Share

The KRASA LAW, Inc. Estate Planning Blog

Monday, August 25, 2014

Ice, Ice Baby

If you have a social media account such as Facebook or Twitter, there is no doubt you are familiar with the fundraising phenomenon known as the #IceBucketChallenge.  The goal of the challenge is to support research and awareness of Amyotrophic Lateral Sclerosis (ALS), often referred to as "Lou Gehrig's Disease," which is a progressive neurodegenerative disease that affects nerve cells in the brain and the spinal cord.  

The idea is simple: donate at least $10 to the ALS Association, post a video to the internet of yourself getting drenched by a bucket of ice water, and challenge three others to do the same.  This idea has gone viral and has swept the nation: ordinary folks, famous athletes such as Aaron Rodgers and Sydney Crosby, celebrities such as Gwen Stefani and Oprah Winfrey, and governors such as Bobby Jindal and Nikki Haley, have all taken the “plunge.”  Even 86-year-old Ethel Kennedy poured a bucket of ice cold water on her head for the cause!    

It may sound goofy, but numbers do not lie: in the few weeks from July 29, 2014 through August 19, 2014, the ALS Association raised $22.9 Million compared to only $1.9 Million over the same period last year.  Regardless of what any critics might say, this fundraiser has been nothing short of sensational.  

While I think everyone should participate in the #IceBucketChallenge (my entire family has done it, including my four-year-old son), there are of course many other ways that you can benefit your favorite charitable causes.  Below are the common ways you can leave a legacy by making a charitable gift through your estate plan.  (The text is taken from a brochure I wrote for Meals on Wheels of the Monterey Peninsula about planned giving.  Contact Meals on Wheels if you would like a copy of the full brochure.)           

Traditional Planned Giving Strategies

•    Cash Bequest
Leave a specific cash amount or percentage of your estate to one or more charities in your will or trust.  

•    Bequest of Property
A bequest of specific property through your will or trust ensures that your favorite charity receives specific assets such as securities or real estate that the charity can sell, using the proceeds toward its charitable mission.  

•    Retirement Plan
You can also designate your favorite charity as the beneficiary of the remainder of your IRA, Keogh, tax-sheltered annuity, qualified pension or profit-sharing plan upon death.  

•    Contingent Bequest
Your favorite charity is given a bequest only in the event of the death of other beneficiaries, such as your children and grandchildren.


Other Planned Gifts

When outright gifts are not practical, you might consider one of the following options to help you accomplish your goals. Giving strategies such as the ones listed below offer numerous tax advantages and are valuable tools in estate and financial planning. Your attorney, accountant or financial planner will know how best to design a giving strategy that best meets your needs.

The Charitable Reminder Trust – If you have a highly appreciated asset that you would like to exchange for a guaranteed stream of income but are concerned about having to pay exorbitant Capital Gains Taxes, consider creating a Charitable Remainder Trust.  During your life, you will obtain an Income Tax deduction, you will be able to defer Capital Gains Tax, and you will be able to obtain a guaranteed stream of income for life.  At death, your favorite charity will be entitled to the remainder.  

The Charitable Lead Trust – A Charitable Lead Trust is the reverse of a Charitable Remainder Trust and offers many of the same benefits such as deferral of Capital Gains Tax and a charitable deduction on your tax return.  You transfer highly appreciated assets to the Charitable Lead Trust.  The Trust pays your favorite charity a stream of income for a certain period of time.  After that period of time expires, the remainder of the Trust assets is either returned to you or paid to your beneficiaries.  

Remainder Interests – (Real Estate) You can donate a remainder interest in your house or other real estate, and retain lifetime use of the property while living. You will get a current income tax deduction for the value of the remainder interest donated. After your death, proceeds from the sale of the property that you donated come to your favorite charity.

KRASA LAW is located at 704-D Forest Avenue, PG, and Kyle may be reached at 831-920-0205.

This article is for general information only.  Reading this article does not establish an attorney-client relationship.  You should consult a qualified attorney who is licensed to practice law in your community before acting on any of the information presented in this article.  


Wednesday, August 20, 2014

The Bar Exam - 10 Years Later

A few weeks ago marked the 10th anniversary of the one and only time I sat for the California Bar Exam.  It was on my mind because a friend of mine was going through the process for the first time.  I thought about the stress she must be going through.  The nervousness of checking into the hotel the night before, hoping that your laptop will work properly throughout the 3-day exam, and trying not to let anybody else’s panic attacks affect your concentration or your “confidence’ (authentic or manufactured).

In the summer of 2004, as I was gearing up my Bar preparation, I wondered why I had chosen this profession.  Didn’t I know about the Bar Exam prior to applying for law school?  Why did I choose to subject myself to this ultimate test?  Of course, during the law school application process, I was aware that after law school I was going to have to endure the “big test.”  I remember the pressure Tom Cruise’s character felt while taking the Bar Exam in The Firm and the stories about JFK, Jr.’s multiple struggles with the New York Bar Exam.  I didn’t appreciate the magnitude of the Exam until the end of my third year of law school.

Three days.  Eighteen hours.  Fourteen subjects.  Common law.  Current law in the majority of jurisdictions.  Current law in the minority of jurisdictions.  California law.  Twelve hours of essay questions.  Six hours of multiple choice questions.  39% pass rate.  Three years of intense law school was largely Bar Exam preparation on its own.  However, immediately after law school graduation, a summer of intense Bar Exam preparation begins where your only occupation is to hone yourself into a lean, mean, Bar Exam-taking-machine.

About halfway through the third year of law school, the first “freak-out” begins.  Students start discussing the fact that the California Bar Exam is often considered the hardest Bar Exam in the Country.  Research is conducted in a desperate attempt to try to determine what state has the “easiest” Bar Exam.  People start considering living in states they never imagined before contemplating the big, bad test.  A rumor started spreading throughout the halls of UC Davis that if we had simply gone to law school in Wisconsin and decided to practice there, the Wisconsin Bar waives its Bar Exam requirement.  We wondered aloud why we didn’t know about this fact when we entered law school.  Would we have chosen Wisconsin over UC Davis?  I’m a Packers fan – I could be happy living in the Dairy State, eating cheese and rooting for the Pack.  Of course, when we started floating the idea of living in these random states with our families and significant others, they thought we had lost our minds!  

