Tag Archives: Estate Planning

Issues with Siblings in Estate Planning

The Wall Street Journal recently had an article entitled “Sibling Rivalry Complicates Estate Planning.” I find that this issue often comes up in estate planning and other matters. The article highlights a dispute over the estate of Jimi Hendrix. When Jimi Hendrix died in 1970, he did not leave a will. His estate had been controlled by his father. When his father died in 2002, a sibling of Jimi Hendrix was put in charge of his estate. In response another sibling disputed the new executor.

The article provides some interesting insight into planning for a dispute among siblings. First, there should not be surprises. If you intend to treat children unequally, a no contest clause may address your needs, although it needs to be written properly. Further, the person who wants to contest a will or trust must have received a sufficient inheritance in order for the beneficiary to decide it is not worth contesting a will or trust. Often times disparate treatment among siblings is a major reason for fights after a parent’s death.

Second, if you do have valuable or sentimental items that you believe your  children will fight over, then it may be worth addressing these issues in your will. California law allows you to handwrite a list of personal property and the persons you want to receive it as part of your will. I will be discussing that issue in a future post.

Sibling disputes can tear apart a family, so efficient estate planning can often avoid these disputes and allow for family unity after a parent’s death. It is important for a person contemplating a will or trust to consider sibling disputes in their estate plan.

Selecting the Right Trustee

A typical misconception about estate planning is that people who are considered older should be concerned with them and that there is always time to go and create a will or trust. The problem with that thought process is that estate plans are much more than the passing of assets to another person. Estate plans can include the power to make decisions for a person regarding health concerns if said person is incapacitated or is unable voice the decision themselves. This is typically an overlooked aspect of estate planning and actually is a very important one in the case of a car accident or maybe a work related injury. Some may argue that one can go make the health care power of attorney if something was to happen, but may forget that if a person is incapacitated they will not be able to create this document. In addition, if an emergency is to occur, it is normal to be in a frazzled state and not think things through clearly before making important documents. Because of these mentioned reasons, it is a very important decision to set up a very precise health care power of attorney and make sure that your health and life is protected in case of an emergency.

The other side of estate planning that younger individuals do not typically think about are wills and trusts to protect the assets that they have. Homes, bank accounts, automobiles, burial expenses are the items people correlate to wills and trusts, but social media accounts and smaller personal belongings is what is left out of that thought process. They may seem minuscule and unimportant, but should be taken care of to make sure that they go into the correct hands. Everything of slight importance could be and should be mentioned in a will so that nothing is left to chance. Also, younger people without a great deal of assets tend to believe that their assets will always be placed in the hands of their spouse or maybe parents, which ends up not being true. It is always beneficial to have a will or trust set up, even for a small amount of assets, so that the assets are distributed to the correct people and survivors do not have to go through a tedious process which occurs when there is no estate plan. In addition, assets that have been obtained after the will or trust has been established can always be added to the documents, so that they are protected as well.

A very important aspect of estate planning that usually is not mentioned in articles is the actual picking of the trustee and how to make sure you have chosen the correct person. The questions that should be asked to picking a trustee are as follows:

–         Does he or she have the experience and knowledge to manage complicated financial affairs in a competent and knowledgeable manner?

–         If he or she must make a decision that may affect family members, will they act in a fair and unbiased manner?

–         Will naming a family member as trustee create tension between family members?

–         Does the prospective trustee have the time to manage your trust and will do so without rushing?

–         Does he or she want this important responsibility?

–         Is there another person in mind to serve as trustee if the trustee selected can’t do it?

These questions should be thought about with the uttermost care and should be discussed with a third party to get a second opinion on the potential choice of the trustee. An attorney could help make the correct choice of a trustee because they would be unbiased. Please contact attorney Anthony Marinaccio at 818-839-5220 with any questions.

Estate Planning is Not Just About Estate Taxes

MSNBC recently wrote about the wealthy not creating estate plans because many of their estates fall under the estate tax exemption. In 2015, the estate tax exemption is $5,430,000 per person (meaning $10,860,000 per couple). Prior to the 2000s, estate planning was focused on estate taxes; however, with the higher exemption limits, most families will not have to deal with estate taxes at all.

