- Comprehensive Estate Plans
- Trust Administration
- Trust Disputes
- Will Contests
- Asset Protection
- Creditor Protection
- Domestic Parterships
- Cohabitation Agreemets
- Tax Issues
- Power of Attorney
- Advanced Health Care Directrives
- Medi-Cal Planning
- Special Needs Trusts
- Family Limited Parterships
- Charitable Trusts
- Qualified Domestic Trusts
- Grant Deeds
Probate is the legal process of transferring property following a person’s death. Although probate customs and laws have changed over time, the purpose has remained much the same: an individual formalizes his or her intentions as to their transfer of his or her property at the time of death (typically through a Will); his or her property is collected, certain debts are paid from the estate and the property is distributed accordingly.
A will is a written instrument containing directions on how the assets and property of the testator (individual creating the Will) shall be divided upon his or her death. Wills can also contain instructions regarding the care of minor children, gifts to charity and formation of posthumous trusts. In order for a Will to be legally valid, the testator must sign the Will in the presence of two witnesses and he or she must be mentally competent and not acting under duress or the controlling influence of another.
Will Contest Litigation:
A Will Contest is a type of litigation that challenges the admission of a will to probate. Issues that are likely to prompt the contesting of a Will include:
- The testator lacked the mental capacity, i.e. was senile, delusional or of unsound mind at the time the documents were signed.
- The testator was subjected to fraud, coercion, or undue influence during its creation and implementation
- There are ambiguities in the document
- The Will is a forgery or does not conform to legal requirements as to the number and nature of the witnesses
If the Will is thrown out, the court, depending on state law and the specific facts and circumstances may disallow only the part of the Will that was challenged; throw out the entire Will, distributing the property as if the person died without a Will, or use the last previous Will.
Trusts are estate planning tools that can replace or supplement Wills and can also help manage property during life. A trust manages the distribution of a person’s property by transferring its benefits and obligations to different people. Maintaining assets in a trust often makes it easier to minimize taxes and leave a larger inheritance. A Trust is also a way to provide a steady income to the Beneficiary over time (as opposed to distribution in a lump sum), thus reducing the Beneficiary’s tax burden, allowing the Trust to grow through investment, and keeping assets free from creditors of the Trust beneficiary. Trusts can also be established for the benefit of charitable organizations.
Estates are categorized as probate or non-probate property. Probate property is property that is transferred by the provisions of a Will. Non-probate property is property that is either jointly held and passes by right of survivorship, is directed by beneficiary designation such as IRA or a life insurance policy, or passes according to the terms of a trust.
Good estate planning is more than just a simple Will. It minimizes potential taxes and fees (including Federal and state gift and estate taxes) as sets up contingency planning to make sure wishes regarding health care treatment are followed before and after death. A good estate plan also coordinates what happens to a home, investments, business, life insurance, employee benefits (such as a 401K plan) and any other property in the event of disability or death.
Powers of Attorney:
Powers of Attorney are governed by the law of agency, a branch of common law concerned with the delegation of common law concerned with the delegation of power from one person (the principle) to another (attorney-in-fact or agent). When a person becomes incapacitated, the government or the court often steps in and appoints someone to represent and make legal decisions for the incapacitated person. One of the ways to avoid government or court intervention and the appointment of a stranger to act as your guardian, is to use a Power of Attorney. A Power of Attorney is a written document that can limit in scope, or it can allow one person to give another the full power and authority to represent him or her. There are two types of Power of Attorneys; one covering assets and one covering health care decisions.
Estate litigation is a legal dispute usually initiated by someone who feels they did not receive all they were entitled to in a Will. Wills can be challenged if it is suspected that the Will is not legally valid or if the person who was writing the Will was wrongly influenced while creating it.
A Conservatorship is a court order that a person deemed fully or partially incapable be subject to the legal control of another person.
- There are two basic types of Conservatorships to accommodate the different needs of individuals. A conservator of the person is appointed to supervise the personal affairs of an individual who is found by the court to be unable, even with the appropriate assistance, to meet essential requirements for personal needs. These needs may include, but are not limited to, the need for food, clothing, shelter, health care and safety.
- A conservator of the estate is appointed to supervise the financial affairs of an individual who is found by the court to be incapable of doing so himself to the extent that property will be wasted unless adequate property management is provided. This may include, but is not limited to, actions to: 1) obtain, administer, manage protect and dispose of real and personal property and tangible property, business property, benefits and income, and 2) deal with financial affairs.
- A person may be in need of one or both types of conservators. Two separate individuals may perform these two roles, or one person may serve in both capacities. A conservator of the estate or person may be an individual, a legally authorized municipal or state official, or a private or nonprofit corporation. However, hospitals and nursing homes cannot be appointed conservators of either the person or the estate, and banks cannot be appointed conservators of the person.
The conservator is responsible for the assets and finances for an incapacitated person. Many jurisdictions use the term “guardian of the person” to refer to the same legal principle. It may be necessary to petition a court to appoint a conservator for persons:
- Who have physical or mental problems that prevent them from managing their own financial affairs;
- Who have no person already legally authorized to assume responsibility for them; and
- Where other kinds of assistance with financial management will not adequately protect them.
