In the Internet age, your property not consists of simply bodily property however digital property like social media accounts, cloud storage and even laptop-based mostly foreign money. Taking inventory of your digital belongings is subsequently a necessary a part of California property planning. Here are a couple of points to contemplate with respect to your “on-line property.”
Online Devices and Cloud Storage
Recently the BBC reported on the story of Anthea Grant, a lady who handed away from most cancers. Grant’s will directed her property be divided equally amongst her 5 youngsters. The youngsters determined amongst themselves how to allocate particular person items of property. Grant’s son Joshua acquired her iPad, manufactured by California-primarily based Apple Inc.
Unfortunately, whereas Joshua Grant took bodily possession of the iPad, he couldn’t use the system with out his late mom’s Apple ID and password, which not one of the relations knew. Apple refused to unlock the gadget with out written consent from the account holder, who was clearly deceased and due to this fact unable to achieve this. Even after Joshua Grant supplied written proof of his mom’s dying, Apple would solely restore the iPad to its manufacturing unit settings; it will not present entry to Anthea Grant’s information—which have been a part of a cloud account—with no court docket order.
If you may have any sort of cloud storage account, it will be significant to assessment the phrases of service. Some providers might merely droop or delete an inactive account. Others could switch an account to an executor or inheritor. Much like banks, an executor may have to present a replica of the account holder’s dying certificates and a courtroom order authorizing the executor to act—normally often called testamentary letters—earlier than the cloud service will grant entry.
The Bitcoin Dilemma
Other sorts of digital property might show much more troublesome in your property or heirs to entry. Digital currencies like Bitcoin have turn out to be well-liked lately. Bitcoin makes use of a public ledger referred to as a “block chain” to handle peer-to-peer transactions. The block chain additionally “mines” new bitcoins. Individual customers retailer their bitcoins in a “digital pockets” that makes use of a pair of cryptographic keys.
The dilemma is that if the person forgets or loses the keys—or just loses the pc or system that shops the digital pockets—there isn’t any technique of restoration. Unlike a cloud storage service, there isn’t a central authority who can reset or entry a bitcoin digital pockets. The bitcoins are merely misplaced.
If you personal bitcoins or an analogous sort of forex, it’s subsequently important to hold backups of your cryptographic keys collectively together with your different property planning paperwork. Some Bitcoin consultants additionally preserve different technical strategies of verifying a digital pockets proprietor’s demise and transferring the bitcoins to his or her property. As this a frequently evolving expertise, it is vital to seek the advice of with a California property planning legal professional earlier than taking any motion.
Estate Tax Implications
Bitcoin and digital currencies may additionally increase attainable federal property tax points. The Internal Revenue Service lately issued pointers stating that Bitcoins are to be handled as property relatively than foreign money. Once once more, that’s the reason you need to work with an skilled lawyer who can hold you apprised of authorized developments. Contact the Law Office of Scott C. Soady as we speak if in case you have any questions.
Ideally, property planning is one thing you do lengthy earlier than it turns into obligatory. It isn’t a good suggestion to wait till you’re in your deathbed to make a will. You could run out of time earlier than you may execute a will that meets with the authorized necessities of California or one other state the place you reside.
Piper v. Dimmers
A recent Michigan case illustrates the perils of final-minute or incomplete property planning. Grace Reid died in 2011 on the age of sixty nine. Reid was single and had no kids. Absent a will, Michigan regulation would distribute her property—which consisted primarily of some land—to her siblings. After she was recognized with coronary heart illness, Reid met with an property planning legal professional to talk about her will. For some purpose, she by no means adopted up with the legal professional prior to her demise.
However, three years earlier, Reid made some handwritten notes concerning her property. As described by the Michigan Court of Appeals, “The doc consists of barely legible notes on two sides of a single sheet of non-public stationary bedecked with birds, butterflies and a bible quote.” Several names have been written and crossed out or modified. Basically, it was a listing of individuals with greenback quantities, presumably presents Reid meant to go away via her property. Among the names have been two associates, Sandra and Amy Piper. Reid gave the doc to Sandra Piper for safekeeping.
After Reid’s dying, Piper requested a Michigan probate courtroom to admit the handwritten notes as a legitimate final will and testomony. Michigan does acknowledge “holographic wills”–paperwork which can be signed, dated and within the handwriting of the particular person making the need. Unlike conventional wills, holographic wills will not be typed and lack the signatures of a minimum of two witnesses.
The Michigan courts rejected the alleged will. At greatest, the Court of Appeals defined, the doc was a draft designed to “arrange [Reid’s] ideas and decide how to divide her property.” There was inadequate proof to show the doc precisely expressed Reid’s intent to make a remaining disposition of her property.
The Perils of “Holographic” Wills
Like Michigan, California regulation does allow the probate of handwritten or “holographic” wills. Such wills should be fully within the particular person’s handwriting needs to be dated. Failure to date a holographic will might lead a court docket to declare it unenforceable, particularly if it conflicts with one other will discovered amongst your results.
While there could also be sure emergencies that necessitate the usage of a holographic will—such as the man who wrote a will on the side of the tractor he was trapped under—in virtually all circumstances, it’s higher to draft a correct will with the help of a certified California property planning lawyer. Wills don’t want to be difficult. It is simply necessary that the need clearly expresses your intentions and is signed within the presence of a minimum of two witnesses. This minimizes the probabilities of any confusion (and litigation) after your demise. If you’ve gotten any questions about making a will, please contact the Law Office of Scott C. Soady in San Diego.
