Three Things to Know About Creating a Living Trust

Posted July 27, 2016 in Estate Planning, Probate by Michael Lonich.

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July 27, 2016
Three Things to Know About Creating a Living Trust
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First, one of the biggest advantages of creating a living trust is avoiding probate court.  Administering a will or trust through probate court takes time and money.  A living trust is a great estate planning vehicle because it can keep the entire administration process court-free.  When the settlor of the trust passes away, the terms of the trust dictate how the estate should be administered. In turn, probate court is avoided.

Second, make sure that the successor trustee is someone who is capable of administering the trust.  Often times, the oldest child is chosen to be the successor trustee.  However, the oldest child is not always the right choice.  A successful administration requires a trustee who is organized, diligent, and capable of administering the trust.  It is also beneficial to have someone with an understanding of accounting.  If your oldest child does not have any of these characteristics, consider appointing another child, relative, or friend.  If no one you know is capable of administering the estate, you may have to hire a third party. There are a number of trust companies and banks that administer trusts.  The biggest concern about hiring a third party is the administration fees, which can be substantial.  If your estate can handle the fees, a third party may be the right choice for you.  Lastly, a trust will never fail for lack of a trustee.  If the elected trustee refuses, another one will be appointed.

Finally, creating a trust avoids California’s intestacy laws.  A state’s intestacy laws provide the default estate plan for those who die without a will.  In California, the beneficiary of a decedent’s estate depends on whether the property was community property or separate property.  Assuming that decedent was married and had community property, the surviving spouse’s intestate share is the decedent’s one-half share of the community property.  On the other hand, if the decedent’s property was separate property, the intestate share of the surviving spouse depends on how many children the decedent had, if any.  While it is important to know a state’s intestacy laws, they should be avoided at all cost.  Thus, creating a trust is a way to avoid intestate succession and have your estate administered the way you want it.

If you are interested in creating a living trust or have any questions regarding your current estate plan, please contact the experienced estate planning attorneys at Lonich & Patton for further information.  The attorneys at Lonich & Patton have decades of experience handling complex estate planning matters, 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:

California Probate Codes § 6400-6414.

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How to protect your assets, even if you didn’t win the billion dollar powerball

Posted January 25, 2016 in Estate Planning, Probate by Michael Lonich.

After the historical $1.5 billion jackpot was finally won, it is time for many of us to consider how to protect our assets during our lifetime and after. Although winning the lottery may not be something we will experience, many of us do have valuable assets that we would like to protect when we are gone.  Therefore, this year it might be time to give your estate plan a review.

An important tool in estate planning to consider is the living trust (also called a revocable living trust). In its simplest form, a living trust is a written agreement which sets forth what happens to your assets in the event of your death.  One of the greatest advantages of a living trust is that it protects your estate from the probate process, which can be time consuming and expensive. And while a living trust is primarily used as a convenient and efficient way to distribute your assets upon death, you still maintain control over all your assets during your lifetime. Therefore you can alter, add or revoke the living trust at any time for any reason.

In many situations, a trust is the best way to achieve your goals. With a trust you can:

  • Avoid probate
  • Provide for your care should you no longer be able to handle your own affairs
  • Provide for children from a previous marriage
  • Hold money for minors and ensure they cannot spend it all the minute they come of age
  • Protect assets from creditors and former spouses
  • Benefit family and charity through one mean

Probate, on the other hand, is the process the court utilizes to manage the affairs of a decedent’s estate. In contrast to a living trust, the probate process, in most metropolitan areas in California, can take about 6- 18 months. This delay creates additional expenses that can consume 3% to 6% or more of the gross value of the probate estate.

At Lonich & Patton, our estate planning attorneys don’t believe in offering services that are “one size fits all.” We understand that each family has particular needs and concerns, and we can customize our estate planning services to meet these specific needs and ensure that your long term wishes are carried out. If you are interested in nonprobate transfers or have any questions regarding your current estate plan, please contact the experienced estate planning attorneys at Lonich & Patton for further information. The attorneys at Lonich & Patton have decades of experience handling complex estate planning matters, including nonprobate transfers, 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.forbes.com/sites/deborahljacobs/2012/01/04/make-a-new-years-resolution-to-give-your-estate-plan-a-checkup-2/#2715e4857a0b7be8584f7cf0

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Question: What happens to your Facebook account when you die?

Posted February 20, 2015 in Estate Planning, Probate by Lonich and Patton.

Answer: Now, you can designate someone to control your Facebook account with the legacy contact option.

As estate planners, we see people each day who think about what happens to their personal effects when they pass away. We write wills in order to designate who should receive a client’s material possession upon their death and answer questions like; where do my assets go? Who will maintain control of my estate when I pass away? But more and more of us are starting to consider what happens to our digital possessions such as our Facebook accounts when we die. Facebook has responded by creating what they call a “Legacy Contact.”

