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Estate News --- Observations of a Trust and Probate Attorney

Friday, April 2, 2010

Holding on to Your Hard Earned Assets

A request that is being made more and more often is how do I protect my assets in this litigious society. Over the next few days I will addess that question.

The goal of asset protection is to make if increasingly difficult for a creditor or litigator take your assets. Some of the tools available are:


1.     Insurance

2.     Incorporating Your Business

3.     Moving assets into a Family Limited Partnership

4.     Moving assets into a Limited Liabilit Company

5.     Domestic Self Settled Asset Protection Trust

6.     Off Shore Self Settled Asset Protection Trust

Each of these tools give different amounts of protection and the cost to set each up increases as you obtain more protection. Over the next few posts I will describe the differences between each tool and the additional protection obtained.


Larry


Friday, April 2, 2010

Away at College

Yesterday I received a special phone call. My daughter who is away to college called just to say hi. There is nothing that makes a dad feel so good as to hear from one of his children. This young lady has been away for only three months now. The snow is beginning to melt and soon will be gone. She was out walking in the park with friends. Do you remember the carefree days of your youth? Walking through the park in early spring.


Tuesday, March 30, 2010

L A Times Got It Wrong

The Money Talk Column of the LA Times by Liz Pulliam Weston on Sunday March 28, 2010 responded to a question by a reader.  The question is from a son who cannot find a signed copy of a revocable Living Trust prepared by his parents.  His father is now suffers from dementia and his mother does not know where the trust might be.

This question was what should they do.  The main asset is the house.  Before spending hours looking for the trust which was the advice given, they need to check the title of the house, with the county recorder.  If title has been changed into the trust they will then know a trust was prepared.  But if title is not in the name of the trust there is no reason to keep looking for a trust.

A trust will only control the property that is titiled in the name of the Trustee of the Trust.  Therefore, it may not matter if they find the trust it may not avoid probate.

If title is in the name of the trust you still may be able to avoid probate even if you cannot find the trust.

If title is not in the trust than we address the question of how to avoid probate even though dad has dementia and may not be able to sign a trust.

This is an example of a situation trying to do it yourself when there are too many things that can go wrong.  People may not want to take the time and spend the small amount of money on an attorney who would have a copy of the signed trust.

Besides there are many reasons in addition to avoiding probate to prepare a comprehensive estate plan.  One of the most important reason is Because You Care Enough.


Tuesday, March 16, 2010

Increasing Estate Litigation


Recently I was asked the following question. Is the economy causing more contested probate cases?  After thinking about the question for over a day I think it is but not in the way the questioner was thinking.  The increase is not directly connected.

There will be more contests because people are NOT doing their planning.  As a result the family will be faces with uncertainty at a time when they are most vulnerable to conflict.  Uncertainty because there is no direction and guidance from the decedent is a situation that we all recognize as a breeding ground for conflict.

Add to the uncertainty of no planning is the changed family structure.  Families are no longer just mom, dad and the three kids.  Today it is yours, mine and ours and there is no connection after parent is gone.  The relationships become strained and conflict erupts.  The result is another case of probate litigation.

The growth area of litigation is Trust Litigation.  This is because the Trust is not correct and the Trustees do not do their jobs.

 


Sunday, March 14, 2010

A Client Made My Day and I Made Her Day

Today is Saturday a day when I am generally not in the office and when I am there I don't answer the phone. However, today I was in the office and answered the phone. A small business owner client called who is on my annual Business Advantage & Protection Plan, (BAPP).

She had a question about a troubling employee. I answered her question in about 15 minutes and proceeded to say goodby. It was at that point that my client made my day.

She thanked me and thanked me over again. Not only for being available but for the advice. She thanked me for the peace of mind of knowing she can call and not receive a bill for every little question. Clients on the BAPP not only receive their minutes updated annually, I remain their agent for service of process, but they can call with their questions during the year.

This is being a lawyer at it's best. Helping someone at that crucial time and giving them peace of mind.


Tuesday, November 17, 2009

47 POINTS TO LOOK AT WHEN EVALUATING AN ESTATE PLAN

47 POINTS TO LOOK AT WHEN EVALUATING AN ESTATE PLAN:

Avoid probate.
Reduce taxes.
ABC Formulas
GPA & LPA
Honor deceased Family Members
Easy to follow format
Name flexibility
Character of property
Powers of trustees
Trust protectors
ILIT
Asset protection
Administrative experience both TRA and Probate
Select the best persons to manage your estate.
Trustee flexibility for each sub trust
Provide protection in the event of the disability and eliminate or reduce court involvement.
Remarriage protection for the surviving spouse.
Distribution for children in can we known as “A toothpaste trust” for life time protection for the children, either in a string, rope, chain or carrot and stick withdrawal provisions.
Protection of grandchildren.
Special Needs Trust.
Springing Special Needs Trust.
Durable Power of Attorney for property management.
Advance healthcare directives.
 Is flexible:
Alzheimer's, cancer, trauma, coma or vegetative state
Pregnant, pre-existing conditions, organ donations, autopsy's blood transfusions,
Personal-care, funeral arrangements, Memorial instructions.
Persons who might object
Exclude persons from contact