In the midst of the Bar Exam prep, after law school graduation and prior to taking the exam, the second freak-out begins.  Students start discussing the fact that if all else fails, we still have our law degrees.  Research begins on what careers are possible for those with law degrees but without an actual license to practice law.  A book is passed around entitled, “Top Non-Lawyer Careers for Lawyers.”  When we started floating this idea of not actually practicing law to our families and significant others, they again thought we had lost our minds!  

I took the Bar Exam at the Sacramento Convention Center at the end of July 2004.  One week later, I got married in the chapel of my undergraduate alma mater, Saint Michael’s College, in Vermont.  The next week, my wife and I had our honeymoon in Hawaii.  A few weeks later, I started working for a law firm in Salinas as a clerk while I awaited the results of the Bar Exam.  It is not until the week before Thanksgiving that we find out whether we are lawyers or whether we need to start preparing for the February Bar Exam to give the whole thing a second try – you can’t take it in parts!  On a Friday, at 6:00 pm, we are able to login and check our results.  The results would become public that Sunday.  A friend of mine from the Salinas law firm was also waiting for his results.  We went home early that day, set up our computers, and waited.  

At 6:00 pm, with my wife and father beside me, I logged on.  Of course the site was busy and I had to constantly refresh the page.  Finally the results were available.  In my panic, I misread the results!  I thought it said: “The name above does not appear on the pass list.”  I remember saying, “Oh no!  Too Bad!”  Then my wife read it and said, “No, it says you passed!”  It actually read: “The name above appears on the pass list.”  Hooray!  Just to be sure, I printed the message about a dozen times.  My friend and I still needed to be sworn-in.

A close family friend and mentor, Judge Albert Maldonado, swore us in at a special ceremony held at the law firm in Salinas.  We then had to mail our oath to the State Bar.  I remember we were very nervous about the Post Office failing to deliver our oath.  We must have put about three times the necessary postage just to be sure!  Necessary or not, it worked and we officially obtained our license to practice law in November 2004.  

Ten years later, the Bar Exam is a distant memory.  It does seem silly now to think about random states in which to live or alternate career paths simply to avoid the big test.  When studying for the Bar, I told myself that if I passed the first time, I would never look down upon anybody who didn’t pass the first time (or the second or third or fourth time, etc.) and I still don’t.  It’s as much about test-taking ability and being “on” for those three days as it is about knowing and applying the law.  

Although it’s a lot of pressure, it’s also a rite of passage.  Now that the Bar Exam is in my rear view window, I am glad that I did not opt for the “Wisconsin plan” of skipping the Bar Exam altogether as I am happy to have had that experience.  Of course, it’s easy for me to say that now, though I certainly understand the angst that this year’s Bar Exam takers experienced.  (I never did find out whether the rumors about being able to skip the Wisconsin Bar were actually true.  I guess once I passed the Bar, that stuff didn’t matter anymore!)  

November will mark my 10th year of happily practicing law.  Last February was the 5th anniversary of my own law firm.  Enduring law school and the Bar Exam has certainly paid dividends!  I look forward to the next wave of freshly-minted lawyers to have their efforts rewarded as well.    

KRASA LAW is located at 704-D Forest Avenue, Pacific Grove, California, and Kyle may be reached at 831-920-0205.


Friday, July 25, 2014

The ABC's of Legal Titles


Initials listed after a professional’s name often designate accomplishment, title, and authority.  While the use of “M.D.” for doctors and “Ph.D.” for professors is widely understood, the initials commonly present after attorneys’ names are less known.  Below is list of the most common legal titles and their meanings.

J.D.

“J.D.” refers to “Juris Doctor,” “Doctor of Law,” or “Doctor of Jurisprudence.”  It means “Teacher of Law” or “Teacher of Legal Knowledge” in Latin and is the degree conferred upon persons who have completed law school in the United States and thus earned a law degree.
 
Most law schools require students to have a Bachelor’s degree to gain admittance and full-time law school in the United States is generally three years.  

Earning a “J.D.” does not confer the right to practice law.  Instead, each state administers its own admission guidelines including the requirement to pass a Bar Exam.  When you see “J.D.” after a person’s name, that person has graduated from law school but is not necessarily licensed to practice law.

LL.M

“LL.M” refers to a “Masters in the Letters of Law.”  It is an advanced law degree after someone completes a “J.D.”  An “LL.M” is often pursued by students who are interested in gaining expertise in a concentrated area of the law.  Some “LL.M” degrees are available for foreign lawyers who wish to learn about the host country’s legal system (referred to as a “Comparative Law Degree”).  

Esq.

“Esq.” often succeeds an attorney’s name.  “Esq.” is an abbreviation for “Esquire.”  Originally a term of social status in England (above a “gentleman” and below a “knight”), in the United States it is customarily used to designate a person licensed to practice law.  Although “Esq.” is not an official title, because it is often associated with persons who are licensed to practice law, most state laws prevent non-lawyers from using the designation.  

In California, in order to practice law and thus be allowed to use the unofficial “Esq.” designation, a person must pass a three-day, 18-hour written Bar Exam as well as pass a separate ethics exam and meet several other qualifications.

CLS

California, as well as many other states, has a program to certify its practicing attorneys as “Certified Legal Specialists” in one or more of eleven different practice areas.  In order to become a Certified Legal Specialist (“CLS”), a California attorney must have been practicing in the area of specialty for a minimum of five years, be an active member of the California Bar, demonstrate performance in a number of designated tasks in the particular field of specialization, demonstrate education performance in the particular field of specialization, pass a written 6.5-hour specialist exam, and demonstrate proficiency in the particular field of specialization through independent inquiry and review.  

Kyle A. Krasa, B.A., J.D., Esq., CLS earned his Bachelor of Arts Degree in English Literature from Saint Michael’s College in Colchester, Vermont, earned his Juris Doctor degree from UC Davis School of Law, is a licensed attorney by the State Bar of California, and is Certified by the State Bar of California Board of Legal Specialization as a Certified Legal Specialist in Estate Planning, Trust, & Probate Law.  