A residing belief is a helpful property planning instrument that may assist keep away from prolonged probate proceedings after your demise. Basically, a residing belief is an entity you create and switch property into by way of a declaration of belief. This declaration specifies how the property throughout the belief needs to be distributed after your dying. Unlike a final will and testomony, belief declarations usually are not submitted to a probate court docket. The declaration merely appoints a successor trustee to perform your needs.
During your lifetime, you’ll be able to nonetheless management all the property transferred into the residing belief. In most instances, the belief isn’t even thought-about a separate authorized entity for tax functions, so your Social Security quantity stays tied to belief belongings like financial institution accounts. You can revoke or amend a residing belief at any level throughout your lifetime. After your demise, nevertheless, the belief typically turns into irrevocable, that means your successor trustee is certain by the declaration of belief.
Always Fund a Trust Properly
It is necessary to perceive that making a belief includes greater than signing a declaration of belief. You should take affirmative steps to fund a residing belief. Even although property put right into a residing belief stay beneath your management, you have to nonetheless take steps to amend the authorized title, say from “John Doe” to “John Doe, Trustee of the John Doe Living Trust.” Without taking this necessary step, the declaration of belief is nothing greater than an empty shell.
Here is an illustration taken from a latest California Court of Appeals case, this case is simply mentioned to illustrate the ideas concerned and shouldn’t be taken as an announcement of the legislation. In December 2000, Rose A. Bozigian had her property planning lawyer put together a dwelling belief. Bozigian, a widow with three grownup youngsters, transferred a single asset into the brand new belief, her Los Angeles County residence. To that finish, Bozigian signed a brand new deed transferring the property from herself to the belief.
But in 2003, Bozigian determined to switch her residence out of the belief. She did this so as to refinance the property. According to courtroom information, Bozigian needed to assist one in every of her youngsters, Steve Bozigian, repay some bank card debt. Bozigian, performing as trustee, signed a brand new deed transferring the residence from the belief to herself and her daughter, Susan Saputo, as joint tenants.
Normally, a joint tenancy signifies that when one co-proprietor dies, the surviving co-proprietor robotically assumes title with out having to undergo probate. This is named a joint tenancy with proper of survivorship. But on this case, the courts decided Rose Bozigian by no means supposed to create a real joint tenancy; slightly, she added her daughter to the deed so as to assist safe the refinancing mortgage.
Rose Bozigian died in 2006. Since she eliminated the home from the belief three years earlier, the residing belief had no belongings. Litigation ensued among the many siblings over this. The probate courtroom, and later the California Court of Appeal, confirmed the belief was empty. That meant the residence had to undergo regular probate.
Don’t Leave Behind an Empty Trust
A residing belief might not be proper to your property planning wants. But should you determine to create a residing belief, it’s important to be sure it’s funded, if for no different motive than to keep away from pointless confusion after your loss of life. An skilled California estate planning attorney can assist you establish the easiest way to defend your property and decrease authorized issues. Contact the Law Office of Scott H. Soady in San Diego in the present day you probably have any questions.
California property planning should consider the state’s neighborhood property legal guidelines. California is one among 9 states that acknowledge neighborhood property, which is a authorized system that governs property held by married couples. In basic, every partner enters the wedding with their separate property. Property subsequently acquired in the course of the marriage is neighborhood property, with every partner retaining a one-half curiosity. Upon a partner’s demise, his or her property plan might solely get rid of that one-half curiosity.
In making a will or belief, it’s due to this fact important to distinguish separate and neighborhood property. If you plan to make provisions for one or the both, you need to achieve this explicitly. Ambiguity might lead to litigation between your heirs, as one latest choice from the California Court of Appeals illustrates. This case is cited just for illustrative functions and just isn’t meant to be taken as an announcement of the legislation.
Pakula v. Klein
Rina Klein and her husband executed their wills in 2007. Klein’s will named her husband as executor and offered for the creation of a household belief. The following 12 months, Klein made a separate revocable residing belief. The first article of the belief instrument mentioned Klein conveyed all of her property “whether or not separate or group” to the belief. But the very subsequent article clarified, “This belief accommodates solely separate property.” The belief named Klein’s mom, Julie Pakula, as successor trustee and instructed her to distribute the belief property to Klein’s kids after her demise.
Klein died under mysterious circumstances in 200N. She died at a Los Angeles hospital after struggling a number of seizures. An post-mortem failed to conclusively decide a reason for demise, nevertheless. Pakula and different members of Rina Klein’s household believed her husband, Gary Klein, murdered her. Beverly Hills police investigated the case for at least four years without arresting or charging Klein.
Pakula and Klein continued to struggle in probate courtroom over Rina Klein’s estimated $P.H million property. The courtroom decided that Klein’s will and belief have been each legitimate. The will, which named Gary Klein executor, took possession of Rina Klein’s group property, whereas her separate property belonged to the belief administered by Pakula as successor trustee.
