1. Each US citizen has a lifetime exclusion amount from estate taxes of $5,340,000 (this amount adjusts for inflation each year).
2. There is an unlimited marital deduction for gifts from a deceased spouse to a surviving spouse who is a citizen.
3. The two concepts at play at the threshold are whether to simply leave everything to the surviving spouse and take advantage of the unlimited marital deduction (therefore no tax on the first death) which may result in a tax at the second death (while the unused portion of a decedent spouse's lifetime exclusion may be "ported" over to the surviving spouse, the total assets on the second death may still exceed the surviving spouse's lifetime exclusion amount). or
4. Alternatively, fund a bypass trust to the maximum amount of the lifetime exclusion of $5,340,000…. This will not be taxed at the first death and will “bypass” the estate of the survivor (i.e. not be subject to tax at the survivor’s death; and if the survivor’s estate is $5,340,000 it will not be taxed on the survivor’s death).
5. If there is too much money to put into the bypass trust, fund the marital trust. This takes advantage of the unlimited marital deduction but only to the extent necessary to avoid estate tax on the first death. There are provisions that can be put into the marital trust that restrict the survivor’s ability to change its ultimate disposition on the survivor’s death (referred to as a “QTIP” trust).
Thus, by using a bypass trust, survivor's trust and marital trust, estate taxes may be minimized while keeping some control over the wealth of the first to die (i.e. lock it into the bypass trust and QTIP trust).
1. Each US citizen has a lifetime exclusion amount from estate taxes of $5,340,000 (this amount adjusts for inflation each year).
A typical case will involve a family member contacting me to complain about the dispositions in a will or trust of a deceased relative, with allegations that another family member or a caregiver "got" to the deceased relative to unduly benefit themselves at the expense of the other family members.
To properly analyze the case, I obtain copies of all prior testamentary documents (to determine if the terms are at variance with the current documents, and how great a variance there is).
I will also obtain all of the available medical records for that deceased relative, for the relevant time period. That includes hospital records, nursing records, physician records, records of mental health professionals, and any other medically related records that can provide insight as to the physical and mental state of the deceased relative at the time the will or trust was executed by them.
I don't pretend to be a medical professional. Rather, I rely on the services of a forensic psychiatrist to assist me in the analysis, and to suggest other areas of discovery that may be useful in assisting that forensic psychiatrist in reaching an opinion regarding both the susceptibility of the deceased relative to undue influence and the actual use of undue influence in procuring the contested will or trust. This is also true when the capacity of the deceased relative to engage in a testamentary act is called into question (capacity and undue influence being regular bedfellows).
To the extent necessary, I will take depositions of the family members or bad actors in question, as well as of physicians involved in the direct treatment of the deceased relative (assuming that the deceased relative was under doctor's care).
On occasion, the bad actor gives in, withdraws from consideration the trust or will in question, and the matter is settled.... on other occasions, the only resolution that can be had is by trial.
I always bear in mind that everyone influences the actions of everyone else; it is only when the influence appears to rise to the level of undue influence that I have work to do.
California defines undue influence in the Civil Code. Specifically, Civil Code Section 1575 states:
"Undue influence consists:
1. In the use, by one in whom a confidence is reposed by another, or who holds a real or apparent authority over him, of such confidence or authority for the purpose of obtaining an unfair advantage over him;
2. In taking an unfair advantage of another’s weakness of mind; or,
3. In taking a grossly oppressive and unfair advantage of another’s necessities or distress. [Enacted 1872]"
Undue influence will be presumed, in California, in many cases where a family member initiates estate planning for an elderly relative; this is even more the case if the if the new plan is unfair to the elderly relative or benefits the one family member exercising undue influence to the detriment of other family members who would otherwise be expected to share in the elderly relative's estate.
Proof of undue influence is made by the introduction, at trial, of circumstantial evidence; the trier of fact must decide based on the inferences shown by the evidence. This is because it is a rare case to have direct testimony of the undue influence.
