To follow up on my post from September 16, 2009, here is another interesting article regarding estate tax reform published by Reuters this afternoon.

http://www.reuters.com/article/email/idUSTRE5B03HZ20091201

The article that I have linked on estate taxes is very interesting.  When I ask clients what they want to accomplish, virtually everyone says the avoidance of probate and the avoidance of estate taxes.  Of course, the vast majority of couples have estates that are more than seven million dollars so generally estate taxes should not be a legitimate concern.  However, if the estate tax were eliminated by law, there would be other taxes.

http://online.wsj.com/article/SB10001424052748704224004574489581033118194.html

Yesterday TheHill.com published an article titled “Debate Over Estate Tax Likely to Wait till 2010,” which suggests that the most likely scenario for estate tax reform is a “one-year extension and then tackling the issue as part of broader tax reform next year.”

The full article is available online at http://thehill.com/homenews/senate/58665-debate-over-estate-tax-likely-to-wait-until-2010. (For those of you unfamiliar with TheHill.com, it is self-described as the publication “for and about Congress, breaking stories from Capitol Hill, K Street and the White House. The Hill stands alone in delivering solid, nonpartisan reporting on the inner workings of Congress and the nexus of politics and business.”)

Asset protection is on a lot of people’s minds.  For some it may be on their minds unnecessarily.  Others do not have asset protection on their minds, but should.

Who should be thinking about asset protection?

The obvious answer is anybody that has some likelihood of being sued.  Thus medical doctors are an obvious group of people who need to be aware that at any time a patient could bring suit.  However, it does not have to be a patient; it could also be a partner or an employee.

Another high risk field is that of builders and developers.  Obviously, a project could go south because of a change in the market.  Eventual owners could sue and once again partners could also sue.

People in all types of businesses and professions need to be on guard.  That includes owners of apartment buildings, duplexes, or simply those who rent out a house.  I know of a situation where an owner of an apartment building was sued for a lot of money because there was a shooting on the property.

We are the most litigious society in the world. As most reading this know, even businesses who serve hot coffee have to be on their toes!

Another reason to do asset protection is to protect yourself when an investment goes bad.  Recently I read that the coach of the University of Michigan football team, Rich Rodriguez, was sued for $3.9 million due to a loan default in a condominium project.  What makes it interesting was that the money was borrowed by a limited liability company of which Rodriguez was a partner.  Ironically, one of the reasons that someone forms a LLC is for asset protection as I will discuss in a future blog.  However, Coach Rodriguez, it is alleged, gave a personal guarantee, and therefore may be liable for whatever the difference is between $3.9 million and the assets in the LLC.  It is true that the creditor can and probably is seeking repayment from all of the partners and not just Coach Rodriguez.  On the other hand, creditors often attempt to get repaid from the easiest source(s).

In future blogs, I will discuss other reasons to do asset protection and what are some asset protection mechanisms including trusts.

For those above a certain age and/or for those from New York City, the Astor family name is synonymous with wealth and charity.

Brooke Astor lived a long and storied life.  She died in 2007 at age 105.  Her son, and an attorney, Anthony Morrissey, who did estate planning for her are on trial in a Manhattan courtroom for among other things, larceny, scheming to defraud and forgery.

The basic prosecution case is that while Mrs. Astor was suffering from Alzheimer’s disease for the last seven years of her life, her son caused her to change her will, forged her name on a codicil, and sold a painting that she was attached to while pocketing a 20% commission.

The prosecution called 72 witnesses over the almost 17 weeks it took to put on its case.  Many of its witnesses had no direct connection to the case, but testified because the prosecution wanted to demonstrate that Mrs. Astor was not competent during the time period that the “acts” were committed. 

Every day in southern California, estate planning attorneys are asked by someone’s child to prepare a trust, or a will, an amendment to a trust, or a codicil to a will, when it is evident to the estate planning attorney, that the parent is not leading the child, but rather the child is leading the parent.  Frequently the motive of the child is harmless – in fact it will be of benefit to the parent.  However, sometimes the motive is not harmless and the primary motive is to alter the wishes of the parent.  It is in those situations that the attorney can become either the defendant in a civil lawsuit or the defendant in a criminal prosecution.