KRASA LAW is located at 704-D Forest Avenue, Pacific Grove, and Kyle may be reached at 831-920-0205831-920-0205.


Friday, July 11, 2014

Why Silver is Better than Gold

My friend and colleague, Travis Long, is one of the best accountants I know.  Like me, he has a column in the Cedar Street Times and he is committed to educating the public about taxes and other related topics.  Also like me, he occasionally strays from the focus of his columns to write about various subjects that appeal to him on a personal level.  I normally trust, respect, and value his judgment.  However, his last column’s absurd and offensive claim that soccer’s World Cup is the “most valuable trophy” in all of sports cannot be ignored.  (See “We Buy Gold . . . FIFA World Cup Trophies.”)  With regard to this subject, I must proffer a strong rebuttal.

In his column, Mr. Long states that the World Cup is made almost entirely of 18k gold and that if you took the championship trophies of the NHL, MLB, NFL, and NBA and “melted them all down,” their combined value would only be worth a fraction of the “melt value” of the World Cup.  One wonders whether he also judges the value of collectible cars at the Pebble Beach Concours d’Elegance by sheer “melt value.”  The Bugatti Type 41 Royale, a beautiful automobile produced in the late 1920’s and early 1930’s, has an estimated value of over $10 Million due to its beauty, its appeal among collectors, is rarity, its ingenuity, and its history.  But Mr. Long would calculate the value of the metal, rubber, and glass and determine its worth to be only a few thousand dollars.  He must not be familiar with the concept that the whole is worth more than the sum of its raw materials.  Does he value his friends this way too?  “Well, if I were to sell all of your possessions, you would be worth $X.”

When using the proper metric for determining intrinsic worth, focusing upon history, beauty, tradition, and meaning, hockey’s Stanley Cup is clearly the most valuable trophy in all of sports.  

The Stanley Cup was originally purchased by Lord Stanley of Preston, the Governor General of Canada, in 1892.  The original trophy was awarded to the hockey champions from that time until 1970 when it became thin and frail and was retired to a bank vault at the Hockey Hall of Fame in Toronto.  Since that time, the same authenticated “Presentation Cup” has been awarded to the hockey championship team each year.  Objectively speaking, it truly is the most beautiful trophy in all of sports.  Its shiny silver gleams in the light.  The NHL employs Philip Pritchard, whose only job is to act as the official “Keeper of the Cup.”  He goes everywhere the Cup goes, all over the world, keeping a keen watch over the cherished chalice and handling it with white gloves.

To paraphrase from an article featured in the Bleacher Report (www.bleacherreport.com) by Chris Hoffman on November 3, 2011 entitled, “5 Reasons the NHL’s Stanley Cup is the Best Trophy in Professional Sports,” I offer my evidence as follows:  

1.  You Get your Name on It.  All players, as well as executives and coaches, who have won the Stanley Cup in the history of the NHL as well as those who won it prior to the formation of the NHL, have their name engraved on the Stanley Cup.  If you are lucky enough to see the Stanley Cup in person, you can look at the names engraved on the Cup – Richard, Howe, Orr, Gretzky, Messier, Yzerman – and get a sense of the rich history of the game and the true honor of having one’s name permanently listed on the same trophy as the legends of the game.  This is unique to all sports trophies.

2.  It’s the Oldest Trophy.  The original World Cup was created in 1946, 54 years – more than half a century – after the Stanley Cup was first handed out to hockey champions.  Both the Stanley Cup and World Cup are older than the trophies of the MLB, NBA, and NFL.

3.  You Get to Take It Home with You.  Everybody who wins the Stanley Cup gets one special day to take it home and to celebrate with friends, family, neighbors, and fans.  Players sleep with it, take it water skiing, jump in their swimming pools with it, drink champagne out of it, and let their kids drink chocolate milk and eat ice cream out of it.  New York Rangers management burned the mortgage to Madison Square Garden in it.  Sylvain Lefebvre of the Colorado Avalanche even had his son baptized in the Cup!  

4.  It Has Been Used and Abused.  Championship teams celebrating a little too much have misplaced it over the years, generating legendary stories of the Cup’s misadventures.  In 1906, a Montreal team took it to a photographer for a team photo and left it there.  A few weeks later, NHL officials discovered that the photographer’s mother was using it to plant geraniums.  Mark Messier took it to an automotive repair shop to fix a dent that was the result of rowdy celebration.  There are scores of other legendary stories about the Stanley Cup that no other trophy in sports matches.  It has been all over the world, including a combat zone in Afghanistan!   

5.  Players Get it First.  Most trophies in other sports are presented to the owners, then other executives, then the coaches, and finally the players.  The Stanley Cup, on the other hand, is handed first to the people who truly earn it: the players.  They take turns hoisting it high above their heads before passing it to the coaches, executives, and owners.

KRASA LAW is located at 704-D Forest Avenue, Pacific Grove, and Kyle may be reached at 831-920-0205831-920-0205.               


Friday, June 27, 2014

What the Donald Sterling Episode Teaches Us about Living Trusts

One of the most popular stories in sports over the past few months has been the controversy surrounding Donald Sterling, the (former?) owner of the National Basketball Association’s Los Angeles Clippers. Mr. Sterling was caught on tape making offensive comments. The NBA reacted by assessing a $2.5 Million fine, banning him for life from the league, and initiating a process to strip him of his ownership.

Although the NBA was confident that it had the power to strip Mr. Sterling of his ownership, the league preferred to save a costly and messy public process by hoping to convince Mr. Sterling to acquiesce and agree to sell the team on his own. Despite the fact Mr. Sterling reportedly vowed to never consent to such a sale, suddenly and without warning, it was reported that the team in fact had been sold to former Microsoft CEO Steve Ballmer for $2 Billion. The twist was that Mr. Sterling was not a party to the deal but that his estranged wife, Shelly Sterling, sold the team out from under him. How did that happen?

Evidently the team was owned by the Sterlings’ revocable living trust. A revocable living trust is a common and powerful estate planning tool. Among a multitude of benefits, it provides a mechanism for smooth management of one’s assets in the event of mental incapacity and upon death. Most people recognize the importance of establishing a procedure whereby their assets can be managed by trusted individuals of their choosing in the event of their mental incapacity.