An inference of undue influence may exist if it is proven that the dispositions of the elderly relative in the will are at odds with the elderly relative's stated intentions. It can also be inferred if there is a close relationship between the bad actor and the elderly relative, and it can be shown that the bad actor took an active role in obtaining the will or trust that is being contested.
In one case the California Supreme Court decided to deny probate to a will where it was shown that the deceased elder had a weakened mental and physical state when the contested will was signed, the bad actor had opportunity and actively procured the contested will and made misrepresentations to the deceased elder concerning other relatives (the bad actor's siblings). Estate of Garibaldi (1961) 57 C2d 108
There are times when a will is challenged in California. There are many reason why this happens and the law sets forth the procedures to follow in making a challenge. Some reasons a will may be challenged include:
The will is fraudulent.
The will wasn’t properly executed.
The person creating the will didn’t have the capacity to legally sign the will.
The person was unduly influenced into signing it.
The person challenging the will desires that a different personal representative be appointed by the court.
Challenging or contesting a will is not to be taken lightly. In order to prove that the will is invalid, one of these reasons must be proven in a court of law. The idea of simply challenging a will because you don’t like the contents may seem reasonable -- but if you can’t prove one of the above factors for invalidating it, you may very well be wasting your time and resources.
Irrevocable Trusts are created in two ways:
1. A revocable trust becomes irrevocable after the grantor has died.
2. An irrevocable trust is established while the grantor is living.
Some types of irrevocable trusts will help to save estate taxes, or provide liquidity for paying the taxes.
Self-settled irrevocable trusts will not generally provide asset protection in California.
Working with an estate planning attorney now can offer so much solace and support for your family and friends later. It truly is a gift that you can give your family that goes far beyond financial rewards.
For more information, contact Ted Hankin today.
Ted Hankin of Lytton Williams Messina and Hankin LLP as featured in: INLAND EMPIRE MAGAZINE, Top Lawyers Resource Guide, Fall 2013 edition.
Lytton Williams Messina & Hankin LLP (the "Firm") maintain close relationships with their clients and continue to make personalized service their number one priority. Partners Lytton Willaims and Messina were all formerly partners in the Century city law firm of Kelly Lytton & Williams. Prior to joining Kelly Lytton, Sheldon Lytton and Richard Williams, each with more than 30 years of legal experience practiced at O'Melveny & Myers and Manatt, Phelps & Phillips, respectively, and were then partners in Finely Kumble Wagner Heine Underberg & Manley, one of the largest national law firms in the United States. John Messina, head of the Firm's Temecula Valley Office, is a licensed real estate broker and was the head of a mortgage banking firm in the San Gabriel Valley before turning to the law. Ted Hankin, an attorney and CPA, heads the Firm's Newport Beach Office and was formerly the Division Chair of the Estates, Probate and Trust Division of Alvarado Smith APC. Henry Holguin, of Counsel to the Firm, was formerly a name partner in Miller & Holguin, and is one of California's most noted health care attorneys; he currently serves as the general counsel of AltaMed, the largest Federally qualified Community Health Center in the United States.
The Firm's Practice Areas Include:
1. General Business Litigation and Resolution of Disputes, including Representation of Public Agencies, and Representation of Clients before Federal, State and Local Government Agencies.
2. Real Estate Litigation and Transactions involving Natural Resources and Environmental Law (Air Quality, Public Utilities, Endangered Species, Water Quality, and CEQA), Real Estate Finance, Land Use and Entitlements, and Eminent Domain.
3. Trust and Estate Planning, Administration and Litigation
4. Health Care Law including Litigation, Regulatory Compliance, and General Health Care Legal Counseling
5. Business Entity Formation, Corporate Governance, Business Securities and Finance, and Business Tax Counseling and Strategies
6. Structure and Placement of International Investments in California Business and Real Estate
7. All Family Law Matters through Of Counsel, Richard Trugman
All four of the Firm's named Partners have a Martindale-Hubble AV Preeminent rating which is the highest possible rating for an attorney for both ethical standards and legal ability.
