How Not to Leave an Inheritance to a Child

A good example of why it's often not a good idea to leave an inheritance outright to a young child, and better to instead consider an ongoing trust, staggered and/or contingent distribution schedule, or simply a greater age than 18, 21, or 25 for outright distribution:

From Trust Fund Kid to Average Joe: What Blowing a $250K Inheritance Taught Me, as told to Marianne Hayes, LearnVest.com, September 9, 2014.

Using A Personal Property Memorandum in Estate Planning

A recent Wall Street Journal article entitled "How to Avoid Estate Fights Among Your Heirs" (Andrea Coombes, Dec. 15, 2013), highlighted one useful estate planning tool, the personal property memorandum:

[G]iven that family heirlooms can spark fiery conflicts, create a memorandum that details how you want to divvy up your personal property. ....

The memorandum describes who shall receive specific items. The will then references the memorandum; for example, "I direct my executor to distribute my tangible personal property in accordance with a signed and dated memorandum to be found with this will." Relatives may be unhappy with your decisions, but they're less likely to be angry at each other.

Make sure your executor knows where to find the memorandum, and be specific about items. In one example, a woman said her diamond ring should go to a daughter, but she didn't clarify which diamond ring, says Ms. Olsavsky. Attaching photos of the item and referencing each photo in your memorandum can help.

Another way to prevent arguments after you're gone: Give items away before you die.

When NOT to call a lawyer

One lawyer's opinion on when to call a lawyer and when not to.

Los Angeles California Estate Planning Blog

Because my practice is a mix of serving small businesses and families, I am separating these two facets of law into separate blogs, so that going forward posts of interest to entrepreneurs and businesses will continue to be posted here, posts concerning estate planning, wills, trusts, etc. will be posted at my new Los Angeles Estate Planning Blog. The first post on trust protectors is up now. For now, past articles on estate planning will remain here, but I may migrate or duplicate these to the new blog at some point.

When to Update Your Estate Plan

A recent Forbes article written by Deborah L. Jacobs serves as a helpful reminder as to when one may want to consider updating an existing estate plan:

These documents, along with the rest of your estate plan, should be reviewed at least every five years–more often if there is a change in the law, your finances or personal circumstances. The following important developments may require action on your part.

Do It Yourself Estate Planning Pitfalls

The pros and cons of DIY estate planning are discussed in yesterday's article in US New and World Report:

"Unless you are single and have absolutely no money," says Brooklyn-based estate planning and tax lawyer Hani Sarji, you need an estate planner, because people tend to make mistakes when they fill out their own forms online. "People might get a false sense of security from DIY estate planning," Sarji adds, and answering one question incorrectly or overlooking something such as appointing a guardian for children can lead to major problems down the road.

On her blog, estate planning lawyer Leanna Hamill writes about a colleague who had a client who used an online do-it-yourself will that he failed to update after some of his beneficiaries died and he opened new bank accounts that weren't mentioned on the form. "That is the reason to have an attorney assist you with this process. We know the questions to ask, and we know what to do with the answers," she writes.

"Without a lawyer, you might not understand the terms," says Deborah Jacobs, author of Estate Planning Smarts. Therefore, you could inadvertently give someone more power than you want to when creating a "durable power of attorney" document, for example. That document essentially gives someone else the power to take care of your finances if you become incapacitated. Jacobs says that if that person isn't trustworthy, he or she could steal from you. She also warns that if the document isn't executed properly—in some states you need witnesses to your signature—then it might not even be valid.

Another risk, says Jacobs, is that when it comes to transferring your money to family members after you pass away, a self-written will might contain holes that lead to errors.

As with other areas of the law, other lawyers, who don't practice estate planning law, have hired me to assist them with their estate plan; if they know they can't tackle an incorporation or an estate plan without some advice and counsel, do you believe you can do better?

LegalZoom.com Faces California Class Action Over Estate Planning Documents

Legalzoom.com has been accused in California of the unauthorized practice of law, as well as providing ineffective estate planning documents.

January 8, 2012 Update: The case now has apparently settled, as most class actions and indeed most lawsuits of any kind are.

Online Passwords and Estate Planning

Estate planning for online passwords:

If you're smart about your online life, you've created strong and varied passwords for all your accounts. You change those passwords often. And you never write them down or share them with anyone.

That's all well and good while you're alive. But your admirable devotion to protecting sensitive personal data can wreak havoc for your heirs after you die.

With an increasing portion of our personal lives stored online in password-restricted accounts -- including bank accounts, automatic bill-pay arrangements, personal messages and even items with small monetary but major sentimental value, such as photos -- piecing together an estate after a death can cause major headaches.