Probate litigation frequently involves claims of undue influence.  Whether or not Mrs. Astor actually signed one of the codicils to her will is important, but almost beside the point.  The key questions are whether it was something that she wanted to do, that she knew what she was doing, that she was not unduly influenced, and that she was competent to do so.

The numbers are staggering.  At least one in two of us — that is you and me – are going to require long term care at some point in our lives.  I would doubt that half of those reading this have a plan in place for their long term care.    

Most of my clients are going to require long term care.  And yet when I ask whether they have a plan in place, the vast majority indicate that they do not.  Let me point out the flaw in the inactivity.

Here are a few numbers.  For a couple turning 65, there is a 70% chance that at least one of them will need long term care.  The percentages obviously increase as the couple ages to the point that for those people over age 85, 97% will require assistance in the last year of life. 

Long term care is not cheap.  Some are estimating that by 2018, a private room will cost $500 per day.  Twenty-four hour care in the home will cost approximately the same.

Long Term Care is defined as when a chronic condition, trauma, or illness limits the ability to carry out activities of daily living (ADLs) which may include bathing, dressing or eating or instrumental activities of daily living (IADLs) which may include household chores, meal preparation, or managing money.

For those over age 50 (I realize most 50 year olds are thinking that they are too young to be thinking about long term care), ask yourself the following questions:

If you ever need long term care, where do you want to receive it?

Who will provide that care?

Are there potential care providers?  Are there arrangements that can be successfully implemented?  For how long?

How will you pay for it?  (Do you have savings?  insurance? government assistance?)

Is your home safe for you to stay in if you require long term care?  If not, can it be made safe?

Will you have to move?

Have you looked at retirement communities, assisted living facilities and skilled nursing facilities in your community?

If you have not developed answers to the above questions by the time you require long term care, there is a large chance that others will make the decisions for you.  Some people are fine with that, but others given the choice will want to decide for themselves.

Meeting with your estate planning attorney is an important first step in analyzing the issues as they relate to you.  The estate planning attorney will make recommendations based upon your situation.  He/she may then suggest speaking to a financial planner and/or insurance professional.

Almost every client asks me where should they keep their estate planning documents.  And every time I explain that there is not a perfect answer.  Historically, many people left the originals with the attorney who drafted the documents.  I am not a proponent of that and in fact retain only two clients original documents.  Both of those clients requested that I do so.

I think that one of the reasons some estate planning attorneys kept the documents was because it insured that they would get future business from the client’s family when the trust will was executed.  I recommend that my clients keep their living trust; wills and other estate planning documents in an easily accessible place.  Moreover, I suggest that they inform their successor trustee/executor where they are kept.

What about safe deposit boxes?  In the event that you wish to keep the originals there, the safe deposit box should be titled in the name of the living trust so that the successor trustee can have easy access.  Otherwise, more than one person has said, it is like locking the keys in the safe.  Moreover, the successor trustee should be informed as to where the safety deposit box is located.   I am currently administering a large estate and my client (the successor trustee) went to more than 10 banks before finding the location where the decedent kept his safe deposit box. 

Ultimately, I am a believer in keeping the documents at home in a safe, but accessible place.  In any event, inform the successor trustee/executor where the documents are kept.

They say nationwide that 50% of marriages end in divorce.  In California that number must be higher and in Southern California it must be even higher still.  Thus, in Los Angeles, Culver City, Santa Monica, Manhattan Beach, and surrounding areas, the percentage may be closer to 60% of marriages ending in divorce.

As an estate planning attorney, I see the results of what happens when someone remarries without revising or amending their estate plan including their living trust and will.  Here are some things – there are others – that one should do upon getting divorced and especially upon getting remarried:

1. Sever all financial ties with your ex spouse.  Obviously, a lot of this occurs in the divorce itself, but frequently not everything.  Doing a new will or living trust is a big start, but it might not be enough.  For example a living trust only controls those assets that have been retitled in the trust and those assets wherein the trust has been made the beneficiary.  Make sure that any retirement assets including IRAs and 401Ks no longer have the ex-spouse listed as a beneficiary.

