Recently I read two articles that indicated earlier this year, Joe Paterno transferred to his wife the house that they have lived in since 1969. The house is valued at approximately $600,000. Obviously it is interesting because of the fact that some have speculated that he could be the target of civil lawsuits in the Jerry Sandusky matter. It is possible that Paterno was aware that there was a possibility that everything was going to become public a couple of months later and wished to engage in asset protection. However, asset protection planning is supposed to be accomplished without knowledge of an impending matter – in other words while the coast is clear.

The other reason it might have been is for estate planning purposes. However, as an attorney admitted in California and not Pennsylvania, I am not exactly sure what it accomplishes. We have entered into the world of “portability” and assuming it continues to exist, a surviving spouse essentially gets to use what is left of the predeceased spouse’s exemption amount.

Regardless, it gives estate planning attorneys something to discuss and write about!

Anna Nicole Smith’s estate – meaning her daughter – lost in June a major decision in the United States Supreme Court by a 5-4 decision. The issue was whether a California bankruptcy court had the authority to resolve a dispute concerning Anna Nicole Smith’s rights in the estate of her husband, J. Howard Marshall.

The United States Supreme Court, by the narrowest of margins, said the Texas probate court rather than a bankruptcy judge in California, had the authority to resolve the dispute concerning Mr. Marshall’s estate. Anna Nicole had not been included in Mr. Marshall’s will.

When someone marries, especially if they have children from a previous relationship, they should always amend their estate planning documents including their will and/or living trust to reflect the fact that they are married and to indicate what they intend their spouse to receive upon their death.

Estate planning attorneys are sometimes asked to prepare premarital agreements. When I am asked, it is usually because at least one of the spouses is “older” or is because it is a second marriage for at least one of the spouses.

People often attempt to take shortcuts in the execution of premarital agreements. Shortcuts can invalidate the agreement. In California, premarital agreements have to meet certain requirements for them to be considered valid by the court in the event the marriage dissolves and one party seeks to implement the agreement.

The Agreement should be in writing. Husband and wife should each have been represented by a different attorney. Full and complete disclosure of all assets must be made by each spouse. Moreover, the Agreement should not contain provisions that are hugely unfair. If so, the entire Agreement is at risk of being thrown out.

The Agreement should be signed at least a week before the marriage; ideally it would be executed much earlier than that. Moreover, each spouse must have had time to read the Agreement and discuss with his or her attorney.

When people come to me to do their will or living trust, one of the questions I ask is whether they have a premarital agreement. It is possible that it will impact the way I draft their estate planning documents.

Many times I am asked by clients for some things they can do to save for their children’s college and that are also make sense financially. College 529 plans (529 is the Internal Revenue Code section which authorizes them) are one such planning vehicle. They became a very viable planning tool with the passage of the Bush Tax Act in 2001.

Essentially a 529 plan is a plan sponsored by a state in which someone saving for college invests in various investment options. Money from a 529 plan is to be used for tuition, fees, supplies and books. The money can also be used for room and board provided that the student is at least half time. As long as the money is used for the above, the gains will not be taxed.

The major advantages of the 529 Plans are that the donor retains control of the account; it is an easy way to save for college; the principal grows tax deferred and distributions for college costs are exempt from tax. Also, it is a way to get assets outside of your estate while continuing to have the ability to utilize the assets, subject to a penalty, if the need arises.

An estate planning lawyer does more than prepare trusts and wills. Often we are able to suggest things that are helpful to our clients right now!

More and more people have assets online. It might be a web based business; it might be a blog that is read by more than its author; it almost certainly includes some social media presence.

When clients come to our office for estate planning – more and more are mentioning types of assets that had not even been invented 10 years ago. They are relatively easy to plan for, but like personal possessions it is important to have a plan in place for family harmony.

In a related vein, people need to think about how they wish to inform their successor trustee/executor of their various passwords. Once again, there are a variety of ways this can be accomplished. It just needs to be thought out!

As an estate planning attorney, it is my job to point out issues that may arise and help you determine the solution that works best for you and your heirs. A living trust and will sound so basic, but they can answer so many questions and well-drafted and thought out documents will assist in the legacy of the testator being preserved.

The cover story of the May 23, 2011 issue of The National Underwriter is titled “Opening The Vault” and deals with unclaimed life insurance funds. Quoting from the article: “On May 17, the National Association of Insurance Commissioners announced that it had formed a task force to investigate life and annuity claim settlement practices.”

Obviously, when the insured dies, it is time for the insurance company to pay out on the policy. One can ask, how does the life insurance company know when the insured has died if the family does not notify the company? Conversely, some families might not be aware of the policy because the insured did not keep good records.

There is something called the Death Master File. It is a database of over 83 million deaths that is kept up by the Social Security Administration. The Department of Commerce sells both weekly and monthly updates to the File.