For example, if you have an online savings account separate from your regular bank account and the statement notifications are only emailed, not mailed, that account may get overlooked when your finances are disbursed to beneficiaries.

"We spend hours or days trying to track down the information," said Hyman Darling, an attorney with Bacon Wilson in Springfield, Mass., and chairman of that firm's estate-planning department. "Very often things don't come in the mail and we wouldn't know about [the account] for some time."

Of course, creating a will detailing your assets can help, but a will doesn't solve everything. "Even when people remember to leave a list of financial accounts with their other important papers for the next of kin, they often forget account passwords," said Michael Palermo, a Lexington, Ky., attorney who specializes in estate planning.

Without log-in information, survivors usually need to go to court for legal authority to gain account access. The process varies from state to state; it doesn't always require a lawyer but it always takes time, Palermo said. Then, the surviving heir must get the company that runs the online account to heed her authority -- a task that's not always easy, Palermo said.

"Try contacting customer service and telling them, 'I've been appointed as my late brother's administrator. Please give me his user ID and password,' " he said. "Eventually, of course, this type of problem is solved when you can reach a real human being who doesn't act like this is the first customer ever to die. But these people have to be sought out within any institution I've ever dealt with."

The process can be even more complicated if someone is incapacitated rather than dies. "If there's no power of attorney, then we have to have a guardian or conservator appointed to have access to these records," Darling said. "Some companies won't give us information even if we have that, without a specific court order."

The costs of gathering the information can add up, Darling said. "It's unfortunate when they could just have put [the passwords] on a piece of paper or given it to someone they trusted."

The problem isn't limited to financial accounts -- heirs may want to save items with personal meaning, including messages in an online email account or photos stored on a site such as Kodak Gallery or Shutterfly.

Or, if you participate in a social-networking site such as Facebook or Twitter, you may want to exert some control over what happens to your profile after you die, but unless you leave your user name and password with a trusted person, it'll be tough for them to gain access.

What happens to your Facebook page if no one has that log-in information? A Facebook spokeswoman said via email that "if a family member alerts us that a loved one has died, we will place the profile in Memorial State, or take the profile down, based on their wishes." In memorial status, certain profile sections "are hidden from view to protect the privacy of the departed." She added: "We will not give access to the person's account."

While some people might be happy their relatives can't get access to their email or other accounts, others are taking matters into their own hands. "I had a young man in his 20s in here a couple of months ago to sign off on his will and he had some specific instructions about Facebook," said Patricia H. Char, a Seattle attorney with K&L Gates. "These are issues for this generation." ....

Full article: Don't Take Your Passwords to the Grave: Neglecting to share details of online accounts will cost your heirs time, money by Andrea Coombes, CBS Marketwatch via Yahoo! Finance, July 23, 2009

Michael Jackson's Estate and Estate Planning (press item)

Recently quoted in the press on Michael Jackson's estate, will/trust, and creditor and child custody issues:

Though Michael Jackson’s body isn't in the ground yet, speculation is running rampant as to what will happen to his financial assets. Many suspect that legions of those only tangentially connected to the pop star are already sharpening their knives for their shares of the possible profits.

"There are a lot of dark characters that are going to try to make a buck out of this because Michael Jackson, unfortunately, is such a polarizing figure and his name is greater than any individual’s name on earth," said Aphrodite Jones, author of "The Michael Jackson Conspiracy."

"That being the case, everyone and anyone during his life tried to make money any way they could, and I don’t think that will end because of his death," Jones explains. "You think about Elvis Presley and all of the people who have made livings as impersonators and the Graceland tours, etc. — that’s nothing compared to what we’re going to see here."

As far as legal entitlements, Jackson's assets are undercut by the $400 million in debt that the pop star left behind.

Jonas M. Grant, an entertainment lawyer in Burbank, Calif., explains. "In general, creditors get the first crack at the contents of a deceased’s estate," he said.

Entertainment lawyer Jonas M. Grant says the mother of two of Jackson's children, Debbie Rowe, will likely get custody of those children and their inheritance. "[She] will benefit financially indirectly even if she is not named as a direct beneficiary of his estate, which she also may well be."

