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The KRASA LAW, Inc. Estate Planning Blog

Wednesday, January 6, 2016

Contingency Planning


Every January, I travel from the moderate climate of the Monterey Peninsula to the frozen lakes of Minnesota to participate in one of the largest pond hockey tournaments in the country.  While most "snowbirds" are escaping the winter, I'm gleefully jumping into it.

As a hockey fan growing up on the Monterey Peninsula, it is a very special treat to experience the sport "as nature intended."  The tournament is held on a large lake where over 2,000 like-minded participants make the annual pilgrimage for a long weekend of fun and enthusiasm in the cold. It's one of the most epic experiences of the year and something we look forward to as soon as the previous year's tournament is over and we're heading home.

When I anticipate an experience like the pond hockey tournament, I often worry about whether something will go wrong.  What if I get sick or injured and that causes me to miss the five days I look forward to the whole year?  I always make sure to get my flu shot well in advance and I take extra precaution in the weeks leading up to the annual event.

There is one aspect that is not under anybody's control: the weather.  It is crucial that we thread that needle between unbearable below-zero temperatures and an unseasonable warm spell that melts the ice.  In the past years, I had always been lucky.  This year, however, is a different story.  With less than a month until the tournament, the organizers made the decision to postpone the tournament by a few weeks due to the fact that the lake has not fully frozen over yet. 

Our team already made travel, lodging, and vacation-time arrangements and we could not adjust to the new schedule.  At the same time, there is no guarantee that the lake will be frozen by the rescheduled dates.  We were collectively bummed out that we won't get to experience the joy of the Land of 10,000 Frozen Hockey Ponds for at least another year.  However, everybody took it in stride.  We understand that nobody has any control over the weather and we need to make the best of it. 

I compared this disappointing experience to a star player being injured and out for a season.  While it is a heart-break to miss an entire year, once the player is back on the team the next season, the missed games will seem like a blip on the screen.  With any luck, in January of 2017 we will be back on the frozen Minnesota pond, trying to prevent hypothermia from setting in, and happily playing the sport that we love so much in an environment that Californians don't often have the opportunity to enjoy.

As I discussed with my teammates, this is the way it goes sometimes.  Life is messy and it does not always go according to plan.  We all understand this and, after taking some time to process the change, we were prepared to move forward with amended plans.

Having a back-up plan is critical.  When it comes to estate planning, we often only think about scenarios on the surface, never fully contemplating what we would like to happen if the ideas that we have in our minds cannot work out due to an unforeseen change of circumstances.  A comprehensive plan should anticipate reasonably foreseeable contingencies with alternate plans ready to be triggered should the need arise.  In establishing a new estate plan or reviewing an existing plan, take the time to consider a "Plan B" and a "Plan C" in addition to your "Plan A."  Sometimes the backup plans end up being critical and more valuable than the original plan.

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

Disclaimer: This article is for general information only.  Reading this article does not establish an attorney-client relationship.  Before acting on any of the information presented in this article, you should consult a competent attorney who is licensed to practice law in your community. 

 

 


Friday, December 11, 2015

Full Disclosure


A trust is a relationship of three parties: (1) the Grantor, also known as the “Trust Maker,” who designs, implements, and funds the trust; (2) the Trustee, also known as the “Trust Manager,” who manages the assets of the trust for the benefit of the Beneficiary in accordance with the terms of the trust; and (3) the Beneficiary who benefits from the assets of the trust.

In a Revocable Living Trust where all three parties are the same person or the same married couple, there is no concern as to whether the Trustee is properly managing the assets for the benefit of the Beneficiary in accordance with the Grantor’s instructions.  However, when the Trustee is different from the Grantor and the Beneficiary, it is of paramount importance that there is full disclosure as to how the Trustee is managing the assets to make sure that the Trustee is acting in accordance with the terms of the trust and that the Beneficiary’s rights to the trust’s assets are being enforced.

The California Probate Code imposes three key duties of disclosure on a Trustee who is managing a trust for a third-party Beneficiary: (1) the duty to account; (2) the duty to provide reports; and (3) the duty to keep beneficiaries informed.

(1) Duty to Account (California Probate Code § 16062)

The Trustee has an affirmative duty to account to the current Beneficiaries of a trust at least annually and upon the occurrence of specified events.  The accounting under this Code Section must contain specific elements as outlined under California Probate Code § 16063.  The Trustee is responsible for providing the Beneficiary with this specific accounting even if the Beneficiary does not request it.  As such, the Trustee should either provide the accounting automatically or request that the Beneficiary sign a Waiver of Accounting.