2.  In the event of remarriage, remember your children from your previous marriage and take steps to affirmatively protect them in the event that you predecease your new spouse.  This is a serious concern.  Frequently, clients assume that there new spouse will provide for your children.  More often than not, your assets ultimately end up not with your children, but with your new spouse’s children.  By working with a qualified estate planning attorney, or an attorney who prepares many living trusts, you can still provide for your new spouse for the remainder of his/her life so that your new spouse will be secure financially.

Many estate planning attorneys are very familiar with planning for blended families.  Make sure you talk to one who has experience with handling the various issues that arise.

In the event that it has been a while since you have reviewed your estate plan, including your will and/or your living trust, it makes sense to review it to make sure it is current with your situation.  If you have not done your estate plan yet, I would enjoy speaking to you about getting it started.  I can be reached at 310-391-1311.

As an estate planning and probate attorney, I like to read about what famous people put in their wills. Recently I saw an article online from the Rochester Minnesota Post-Bulletin which indicated that the late Senator Jess Helms’ will was filed in the Wake County North Carolina Courts on July 16, 2008 less than 2 weeks after his death. 

In his will, he requests that his “children try to be as understanding and tolerant of each other as possible.”  As I read that, I thought that is interesting for a United States Senator to write because a senator who wants his legislation to be continuously passed has to be mindful of following that thought.

The Post-Bulletin article which was written by McClatchy Newspaper writer Mark Johnson indicates that Senator Helms divided his estate “between his wife, and a trust to provide any needed support for his wife, children and grandchildren.”

Among specific items it provided that his wife receive his congressional papers; that his stamp and coin collections be sold; and that if no one wanted his Senate desk – I would think someone would want it – that it should be given to the Jesse Helms Center Foundation until a family member requests to use it.

Mr. Johnson indicates that the will repeatedly uses the term “death taxes”.  Many estate planning and probate lawyers use the more benign sounding phrase “estate taxes”.  Helms had been a proponent of eliminating those taxes.

While I am not certain of the probate law in North Carolina, I imagine it is similar to California probate in that wills lodged with the court are available for the public to see.

Ed Masry, became famous as the attorney played by Albert Finney in the movie Erin Brockovich, is still winning on the side of lawsuits despite having died in 2005. This time it deals with estate planning and specifically his living trust.

In 2004, Mr. Masry and his wife of 13 years, created the Edward and Joette Masry Family Trust as their living trust. They appear to have funded the trust with the property they acquired during their marriage. Each spouse was a trustee of the trust. The trust contained language providing that each spouse reserved “the right and power to revoke this trust, in whole or in part, from time to time during their joint lifetimes, by written direction delivered to the other Trustor and to the Trustee.” (“Trustors” are the creators of the trusts and in this case the owners of the assets in the trusts. Some attorneys use the word “Settlors” and others use “Grantors” instead of “Trustors”).

A couple of weeks before his death, Masry executed both a “Notice of Revocation of Interest in Trust and Resignation as Trustee” and a new trust, the Edward L. Masry Trust, with two of his children as successor co-trustees. He virtually simultaneously transferred his assets from the family trust to the new trust.

Needless to say, his widow was not happy and she sought to have the Revocation of the Family Trust to be declared invalid because she did not receive notice during her lifetime. She lost at the trial court level as the judge found that the method of revocation in the trust was not the exclusive method of revocation because the trust did not say it was the only method of revocation that could be used and that the California Probate Code provided an additional method of revocation.

Mrs. Masry appealed the trial judge’s finding to the California Court of Appeal and the Court of Appeal upheld the trial court. The Court of Appeal in its written opinion acknowledged on the one hand, that it might not be fair that one spouse can revoke a trust without the knowledge of the other, but noted that on the other hand, one spouse can dispose of his or her share of the community property without the other’s consent.

Frequently in estate planning and in drafting a living trust or family trust, it is the little things that can make all the difference. That is why we constantly urge our clients to stay on top of their affairs and to review their documents at least annually.