To see the archived article, click here.
You have been successful and obtained a California judgment against your adversary. However, you have been unsuccessful in collecting on it. Should you be concerned about the passage of time? After all, interest on judgments is generally 10% annually in California.
The answer is, it depends. If you have a civil judgment, it must be renewed through the courts every ten years. If not, it will become unenforceable (California Code of Civil Procedure Section 683.020). Renewal is accomplished by submitting an application for renewal to the court prior to the expiration of the ten year period (California Code of Civil Procedure Section 683.120).
However, if you have a family law judgment (or order), it never expires (California Family Code Section 291). This is a very useful quality, if you should find, for example, that your ex-spouse's parent has died and that ex-spouse is about to come into enough money to satisfy that more than 10 year old judgment or order......
I have represented three sisters against their brother over their mother’s will.
I’ve represented a child who was adopted and thought she had a great relationship with her presumed half-sister and then found out the sister wanted all of the deceased father’s estate. We had to find tissue and get DNA testing to resolve that matter despite all of the family photographs.
I’ve represented cousins against a decedent’s lover, who got the decedent to leave his entire multi-million dollar estate to the lover. We showed up for trial at 1PM. The judge sent us to discuss settlement … three different times I announced that I would proceed with the trial because there could be no settlement, and three different times the other side blinked. We finally settled at 7:30 PM (kudos to the judge and his staff for staying so late).
I’ve had to represent a probate estate against a former business partner to get what was due the decedent pursuant to the buy-sell agreement.
I’ve represented grandchildren against their father, who was named as trustee by the grandparents, to get him to account and give up the money, many years after it was supposed to have been distributed to the grandchildren.
And there have been so many more……
So is there a human cost to estate planning; yes there is…. It can be minimized if there is harmony in the family and the choices of individuals to serve roles (e.g. executor, trustee) are good choices. But if there is not, or there is a bad actor influencing the situation, the cost can indeed be a high one.
Trust contests are very similar to will contests with similar allegations of incompetency and/or undue influence. The difference is that there may be only a very short time to decide if you are going to file a contest.
There is a procedure in the Probate Code (§16061.7) where the trustee gives notice to all beneficiaries that the trust has become irrevocable and a copy of the trust is provided; if that procedure is properly followed, then a contestant has only 4 months in which to bring a trust contest.
If the contestant waits too long, or there is a no contest clause, then they may be out of luck. That’s not to say that if you can prove the entire trust is invalid (and therefore the Probate Code §16061.7 notice is invalid) you can’t win; you might. It just makes a hard job harder.
Suppose a will is being offered for probate (the process by which the decedent’s debts are paid and the assets distributed) and someone thinks (a) the writer of the will was mentally incompetent when they wrote it or (b) the writer of the will was being unduly influenced at the time (in other words, without the influence, the will would have been written differently).
Their best option is to file a will contest to try and prove their theories as to why the will should not be subject to probate. They might have an earlier will that benefits them and they want to offer that document for probate.
All of the above amounts to a will contest which boils down to litigation in the probate court. I’ve represented both sides. Sometimes it is a niece against an uncle, three sisters against a brother, brother against brother.
At the end of the trial, if there is not an agreed settlement that addresses the issue, the court will decide which will works; that will determine who gets what.
But wait, what if the will has a “no-contest” clause? If it does, the contestant may be jeopardizing any inheritance that is given the contestant in the will. Of course, if the contestant gets nothing in the will, there is no risk (generally) in bringing the contest.
What if, despite everyone’s good intentions, there is conflict after the death?
What if an heir or beneficiary or someone who thinks that they should have been made an heir or beneficiary complains?
What if a trustee never accounts to the beneficiaries and enriches himself at the expense of the others?
