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General Legal

Friday, September 2, 2016

Why You Need A Plan Of Care


While sitting in a Deposition recently and listening to the testimony I realized the witness was describing the actual moment 5-6 years ago when the caregiving actually began.  But the family did not really realize this had begun until grandpa was checked into the facility several years later.  By that time well over $100,000 had already been spent on care and it had been done without a plan and, as usual, without accounting or reporting to the family.  The money that had already been spent limited the options that were now available and led to accusations

I know how difficult it is for caregivers.  Usually they are trying to juggle many different things.
Read more . . .


Wednesday, August 17, 2016

Investment Policy Statements


An Investment Policy Statement is basically a summary Financial Plan and roadmap for the investments of a Trust / Estate / Conservatorship.  It is a critical tool that provides a great deal of protection for the Fiduciary.  If all of the assets you are managing are in a brokerage account with an experienced Financial Planner you probably have something like this already in place.

But in many situations the assets are not so conventional or held in one place and as a result diversification and suitability can be difficult to prove - particularly if the Fiduciary is the subject of litigation in the future.  The attorney, CPA and Financial Advisor (if they are capable) should get together every year or two and create a joint Investment Policy Statement to protect the interests of the Fiduciary.
Read more . . .


Monday, April 4, 2016

No More ABC Trusts

 

    For years the standard in the Estate Planning industry was the ABC Trust so there is a good chance you have one.   You will know you do if you have a Trust that requires mandatory divisions into separate irrevocable Trusts when the first spouse dies.  If you do please have it reviewed immediately.

    Why?  Because unless you and your spouse have more than about $15 million you do NOT need this.  Even worse, I see Trusts everyday that have ABC provisions and owners have less than $500,000 - meaning they never even needed such a Trust and were simply "oversold" by their attorney. 

    ABC Trusts are tedious and EXPENSIVE to administer following the death of the first spouse and are simply are not necessary.  Some attorneys justify their persistent use of ABC Trusts as a way to protect a surviving spouse in the event they end up remarried to some "grifter" or as having some sort of Asset Protection benefit.  

    But I can assure you that in my 19 years of Estate Planning, I have never seen a situation where an Irrevocable Trust prevented anyone from stealing from a surviving spouse or provided any form of effective asset protection.

    On the other hand, on a daily basis I deal with surviving spouses whose hands are tied by having to deal with these Irrevocable Trusts in situations such as trying to get a Reverse Mortgage or line of credit, or trying to eliminate a child beneficiary who has a drug or gambling problem.

    When I started doing this and the Estate Tax Exemption was $600,000 these Irrevocable Trusts had a lot of benefits.  But it has been a long time since the average family was anywhere near the Estate Tax Exemption levels and it is time to search out these outdated Trusts and fix them.


Wednesday, March 30, 2016

Property Tax More Important Than Estate Tax For Most Of Us

 

    Today the threshold for advanced Estate Planning is really $12-15 million.  For most people the most important tax consideration is being able to transfer property and keep our beneficial Prop. 13 values.  Many of the oversold and unnecessary strategies such as the use of LLC's and Irrevocable Trusts for "Asset Protection" will put your Prop. 13 Tax Basis at risk.  The County Assessor is ready to pounce on any questionable transfer and the need for tax revenue to support our local governments and soaring pension obligations will only increase. 

    The bottom line is this In today's environment - NEVER RECORD A DEED WITHOUT BEING ABSOLUTELY SURE OF THE PROPERTY TAX IMPLICATIONS.


Saturday, March 26, 2016

The New Revocable Transfer On Death (TOD) Deed - Must Be Good Because Estate Planning Attorneys Hate It

 

    California has long provided free Estate Planning tools such as the Statutory Will, Durable Power of Attorney and Advanced Healthcare Directive.  When it came to real property however, the only Do-It-Yourself option to avoid Probate was to make a lifetime gift and put your beneficiary on title with you as a Joint Tenant.  As it is not always ideal to have a beneficiary on title with you during your lifetime, California has now given us a great new tool.

    The new Revocable Transfer On Death Deed allows for you to designate a beneficiary for your real property and when you die it will pass to them and avoid Probate.  The Estate Planning community hates this as it will eliminate the need for any formal Estate Planning for many, many Californians, and so they have already come up with they typical laundry list of problems with these new Deeds - and they will inevitably try to convince people not to use them.

