Estate Planning Lessons from Robin Williams

Posted August 22, 2014 in Estate Planning, In the Community, Probate by Michael Lonich.

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August 22, 2014
Estate Planning Lessons from Robin Williams
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As many of us mourn the loss of this great comedic genius, new information is still coming forward about Robin Williams. According to ABC News, with more than half of his movies portraying Williams as the leading man, his movies grossed over $6 billion throughout his career. While he was paid $165,000 per episode for his one season of The Crazy Ones, it is unclear whether he returned to television because of alleged “bills he had to pay” following his two divorces.

Robin Williams is survived by his third wife, Susan Schneider, who was married to him for 3 years, and his three adult children from his prior two marriages whose ages range from 22 to 31. The question for them now is what was the state of his financial affairs when he passed away?

While it appears from public record that Williams left real estate with equity of around $25 million behind, it is unclear what else he left for his heirs. What is clear, however, is that Williams appeared to have several estate planning documents which will be invaluable to his family. These include two different trusts. The first is the “Domus Dulcis Domus Holding Trust” (Latin for “home sweet home”). TMZ also reported that someone had leaked a copy of a different trust, which Williams created in 2009. This would have been while Williams was in the middle of his divorce from his second wife, Marsha Garces.

This trust reportedly named his three children as beneficiaries, splitting their trust funds into three equal distributions for each of them, set to pay out when they reach ages 21, 25, and 30. While the Domus Dulcis Domus Holding Trust appears to have been done to minimize estate taxes, this second trust accomplishes the goals of safeguarding privacy for Williams and his family since trusts avoid probate, keeping his affairs private (as long as they are not leaked to the media).

If you would like to learn more about trusts or avoiding probate in general, call Lonich & Patton to schedule a free half-hour consultation. Our attorneys are passionate about estate planning and 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 for further information.

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Tax and Estate Planning for Same-Sex Couples

Posted August 1, 2014 in Estate Planning, In the Community, Probate by Michael Lonich.

Earlier this week, the U.S. Court of Appeals for the 4th Circuit struck down Virginia’s same-sex marriage ban, saying that withholding the fundamental right to marry from same-sex couples is a form of segregation that the Constitution cannot tolerate.

In June 2013, the Supreme Court of the United States in United States v. Windsor, held that the federal government must recognize same-sex marriages and that it is up to state Legislatures to define marriage within state boundaries. Since then, numerous law-suits challenging the constitutionality of state DOMAs on equal protection and due process grounds have prevailed in various federal and state courts. Currently, 19 states, including California, plus the District of Columbia recognize same-sex marriage (recognition states), while 40 states prohibit it (non-recognition states).

The prevailing prediction is that a Supreme Court guarantee of a right to marriage is on its way. American support for same-sex marriage is at a new high of 55 percent, and California support is at 61 percent and increasing, if the trends continue. It is important for all couples to create an estate plan. Additionally, it is important for same-sex couples to be aware of the potentially complicated issues that arise when they move across state lines.

Same-Sex Couples Living in California

Same-sex married couples now living in California enjoy the same benefits and burdens under state and federal law as married opposite-sex couples. Before Windsor and IRS Revenue Ruling 2013-17 (which extended federal tax benefits to married same-sex couples, regardless of their state of residency), many married opposite-sex couples likely took this preferential treatment for granted.

Some of these benefits include:

  • Property transferred between spouses incident to a divorce is not subject to income or gift tax;
  • Spousal support (alimony) payments are tax deductible to the paying spouse;
  • Child support payments are not subject to income tax;
  • Spouses receive a community interest in 401(k) accounts and other retirement plans; and
  • Spouses receive all community property and anywhere from one-third to all of the deceased spouse’s separate property for intestate (when a person dies without a will or other non-probate instrument) inheritance purposes.

All couples should be aware of their legal rights at marriage, divorce, and death. It is important for both same-sex couples and opposite-sex couples to consider pre-marital agreements, estate plans, and any tax consequences that arise from marriage or divorce.

The Marital Status of Migrating Same-Sex Couples

When a same-sex couple moves out of California, their marital status will depend on the other state’s law with regards to various issues including, state tax filing status, intestate succession, guardianship and conservatorship appointments, and adoption and artificial reproductive technologies. In other words, a non-recognition state may not recognize the otherwise valid same-sex marriage.

If and when the Supreme Court guarantees a right to marriage, moving across state lines will no longer be an issue for same-sex couples. However, in the interim, it is important to be aware of the possible legal consequences.