The Trustee under this Code Section is not required to provide an accounting to “remainder” Beneficiaries, i.e., Beneficiaries who have a future interest in the trust’s assets after the “current” Beneficiaries pass away.  

However, the other two duties of disclosure described below often apply to remainder Beneficiaries as well as current Beneficiaries and the Trustee might be required to provide essentially the same information to remainder Beneficiaries under those other duties.  

Furthermore, if the current Beneficiary of a trust is incapacitated, it is often recommended that the trustee provide an accounting to the remainder Beneficiaries as well in order to guard against a later accusation of mismanagement of trust funds.  

(2)  Duty to Report (California Probate Code § 16061)   

A Beneficiary may make a “reasonable request” for information “relating to the administration of the trust relevant to the beneficiary’s interest.”  Under this Code Section, the Trustee’s duty of disclosure is not limited to current Beneficiaries and thus even future remainder Beneficiaries can require the disclosure of certain information.  Exactly what kind of information the Beneficiary is entitled to under this Code Section is an open question.  However, courts have indicated that in some circumstances, the information required to be disclosed under this Code Section could be identical to, or even broader than, the information required to be disclosed under the Duty to Account.

It is important to note that unlike the Duty to Account, the Duty to Report is not an affirmative duty and the Trustee is only required to Report upon a “reasonable request” by a Beneficiary.  

(3)  Duty to Keep Beneficiaries Reasonably Informed (California Probate Code § 16060)

The Trustee has an affirmative duty to keep Beneficiaries “reasonably informed of the trust and its administration.”  Trustees must communicate "information that is reasonably necessary to enable the beneficiary to enforce the beneficiary's rights under the trust or to prevent or redress a breach of trust.”  

This Code Section applies to both current and remainder Beneficiaries.  Once again, it is an open question as to exactly what information is required to be disclosed under this Code Section, but it is widely accepted that providing an accounting in accordance with the Duty to Account will satisfy this responsibility.

Conclusion

Trustees should be mindful of the fact that their actions in managing the assets of a trust might be held under a microscope.  They should operate imagining that a judge is looking over their shoulders reviewing every investment, expense, and distribution.  Every action should be addressed in a reasonable and fair manner and should be well documented.

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

Disclaimer: This article is for general information only.  Reading this article does not establish an attorney-client relationship.  Before taking action on any of the information presented in this article, you should consult a qualified attorney who is licensed to practice law in your community.


Friday, October 30, 2015

How to Double a Popular Tax Break

Although the real estate market has fluctuated over the past few years, over time real estate has appreciated significantly.  The median price of a home in California in 1968 was less than $25,000.  Today, the median price of a home in California is over $450,000.  Typically, if you were to sell a house that has appreciated significantly, you would likely owe considerable capital gains tax.  In general, capital gains tax is a tax on the difference between the original purchase price (the “basis”) and the sales price on real property and securities.  There are some exceptions to the general rule such as the cost of improvements increasing the basis and a $250,000 exclusion from capital gains tax on the sale of a principal residence pursuant to Section 121 of the Internal Revenue Code.  Nevertheless, if you bought a home in California in 1968 and sold it today, you would likely owe significant capital gains tax.

Carry-Over Basis
As indicated above, if you bought a home in 1968 for $25,000 and sold it today for $450,000, not taking into account adjustments to basis for home improvement and the Section 121 exclusion, you would owe capital gains tax on the $425,000 difference.  Instead of selling the house, if you were to give away a house that you purchased for $25,000 when it was worth $450,000, your $25,000 basis would “carry-over” to the recipient of your gift.  If the recipient sold the house for $450,000, the recipient would owe capital gains tax on the $425,000 difference.  

Step-Up in Basis
Suppose instead of gifting the house away during your lifetime, you left the house to your beneficiary upon your death through your will or your trust.  Even though your basis in the house was $25,000, your beneficiary would not inherit your basis.  Instead, your beneficiary’s basis would be adjusted to the fair market value on the date of death.  If the house were worth $450,000 at the time of your death, your beneficiary’s basis would be adjusted to $450,000.  If your beneficiary sold the house for $450,000, your beneficiary would not have to pay any capital gains tax at all.  If your beneficiary waited 10 years to sell the house and the value had appreciated to $600,000, your beneficiary would only have to pay capital gains tax on the $150,000 of appreciation between the value on your date of death and the sales price.  