    However, I have probably talked to hundreds of Californians where this would have been all the Estate Planning they needed, in addition to the simple free forms mentioned above.  Sure, if you have problems with creditors or a more complex situation this is not for you.  But if you just have 1 or 2 beneficiaries and you want them to get your property this is certainly a viable option.


Monday, March 21, 2016

It is OK to treat your kids differently - but make the gift now to avoid controversy.

 

    In my 19th year of Estate Planning I am very comfortable saying that It is OK to treat your children differently.  It is also OK to give money to your spouse in a second marriage even though that means your kids will get less or even none. 

    But in order to avoid controversy I recommend that you make at least some of these gifts during your lifetime.  You can put someone on title to your real estate with you or open a joint account so that it goes directly to them at your death. 

    If you really want to avoid controversy you should tell your family members that you are doing this.  This will provide witnesses in case it is ever challenged later.   But this also allows you to defend the beneficiary you are trying to help.  We spend countless hours in Court proceedings arguing about what someone meant ... doesn't if make more sense to say it in your own voice while you can?

    I know that many Estate Planning attorneys will read the above and say this is very poor advice and that you are exposing yourself to the bad deeds or creditors of your kids if you put them on title with you and  that you need a fancy and complex A-B-C Trust to protect your surviving spouse and kids.  To this I say MAYBE‚Ķbut if you did not trust them you probably would not be thinking about lifetime gifts anyway. 

 


Saturday, March 19, 2016

The right way to lend money to family and friends

 

    While I could give you many first hand accounts of why you probably should never lend money to family and friends I will assume that you have already decided to do so and cannot be talked out of it.

    The first thing you should do is have a serious discussion about why they need to borrow from you.  You will find that it is usually because they cannot get money from anywhere else, or the price of borrowing is just too high.  Does this raise red flags for you?  If you still think they are credit worthy, this conversation should at least start the negotiation / discussion of an appropriate interest rate (it should be high - but if you go above 10% in California you could have a usury problem).

    As alternative you may want to try to find another way to help.  Maybe you can lease a car or truck for them.  If they are starting a business maybe you can help them finance a critical piece of equipment (and then it reverts to you if the business fails or they cannot make payments).

    If you are still going to lend you need to critically discuss their ability to repay the loan and the timeframe.  Discuss cash flows and priorities.  In my experience, an interest only is not a practical solution because it just pushes the problem further down the road and will lead to tension between you and your family member / friend, something we all want to avoid.  Therefore substantial principal reduction needs to be part of the loan, as well as a reasonable exit point where you will be repaid in full.

     Finally, the loan needs to be secured.  That means a Deed of Trust if the security is going to be real property or a UCC Financing Statement or pledge agreement if it is personal property.      



Tuesday, March 15, 2016

A Reverse Mortgage is a powerful Estate Planning Tool

         Reverse Mortgages are a great Estate Planning tool that should be considered by everyone - even very wealth folks.  Having seen the typical needs and issues faced by my clients in typically lengthy retirements I can assure you that few tools are as efficient as a Reverse Mortgage.  Why efficient?  Because Reverse Mortgages allow seniors to minimize their monthly expenses, without selling anything or causing a taxable event.  In an era of persistent market volatility it can be very damaging to a portfolio to make consistent large withdrawals, and if you are withdrawing more than your RMD's from an IRA you are incurring unnecessary taxes.

          Based on the rapidly extending lifespans we are all seeing, I have a feeling that Reverse Mortgages will turn out to be a very good deal for many seniors.  There may be no equity left in your home when you pass away, but the Reverse Mortgage may have allowed you to give your children something more valuable such as a an inherited IRA balance.  Why would an inherited IRA be more valuable than giving the family home?  Because due to the tax implications your children will likely feel obligated to "roll over" their inheritance into their own IRA and this will give them a stream of incoming for the rest of their lives.




The Tonkovich Law Firm assists clients with Estate Planning, Wills, Trusts, Durable Powers of Attorney, Conservatorship and Contested Probate Procedures and Business and Real Estate Litigation in Irvine, CA as well as El Toro, Aliso Viejo, Lake Forest, Laguna Hills, Tustin, Newport Beach, Santa Ana, Newport Coast, Ladera Ranch, Foothill Ranch, Mission Viejo, Laguna Woods, Corona Del Mar, Silverado, Orange, Laguna Beach, Rancho Santa Margarita amd Fountain Valley in Orange County.



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