For example, under Florida law, the definition of “heir” does not include same-sex spouses for intestate inheritance purposes. This means that a same-sex couple that was married in California, but permanently living in Florida, will not inherit from each other under the Florida intestate system. Some courts in non-recognition states are willing to recognize same-sex marriage in certain contexts through the doctrine of comity, which is where a court gives deference to another state’s laws. However, most surviving spouses want to avoid litigation because it can be a headache, requiring time, money, and mental energy.

In some cases, it might be worthwhile for same-sex spouses to opt out of the intestate system with non-probate instruments, such as estate plans. A same-sex couple’s estate plan needs to be drafted with precision, specifically naming beneficiaries, rather than using general terms such as “spouse.” This becomes especially important if a same-sex couple moves to a non-recognition state, where the court may not interpret a same-sex spouse to qualify as a spouse or heir. If any other blood related heirs of the deceased spouse were to contest the non-probate instrument, they could end up inheriting property that would have gone to the same-sex spouse in California or another recognition state.

If you are a same-sex couple and are considering marriage, or need to create or update an estate plan, please contact our California Certified Family Law Specialists. Our attorneys have decades of experience handling complex family law and estate planning matters and offer 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 include legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

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Estate Tax Portability: A Valuable Asset You May Not Know You Had

Posted March 27, 2014 in Estate Planning, Probate by Michael Lonich.

Have you heard about the “portability provision?” Believe it or not, your estate (or your spouse’s estate, if you were to pass first) could benefit tremendously if the executor of your estate elects this provision. In short, the portability election allows the transfer of any unused estate tax exclusion amount of the first spouse to die (commonly referred to as the “deceased spouse’s unused exemption” or “DSUE”) to the surviving spouse, who can then utilize the remaining amount to benefit his or her gift or estate tax purposes. Essentially, this provision operates as a safety net for couples with joint assets exceeding the exemption amount for the estate of the first spouse to die because the surviving spouse can reduce his or her estate or gift tax liability. Depending on the size of the estate, electing this provision can mean saving a significant amount on estate taxes.

Although this portability provision technically expired after 2012, Congress passed the American Tax Relief Act of 2012 (“ATRA”), which made the “portability” of the applicable exclusion amount between spouses permanent. This favorable estate tax rule should be incorporated into estate plans because as previously mentioned, the potential impact of the portability provision can be quite substantial.

For example, suppose the following: A husband and wife each own $2 million individually and $3 million jointly with rights of survivorship, bringing their estate to a total of $7 million in assets. Suppose their wills instruct that all assets pass first to the surviving spouse and then to the couple’s children. If the husband dies in 2014, his $2 million in assets is covered by the unlimited marital deduction. His $5.34 million exemption remains unused (his DSUE). When the wife dies, her estate can use that leftover DSUE amount, in addition to the exemption for the year in which she dies, to shelter the remaining $7 million of assets from tax. ATRA has permanently set the top estate tax rate at 40 percent. As such, if the wife died later in 2014, $1.66 million in assets would have been subject to estate tax without the portability provision. Therefore, the family saves $664,000 in federal estate tax (40% of $1.66 million).

Not only is the portability provision an excellent tool to use for estate and gift planning considerations, the provision can also be used as a negotiation tool during marital agreement negotiations. The portability provision can be viewed as a highly valuable asset that attorneys and their clients should consider when drafting marital agreements. However, there are also certain limitations to be aware of. For example, the executor of a deceased spouse’s estate must elect portability for the provision to take effect, and the election must be made on an estate tax return filed within nine months of death.*

If you or your loved ones are in the planning stages of creating an estate plan, take the necessary steps to ensure that you and your family members are maximizing the benefits available to you by an experienced, knowledgeable estate planning attorney guide you through the process. Estate planning laws are constantly evolving and having a trusted estate planning attorney by your side can prove to be invaluable. The attorneys at Lonich & Patton 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.

Sources: http://www.bizactions.com/n.cfm/page/e120/key/259853661G1005J3585631N0P0P2268T2/;http://www.forbes.com/sites/lewissaret/2014/02/25/estate-tax-portability-and-marital-agreements-a-new-consideration/

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Elder Abuse: Protect Your Loved Ones From Financial Exploitation

Posted March 24, 2014 in Estate Planning, Probate by Michael Lonich.

Financial exploitation of the elderly is a growing – and mostly silent – epidemic in our country. In fact, one study estimates the amount lost by exploited seniors to be nearly $5 billion every year. One prime example occurred in 2007, when renowned New York society queen and philanthropist Brooke Astor left behind a coveted estate of nearly $200 million dollars. Though her will appeared to be adequately in place, the three codicils that followed turned out to be anything but.