It appears that during a better time in the Sterlings’ marriage, they established a revocable living trust, naming themselves as the initial co-trustees (co-managers) of the trust. Upon the mental incapacity of one spouse, they each trusted sole management authority in the remaining spouse.

One of the key decisions they had to make was how to determine if one spouse lost mental capacity. Some clients elect to choose a “disability panel,” a group of trusted individuals who will make their own private, independent determination of the trust-maker’s mental incapacity. Other clients prefer to instruct that a physician must meet with the trust-maker and then write a letter stating his/her determination that the trust-maker is mentally incapacitated. Other clients prefer that two doctors make the determination so that there is a second, corroborating medical opinion.

With regard to the Sterlings’ living trust, it appears that they chose a method whereby two physicians make the determination of incapacity. Apparently there had been concern for quite some time about Mr. Sterling’s mental capacity. Those close to him felt that he might be suffering from dementia. In fact, one report even suggested that Mr. Sterling’s questionable mental capacity was the reason for the recording of his comments in the first place. The Huffington Post reported that Mr. Sterling made voluntary visits to two neurologists who concluded that he lacked the ability to manage his finances. As a result, under the terms of the trust, Shelly Sterling apparently became the sole trustee of the revocable living trust and had the sole authority to manage the trust’s assets, including selling the Clippers.

Shelly Sterling then struck a deal with Steve Ballmer to sell the team. Her lawyers cited the conclusions of the two neurologists that Mr. Sterling lacked mental capacity to manage his finances for the justification that she could unilaterally enter into an agreement with Mr. Ballmer. Donald Sterling’s attorneys apparently dispute the conclusions of the two neurologists and insist that he still has mental capacity to manage his assets. As a result, he would need to be a party to any transaction involving the sale of the Clippers. The validity of the sale to Mr. Ballmer is still being sorted out by the attorneys and the court and it appears that a key issue will be whether or not Donald Sterling in fact has mental capacity to manage his finances.

This episode raises the question of whether the revocable living trust helped or hurt the situation.

From Shelly Sterling’s perspective, the trust definitely helped the situation. A major asset was under the co-control of somebody who no longer had the mental capacity to manage finances and a very generous, record-setting offer to purchase the team would have been in jeopardy if not for the incapacity provisions of the trust.

From Donald Sterling’s perspective, it’s not quite as clear. While it is true that the trust, combined with the two neurologist’s evaluations, ostensibly allowed his estranged wife to sell the team without his consent, blame can’t really be placed on the trust itself. The trust provided what most would agree is a pretty high standard for determining incapacity: the opinion of two medical doctors. If the trust did not exist, the opinions of the two neurologists would have still existed and Shelly Sterling’s lawyers would have instead initiated conservatorship proceedings.

Perhaps the lesson of this episode from Donald Sterling’s perspective is that he should have updated his trust when circumstances changed. Despite the fact that he became estranged from his wife and they lived at separate residences, he apparently never thought to change his trust to name a third party of his choosing as his successor co-trustee in the event of his mental incapacity instead of keeping the provisions that Shelly would become sole trustee. At least with that change, he would have had somebody with the authority as an equal co-trustee with Shelly who presumably would have advocated his interests.

KRASA LAW is located at 704-D Forest Avenue, Pacific Grove, California, and Kyle may be reached at 831-920-0205.

This article is for general information purposes only.  Reading this article does not establish an attorney / client relationship.  Because the law is so complex and because everybody's situation is different, you should consult with an attorney licensed to practice law in your community before acting upon any of the information contained in this article. 

 


Friday, June 13, 2014

A Proustian Stanley Cup Final

Marcel Proust’s protagonist in his epic work, Remembrances of Things Past, bites into a cake dipped in tea which instantly “reveals” volumes of childhood memories containing the “essence of the past.”  I had a similar experience a few days ago at Staples Center in Los Angeles.  Instead of a delicious treat, the trigger of my “involuntary memory” was watching the New York Rangers in an intense, close Stanley Cup Final game.
 
I will never be as emotionally invested in any sports team as I was in the 1994 New York Rangers.  Although I grew up in the temperate climate of the Monterey Peninsula, before the San Jose Sharks existed, and when there were no local television broadcasts of the sport, I was a hockey fanatic.  My grandfather, Karel A. Krasa, was a prominent hockey player, coach, and manager in pre-WWII Europe and he would tell me stories about playing on outdoor frozen ponds in what is now the Czech Republic.  Since we did not have a local NHL team, I picked the New York Rangers as I had loved the city when I first visited the metropolis as an impressionable 9-year-old boy.
 
At the time, the Rangers had not won the Stanley Cup since 1940 – the longest Cup drought in the NHL.  Most fans attributed the Cup drought to a curse that was placed on the Rangers, either because the team burned the mortgage to the old Madison Square Garden in the bowl of the Stanley Cup, thus desecrating a sacred object, or because Red Dutton, the former owner of the rival New York Americans, was furious that the Rangers essentially froze his team out of the league.  Regardless of the curse’s origin, the Rangers were always taunted on the road with mocking jeers of “1940!”
 
My mother ordered my first hockey sweater (real hockey fans refer to “jerseys” as “sweaters”) from a catalog when I was in 6th Grade.  I wore my red, white, and blue Rangers sweater proudly to Pacific Grove Middle School.  None of my fellow students were hockey fans and most of them had probably never even heard of the New York Rangers.
 
The following year, 1991-1992, the Sharks began their inaugural season and their games were televised.  I remember watching my first Rangers game on television when they played the Sharks at Madison Square Garden in the fall.  Adam Graves won the game for the Rangers with an overtime goal.  In January of that year, I saw the Rangers in person for the first time when they played the Sharks at the Cow Palace in Daly City.

With five-time Stanley Cup champion Mark Messier joining the team as its captain, the Rangers were favored to win the Stanley Cup that year.  They had the best regular season record in the NHL but were eliminated in the second round of the playoffs by the eventual champion Pittsburgh Penguins. 

The next year, their second-best player, Brian Leetch, ironically injured himself while slipping on ice getting out of a taxi cab and they missed the playoffs.  The curse was in full force and effect.