That is when we get into another part of what I do, probate and trust litigation. This is where there is a high price paid, both dollars and emotionally, for resolution of the hurt caused by the estate planning (or lack thereof).
Patterns occur in estate planning just like in other fields. The following are typical patterns that I deal with:
1. Parents with minor children
At the very least, a will is required because if the parents die together (car crash) it is in a will where you designate guardians. There are two kinds of guardians: of the person (who will have physical custody of the child) and of the estate (who will handle the financial affairs of the child). The guardians can be one in the same or two different people.
If the guardians are not set forth in a will, then a court will decide… most parents want to make that decision themselves.
2. Parents with Adult children
Usually the easiest situation, if there is no conflict within the family. Generally, the distribution is for each of the children to get an equal share of the estate. If one of the children dies before distribution, it is typically provided that the deceased child’s share will go to their children, or if there are none, to the surviving siblings.
If there are conflicts between parents and children, uneven distributions may occur or there may be an outright disinheritance. It is the parents’ choice if they want to do that; it usually sets up conflicts between the siblings after the parents die. Not the parents’ problem, they won’t be around to deal with the conflict. But it is a human cost.
3. Blended Families
More and more I see parents who have had prior marriages, with children from those marriages. Sometimes there is a big age difference between the couple. In any event, there is the issue of who gets what.
Some families (the minority of those I counsel) simply say that they want all of the children (including step children) to share equally and that is that…. Fairly simple.
Predominantly, however, each parent has separate property that they brought into the marriage, and they want their progeny to benefit from that property, not the progeny of the other spouse.
This can lead to some serious drafting issues.
For example, if the other spouse is likely to remarry after a death, do you want her to give the deceased spouse’s wealth to the new paramour?
Or even if there is no new love, is there a concern that the surviving spouse may take everything and give it to her own children (in my world, it is always assumed that the wife survives the husband, even though in the real world that is not always the case) to the exclusion of the deceased spouse’s children? More human cost.
In such circumstances, it is appropriate to recommend the use of a trust, which splits into two trusts after the first death. One trust holds the decedent’s property; the other trust holds the survivor’s property.
The decedent’s trust will provide that the income from the decedent’s property is paid to the survivor to further provide support. But upon the survivor’s death, the decedent’s trust requires that property to go to the decedent’s children; the survivor has complete control over her trust and can do with it as she fits.
4. Special Needs
Sometimes a couple will consult with me concerning one of their children who has public assistance (such as SSDI). If that child receives outright their share of the parents’ estate, the public benefits may be jeopardized. A Special Needs Trust may be created to address this issue.
A Special Needs Trust keeps the money out of the hands of the disabled child thereby safeguarding the public benefits. But it is available to provide what the public benefits do not; items separate from food and shelter.
When the disabled child no longer needs the public benefits, the trust can be distributed to that child; or if that child has died, the trust can be distributed to the surviving siblings.
What is my role as an estate planner in California? I gather personal and financial information from my clients in order to assess what estate planning product or products are best suited to their needs.
During our conversation, which usually lasts an hour, I learn about family conflicts. I am sometimes asked what they should do about their conflict. I will venture an opinion, but I always emphasize that it is just an opinion.
At the end of the conversation, if I have not already done so, I explain the different tools and techniques that I think are suitable to their situation. Once we have agreed, we adjourn.
I then draft the documents (typically it will include a will for the husband, a will for the wife, a revocable trust, a power of attorney for healthcare for each and a power of attorney for financial affairs for each).
Once the draft is complete I send it to my clients for their review and approval. Once satisfied, they return to my office to sign the documents (in front of witnesses for the wills, in front of a notary for the trust and other documents).
What happens next is up to them. I encourage clients to discuss their estate plans with their beneficiaries (usually children). That way, if there is going to be any pushback, it can happen while the parent is alive and able to discuss the situation (as opposed to making it a surprise for the child after the parent has died).