Under Astor’s will, her only son, Marshall, stood to take tens of millions of dollars – with the condition that remaining funds after his death be given to charity. Marshall, however, had other plans, and the country watched as the truth behind Ms. Astor’s will began to unravel: Marshall, along with his lawyer, had convinced the elderly Astor – while she was suffering from dementia – to sign a series of codicils allowing him to leave much of her fortune to whomever he wanted. Rumor has it that Marshall wanted to share his mother’s fortune with his much-younger wife – whom Astor reportedly detested.

Fast forward to 2009 after 6 months of trial and many millions of dollars later, Marshall (then 85-years-old) and his attorney were convicted of 14 counts out of 16 for financially exploiting Astor. But after 8 weeks in jail, Marshall was out – the parole board found his age, ailing health, and hundreds of support letters from some of New York’s most influential people compelling and released him. With these turn of events, Marshall’s financial exploitation of his mother (to the tune of tens of millions of dollars) essentially went unpunished.

The highly-publicized financial exploitation of Ms. Astor is only one of the millions of cases of financial elder abuse that goes on quietly behind closed doors each year. When a family member manipulates a person with dementia, it is undue influence. California Civil Code § 1575 explains that undue influence comprises of:

  • The use, by one in whom a confidence is reposed by another, or who holds a real or apparent authority over him, of such confidence or authority for the purpose of obtaining an unfair advantage over him;
  • The taking of an unfair advantage of another’s weakness of mind; or
  • The taking of a grossly oppressive and unfair advantage of another’s necessities or distress.

Financial abuse of an elder or dependent adult can occur through various ways – undue influence is only one of them.* Sadly, many greedy individuals will find their elderly family members to be easy targets for financial gain, particularly when the elderly individual’s mind is stricken with a degenerative disease like Alzheimer’s or dementia. The undercover coercion and undue influence to change an estate plan can be hard to notice because these manipulative acts are generally covert and completed with no witnesses around. Even if the coercion is discovered in time, proving it in court can often be an uphill battle.

If you or your loved ones are in the planning stages of creating an estate plan, take the necessary steps to ensure that you and your family members are protected by having an experienced, knowledgeable estate planning attorney guide you through the process. If you suspect undue influence, consult an experienced estate planning attorney for an objective assessment to ensure the decedent’s assets are distributed as they intended. Estate planning laws are constantly evolving and having a trusted estate planning attorney by your side can prove to be invaluable. The attorneys at Lonich & Patton 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.

* California Welfare and Institutions Code §15610.30(a).

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What is Probate and Why Should I Avoid It?

Posted February 21, 2014 in Estate Planning, Probate by Michael Lonich.

Probate is a court process that is known for being time-consuming and expensive. It is also a public process that makes personal information about your assets and debts part of the public record. If you die without a will, the probate process can be a nightmare for your family. However, even if you have a well-written will, the probate court still must oversee the payment of your debts and distribution of your property. These are just a few of the reasons why many people want to avoid sending the estate, and oftentimes their family, through the probate process after their death.

To avoid the probate system entirely, you will need to use an estate planning vehicle other than a will to transfer property after your death. For example:

  • Life insurance: Life insurance policies generally pass outside of probate as long as there is at least one named beneficiary.
  • Retirement accounts: Similarly, retirement accounts, including IRAs and 401(k) plans, pass outside of probate as long as there is at least one named beneficiary.
  • Joint tenancy real property: If you own a home with your spouse (or any other individual) as joint tenants with right of survivorship (as opposed to tenants in common), your ownership interest will be “extinguished” upon your death and the remaining owner will own the property outright as a matter of law.
  • Joint tenancy bank accounts: Bank accounts may also be held in joint tenancy so that when one spouse (or account holder) dies, the other spouse (or account holder) is automatically the sole owner of the account.
  • Pay-on-death accounts: Selecting a pay-on-death beneficiary for bank accounts or investment accounts allows you to designate who your accounts will be transferred to upon your death without the need for probate.
  • Trusts: A living trust is a legal document that, much like a will, contains instructions for what you want to happen to your property when you die. But, unlike a will, a living trust can avoid probate at your death. While you place your property and assets (i.e., your family home) in the trust, you maintain control over all trust assets during your lifetime. When you are no longer alive, your property can be transferred to your designated beneficiaries in a timely manner without going through probate.

Trusts are a favorite of estate planners because they are simple, flexible and effective. Trusts can be used to easily transfer property to family members or charitable organizations at death. In some circumstances, trusts can also be utilized to decrease or minimize estate taxes.

If you would like to learn more about trusts or avoiding probate in general, call Lonich & Patton to schedule a free half-hour consultation. Our attorneys are passionate about estate planning and 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 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.

This article has no comment.

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