In 1993-1994, the Rangers were hot again.  With a new head coach and a more disciplined system, the Rangers once again finished the regular season with the best record in the NHL.  In the first two rounds of the playoffs, they were unstoppable.  They defeated their cross-town rivals, the New York Islanders in four games, and defeated the Washington Capitals in five games. 

In the third round, they faced trouble against the New Jersey Devils.  Several games went into nail-biting overtimes.  They were down 3 games to 2 with Game 6 in New Jersey.  Facing elimination, Captain Mark Messier guaranteed a Rangers victory, causing the Big Apple media to compare the comment to Joe Namath's Super Bowl III guarantee and Babe Ruth's called shot in the 1932 World Series.  The Rangers were losing 2-0.  Some of my friends called to mock me claiming that the Rangers were going to be eliminated.  Mark Messier ended up scoring a hat trick to lead the Rangers to a 4-2 victory. 

In Game 7, the Rangers were nursing a 1-0 lead when the Devils tied the game with less than 8 seconds left.  That sudden death overtime was one of the most intense games of any sport that I had ever watched.  Each Devils shot was frightening and each Rangers shot was exhilarating.  In double overtime, Stephane Matteau scored to send the Rangers to the Stanley Cup Final.

In the Stanley Cup Final against the Vancouver Canucks, the Rangers were again pushed to a Game 7, after blowing a 3 games to 1 series lead.  They were leading late in the game by only one goal.  With 10 minutes to go in the game, I told myself that the Rangers might really be cursed, that the Canucks might come back, that they might never win the Stanley Cup, but the Rangers "version" of winning the Cup might be to see how close they can get.  Then the Rangers were 5 minutes away!  Then 3 minutes away!  The last minute was torture.  They took face-off after face-off in the Rangers zone.  With less than ten seconds to go in the game, they cleared the puck and players jumped off the bench in celebration.  I thought they had won the Cup but with less than 2 seconds to go, play was stopped on an icing call.  It seemed the anticipation would never end!  Finally, Craig MacTavish took the final face-off and the wait was over!  The Rangers had won the Stanley Cup, ending a 54-year drought and breaking the curse! 

This year the Rangers returned to the Stanley Cup Final for the first time since 1994.  I drove down to Los Angeles to attend Game 2 against the Los Angeles Kings.  I happened to sit with several other Rangers fans and we reminisced about 1994, cheered for every Rangers goal, and consoled each other for every Kings goal.  The game went into double overtime.  I hadn't felt that level of intensity watching a hockey game in 20 years. 

Excitedly watching the Rangers in the Stanley Cup Final this year with fellow Rangers fans instantly brought me back to my 15-year-old self.  Then I thought of my 4-year-old son who has become quite the hockey fanatic, both as a fan and a player, and who has thoroughly enjoyed the Stanley Cup Playoffs this year, especially the Sharks and Rangers games.  The past, present, and future coalesced.

KRASA LAW is located at 704-D Forest Avenue, Pacific Grove, and Kyle may be reached at 831-920-0205.  


Thursday, June 12, 2014

Anatomy of a Trust

The revocable living trust is the most common estate planning instrument.  While trusts accomplish many goals, one basic purpose of a revocable living trust is to solve the problem of title to an asset being held in the name of someone who is unable to act due to mental incapacity or death.  In general, without proper planning, the only way for a third party to gain access to an asset that is titled to a person who is mentally incapacitated or who has died is to seek authority from the Court, either through a conservatorship process (in the case of mental incapacity) or through the probate process (in the case of death).  A properly drafted trust can bypass both a conservatorship and a probate.

Every trust has three distinct roles.  They are as follows:

1.  Grantor

The “Grantor,” sometimes also referred to as a “Settlor” or a “Trustor,” is the “Trust Maker.”  The Grantor creates the trust, decides what is going to happen to the trust’s assets in a variety of scenarios, and then transfers title of his/her assets to the trust. 

2.  Trustee     

The “Trustee” is the “Trust Manager.”  The Trustee has all of the powers over the assets of the trust to invest, sell, purchase, borrow, loan, gift, and spend the trust’s assets in accordance with the terms of the trust. 

3.  Beneficiary

The Trustee uses his/her powers to manage the assets that the Grantor placed into the trust under the terms that the Grantor established for the benefit of the “Beneficiary.” 

Creating a Living Trust

If you were to create a revocable living trust, you would act as the Grantor.  You would establish the trust, decide what is going to happen in a variety of scenarios, and then transfer title of your assets to the trust.

You would also be the Trustee.  You would manage the assets of the trust under the terms of the trust that you created.  You would retain all the powers over the assets that you had before you put them into the trust.

You would also be the beneficiary.  You would manage the assets for your own benefit. 

You therefore initially occupy all three roles of the trust.  With a revocable living trust, you are making a contract with yourself whereby you manage your own assets for your own benefit under terms that you establish.  This is essentially what everybody does with their own assets informally. 

While you are living and have capacity, everything is pretty much the same: you have complete control over your assets and your taxes are the same: you continue to report your income on your 1040 and 540.  The only difference is that title to your assets – with a few exceptions – should be held in your name as trustee of the trust.  As I often tell my clients, your “new last name” for titling purposes is “trustee.” 

While it would be “business as usual” while you are living and have capacity, the trust would enable agents of your choice to gain access to your assets in the event of incapacity or death. 

If you no longer had the mental capacity to manage your finances, your trust would name a “Successor Trustee” who, after demonstrating your incapacity through a method that you established, would have access to your finances.  Although you would no longer be the Trustee of your trust, you would still be the beneficiary and the Trustee would be legally obligated to manage your assets for your benefit.  This solves the problem of assets being held in the name of a person who is incapacitated and avoids a Court conservatorship.

Upon death, your trust would also name “Successor Beneficiaries” who would have an interest in the trust’s assets per the terms that you established.  The Successor Trustee would be obligated to either manage the assets on behalf of the Successor Beneficiaries or to distribute the assets directly to the Successor Beneficiaries and then terminate the trust.  This solves the problem of assets being held in the name of a person who is deceased and avoids a Court probate.