A guardianship is a legal relationship created by a court between a guardian and his ward, either a minor child or an incapacitated adult. The guardian has a legal right and duty to care for the ward. This may involve making personal decisions on his or her behalf, managing property or both. Usually, as person has the status of guardian because the ward is incapable of caring for his or her own interests due to infancy, incapacity or disability.
Courts generally have the power to appoint a guardian for an individual in need of special protection. There are different types of guardians that can be appointed. A guardian with responsibility for both the personal well-being and financial interests for the ward is a general guardian. A person may also be appointed as a special guardian, having limited powers over the interest of the ward. A guardian appointed to represent the interests for a person with respect to a single action in litigation is a guardian ad litem.
Estate Tax Returns:
The money and property you own when you die (your estate) may be subject to federal estate tax. Most estates are not subject to the tax. Only about 2% of all estates are subject to the estate tax. An estate tax return generally will not be needed unless the estate is worth more than the applicable exclusion amount for the year of death. The estate tax is technically a tax on the transfer of the property to others, generally to the children of the decedent.
Estate taxes are different from, and in addition to, probate expenses and final income taxes owed on income the decedent earned in the year of his or her death. They also are separate from inheritance taxes that are collected by some states.
Most states impose their own estate taxes, usually a “sponge tax” that piggybacks on the federal estate tax. The federal estate tax allows each estate a tax credit for any state inheritance or estate taxes paid, up to a maximum dollar amount.
Private Annuities & Charitable Trusts:
In a private annuity trust, an owner transfers property to an irrevocable trust in exchange for a promise to make prescribed payments to the owner for his or her lifetime. The trust then sells the property to a third party, the proceeds of which are invested to provide the payments promised to the owner. On death the remainder of the trust estate typically passes to the heirs of the property owner. The trustee must be someone other than the property owner.
A charitable trust is somewhat similar to a private annuity trust, except that the owner transfers the property to an irrevocable trust of which one or more charitable organizations will be beneficiaries. The type of charitable trust most likely be used is a charitable remainder trust, in which the owner retains an income interest for his or her lifetime. The property can be sold by the trustee and the proceeds invested to provide the payments to the owner. On death or after a specified term of years, the remainder of the trust estate passes to one or more designated charitable organizations. Unlike a private annuity trust, the trustee can be the property owner.
A special needs trust is created to ensure that beneficiaries who are disabled or mentally ill can enjoy the property which is intended to be held for their benefit. In addition to personal planning reasons for such a trust, the person may lack the mental capacity to handle their financial affairs; there may be fiscal advantages to the use of a trust. Such trusts may also avoid beneficiaries losing access to essential government benefits.
Special needs trusts can provide benefits to, and protect the assets of, the physically disabled or the mentally disabled. Special needs trusts are frequently used to receive an inheritance or personal injury settlement proceeds on behalf of a disabled person or are founded from the proceeds of compensation for criminal injuries, litigation or insurance settlements.
Many of the traditional forms of estate planning can be used effectively as asset protection techniques. Gifts of property that are not intended to defraud creditors will remove the assets from your estate. If your child owns the farm, not you, it is less likely a creditor risk (though such a transfer has that issue to be addressed).
Retirement plans have a significant amount of asset protection built in due to federal and state law. Spendthrift provisions in life insurance contracts and certain trusts can prevent creditor attack while the assets are outside the hands of the beneficiary. Conducting your business as a corporation, using limited liability companies, limited partnerships and other business entities afford considerable personal liability protection as well as possible tax advantages. When considering an asset protection plan, these traditional forms of asset protection should be the first ones considered. But they may not be enough.
Some basic types of asset protection include investing in retirement accounts that are protected by the government from creditors (these vary from state to state) as well as some simple methods of setting up your business. Two popular examples of these are Family Limited Partnerships (FLP) and limited Liability Companies (LLC). By setting up your business in one of these ways, you will be able to protect your individual assets (at least to a point) from any business problems. Basic partnerships or sole-proprietorships cannot usually afford the asset protection that FLPs or LLCs can.
The types of asset protection you need can sometimes be hard to determine. If you are unsure, or need assistance with beginning your asset protection plan, you should consult with a qualified and experienced attorney or financial advisor to decide the safest and most productive method of asset protection for you.
If you or someone you know in Southern California needs the assistance of an experienced Palm Desert Estate Attorney, call The Law Offices of Mark J. McGowan, PC today at 866-ADVOCACY (866-238-6222) or 760-340-3222 to schedule a free consultation.
Mark J. McGowan is a Phi Bets Kappa graduate of Stanford University (1981) and of Stanford Law School (1984). As a Certified Specialist in Estate Planning, Trust and Probate Law, a license and distinction of the California State Bar’s Board of Legal Specialization, he is devoutly dedicated to providing each selected client with personal, caring counsel, attentive accessibility, diligent performance and quality service.