This adjustment to a beneficiary’s basis after a transfer upon death to the fair market value as of the date of the transferor’s death is commonly referred to as a “step-up” in basis.  It should be noted that the basis adjustment could be a “step-down” in basis if the real property were worth less at the date of death than the original purchase price.  However, with regard to real property, particularly in California, over a long period of time, it is generally likely that real estate values will increase.  

Half Step-Up in Basis
Suppose that you own the house with your spouse equally as joint tenants.  If your spouse pre-deceases you, your spouse’s half of the house will get a “step-up” in basis as to the fair market value on the date of his/her death.  However, your half of the house will not get a “step-up” in basis because you are still living.  Therefore, if you were to sell the house, you would be able to eliminate or substantially reduce the capital gains tax on your spouse’s half of the house, but would have to recognize significant gain on your half of the house.

This concept whereby the deceased spouse’s half of the house gets a “step-up” in basis whereas the surviving spouse’s half does not get a “step-up” in basis is often referred to has a “half step-up” or a “single step-up” in basis.  Although the surviving spouse’s capital gains tax would be reduced to an extent, the surviving spouse still has to recognize capital gains tax on his/her half of the house.

Full Step-Up in Basis
Suppose that you own the house with your spouse equally, but instead of holding it as “joint tenants,” you hold it as “community property.”  California is one of ten states that recognize community property as a method for holding title to property between spouses.  

If the house is held as “community property” and your spouse pre-deceases you, just as in the example above, your spouse’s half of the house will get a “step-up” in basis as to the fair market value on the date of his/her death.  However, this time, your half will also get a “step-up” in basis as to the fair market value as of your spouse’s date of death.  If you decide to sell the house, you would be able to eliminate or dramatically reduce the capital gains tax on the entire house.

This concept is often referred to as a “full step-up” or a “double step-up” in basis. Knowing these rules, spouses in community property states will often change title from joint tenants or from an alternate form of ownership to community property in order to double this tax break, potentially saving tens of thousands of dollars.  It is important to note that property may be held as community property even though it is placed in a living trust.

As with most aspects of the law, issues are not always as simple as they appear to be on the surface.  All forms of joint ownership have their pros and cons and you should consult a qualified advisor before changing the form of ownership on property.

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

Disclaimer: This article is for general information only.  Reading this article does not establish an attorney-client relationship.  Before acting on any of the information presented in this article, you should consult a competent attorney who is licensed to practice law in your community.     


Friday, October 16, 2015

Tattoos - More Permanent Than Ever!

Estate planning invariably involves dealing with assets.  Some assets are common and relatively easy to handle: a residence; checking and savings accounts; and stocks, bonds, and mutual funds.  Other assets create their own unique complexities.  CEB, a publication of practice manuals for attorneys, has a volume entitled, Estate Planning for Special Assets.  The volume covers family businesses; vineyards, farms, and ranches; family vacation homes; out-of-state real property; pets; art and other collectibles; copyrights, patents, and trademarks; restricted securities; compensatory stock options; and even the disposition of a law practice.  

When helping my clients fund their assets to their trusts, in addition to titling specific assets to their trusts, I have them sign an “Assignment of Personal Property” that is quite broad and includes the following text:

“My tangible personal property includes all of my jewelry, clothing, household furniture, furnishings and fixtures, chinaware, silver, photographs, works of art, books, boats, automobiles, sporting goods, electronic equipment, musical instruments, artifacts relating to my hobbies, and all other tangible articles of personal property that I now own or later acquire, regardless of how they are acquired or the record title in which they are held.”

As comprehensive as these examples are, there is one “asset” I never considered in over a decade of practicing estate planning: tattoos.  I always knew that one had to carefully consider getting tattoos since they are permanent, but a new organization has taken the permanence of tattoos to a new level.

The National Association for the Preservation of Skin Art (“NAPSA”), which launched earlier this year, features a “tattoo preservation” program which allows you to preserve and then transfer your tattoos in the form of collectible art to your loved ones after your death.  NAPSA’s website provides a 9-step procedure for the preservation and transfer of your tattoos upon death as follows:

Step One: If you do not want to be defined by others, declare who you are today by registering for a NAPSA membership!