Pakula appealed this resolution. She argued the belief ought to embody each the group and separate property. But the Court of Appeals discovered no error within the probate court docket’s judgment. Based on the out there proof, it was clear Rina Klein solely supposed to switch her separate property to her belief. Although there was an obvious battle between the 2 articles within the belief instrument on this level, the court docket examined emails from Klein to her property planning legal professional that confirmed she solely wished to present for her separate property within the belief. While Pakula did current contradictory proof, the probate court docket’s weighing of such proof won’t be questioned by an appeals courtroom absent some clear error.
Always Make Your Intentions Clear
It doesn’t take a homicide investigation to inflame household rivalry over a precious property. That is why, in case you have any vital property, it is important you’re employed with a California property planning lawyer who can advise you on one of the simplest ways to reduce potential conflicts over your separate and group property. Contact the Law Office of Scott C. Soady in San Diego as we speak you probably have any questions.
An usually ignored a part of property planning is enterprise succession. If you personal and function your individual enterprise, it’s important your property plan make provisions to both wind-up the enterprise upon your demise or switch these property to a delegated successor. This is particularly true if your enterprise isn’t included—that’s, you use a sole proprietorship or perhaps a one-member restricted legal responsibility firm.
Separating Business and Personal Assets
A latest case from the Georgia Supreme Court is instructive. Robert Haege died in 2006. Haege operated an artwork enterprise below the title Traditional Fine Art, Ltd. In his will, Haege left his “private belongings” to his siblings and his “enterprise belongings” to his siblings and two of his workers.
The siblings argued that Traditional Fine Art was a private asset, as a sole proprietorship has no authorized existence separate from the deceased Haege. The staff sued, claiming the language of the need clearly contemplated a distinction between the Traditional Fine Art belongings and different private property owned by Haege. The Georgia Supreme Court sided with the employees. The Court cited the specific language of the need, which referred to “all of my enterprise pursuits, each tangible and intangible, actual or private, related to the enterprise generally known as Traditional Fine Art, Ltd.” (Emphasis in unique)
One method to keep away from such confusion is to incorporate what you are promoting so there may be an unmistakable distinction between private and enterprise property. A company, not like a sole proprietorship, has a separate authorized identification from its proprietor. Upon the proprietor’s dying, his or her shares within the company are nonetheless transferred by will, however the enterprise itself stays in operation.
Probating a Business
Still, companies will not be at all times the best choice for each small enterprise. Sole proprietorships are usually simpler to administer whereas the proprietor remains to be alive. But what occurs to the enterprise when the only real proprietor dies? Under California legislation, the executor of an property could proceed an unincorporated enterprise for up to six months and not using a court docket order. Thereafter, the executor should get a probate decide’s permission to proceed the enterprise, wind up the enterprise, or switch the belongings to a brand new proprietor.
An various to a sole proprietorship or company is a partnership, the place you herald a number of individuals who can assume possession of the enterprise after your dying. A partnership will not be an organization. Profits and losses from partnerships are typically allotted to every particular person associate. The companions signal an settlement that specifies every particular person’s share and duties, and might embrace provisions for coping with the loss of life of a accomplice. For instance, you would possibly usher in a “silent” companion who owns 10% of the enterprise till your demise, at which period he assumes full possession and continues the enterprise as a sole proprietor.
There are, as you’ll be able to see, many choices for coping with unincorporated belongings as a part of your property plan. The necessary factor is that you just work with an skilled California estate planning attorney who might help decide the best choice for you and your enterprise. Contact the Law Offices of Scott A. Soady in San Diego right this moment if in case you have any questions.
Many individuals suppose they are going to save time and expense through the use of pre-printed varieties to meet their authorized wants equivalent to a final will and testomony. But pre-printed kinds carry important dangers, particularly when people fill them out with out acquiring the recommendation of an skilled California estate planning attorney. In reality, the Florida Supreme Court just lately warned individuals of the dangers of utilizing pre-printed wills in a call that illustrates the perils of counting on industrial kinds.
Basile v. Aldrich
In April 2004, Ann Aldrich bought a business pre-printed final will and testomony type. She ready the shape herself, apparently with none authorized recommendation. Under a bit marked “Bequests,” Aldrich recognized a number of particular gadgets of actual and private property. She left the entire listed property to her sister, Mary Jane Eaton. Aldrich named her brother, James Aldrich, as alternate beneficiary of these explicit belongings if her sister didn’t survive her. Aldrich apparently had no youngsters or heirs except for her two siblings.
Indeed, Eaton died in 2007, two years earlier than Aldrich herself handed away. Because Eaton died first, her property left property to Aldrich, together with money and land. Aldrich positioned the money in a brokerage account. She didn’t revise her 2004 pre-printed will to replicate the extra property in her property.
James Aldrich was appointed executor of the Estate of Ann Aldrich. He argued that, as he was the one surviving named beneficiary within the will, his sister meant he ought to inherit the complete property, together with the money and land acquired from Eaton’s property two years earlier. But Eaton’s two kids challenged this. They argued that since Ann Aldrich’s pre-printed type contained no residuary clause—a designation of who ought to obtain any property not particularly disposed of within the will—the property from their late mom’s property ought to cross underneath Florida intestacy legislation. That would imply the money and land could be divided, with half going to James Aldrich because the surviving brother, and the opposite half to the nieces and heirs of the predeceased sister.
Ultimately, after a number of years of litigation, the Florida Supreme Court sided with the nieces. The justices unanimously agreed that absent a residuary clause or particular language disposing of the Eaton inheritance, the disputed property had to cross beneath intestacy regulation.
