trusts: What Are They?

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

Disinheritance: The Elephant in the Room

Gift Taxes: How Much Your Generosity Could Cost You

Protecting the Hand-Me-Down Business

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

Free 30-Minute Family Law or Estate Planning Consultation

Contact Us