Step Two: Visit your profile to complete the straightforward online forms to ensure the preservation of your registered tattoo and that your Final Wish Fulfillment Benefit is activated.

Step Three: Share your plans for the preservation of your tattoos with your friends, family, and loved ones - show off your Membership Certificate! For those who you will entrust with your preserved art, download or order a Beneficiary Certificate.

Step Four: Enjoy all of your NAPSA benefits and interacting with our groundbreaking community of like-minded tattoo collectors, enthusiasts, and artists. Renew your annual NAPSA membership to ensure that your benefits remain active.

Step Five: Upon your passing, your Final Wish Beneficiary begins the quick and easy process to give NAPSA notice within 18 hours.

Step Six: Soon after the claims process begins, your Beneficiary is electronically provided detailed information covering the recovery and preservation process. A preservation kit, containing instructions and all the necessary equipment to recover, temporarily preserve, and safely ship your tattoo to NAPSA, is mailed overnight to the recovery provider (In most cases, your funeral home).

Step Seven: With the advice and support of the Association, your Beneficiary confirms that the recovery of your tattoo is undertaken in accordance with the instructions and with the equipment provided in our kit within 60 hours of your passing.

Step Eight: Upon NAPSA’s receipt of your art for preservation, the Final Wish Fulfillment Benefit will be mailed to your Final Wish Beneficiary.

Step Nine: In the following three to six months, your designated beneficiary will receive your beautifully preserved art!”

NAPSA’s website even features a “gallery” of preserved tattoos.  Each piece is nicely framed and tastefully presented.  
There is no doubt that NAPSA addresses a niche interest that will have a unique, yet strong, following.  

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

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


Wednesday, October 14, 2015

A Question of Capacity

We take for granted the fact that we have the basic civil right to make personal decisions for ourselves.  We can decide where we are going to live, with whom we are going to associate, what we are going to eat, who will be our health care professionals, what kind of medication we will take, and what kinds of medical procedures or treatments we will undergo.  

We also take for granted the fact that we have the basic civil right to make financial decisions for ourselves.  We can decide how we are going to make our money, how we are going to invest our money, how we are going to spend our money, whether we will make gifts to loved ones, and whether and to what extent we will make donations to support our favorite charitable causes or express our political beliefs.  

Estate planning is designed to ensure that these wishes will be carried out by trusted individuals of our choosing when we are no longer in control due to mental incapacity or death.  Although we know that it is important to execute a comprehensive and detailed estate plan, we often tell ourselves that we have plenty of time to accomplish that task.  Of course, if we wait too long, it might become too late.  Not only must we make such arrangements before death, we must also take care to make sure that we get our wishes in order before we lack the mental capacity to execute an estate plan.

An estate planning attorney should be considerate of capacity issues when a client makes an estate plan.  The California Probate Code contains the “Due Process in Competence Determinations Act” which is designed to provide a legal framework for determining whether a person has the mental capacity enter into a contract, make a gift, make medical decisions, get married, and execute wills or trusts.  

While Section 810 of the California Probate Code states that there is a rebuttable presumption that all persons “have the capacity to make decisions and to be responsible for their acts or decisions,” Section 811 of the California Probate Code provides several factors as evidence of incapacity.  These factors include:

“(1) Alertness and attention, including, but not limited to, the following:

(A) Level of arousal or consciousness.

(B) Orientation to time, place, person, and situation.

(C) Ability to attend and concentrate.

(2) Information processing, including, but not limited to, the following:

(A) Short- and long-term memory, including immediate recall.

(B) Ability to understand or communicate with others, either verbally or otherwise.

(C) Recognition of familiar objects and familiar persons.

(D) Ability to understand and appreciate quantities.

(E) Ability to reason using abstract concepts.

(F) Ability to plan, organize, and carry out actions in one’s own rational self-interest.

(G) Ability to reason logically.

(3) Thought processes. Deficits in these functions may be demonstrated by the presence of the following:

(A) Severely disorganized thinking.

(B) Hallucinations.

(C) Delusions.

(D) Uncontrollable, repetitive, or intrusive thoughts.

(4) Ability to modulate mood and affect. Deficits in this ability may be demonstrated by the presence of a pervasive and persistent or recurrent state of euphoria, anger, anxiety, fear, panic, depression, hopelessness or despair, helplessness, apathy or indifference, that is inappropriate in degree to the individual’s circumstances.”