Justice Barbara C. Pariente, writing individually from the remainder of the Court, famous that “though that is the right outcome underneath Florida’s probate regulation, this end result doesn’t effectuate Ms. Aldrich’s true intent.” There was proof that Aldrich supposed to go away her complete property solely to her brother. But that proof was not admissible underneath Florida legislation. Justice Pariente added, “This unlucky consequence stems not from this Court’s interpretation of Florida’s probate legislation, however from the truth that Ms. Aldrich wrote her will utilizing a commercially obtainable kind … which didn’t adequately handle her particular wants—apparently with out acquiring any authorized help.”
Don’t Do it Alone
Justice Pariente cautioned that whereas utilizing a pre-printed kind might lower your expenses within the brief time period, the lengthy-time period prices will negate any financial savings, particularly if the desire results in litigation over questions of the deceased individual’s intentions. Speed and comfort shouldn’t be paramount issues when it comes to a will or some other property planning doc. Contact the Law Office of Scott C. Soady in San Diego at this time when you have any questions.
Many individuals fail to make a final will and testomony as a result of they merely assume their heirs, akin to a partner or little one, mechanically inherit their property underneath the legislation. While it’s true the legislation offers for individuals who die intestate—that’s, with no will—it’s by no means a good suggestion to depend on this course of, as it might produce outcomes you don’t intend. This is particularly true when coping with atypical household conditions.
Jones v. Brown
Here is a recent illustration from the California Court of Appeals. Lonza Jones died in 2009 on the age of eighty one. Jones had one surviving sibling, Mathis Jones. Another sibling died a number of a long time earlier; Lonza Jones raised that sibling’s kids, together with Elinda F. Edwards.
If Jones died with out leaving a partner or any organic youngsters, California intestacy regulation would give his complete property to Mathis Jones as the one surviving sibling. But shortly after Jones’ loss of life, Elinda Edwards filed a petition to probate her uncle’s property through which she claimed he had two organic kids, Wallace S. Wright and Johnniese Peterson Exum.
Wright was apparently deceased. Stephanie Brown, Wright’s daughter, filed her personal petition for appointment as administrator of her purported grandfather’s property. Mathis Jones opposed the appointment of both Brown or Edwards. Jones additional claimed neither Wallace Wright nor Exum had been his brother’s little one.
The probate courtroom appointed Brown as administrator for the property, which had property of about $60,000. Mathis Jones claimed a few of these funds had been improperly transferred from a joint account he held along with his late brother. Jones demanded Brown’s elimination as administrator and continued to problem the paternity of Exum, the only surviving inheritor.
The probate courtroom denied all of Mathis Jones’ motions. The California Court of Appeal affirmed the probate courtroom on all points. The appeals court docket stated Jones waited too lengthy to enchantment Brown’s appointment as administrator. He additionally failed to present an sufficient evidentiary file to problem the probate choose’s findings on the opposite points.
With respect to the query of Exum’s paternity, the Court of Appeals famous that “snippets of the document present the probate court docket had proof that, throughout his lifetime, decedent acknowledged Exum as his daughter, together with taking her into his dwelling and claiming to be her father at school data.”
Establishing Paternity
If a toddler’s organic paternity just isn’t naturally presumed—i.e., the kid is born to married dad and mom or the daddy’s title is listed on the start certificates—California intestacy regulation requires another proof that the particular person is an inheritor. In the Jones case, Exum established paternity by way of “clear and convincing proof that the daddy has brazenly held the kid as his personal.” However, a previous court docket order declaring paternity or clear and convincing proof that the individual is a toddler’s father can also be enough.
Of course, paternity turns into much less of a problem when the deceased leaves a will specifying his chosen beneficiaries. Had Lonza Jones signed a will leaving his whole property to Exum—assuming that was his want—his brother would have had no authorized grounds to problem that call. It would not matter whether or not or not Exum was Jones’ organic daughter.
This is only one instance of how a scarcity of a will creates pointless confusion amongst heirs and members of the family. You can keep away from an identical circumstance by working with an skilled California property planning lawyer. Contact the Law Office of Scott C. Soady in San Diego at present for a session.
Taxes are an vital a part of property planning. While most individuals affiliate property planning with the need to decrease federal property taxes, this is not going to truly be a problem for most people, because the property tax presently applies solely to these estates with greater than $H.34 million in belongings. But there are different tax points even smaller estates should think about.
For instance, when you plan to go away important property to members of the family, it’s best to think about the way it will have an effect on their taxes going ahead. A certified California property planning legal professional can advise not solely you, however your potential heirs, on one of the simplest ways to decrease complete tax legal responsibility and keep away from pitfalls which will show pricey years after your demise.
Zampella v. Commissioner of Internal Revenue
A recent decision by a federal appeals court in Philadelphia offers one example of a tax complication arising from the administration of an estate. The deceased, Maria Lee Zampella, lived in New Jersey. Zampella made a final will and testomony dividing her total property equally amongst her two sons, Edward and Arthur Zampella, who have been additionally named co-executors. The property included Zampella’s residence in Monmouth County, New Jersey.