HIPAA releases.
A repository to hold the Advance Healthcare Directive.
Priceless conversations, legacies and valued distribution.
Family history.
Personal property memorandums.
Memorial instructions.
Location lists and key advisers and people.
Certification of trust.
Naming of guardians and exclusion of guardians.
Funding Assets into the trust, either through transfer of beneficiary designation.
Independent distribution trustees.
IRA stretch out trust.
Business succession planning.
On going business relationship
Does the drafting attorney have a plan to help you if that attorney is no longer available
Trust Protector
Flexibility to provide or exclude for step and adopted children
Co-trustees after death of first spouse as additional remarriage protection
Power to change the trustee after the death of the first spouse
Powers to edit the trust or modify the trust after the trust becomes irrevocable
When would you want to make changes and what powers are available
Generation-skipping transfer tax splitting
Sweater in the suitcase
Definitions
   
 


Saturday, November 7, 2009

To Contest or Not to Contest that is the Question

I found this article from the Houston Chronicle and it is right on point. Here in California the law governing the No Contest Clause has been changed. 

If you want to disinhrit someone it is more important to discuss your estate plan with a qualified attorney.

 

In terrorem’ clause is one way to cut heir out of will
By ALBERT E. VACEK JR.
HOUSTON CHRONICLE
Nov. 6, 2009, 10:42PM

Curry Glassell, the daughter of oilman and arts benefactor Alfred Glassell, is disputing his last will in a high-profile Houston court battle that will have serious consequences for Houston's arts groups as well as for the Glassell family. One of the issues at stake is what is called an “in terrorem” clause in the will (also known as a forfeiture clause) that provides that anyone who contests the will is to lose whatever bequest has been granted to him or her — hence, the “terror” that will result if one does not follow the directives of the will. The will of the recently and tragically deceased John O'Quinn also contains a no contest clause.

Many people who are not specialists in estate planning law would tend to take such a clause at face value and believe that, if their lawyer includes such a clause in their will, their chosen heirs will be protected forever from the possibility of litigation challenging the will. Unfortunately, this is not the case.

An “in terrorem” clause sounds great and offers apparent reassurance to those who rely on a will, but it is no panacea. In fact, a new Texas law that went into effect on June 19, 2009, reduces the effectiveness of these clauses even further by clarifying that they do not apply if an attack on the will is made and maintained in good faith and on the basis that probable cause exists. On the other hand, an “in terrorem” clause may still apply if a lawsuit challenging a will is deemed to be just a frivolous nuisance suit designed to extort more money from the beneficiaries.

Unhappy heirs or potential heirs who decide to challenge a will often do so either on the basis that the testator was unduly influenced by a beneficiary, or that he or she was suffering from diminished capacity at the time the will was made and did not really know what he was doing — as in the recent New York case involving the estate of wealthy socialite and philanthropist Brooke Astor. In that case, the jury agreed with prosecutors that Brooke Astor's son took advantage of her reduced mental capacity to trick her into changing her will to his benefit.

There are other, better ways to protect a will from a challenge than just relying on an “in terrorem” clause. One method is to, in a sense, buy off a potential challenger by leaving him or her something of value so that he or she will be tempted to take the money rather than file a lawsuit and await the uncertain outcome of litigation.

Another tactic is for the testator (the person making the will) to be entirely frank with heirs and potential heirs while he or she is still alive, and let them know exactly what to expect, so there will be no nasty surprises or disappointment down the road. If a potential heir is to be disinherited or left very little in comparison to others, the will should state that fact plainly, so that a challenger cannot claim that the testator was not in his or her right mind and simply forgot about his oldest son or youngest grandchild. Such a clause might state that the testator had adequately provided for the heir during his lifetime, or that he is leaving the potential heir some small amount, or even that the potential heir is to receive nothing, in the words of the infamous Leona Helmsley will, “for reasons well known to them.”

In every case, all the required formalities should be carefully observed, such as, for example, making sure the will is signed in the presence of impartial witnesses. It's also a good idea for any testator to design and execute a plan to provide for heirs well in advance of serious illness and death so there can be little question later that he or she didn't know what he was doing.

Testators should also consider a living trust as a valuable tool to minimize the possibility of a contest. Typically, living trusts are harder to contest than wills.

Few testators have $500 million to bequeath, as did Alfred Glassell, or the many millions probably involved in the John O'Quinn estate.

But whatever amount a testator may have to leave to loved ones, whether large or small, a proper will should include every possible protection to ensure that his or her wishes will be observed.

Vacek is a board-certified estate planning and probate attorney who has been practicing in Houston for more than 38 years.

 


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