Up till now, when Facebook learned that someone died, they would offer only a basic memorialized account that other people could view but couldn’t manage. It would be frozen, angering heirs who wanted to edit the deceased’s online presence. When Alison Atkins died in 2012 after a battle with a colon disease, her sister and parents wanted access to her digital assets. Slowly, these accounts began shutting down in order to protect Alison’s privacy, per the websites’’ terms of service. Later that year when her Facebook account disappeared, her family felt like they were losing another part of Alison.

However, starting this Thursday, you can assign a legacy contact who can have more room to manage an account when the user dies.

Your legacy contact will have limited control

There are limits, however, to what a legacy contact can do. A legacy contact can:

  • Write a pinned post for your profile (ex: to share a final message on your behalf or provide information about a memorial service)
  • Respond to new friend requests (ex: old friends or family members who weren’t yet on Facebook )
  • Update your profile picture and cover photo
  • Download a copy of what you’ve shared on Facebook (this is an additional option that you can add/decline)

There are several things your legacy contact cannot do, and you should be aware of them. A legacy contact cannot:

  • Remove or change past posts, photos and other things you’ve shared on your Timeline (regardless of how embarrassing they might be)
  • Read messages you’ve sent to other friends
  • Remove any of your friends

Choosing your legacy contact

Once you have decided who your legacy contact will be, selecting them is easy. A concern that is coming is what if you select your spouse but you both travel frequently together? What if you both die? At this point in time, you can only select one person with no back up.

Estate planning has always been a complex field and the digital era is adding new complexity to this process. Facebook and other tech companies are starting to realize this, prompting changes to their terms of service. In 2013, Google began allowing people to assign beneficiaries of their Google accounts as well.

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 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 for further information as 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.

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How will proposed tax reform affect your estate plan?

Posted January 30, 2015 in Business Law, Estate Planning, Probate by Jennifer Mispagel.

On January 20th, 2015, President Obama stood before a joint session of Congress and delivered the annual State of the Union address. Some of the topics discussed were the current State of the Union, College Savings Plan reform, his legislative agenda as well as several White House proposed tax reforms for the upcoming fiscal year.

While many of his new policies will affect all Americans in some way, several of his proposed tax increases will particularly affect upper-income persons and financial corporations. One in particular is a proposed change to the tax on appreciated estate property, otherwise referred to as the “trust-fund loophole.”

Taxation on Appreciated Estate Property

The term Capital Gain stands for the profit realized on the sale of a non-inventory asset that was purchased at a cost amount that was lower than the amount realized on the sale.  In the United States, individuals and corporations pay U.S. federal income tax on the net total of all their capital gains just as they do on other sorts of income. “Long term” capital gains are generally taxed at a preferential rate in comparison to ordinary income.

Currently, the law states that property which has appreciated in value that is owned by an estate is generally not subject to tax at death. Under this tax scheme, children and other heirs typically receive and sell property with little or no capital gains tax since most property receives an increase in basis to fair market value. For example, a parent who dies can pass along a valuable asset to their child or heir with no capital gains tax being due. When the child or heir eventually sells the asset, the current law limits the eventual tax bill by figuring the taxable gain only since the parent’s death. While this is a feature commonly known as a stepped-up basis the administration refers to this as the “trust fund loophole” and is looking to change it.

The White House proposal is to tax this appreciated estate property. The proposal states that the tax will be at 28% if the difference between the cost of the property and the fair market value at death exceeds $100,000 per person. There would be a separate exclusion for a personal residence of $250,000 per person. The proposal would not include clothes, furniture and most other personal items.

In arguing its case for revising this aspect of the tax code, the White House claims that all of the gain on valuable property or assets that occur prior to the death of a parent unfairly escapes tax. The White House claims it is in good company. Critics of the current tax code say that it is outdated. They claim that while the current policy reduces disputes over prices paid for assets long ago, they acknowledge that revision to the tax code would unlock capital by removing an incentive for holding valuable assets for generations.

Many experts, such as USC tax expert Edward Kleinbard, agree. Mr. Kleinbard notes that the capital gains tax is our only truly voluntary tax. Taxpayers can defer it for a considerable amount of time simply by withholding on the sale of their taxable assets. He argues that if you’re rich enough to hang onto your stocks and bonds, or can utilize financial strategies to enable you to exploit their value without selling them, you can defer paying capital gains tax your entire life.

Whether the White House prevails in passing this legislation remains to be seen. It seems clear, however, that negotiations on tax policy will continue in attempts by the current administration to eliminate tax loop-holes. Eliminating the lock-in effect, where holders of appreciated assets avoid selling because of the taxes imposed on the sale, could have a major impact on estate planning strategies and should prompt concerned individuals to look more closely at their estate plans, which should be revised periodically to ensure the best treatment of ones assets.

These are issues that make estate planning 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 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 for further information as 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.

 

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Estate Planning Lessons from Robin Williams

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

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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