After their mom’s demise in 2008, the brothers had the residence appraised at $430,000. Edward Zampella provided to purchase out his brother’s one-half curiosity in the home. To that finish, Edward paid $215,000 to a settlement agent who then issued a test to Arthur. The brothers, as co-executors of the property, then executed a deed transferring 100% of the residence to Edward alone.
A tax difficulty arose when Edward Zampella then claimed an $H,000 credit score on his private revenue tax return. In 2009, Congress allowed first-time house patrons to declare such a credit score. The credit score didn’t apply in instances the place an individual bought the house from a associated particular person, together with a dad or mum or a guardian’s property. Edward Zampella argued he was eligible for the credit score, nevertheless, as a result of he really bought the house from his brother, who was not thought of a “associated particular person” below the tax code.
The Internal Revenue Service denied Zampella’s credit score and the Court of Appeals affirmed. Even although his brother did obtain a half-curiosity within the residence underneath their mom’s will, the documented transaction confirmed the property transferring the complete property to Edward. Therefore, he couldn’t declare the tax credit score.
This is only one instance of how a number of tax points could issue into property planning and administration. If you are in search of recommendation on how to finest handle tax questions as a part of your personal property planning, contact the Law Office of Scott C. Soady in San Diego as we speak.
In the Internet age, your estate no longer includes just physical property but digital assets like social media accounts, cloud storage and even computer-based currency. Taking stock of your digital assets is therefore an essential part of California estate planning. Here are a few issues to consider with respect to your “online estate.”
Online Devices and Cloud Storage
Recently the BBC reported on the story of Anthea Grant, a woman who passed away from cancer. Grant's will directed her estate be divided equally among her five children. The children decided among themselves how to allocate individual pieces of property. Grant's son Joshua received her iPad, manufactured by California-based Apple Inc.
Unfortunately, while Joshua Grant took physical possession of the iPad, he could not use the device without his late mother's Apple ID and password, which none of the family members knew. Apple refused to unlock the device without written consent from the account holder, who was obviously deceased and therefore unable to do so. Even after Joshua Grant provided written proof of his mother's death, Apple would only restore the iPad to its factory settings; it would not provide access to Anthea Grant's files—which were part of a cloud account—without a court order.
If you have any type of cloud storage account, it is important to review the terms of service. Some services may simply suspend or delete an inactive account. Others may transfer an account to an executor or heir. Much like banks, an executor may need to provide a copy of the account holder's death certificate and a court order authorizing the executor to act—usually known as testamentary letters—before the cloud service will grant access.
The Bitcoin Dilemma
Other types of digital assets may prove even more difficult for your estate or heirs to access. Digital currencies like Bitcoin have become popular in recent years. Bitcoin uses a public ledger called a “block chain” to manage peer-to-peer transactions. The block chain also “mines” new bitcoins. Individual users store their bitcoins in a “digital wallet” that uses a pair of cryptographic keys.
The dilemma is that if the user forgets or loses the keys—or simply loses the computer or device that stores the digital wallet—there is no method of recovery. Unlike a cloud storage service, there is no central authority who can reset or access a bitcoin digital wallet. The bitcoins are simply lost.
If you own bitcoins or a similar type of currency, it is therefore essential to keep backups of your cryptographic keys together with your other estate planning documents. Some Bitcoin experts also maintain other technical methods of verifying a digital wallet owner's death and transferring the bitcoins to his or her estate. As this a continually evolving technology, it is important to consult with a California estate planning attorney before taking any action.
Estate Tax Implications
Bitcoin and digital currencies may also raise possible federal estate tax issues. The Internal Revenue Service recently issued guidelines stating that Bitcoins are to be treated as property rather than currency. Once again, that is why you should work with an experienced attorney who can keep you apprised of legal developments. Contact the Law Office of Scott C. Soady today if you have any questions.
Ideally, estate planning is something you do long before it becomes necessary. It is never a good idea to wait until you are on your deathbed to make a will. You may run out of time before you can execute a will that meets with the legal requirements of California or another state where you reside.
Piper v. Dimmers
A recent Michigan case illustrates the perils of last-minute or incomplete estate planning. Grace Reid died in 2011 at the age of 69. Reid was unmarried and had no children. Absent a will, Michigan law would distribute her estate—which consisted primarily of some land—to her siblings. After she was diagnosed with heart disease, Reid met with an estate planning attorney to discuss her will. For some reason, she never followed up with the attorney prior to her death.
However, three years earlier, Reid made some handwritten notes regarding her estate. As described by the Michigan Court of Appeals, “The document consists of barely legible notes on two sides of a single sheet of personal stationary bedecked with birds, butterflies and a bible quote.” Several names were written and crossed out or changed. Basically, it was a list of people with dollar amounts, presumably gifts Reid intended to leave through her estate. Among the names were two friends, Sandra and Amy Piper. Reid gave the document to Sandra Piper for safekeeping.
After Reid's death, Piper asked a Michigan probate court to admit the handwritten notes as a valid last will and testament. Michigan does recognize “holographic wills”--documents that are signed, dated and in the handwriting of the person making the will. Unlike traditional wills, holographic wills are not typed and lack the signatures of at least two witnesses.
The Michigan courts rejected the alleged will. At best, the Court of Appeals explained, the document was a draft designed to “organize [Reid's] thoughts and determine how to divide her estate.” There was insufficient evidence to prove the document accurately expressed Reid's intent to make a final disposition of her property.