KRASA LAW is located at 704-D Forest Avenue, Pacific Grove, CA, and Kyle can be reached at 831-920-0205.

Disclaimer: This article is for general information only.  Reading this article does not establish an attorney/client relationship.  Because of the complexity of the law, you should consult with a qualified attorney licensed to practice law in your community before acting upon any of the information contained within this article. 


Wednesday, May 21, 2014

The Answer Book

When I first started practicing law, one of my supervisors told me, “If you have a question, chances are the answer is in the Probate Code.”  The California Probate Code is the section of law that controls almost all aspects of estate planning, from the creation and interpretation of trusts to the default inheritance rules when someone dies without an estate plan.  California’s Probate Code has long been held in high esteem for its precise detail and its ability to address almost any issue that might arise in the context of estate planning.  Many other states have used the California Probate Code as a model for the creation and revision of their own Probate Codes. 

Below are some sample provisions that illustrate its comprehensive nature.

1.  Rules of Language Construction and Definitions

As someone who holds a degree in English Literature, I appreciate grammar and vocabulary.  A large section of the California Probate Code is dedicated to providing special grammar rules and definitions of specific terms.

Section 9 of the Probate Code entitled, “Verb Tense Meaning,” states: “The present tense includes the past and future tenses, and the future, the present.”  I never knew it was possible to completely re-write grammar rules!  This is pretty bold for the authors of his section to take this position.  I wonder how an English teacher would react if a student who had weak grammar skills used this disclaimer at the top of an essay.

Section 10 of the Probate Code is even bolder: “The singular number includes the plural, and the plural, the singular.”  Not only do I question the comma placement of this section, but this completely unravels everything I learned in elementary school.

Section 12 of the Probate Code brings us back to reality: ‘“Shall’ is mandatory and ‘may’ is permissive.”  I shall accept that rule of construction. 

Section 45 provides a definition for the word, “instrument”: “a will, trust, deed, or other writing that designates a beneficiary or makes a donative transfer of property.”  Sorry polka fans, accordions are not included in this definition.   

Section 56 states that the word, “person,” includes “an individual, corporation, government or governmental subdivision, or other agency, business trust, estate, trust, partnership, limited liability company, association, or other entity.”  Should this section be re-written to the more succinct, “Corporations are people, my friend”?  

Section 59 defines a “predeceased spouse” as “a person who died before the decedent while married to the decedent.”  I often use the term “predeceased” when discussing estate planning.  For example, I might say, “Have you thought about what should happen if Kelly is predeceased?”  One time a client who is a doctor asked me, “Aren’t we all predeceased?”  He had a point.

Section 74 defines “state” as “any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, and any territory or possession subject to the legislative authority of the United States.”  Contrary to what you learned in school, Washington, D.C. and Puerto Rico are states!    

2.  Rules to Avoid Mischief

The California Probate Code includes many rules intended to protect against would be mischief.  For example, Section 250 states: “A person who feloniously and intentionally kills the decedent is not entitled [to inherit from that person].”  This is often referred to as the “anti-slayer’s rule: you don’t get to inherit from the person you murder.  This makes sense, though most people who plot to murder someone for the purpose of receiving an inheritance don’t think they will get caught!

Not to compare murderers with lawyers, but Section 21380 prohibits the attorney who drafted an estate plan from inheriting from that estate plan unless certain conditions are met.  The genesis of this rule stemmed from a Los Angeles Times report about an estate planning attorney who was named as a beneficiary in most of his clients’ estate plans!  Either he was very well-loved or he was very sneaky.  In any case, the Probate Code now attempts to guard against cases that involve sneakiness on the part of the drafting attorney.

3.  Rules that Keep Up with Science

In my last article, I wrote about the estate planning impact of cryonics which demonstrated how laws must adapt to scientific changes.  Sections 249.5 through 249.8 address “posthumously conceived children.”  The fact that modern science allows children to be conceived after the parent’s death creates scores of new estate planning questions and issues and the California Probate Code is on top of these developments!

The California Probate Code is indeed a comprehensive text and, as many of the above examples illustrate, estate planning can create so many complex issues that a detailed “guidebook” is necessary.  

KRASA LAW  is located at 704-D Forest Avenue, PG, and Kyle may be reached at 831-920-0205.

Disclaimer: This article is for general information only.  Reading this article does not create an attorney/client relationship.  Before acting on any of the information provided in this article, you should consult with a qualified attorney licensed to practice law in your community.             


Friday, May 2, 2014

Captain America's Estate Planning Dilemma

I was never a big comic book fan.  However, when I was fourteen I spent the entire summer in Central Oregon.  In search of entertainment, I discovered Captain America at a local comic book shop.  I declared Captain America to be my favorite comic.  Although at the time there was a Captain America movie, it was a “B-List” movie at best and it was impossible to predict the enormous appeal and box office success that the current Captain America series of movies has become today.  Yes, I’m claiming to have been on the “Captain America bandwagon” before it was “cool.”  Once again, I’m a trendsetter.

As with many subjects, I view Captain America as an adult with a different prism than when I was a teenager.  In particular, the storyline where Captain America heroically crashes the airplane carrying nuclear weapons bound for the United States into the ice, is frozen, and is regenerated seventy years later causes me to think about the unique estate planning dilemmas that Captain America would face.  This might sound like a classic, absurd theoretical comic book debate from an episode of The Big Bang Theory, but there are actually thousands of people who hope to become real life “Captain Americas.”

According to Wikipedia, “cryogenics” refers to the branches of physics and engineering that involve the study of very low temperatures, how to produce them, and how materials behave at those temperatures.  “Cryonics” is the emerging medical technology of “cryopreserving” humans and animals with the intention of future revival, i.e., the attempt to “Captain America” one’s self, if we may use “Captain America” as a verb.  The dispute over Hall of Fame Red Sox slugger Ted Williams’ estate brought a national spotlight to this concept.  As some estate planning attorneys have realized, this relatively new idea could have a profound impact upon estate planning.