Estate planning is more importantly a method to control what you want to do with your assets when you’re alive and unable to make decisions and when you’re deceased. It allows you to pass property to the people you want. If you do nothing, your “estate” will be decided by a set of California laws, known as dying intestate or intestacy. This might not be what you want. Further, if you do nothing, your estate may need to go to probate, which is a court process to pass assets to your closest living relatives. The costs associated with probate can be high.

Part of any estate plan is to include a revocable living trust and will to avoid probate. Further, an estate plan includes a power of attorney and advance healthcare directive to address issues while you are alive and unable to make decisions. These important documents are not just to minimize estate taxes, but allow certainty and minimize costs associated with passing property to your heirs.

The article is “Wealthy suffer from ‘estate planning fatigue.'”

Holding Title as Joint Tenants

Joint Tenancy is a type of ownership of real estate by two or more persons in which each owns an undivided interest in the whole property. Joint tenancy is often touted as one method of estate planning; however, there are consequences you may not be aware of that could not make it the best option available.

When a joint tenant dies, the interest in the property is then vested into the interest of the surviving joint tenant or joint tenants. Simply put, if one of two joint tenants passes away, the second party of the joint tenancy gains all the percentage of interest of the party who passed away and has one hundred percent of the property.

In order for the property to pass the surviving joint tenant, the surviving joint tenant would be required to record an Affidavit of Death of Joint Tenant with a copy of the deceased joint tenant’s death certificate. It avoids probate and trust administration, and is a relatively short and easy process to acquire property after a death.

A joint tenant cannot pass on the property through a will or revocable living trust, so there are no other options as to who will receive the property except to the surviving joint tenants.

One of the main drawbacks in owning a property in joint tenancy is that any joint tenant can file a partition action to force the sale of the property. Further, if a joint tenant has a judgment against him or her, that judgment can attach to the property.

I generally do not recommend using joint tenancy as an estate planning tool but to draft a will and revocable living trust because ultimately it gives you control during your lifetime without relinquishing that control to another. Further, if there is a dispute between you and your joint tenants, any joint tenant can file a partition lawsuit and require that the property be sold, even if you live on the property.

Please contact Attorney Anthony Marinaccio at 818-839-5220 for more information regarding joint tenancy properties.

End of the Year Estate Planning Reminder #2

Before 2014 comes to a close, it is important for those with extra cash or assets on hand to consider using the annual gift tax exclusion of $14,000 per year per recipient. A married couple can give $28,000 to any person without filing a gift tax return. Gifts must be made and checks deposited by December 31, 2014, so if you would like to use this exclusion, gifts should be provided a little before December 31, 2014 if a check is being used. The number of donees is unlimited, so a couple or person can give as many $28,000 or $14,000 gifts to as many people as they want.

It is also important to note that the $14,000 exclusion do not include the payment of education or medical expenses when payment is actually made to the institution and not the person. For example, if you pay $20,000 directly to a college for your grandchild’s education, this would not be included as a “gift” for gift tax purposes.

Prior to making gifts that are larger than the annual exclusion, you should contact your accountant for tax advice regarding such gifts.



Year End Estate Planning Reminder #1

The end of the year, combined with the holidays and seeing family, is as good as a time as ever to review your estate plan or get an estate plan.  This week I plan to write about some reminders that you should think about as the end of the year is close in order to ensure that you have a properly written estate plan that actually reflects your intentions.

Take some time to read your revocable living trust

Over the last several years there have been a number of changes to the laws of estate taxes that may affect your revocable living trust. Prior to 2013, many trusts were “AB Trusts” that attempted to minimize the amount of estate taxes that would have to be paid. Now, with an estate tax exemption of $5.34 million in 2014 and $5.42 million in 2015 many estates will not even be close to paying estate taxes. It is also important to note that married couples get double the exemption because each spouse receives the exemption.

There are number of reasons why you may still want AB Trusts since each situation is different. However, if you have not reviewed your estate plan in several years, it may be time to review it to ensure it still complies with the current tax environment.

Using Joint Tenancy as an Estate Planning Tool

I often hear from clients and potential clients that they want to add a relative’s name to a piece of real estate as “joint tenants” in order to avoid probate. Although this is probably the cheapest estate planning tool you can do in the short term, it is the least favorable for most circumstances for several reasons. This article highlights the disadvantages of using joint tenancy as an estate planning tool.