The Perils of “Holographic” Wills
Like Michigan, California law does permit the probate of handwritten or “holographic” wills. Such wills must be entirely in the person's handwriting should be dated. Failure to date a holographic will may lead a court to declare it unenforceable, especially if it conflicts with another will found among your effects.
While there may be certain emergencies that necessitate the use of a holographic will—such as the man who wrote a will on the side of the tractor he was trapped under—in almost all circumstances, it is better to draft a proper will with the assistance of a qualified California estate planning attorney. Wills don’t need to be complicated. It is only important that the will clearly expresses your intentions and is signed in the presence of at least two witnesses. This minimizes the chances of any confusion (and litigation) after your death. If you have any questions about making a will, please contact the Law Office of Scott C. Soady in San Diego.
A living trust is a useful estate planning tool that can help avoid extended probate proceedings after your death. Basically, a living trust is an entity you create and transfer property into through a declaration of trust. This declaration specifies how the property within the trust should be distributed after your death. Unlike a last will and testament, trust declarations are not submitted to a probate court. The declaration simply appoints a successor trustee to carry out your wishes.
During your lifetime, you can still control all of the property transferred into the living trust. In most cases, the trust is not even considered a separate legal entity for tax purposes, so your Social Security number remains tied to trust assets like bank accounts. You can revoke or amend a living trust at any point during your lifetime. After your death, however, the trust generally becomes irrevocable, meaning your successor trustee is bound by the declaration of trust.
Always Fund a Trust Properly
It is important to understand that creating a trust involves more than signing a declaration of trust. You must take affirmative steps to fund a living trust. Even though assets put into a living trust remain under your control, you must still take steps to amend the legal title, say from “John Doe” to “John Doe, Trustee of the John Doe Living Trust.” Without taking this important step, the declaration of trust is nothing more than an empty shell.
Here is an illustration taken from a recent California Court of Appeals case, this case is only discussed to illustrate the concepts involved and should not be taken as a statement of the law. In December 2000, Rose D. Bozigian had her estate planning attorney prepare a living trust. Bozigian, a widow with three adult children, transferred a single asset into the new trust, her Los Angeles County residence. To that end, Bozigian signed a new deed transferring the property from herself to the trust.
But in 2003, Bozigian decided to transfer her residence out of the trust. She did this in order to refinance the property. According to court records, Bozigian wanted to help one of her children, Steve Bozigian, pay off some credit card debt. Bozigian, acting as trustee, signed a new deed transferring the residence from the trust to herself and her daughter, Susan Saputo, as joint tenants.
Normally, a joint tenancy means that when one co-owner dies, the surviving co-owner automatically assumes title without having to go through probate. This is known as a joint tenancy with right of survivorship. But in this case, the courts determined Rose Bozigian never intended to create a true joint tenancy; rather, she added her daughter to the deed in order to help secure the refinancing loan.
Rose Bozigian died in 2006. Since she removed the house from the trust three years earlier, the living trust had no assets. Litigation ensued among the siblings over this. The probate court, and later the California Court of Appeal, confirmed the trust was empty. That meant the residence had to go through normal probate.
Don't Leave Behind an Empty Trust
A living trust may not be right for your estate planning needs. But if you decide to create a living trust, it is important to make sure it is funded, if for no other reason than to avoid unnecessary confusion after your death. An experienced California estate planning attorney can help you determine the best way to protect your assets and minimize legal complications. Contact the Law Office of Scott C. Soady in San Diego today if you have any questions.
California estate planning must take into account the state's community property laws. California is one of nine states that recognize community property, which is a legal system that governs property held by married couples. In general, each spouse enters the marriage with their separate property. Property subsequently acquired during the marriage is community property, with each spouse retaining a one-half interest. Upon a spouse's death, his or her estate plan may only dispose of that one-half interest.
In making a will or trust, it is therefore essential to distinguish separate and community property. If you intend to make provisions for one or the either, you should do so explicitly. Ambiguity may lead to litigation between your heirs, as one recent decision from the California Court of Appeals illustrates. This case is cited only for illustrative purposes and is not meant to be taken as a statement of the law.
Pakula v. Klein
Rina Klein and her husband executed their wills in 2007. Klein's will named her husband as executor and provided for the creation of a family trust. The following year, Klein made a separate revocable living trust. The first article of the trust instrument said Klein conveyed all of her property “whether separate or community” to the trust. But the very next article clarified, “This trust contains only separate property.” The trust named Klein's mother, Julie Pakula, as successor trustee and instructed her to distribute the trust property to Klein's children after her death.
Klein died under mysterious circumstances in 2009. She died at a Los Angeles hospital after suffering multiple seizures. An autopsy failed to conclusively determine a cause of death, however. Pakula and other members of Rina Klein's family believed her husband, Gary Klein, murdered her. Beverly Hills police investigated the case for at least four years without arresting or charging Klein.
Pakula and Klein continued to fight in probate court over Rina Klein's estimated $2.8 million estate. The court determined that Klein's will and trust were both valid. The will, which named Gary Klein executor, took possession of Rina Klein's community property, while her separate property belonged to the trust administered by Pakula as successor trustee.