Traditionally we take the view that once we die, we no longer need our assets.  We therefore take the time and effort to establish legally recognized plans that will distribute any assets that we might have remaining at the time of our deaths to our loved ones or for the benefit of our favorite charitable causes.  There is often a joke about estate planning that in the ideal world, you would spend your last penny as you take your last breath and therefore wouldn’t need any estate planning!  However, with cryonics, you might need your assets long after you pass away.

First, there are costs necessary to initiate and maintain the cryopreservation process.  Such expenses include medical supplies, chemicals, facilities, electricity, and staffing.  It is necessary that these expenses are paid for years after your death.  Relying on your surviving loved ones to continue to fund these costs long after your death is not a practical solution, especially if future technology will not permit the hope of future revival for decades or even centuries.  At least one organization, ALCOR, has developed a method for financing the cryopreservation process after one’s death.

In the early 1990s, ALCOR consulted numerous estate planning experts to determine if it were possible to create a common trust what would be used to fund the cryopreservation process for cryonics patients long after their deaths.  ALCOR finally found an attorney in Arizona who created the “ALCOR Patient Care Trust.”  The idea is that a person interested in cryopreservation through ALCOR will transfer a specified amount of assets into the Patient Care Trust, either during life or upon death – most commonly through a life insurance policy.  The Patient Care Trust will then use those assets to fund the expenses of the cryopreservation process until the person is revived, presumably years into the future.  Although none of my legal drafting materials feature such a trust, you can read the ALCOR Patient Care Trust on its website, www.alcor.org.  ALCOR claims that it invests the trust assets in such a way as to use the income off of its investments to fund the cryopreservation process. 

Second, although Captain America was financially supported by the government upon his revival, you might not be so lucky.  If you are to be revived decades or centuries into the future, you probably want to make sure that you maintain a nest egg of assets so that you do not wake up to poverty, hunger, and homelessness.  Should your estate plan leave all or a portion of your estate to your future self?  There are various organizations that claim if you invest a portion of your estate in a certain manner, with the magic of compound interest, by the time you are revived you will have more than enough money to support yourself! 

Both of these aforementioned kinds of trusts raise another interesting issue: can a trust last indefinitely?  Under the common law, there is a limit as to how long a trust may last.  This limit is known as the “Rule Against Perpetuities” (“RAP”) and has confused law students for generations.  Some states, such as Alaska, have eliminated the RAP and allow trusts to continue forever.  Other states, such as Arizona, allow exceptions to the RAP under certain conditions.  The ALCOR Patient Care Trust was drafted under Arizona law and was cleverly structured in such a way as to fall within Arizona’s exception to the RAP.  California, on the other hand, does in fact have a RAP and thus would not be the ideal jurisdiction to govern cryonics trusts. 

Whether or not you believe in the merits of cryonics, the topic does demonstrate the impact of science on estate planning and the unique practical and legal challenges that certain medical issues or concepts can create.

KRASA LAW is located at 704-D Forest Avenue, PG, and Kyle may be reached at 831-920-0205.

This article is for general information only.  Reading this article does not create an attorney / client relationship.  Before acting on any of the information presented in this article, you should consult a qualified attorney licensed to practice law in your community.


Friday, April 18, 2014

An “E-Z Legal Form” Turned Out to Be Not so Easy

An article that recently appeared in the ABA Journal described yet another disastrous consequence of a “do-it-yourself” estate plan.  In the Florida Supreme Court case of Basile v. Aldrich, the decedent drafted her own will with the “guidance” of an “E-Z Legal Form,” an online service that allows consumers to draft their own legal documents.  The decedent left several specific items to specified beneficiaries but failed to include a “residuary clause.” 

The purpose of a “residuary clause” is to dictate how any assets that are not specifically identified are to be distributed.  A “residuary clause” is a basic estate planning concept that is fundamental to any will or trust.  It often serves as a “catch all” clause to address any assets that are not specifically identified by the estate planning document. 

In the Aldrich case, the decedent acquired certain assets after she drafted her will but never updated her will to specify to whom those additional assets should be distributed.  Because there was no “residuary clause” to control the distribution of such non-specified assets, the Florida Supreme Court ruled that such assets should be distributed to the decedent’s “intestate heirs,” those persons who would inherit had the decedent not established a will in the first place.  The decedent’s intestate heirs were never mentioned in her will and it was readily apparent that the decedent did not intend for those heirs to inherit from her. 

In the opinion, Florida Supreme Court Justice Barbara Pariente stated:

While I appreciate that there are many individuals in this state who might have difficulty affording a lawyer, this case does remind me of the old adage “penny-wise and pound-foolish.”

I therefore take this opportunity to highlight a cautionary tale of the potential dangers of utilizing pre-printed forms and drafting a will without legal assistance. As this case illustrates, that decision can ultimately result in the frustration of the testator’s intent, in addition to the payment of extensive attorney’s fees—the precise results the testator sought to avoid in the first place.

This story illustrates two common ironies with respect to “do-it-yourself” legal services. 

First, as is noted in the Justice’s comments, it is likely that the decedent was attempting to save legal fees by using the E-Z Legal Form.  However, the poorly drafted will forced her beneficiaries to battle her intestate heirs in the court system, presumably for years.  The will likely resulted in tens of thousands of dollars in legal fees for the decedent’s family.  I am reminded of a sign I once saw in a TV repair shop showing three tiers of fees: “Standard Rate: $40 per hour; “Rush Job: $70 per hour; “You Already Tried to Fix It: $140 per hour.”  I am also reminded of the old slogan for Fram Oil Filters: “You can pay me now, or pay me later.”  In this case, the decedent’s family certainly had to pay their lawyers later, much more than a properly drafted estate plan would have cost.    

Second, in establishing her will, the decedent attempted to override Florida’s intestate rules by giving her assets to individuals who would not inherit from her by operation of law if she did not create an estate plan.  Because her will failed to include a residuary clause, a significant portion of her estate was distributed to her intestate heirs nevertheless.  

It is not clear why the decedent’s will did not include the basic concept of a “residuary clause.”  It could have been that the will form was poorly drafted or it could have been the fact that the decedent failed to select that option, not comprehending the nature of such a clause.  In either case, this story reinforces the notion that complex legal tasks should be performed with the aid of a knowledgeable attorney. 