The California Probate Code has additional sections detailing elements of capacity in general and a specific test as to whether a person has the power to make medical decisions.  

Capacity is often an important issue with respect to estate planning.  While it is important that you have an opportunity to execute a legally binding plan to carry out your wishes, it is equally important that there is reasonable certainty that you are able to think clearly about your wishes and understand the significant risks, benefits, reasonable alternatives, and the probable consequences to you and to those affected by your plan.

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

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


Monday, September 21, 2015

How to Expand your FDIC Insurance Coverage

Most people are aware that the Federal Deposit Insurance Corporation (“FDIC”) provides deposit insurance that guarantees the safety of accounts in certain member banks up to $250,000.  However, most people are unaware that accounts held in the name of a revocable living trust can increase the amount of FDIC insurance coverage depending upon whether the trust is for a single person or a married couple and depending upon the number of trust beneficiaries.

From the FDIC Website:

Deposit insurance coverage for revocable trust accounts is provided to the owner of the trust. However, the amount of coverage is based on the number of beneficiaries named in the trust and, in some cases, the interests allocated to those beneficiaries, up to the insurance limit. A trust beneficiary can be an individual (regardless of the relationship to the owner), a charity, or a non-profit organization (as defined by the IRS).
Revocable trust coverage is based on all revocable trust deposits held by the same owner at the same bank, whether formal or informal. If a revocable trust account has more than one owner, each owner's coverage is calculated separately, using the following rules:

•    Revocable Trust Deposits with Five or Fewer Beneficiaries — Each owner's share of revocable trust deposits is insured up to $250,000 for each unique eligible beneficiary named or identified in the revocable trust (i.e., $250,000 times the number of different beneficiaries), regardless of actual interest provided to beneficiaries.

•    Revocable Trust Deposits with Six or More Beneficiaries — Each owner's share of revocable trust deposits is insured for the greater of either (1) coverage based on each unique eligible beneficiary's actual interest in the revocable trust deposits, with no beneficiary's interest to be insured for more than $250,000, or (2) $1,250,000.

The deposit coverage rules can be confusing, even for seasoned attorneys.  To help determine the amount of FDIC coverage in different situations, the FDIC website features a calculator known as the Electronic Deposit Insurance Estimator (“EDIE”).  It is helpful to use the EDIE to run through various scenarios to better understand the coverage as it relates to revocable living trusts.

For example, according to the EDIE, if Gwen, a single person, has a revocable living trust and has only named one beneficiary of her trust, the total amount covered under FDIC is $250,000 for her trust account.  

However, if Gwen has three individuals as beneficiaries of her trust, then EDIE calculates her total coverage for the one trust account to be $750,000 ($250,000 worth of coverage for each beneficiary of the trust).

Changing the facts a bit further, if Gwen gets married and establishes a married joint revocable living trust with her husband and names three individuals as beneficiaries of her trust, according to the EDIE, the total amount insured increases to $1,500,000 (Gwen gets $250,000 coverage for each of the trust’s three beneficiaries and her husband also gets $250,000 for each of the trust’s three beneficiaries).  

Of course, with trusts and beneficiaries, it could be a bit of a moving target.  For example, if Gwen and her husband establish a revocable living trust that names three individuals as beneficiaries, the coverage at that time is $1,500,000 as described above.  However, if one of the three beneficiaries dies before Gwen and her husband and the terms of the trust provide that the trust will therefore be divided among the remaining two beneficiaries, then the coverage drops to $1,000,000 (both Gwen’s coverage and her husband’s coverage for the third beneficiary who is now deceased are eliminated).  

The FDIC also provides expanded coverage for other types of accounts such as joint accounts, “payment on death” accounts, and retirement accounts.  Fully understanding the extent and limits of your coverage is prudent.  If you are unable to determine your coverage using the EDIE, the FDIC encourages you to contact them directly to run through different scenarios.

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

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


Friday, September 4, 2015

Have You Planned Your Digital Estate?

One of the main problems competent and thorough estate planning resolves is the issue of access to assets that are titled in the name of someone who is unable to act due to incapacity or death.  A detailed estate plan will often include a revocable living trust, a property power of attorney, and a pour-over will that will give specific permission to an individual or an institution to manage a person’s finances under such circumstances without the need to involve the courts.  