Pakula appealed this decision. She argued the trust should include both the community and separate property. But the Court of Appeals found no error in the probate court's judgment. Based on the available evidence, it was clear Rina Klein only intended to transfer her separate property to her trust. Although there was an apparent conflict between the two articles in the trust instrument on this point, the court examined emails from Klein to her estate planning attorney that confirmed she only wanted to provide for her separate property in the trust. While Pakula did present contradictory evidence, the probate court's weighing of such evidence will not be questioned by an appeals court absent some clear error.
Always Make Your Intentions Clear
It does not take a murder investigation to inflame family rivalry over a valuable estate. That is why, if you have any significant assets, it's essential you work with a California estate planning attorney who can advise you on the best way to minimize potential conflicts over your separate and community property. Contact the Law Office of Scott C. Soady in San Diego today if you have any questions.
An often overlooked part of estate planning is business succession. If you own and operate your own business, it is essential your estate plan make provisions to either wind-up the business upon your death or transfer those assets to a designated successor. This is especially true if your business is not incorporated—that is, you operate a sole proprietorship or even a one-member limited liability company.
Separating Business and Personal Assets
A recent case from the Georgia Supreme Court is instructive. Robert Haege died in 2006. Haege operated an art business under the name Traditional Fine Art, Ltd. In his will, Haege left his “personal assets” to his siblings and his “business assets” to his siblings and two of his employees.
The siblings argued that Traditional Fine Art was a personal asset, as a sole proprietorship has no legal existence separate from the deceased Haege. The employees sued, claiming the language of the will clearly contemplated a distinction between the Traditional Fine Art assets and other personal property owned by Haege. The Georgia Supreme Court sided with the employees. The Court cited the express language of the will, which referred to “all of my business interests, both tangible and intangible, real or personal, connected to the business known as Traditional Fine Art, Ltd.” (Emphasis in original)
One way to avoid such confusion is to incorporate your business so there is an unmistakable distinction between personal and business assets. A corporation, unlike a sole proprietorship, has a separate legal identity from its owner. Upon the owner's death, his or her shares in the corporation are still transferred by will, but the business itself remains in operation.
Probating a Business
Still, corporations are not always the best option for every small business. Sole proprietorships are generally easier to administer while the owner is still alive. But what happens to the business when the sole proprietor dies? Under California law, the executor of an estate may continue an unincorporated business for up to six months without a court order. Thereafter, the executor must get a probate judge's permission to continue the business, wind up the business, or transfer the assets to a new owner.
An alternative to a sole proprietorship or corporation is a partnership, where you bring in one or more people who can assume ownership of the business after your death. A partnership is not a corporation. Profits and losses from partnerships are generally allocated to each individual partner. The partners sign an agreement that specifies each person's share and duties, and may include provisions for dealing with the death of a partner. For example, you might bring in a “silent” partner who owns 10% of the business until your death, at which time he assumes full ownership and continues the business as a sole proprietor.
There are, as you can see, many options for dealing with unincorporated assets as part of your estate plan. The important thing is that you work with an experienced California estate planning attorney who can help determine the best option for you and your business. Contact the Law Offices of Scott C. Soady in San Diego today if you have any questions.
Many people think they will save time and expense by using pre-printed forms to meet their legal needs such as a last will and testament. But pre-printed forms carry significant risks, especially when individuals fill them out without obtaining the advice of an experienced California estate planning attorney. In fact, the Florida Supreme Court recently warned people of the risks of using pre-printed wills in a decision that illustrates the perils of relying on commercial forms.
Basile v. Aldrich
In April 2004, Ann Aldrich purchased a commercial pre-printed last will and testament form. She prepared the form herself, apparently without any legal advice. Under a section marked “Bequests,” Aldrich identified several specific items of real and personal property. She left all of the listed property to her sister, Mary Jane Eaton. Aldrich named her brother, James Aldrich, as alternate beneficiary of those particular assets if her sister did not survive her. Aldrich apparently had no children or heirs aside from her two siblings.
Indeed, Eaton died in 2007, two years before Aldrich herself passed away. Because Eaton died first, her estate left property to Aldrich, including cash and land. Aldrich placed the cash in a brokerage account. She did not revise her 2004 pre-printed will to reflect the additional property in her estate.
James Aldrich was appointed executor of the Estate of Ann Aldrich. He argued that, as he was the only surviving named beneficiary in the will, his sister intended he should inherit the entire estate, including the cash and land received from Eaton's estate two years earlier. But Eaton's two children challenged this. They argued that since Ann Aldrich's pre-printed form contained no residuary clause—a designation of who should receive any property not specifically disposed of in the will—the property from their late mother's estate should pass under Florida intestacy law. That would mean the cash and land would be divided, with half going to James Aldrich as the surviving brother, and the other half to the nieces and heirs of the predeceased sister.
Ultimately, after several years of litigation, the Florida Supreme Court sided with the nieces. The justices unanimously agreed that absent a residuary clause or specific language disposing of the Eaton inheritance, the disputed property had to pass under intestacy law.
Justice Barbara J. Pariente, writing separately from the rest of the Court, noted that “although this is the correct result under Florida's probate law, this result does not effectuate Ms. Aldrich's true intent.” There was evidence that Aldrich intended to leave her entire estate solely to her brother. But that evidence was not admissible under Florida law. Justice Pariente added, “This unfortunate result stems not from this Court's interpretation of Florida's probate law, but from the fact that Ms. Aldrich wrote her will using a commercially available form … which did not adequately address her specific needs—apparently without obtaining any legal assistance.”