Vultures set to profit off of Jackson’s death: Skeptics say those who exploited him in life ready to strike again, Heidi Patalano, Metro International, June 29, 2009

Update: When quoted for the above news article, I didn't have the benefit of reviewing Michael Jackson's purported last will, which can be seen below, and is a pour-over will, essentially directing that all of his property not already titled to the "Michael Jackson Family Trust" be added to that trust, for distribution to the beneficiaries named in that trust:


Michael Jackson's Will - full screen (new window)

Same-Sex Marriage in California; Domestic Partnerships

As a result of the California Supreme Court's recent ruling that prohibiting gay marriage violates the California Constitution, many Golden State gay couples, who had previously registered at the state level as domestic partners, are wondering whether to dissolve their domestic partnership, before or following their gay marriage? This recent San Francisco Chronicle article sheds some light on the topic, and reports that state legislature attorneys advise that the domestic partnership need not be dissolved, prior to such any such marriage:

Same-sex couples who are registered as domestic partners do not have to dissolve that union before getting married, attorneys that advise the state Legislature said Thursday, just as county clerks and other local officials met to determine how they will enact last week's historic state Supreme Court ruling.

Given the possibility (perhaps even the likelihood, given the decisive ballot-box victory of the California Defense of Marriage Act in 2000) that California voters will turn out at polling places and amend the state constitution to prohibit gay marriage this November by passing Proposition 8, it is in fact probably advisable, though of course legally untested at this point, for gay couples to maintain domestic partner registration following and during their marriage, which would presumably remain in effect, following and despite any termination of their legal marriages due to a change in the law.

Estate Planning: Charitable Giving as Part of Your Legacy

Financial education Web site Minyanville.com today offers an overview of ten ways to give, to be implemented within an overall estate plan, some simple, some more complex to - in their words - "achieve both [your] financial and charitable goals. Whether you’re 20, 40, 60 or 80, the Minyan[ville.com] credo of earn, save, spend and give applies. I encourage you, no matter your age, to think about planning your legacy of goodwill and providing valuable lessons to your family through planned giving....

Here are ten options for deferred -- or planned -- gifts. It’s always best to select the option that matches your goals. Each of these options require a statement in your will (you have a will, don’t you?). Of course, all options should be explored with an estate planning attorney.

Type of gift: Bequest
Your goal: Defer a gift until after your lifetime.
How to make the gift: Name a charity in your will (designate a specific amount, percentage or share of the residue).
Benefits: Donation exempt from federal estate tax and control of your assets over your lifetime.

Type of gift: Living trust
Your goal: Make a revocable gift during your lifetime.
How to make the gift: Name a charity as the beneficiary of assets in a living trust.
Benefits: Control of the trust over your lifetime.

Type of gift: Gift of life insurance
Your goal: Make a large gift with little cost to yourself.
How to make the gift: Change ownership on a life insurance policy you no longer need.
Benefits: Current income tax deduction and possible future deductions through gifts to pay policy premium.

Type of gift: Outright gift of securities
Your goal: Avoid tax on capital gains.
How to make the gift: Contribute long-term appreciated stock or other securities.
Benefits: Immediate charitable deduction and avoidance of capital gains tax.

Type of gift: Gift of retirement assets
Your goal: Avoid the twofold taxation on IRAs or other employee benefit plans.
How to make the gift: Name a charity as the beneficiary of the remainder of the assets after your lifetime.
Benefits: Gift from the most highly taxed assets, leaving better assets for family.

Type of gift: Gift of real estate
Your goal: Make a gift of property no longer needed and generate an income tax deduction.
How to make the gift: Donate the property to a charity.
Benefits: Immediate income tax deduction and reduction or elimination of capital gains tax.

Type of gift: Retained life estate
Your goal: Give your personal residence or farm now, but continue to live there.
How to make the gift: Designate ownership of your home to a charity, but retain occupancy.
Benefits: Valuable charitable income tax deduction and lifetime use of residence.

Type of gift: Charitable remainder annuity trust
Your goal: Secure a fixed and often increased income.
How to make the gift: Create a charitable trust that pays you a set income annually.
Benefits: Immediate income tax deduction and fixed income for life, often at higher rate of return.

Type of gift: Charitable remainder unitrust trust
Your goal: Create a hedge against inflation over the long term.
How to make the gift: Create a trust that pays a fixed percentage of trust’s assets as revalued annually.
Benefits: Receive a variable income for life and an immediate income tax charitable deduction.

Type of gift: Charitable gift annuity
Your goal: Supplement income with steady payments that are partially tax-free.
How to make the gift: Establish a charitable gift annuity contract with a charity that pays a set amount for life.
Benefits: Current and future savings on income taxes and fixed payments for life for one or two individuals.

Type of gift: Charitable lead trust
Your goal: Reduce gift and estate taxes on assets you pass to heirs.
How to make the gift: Create a charitable trust that pays fixed or variable income for a specific term of years; principal is retained for heirs.
Benefits: Reduces your taxable estate and the property is kept by your family, often with reduced gift taxes."

"George W. Bush" on Estate Planning

Because "between 100 and 200% of Americans don't have a will or an old testament"....