What is Joint Tenancy? 

Under joint tenancy, each co-owner of real estate owns an undivided equal interest in the real estate. Upon the death of one joint tenant, the deceased joint tenant’s interest passes on to the other surviving joint tenants. This is accomplished after a joint tenant’s death by recording an Affidavit of Death of Joint Tenant in order to remove the deceased joint tenant’s name from the real estate.

For several reasons, joint tenancy is not the best method to pass on property after your death.

Loss of Control and Creditor Protection

First and foremost, you lose control of the real estate because you will now own the property with co-owners.If a co-owner wants to sell, he can force the sale through a partition action. Relationships can change over years that could alter the relationship co-owners have with the real estate owned together.

Further, if the co-owner has judgments against him, a creditor can put a lien on the real estate. This can be extremely disadvantageous because even if you do not have judgments or liens, a creditor can attach a lien to the property because of a co-owner’s debt and potentially force a sale.

Tax Implications

A great estate planning tool is to take advantage of the “step up in basis” of real estate when it is within a trust or passed through probate. Generally, if real estate is inherited, the heirs receive a “step up in basis” meaning that their basis for the asset is the value of the property upon the death of the previous owner. For example, John purchases an apartment building in 1980 for $100,000. It is currently worth $1,000,000. If he sells it today, he will pay capital gains taxes on $900,000 (this is oversimplifying it because you also have to take into account depreciation). However, if he dies and his children inherit it and then sell it, they do not pay any capital gains taxes because the children’s basis is $1,000,000.

However, if you own real estate in joint tenancy, the surviving joint tenant assumes the deceased joint tenant’s basis. So in the example above if John owned the apartment building with his children as joint tenants and John’s children decide to sell upon his death, they would be liable for capital gains taxes on the $900,000 gain.

There is an also an issue of gift taxes when you “give” an asset away during your lifetime.

What to do instead?

By drafting a revocable living trust, there is still a way to avoid probate without adding co-owners to any real estate you own. If you are interested in learning more, please contact Attorney Anthony Marinaccio at (818) 839-5220 for more information.


Estate Planning for Childless Couples

The Wall Street Journal recently had an article entitled “Estate Planning for Childless Couples” that emphasizes the importance of different estate planning tools for your personal situation. I often tell people who do not have children that estate planning may have even more important repercussions for them than people with children because if you die without a will, the State of California decides who will inherit your estate through intestacy laws.

If you die without a will, you are said to have died “intestate.” The Probate Code sets forth who would receive your estate. If you die without a will only family members will be able to inherit (even long lost ones). Therefore, it is sometimes more important for persons without children to have an estate plan.

The Wall Street Journal article highlights why having a plan is important particularly if you want to leave your estate to close friends or a charity. Both categories would not receive anything if you die without a will. It would also be important to create a revocable living trust for the same reasons anyone should – namely to avoid probate.

It is also very important for childless couples to address a power of attorney and advanced healthcare directive because without one, decisions that need to be made if you are incapacitated will most likely be left to strangers.

For these reasons a couple that does not have any children should address all of these issues in their estate plan. Attorney Anthony Marinaccio can properly advise you for your particular situation if you have any questions or concerns. Please contact him at (818) 839-5220. 

6 Estate Planning Moves You Should Make in Your 30s

Daily Finance has an interesting article for estate planning that should be addressed in your 30s. Estate planning is often equated with older people; however, there can be some estate planning moves that you can make as you are younger that might make sense. In addition to having a will, a revocable living trust, a healthcare directive, and a power of attorney, the article also talks about planning for retirement.

The article is 6 Estate Planning Moves You Should Make in Your 30s.

Using a 529 College Savings Account for Estate Planning

Marketwatch has an interesting article on how you can use a 529 College Savings Account as part of your estate planning process. Estate planning is all encompassing so it is important to use a variety of tools to give gifts, minimize taxes, and make your wishes known.

The article discusses the importance of using a 529 College Savings Account for grandparents to grandchildren and how this can minimize the size of an estate for estate tax purposes along with providing gifts to your grandchildren. Of course, the same reasoning can be applied to children.

The article is Using a 529 college savings accounts for estate planning.