Don't Do it Alone
Justice Pariente cautioned that while using a pre-printed form may save money in the short term, the long-term costs will negate any savings, especially if the will ends up in litigation over questions of the deceased person's intentions. Speed and convenience should not be paramount concerns when it comes to a will or any other estate planning document. Contact the Law Office of Scott C. Soady in San Diego today if you have any questions.
Many people fail to make a last will and testament because they simply assume their heirs, such as a spouse or child, automatically inherit their property under the law. While it is true the law provides for persons who die intestate—that is, without a will—it is never a good idea to rely on this process, as it may produce outcomes you do not intend. This is especially true when dealing with atypical family situations.
Jones v. Brown
Here is a recent illustration from the California Court of Appeals. Lonza Jones died in 2009 at the age of 81. Jones had one surviving sibling, Mathis Jones. Another sibling died several decades earlier; Lonza Jones raised that sibling's children, including Elinda G. Edwards.
If Jones died without leaving a spouse or any biological children, California intestacy law would give his entire estate to Mathis Jones as the only surviving sibling. But shortly after Jones' death, Elinda Edwards filed a petition to probate her uncle's estate in which she claimed he had two biological children, Wallace L. Wright and Johnniese Peterson Exum.
Wright was apparently deceased. Stephanie Brown, Wright's daughter, filed her own petition for appointment as administrator of her purported grandfather's estate. Mathis Jones opposed the appointment of either Brown or Edwards. Jones further claimed neither Wallace Wright nor Exum were his brother's child.
The probate court appointed Brown as administrator for the estate, which had assets of about $60,000. Mathis Jones claimed some of those funds were improperly transferred from a joint account he held with his late brother. Jones demanded Brown's removal as administrator and continued to challenge the paternity of Exum, the sole surviving heir.
The probate court denied all of Mathis Jones' motions. The California Court of Appeal affirmed the probate court on all issues. The appeals court said Jones waited too long to appeal Brown's appointment as administrator. He also failed to provide an adequate evidentiary record to challenge the probate judge's findings on the other issues.
With respect to the question of Exum's paternity, the Court of Appeals noted that “snippets of the record show the probate court had evidence that, during his lifetime, decedent acknowledged Exum as his daughter, including taking her into his home and claiming to be her father in school records.”
Establishing Paternity
If a child's biological paternity is not naturally presumed—i.e., the child is born to married parents or the father's name is listed on the birth certificate—California intestacy law requires some other evidence that the person is an heir. In the Jones case, Exum established paternity through “clear and convincing evidence that the father has openly held the child as his own.” However, a prior court order declaring paternity or clear and convincing evidence that the person is a child's father is also sufficient.
Of course, paternity becomes less of an issue when the deceased leaves a will specifying his chosen beneficiaries. Had Lonza Jones signed a will leaving his entire estate to Exum—assuming that was his wish—his brother would have had no legal grounds to challenge that decision. It wouldn't matter whether or not Exum was Jones' biological daughter.
This is just one example of how a lack of a will creates unnecessary confusion among heirs and family members. You can avoid a similar circumstance by working with an experienced California estate planning attorney. Contact the Law Office of Scott C. Soady in San Diego today for a consultation.
Taxes are an important part of estate planning. While most people associate estate planning with the desire to minimize federal estate taxes, this will not actually be an issue for most individuals, as the estate tax presently applies only to those estates with more than $5.34 million in assets. But there are other tax issues even smaller estates must consider.
For example, if you plan to leave significant assets to family members, you should consider how it will affect their taxes going forward. A qualified California estate planning attorney can advise not only you, but your potential heirs, on the best way to minimize total tax liability and avoid pitfalls that may prove costly years after your death.
Zampella v. Commissioner of Internal Revenue
A recent decision by a federal appeals court in Philadelphia offers one example of a tax complication arising from the administration of an estate. The deceased, Maria Lee Zampella, lived in New Jersey. Zampella made a last will and testament dividing her entire estate equally among her two sons, Edward and Arthur Zampella, who were also named co-executors. The estate included Zampella's residence in Monmouth County, New Jersey.
After their mother's death in 2008, the brothers had the residence appraised at $430,000. Edward Zampella offered to buy out his brother's one-half interest in the house. To that end, Edward paid $215,000 to a settlement agent who then issued a check to Arthur. The brothers, as co-executors of the estate, then executed a deed transferring 100 percent of the residence to Edward alone.
A tax issue arose when Edward Zampella then claimed an $8,000 credit on his personal income tax return. In 2009, Congress allowed first-time home buyers to claim such a credit. The credit did not apply in cases where a person purchased the home from a related person, including a parent or a parent's estate. Edward Zampella argued he was eligible for the credit, however, because he actually purchased the home from his brother, who was not considered a “related person” under the tax code.
The Internal Revenue Service denied Zampella's credit and the Court of Appeals affirmed. Even though his brother did receive a half-interest in the residence under their mother's will, the documented transaction showed the estate transferring the entire property to Edward. Therefore, he could not claim the tax credit.
This is just one example of how multiple tax issues may factor into estate planning and administration. If you're looking for advice on how to best address tax questions as part of your own estate planning, contact the Law Office of Scott C. Soady in San Diego today.