(Source: ABA Journal,“Estate dispute caused by ‘E-Z Legal Form’ is a ‘cautionary tale,’ says justice,” by Debra Cassens Weiss.)

KRASA LAW is located at 704-D Forest Avenue, PG, and Kyle may be reached at 831-920-0205831-920-0205.

Disclaimer: This article is for general information purposes only.  Reading this article does not create an attorney-client relationship.  Because the law is so complex and everybody’s situation is unique, you should consult with a qualified attorney licensed to practice law in your community before acting upon any of the information contained within this article. 


Monday, April 7, 2014

Stepping Into Your Shoes

The purpose of a financial Power of Attorney is to allow a third party to step into your shoes with regard to the management of your assets.  If you are unable or unwilling to handle certain financial tasks, you might want a legal mechanism to be able to delegate that authority to an agent.  Although the original idea was of limited scope, the concept of a Power of Attorney has expanded into many different renditions that serve a myriad of purposes.      

Special v. General

A “Special” Power of Attorney gives your agent limited authority to only perform certain specified tasks.  For example, if you need to sign a loan document by a certain date but you know that you will be on vacation during that time, you might execute a Special Power of Attorney that only gives your agent the power to sign that specified loan document on your behalf.  The Special Power of Attorney will not give your agent any other authority over your financial affairs.

A “General” Power of Attorney gives your agent expansive authority to perform numerous or all financial tasks on your behalf.  Many common General Power of Attorney documents use vague broad terms such as “Real Estate Powers” and “Banking Powers.”  It is increasingly important to specifically spell-out what you mean by such broad terms.  For example, does “Real Estate Powers” include the power to refinance?  Does “Banking Powers” include the ability to open or close a safe deposit box?  It is better to flesh out such powers in detail to make sure that financial institutions and other third parties will be comfortable in giving access to your agent to carry out a wide array of tasks on your behalf.

Regular v. Durable

Historically, the concept of a Power of Attorney was to give an agent the authority to act essentially as your clone: a person who can pretend to be you.  The original concept was that if you were to ever lose the mental capacity to make financial decisions, the Power of Attorney would necessarily cease to exist.  The original thinking was that you would not want someone to be able to act on your behalf if you did not have the ability to monitor what your agent was doing and if you did not have the ability to revoke the power should you change your mind.

However, as the Power of Attorney concept developed, it became clear that there is a benefit to allowing somebody to act on your behalf should you become mentally incapacitated.  In fact, this might be the most crucial time to give an agent the authority to manage your financial assets, otherwise your bank accounts and other assets would “freeze” and would be very difficult for your loved ones to access.  The concept of a Power of Attorney that continues to be effective after your incapacity is referred to as a “Durable” Power of Attorney.     

Immediate v. Springing

A Power of Attorney that gives your agent the authority to manage your assets as soon as you sign the document is referred to as an “Immediate” Power of Attorney.  However, you might decide that you like the idea of allowing an agent to act on your behalf if you become incapacitated, but you do not have the need or inclination to allow the agent to have authority over your financial assets right now, when you still have capacity. 

A Power of Attorney that only becomes effective upon your incapacity is known as a “Springing” Power of Attorney.  The agent’s authority “springs” into action upon your loss of capacity.  Unless and until you lose capacity, your agent has no authority over your assets.  A good Springing Power of Attorney should outline a specific procedure for demonstrating your incapacity such as obtaining a letter from your attending physician that states that you do not have the mental ability to manage your financial affairs.    

A “Hybrid” Power of Attorney will start off as a Springing Power of Attorney, but will allow you to sign an additional page that converts the Springing Power of Attorney into an Immediate Power of Attorney.  This hybrid option allows you to hedge your bets: right now you might not be comfortable in giving your agent immediate authority to act, but in the future, upon getting older or ill, for example, you might change your mind and decide to give your agent immediate authority to act on your behalf.  The idea behind the Hybrid Power of Attorney is to give you an additional option. 

Conclusion

Many of these types of Power of Attorney concepts are combined.  For example, you might execute a Special Immediate Power of attorney if you want to give someone a (1) specific power (2) to act immediately but only (3) during your capacity.  Or you might want to execute a General Durable Springing Power of Attorney if you want your agent to have (1) expansive powers (2) that endure after your lose capacity and that (3) only give your agent the authority to act upon your incapacity. 

Although Power of Attorney documents can be quite helpful, it is often more efficient if you bestow such powers upon your agents through a Revocable Living Trust.  If you have an asset that is titled to a Revocable Living Trust and you want to give an agent immediate authority over such an asset, you might need to amend your Trust in addition to executing a Power of Attorney.

A Health Care Power of Attorney, which is often part of an Advance Health Care Directive, gives an agent the authority to make health care decisions on your behalf.  This is a different concept than a financial Power of Attorney and requires a separate document. 

A qualified attorney can help you navigate these various options for appointing an agent to step into your shoes.
 
KRASA LAW is located at 704-D Forest Avenue, PG, and Kyle can be reached at 831-920-0205831-920-0205.
This article is intended for general information only. 

Reading this article does not create an attorney-client relationship.  You should consult an attorney licensed to practice law in your community before acting upon any of the information contained within this article.  

Archived Posts

2018
2017
2016
2015
2014
2013
2012
2011
2010
2009


KRASA LAW assists clients with Estate Planning, Elder Law, Pet Trusts, Asset Protection, Special Needs Planning and Probate / Estate Administration in Pacific Grove, CA(93950), Monterey (93944, 93940, 93943, 93942), Salinas (93901, 93905, 93906, 93907), Hollister (95023,95023) Pebble Beach (93953), Carmel By The Sea (93921), Seaside (93955) and Carmel (93923, 93922) in Monterey County and San Benito California.

Please read our disclaimer prior to using any information on this website



© 2018 KRASA LAW, Inc. | Disclaimer
704-D Forest Avenue, Pacific Grove, CA 93950
| Phone: 831-920-0205

Estate Planning | Probate / Estate Administration | Asset Protection | Elder Law | Special Needs Planning | Pet Trusts | Advanced Estate Planning | Testimonials | Kyle’s Famous Legal Lessons | About The Firm | LegalVault | Request Kyle as a Speaker

Attorney Website Design by
Zola Creative