The John Hancock Company entered into a settlement with the state of California’s Controller’s office in April of this year dealing with some of these same issues. The insurance companies will start being more proactive. However, there is no reason that consumers cannot be in control.

It is important for all of us to maintain our files so that our successor trustee or executor or administrator will be able to ascertain all of our assets and maximize the value of the estate. When I meet with clients as their estate planning attorney to do their trusts and wills, I ask them about all of their assets. I am always concerned that an insurance policy whose premium has long since been paid will not be discovered.

As an estate planning attorney, I am frequently asked by my clients to assist them in determining how their bequests to charity should be handled. Frequently, it is a lengthy part of our meeting as we discuss what they want to accomplish with their money.

Monday, May 16, 2011’s Los Angeles Times carried an article about Robert and Adrienne Westerbeck, a couple in Pasadena. The Westerbecks appeared to be the normal middle class couple. Mr. Westerbeck was a retired engineer who had attended Pasadena City College, loved animals and passed away in 2006 at age 89. Mrs. Westerbeck earned 3 degrees from USC taught music and passed away in 2010 at age 103.

The couple was childless and decided to leave their estate to their Alma matters. Pasadena City College received $4 million dollars which the Times reports is the largest single donation in the school’s history and will establish the Robert Westerbeck Scholarship Endowment. USC’s Thornton School of Music also received $4 million dollars and is establishing the Adrienne Westerbeck Endowed Music scholarship.

As someone who has prepared many living trusts and wills, I do not recall having a similar situation. I am looking forward to the time where a couple like the Westerbecks comes to my office to do something that will provide as much benefit to so many people.

I often get calls that run something like this: Mom left a Will in which she said that everything is to be distributed equally to the three kids and we all agree that it should be sold. Do we still have to do a probate?

The answer is “yes.” When one thinks about it, the answer is obvious. No one has the authority to transfer title to the house. Probate exists to determine legal ownership in an asset that was owned by an individual who did not have a beneficiary listed on the asset or have the asset titled in joint tenancy.

In the event that “Mom” had any creditors, the creditors need to be paid. Creditors need to be paid whether or not there is a probate. In the event the named executor does not petition the court to begin the probate proceedings, a creditor may petition the court.

Had the house been placed in a living trust, probate would have been avoided. It is my opinion that there will be less probates in the years to come because more people are doing trusts.

Obviously it is an important issue! Many business owners have created a very successful business by working incredibly hard to create something that is worth a fair amount of money. Unfortunately, a lot of these same people have not implemented a succession plan.

Many of these same people do have an estate plan including a well drafted living trust – obviously some do not – but it is silent regarding the business. Thought is required regarding the business and depending on the business may require the company’s CPA, a financial advisor, an insurance professional, and an estate planning attorney.

There needs to be a mechanism in place that provides for the orderly transfer of the business. Some estate planning attorneys are recommending the creation of a special asset trust to manage the business immediately after the death of the owner of the business. This allows for key business decisions to be made by individuals pre-selected by the owner.

An estate planning attorney with experience in business succession planning is essential to the smooth continuation of a “small” business.

The tax act that President Obama signed in December 2010 had a lot of features. In the estate tax area, “portability” of the deceased spouse’s unused exclusion amount was implemented and when combined with the increase for 2011 and 2012 to $5 million as the applicable exclusion amount, leads to some interesting results for some people.

The basic requirements are that as follows: married at time of death; the spouse’s death occurred January 1, 2011 or later; the election to transfer the unused exclusion amount must be made on an estate tax return; the exclusion amount may only be transferred to a surviving spouse; and the deceased spouse’s unused exclusion amount wipes out any unused exclusion amount previously transferred to the surviving spouse by an earlier deceased spouse.

Here is an example of how it works: Paul and Grace are married and each has his/her full $5 million exclusion amount. Paul dies in 2011 and his entire $3 million estate is left to a bypass trust. His executor elects on a timely filed estate tax return permitting Grace to use Paul’s unused exclusion amount.

Grace now has an applicable exclusion amount of $7 million which is comprised of her $5 million basic exclusion amount and $2 million from her deceased husband, Paul.

Now lets say Grace gets married to Brad. Brad has a $4 million estate and dies in 2012. He left his entire estate to his children. He only has $1 million in unused exclusion amount. The amount that Grace had received from Paul (husband number 1) is now lost. In the event that Brad’s executor makes an election on a timely filed federal estate tax return, Grace will have an applicable exclusion amount of $6 million. If his executor does not do so, Grace will be limited to her basic exclusion amount of $5 million.

For the vast majority of Americans, this is irrelevant. However, for some people it will result in an estate tax savings. It brings to bear the question of whether bypass trusts are still relevant. I argue that they are and will do so in a subsequent blog.