Even without a thorough estate plan, loved ones of an incapacitated or deceased person will eventually be able to access assets after going through the court procedure of a conservatorship or a probate.  Although it is far preferable to avoid these court procedures due to their additional delay, cost, and administrative hurdles, at least there is a mechanism recognized by law that allows access to an incapacitated or deceased person’s assets in order to move forward with the administration or settlement of an estate.  

The need to access an incapacitated or deceased person’s estate has long been recognized by the law.  However, a California Assembly Bill that was proposed earlier this year might dramatically change this practice with respect to digital assets.

California Assembly Bill 691 (“AB 691”), also known as the “Privacy Expectation Afterlife and Choices Act (“PEAC”) would require that a person during his/her lifetime specifically express the consent to the disclosure of digital assets such as email, social media accounts, financial accounts, blogs, listservs, online stores and auction sites, online accounts, and cloud storage accounts that might house sentimental pictures and documents.

Access to digital assets can be important.  For example, the San Jose Mercury News recently ran an article detailing a father’s repeated attempts to access his deceased daughter’s electronic files that were kept online in a cloud storage service.  His daughter was a novelist and she had many unfinished manuscripts that he wanted to access for sentimental reasons and to preserve her legacy but constantly ran into road blocks.  (See “Who owns your digital afterlife?” by Matt O’Brien, posted August 28, 2015.)  

Providers of digital services are often hesitant to grant access to such accounts as they express a worry about the privacy of their users and, from a practical standpoint, probably prefer not to be “bothered” with constant requests from estates seeking access to such information.  The proposed legislation is designed to balance these issues.  

The summary of the proposed legislation reads in part: “The bill would additionally permit a provider to disclose contents of communications or stored contents if an executor, administrator, or trustee gives the provider documents and information, as specified, including a will or trust showing the decedent’s express consent for disclosure of the contents.”  

While it was always important to execute an updated and detailed estate plan to allow for efficient administration of one’s estate in the event of incapacity or death, with respect to digital assets, this proposed legislation will make it almost mandatory.  Some digital providers such as Facebook allow for users to express their intent regarding how to handle their digital assets after death through selecting certain settings.  However, it is also important to specifically address the issue in an estate plan.

A detailed and updated estate plan will include specific language in both the revocable living trust and the property power of attorney that grants access to digital assets.  Furthermore, there should be a specific assignment transferring digital assets to the living trust.  Under the current legislation, this will give executors, administrators, and trustees the best chance to access what could be very meaningful treasured memories.

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

Disclaimer: This article is for general information only.  Reading this article does not establish an attorney-client relationship.  Before acting on any of the information presented in this article, you should consult a competent attorney who is licensed to practice law in your community.  


Wednesday, September 2, 2015

Milestones

My five-year old son is quite the sports fanatic.  He has been ice skating since he was two years old and currently plays in an ice hockey league.  He has played soccer for almost as long.  He enjoys tennis with my wife and my father on occasion.  We play touch football at the beach as a family.  He enjoys playing baseball and basketball in the backyard and I’ve even introduced him to lacrosse.   He was a natural at learning how to ski and he has a very good golf swing.  We’ve gone on hikes together and he’s even jogged with my father who is a marathon runner.  I even plan on doing a curling clinic with him at some point!  

The one major physical activity that was missing from his sports repertoire was riding a bicycle without training wheels.  It’s not that he wasn’t capable of it, but rather my wife and I were so busy with so many other activities that we never really focused on teaching him how to ride a bike other than occasional trips to the PG recreation trail with his training wheels.  It suddenly dawned on my wife and me that our super athlete needs to know how to ride a bicycle.

I realized that this was a major milestone.  I remember the day my father took the training wheels off of my bicycle.  He ran behind the bike and pushed me and then he’d let go.  I’d glide for several feet and then I’d fall.  We repeated this process over and over again until one time I felt that he was pushing me for a long time and I told him: “Stop pushing!”  He responded: “I’m not!”  I looked over my shoulder and he was far behind me.  I was riding my bike!  It felt as if I were flying!  

I don’t remember how long it took me to learn how to ride the bike, but I figured this milestone for my son would require a great degree of preparation and trial and error.  I did some research online about how to teach a child to ride a bike.  We were finally ready for the big day.

We took our son to the PG Middle School track.  He rode around a few times on his training wheels and then we ceremoniously removed them.  My wife and I ran beside him.  Less than 5 minutes later, he had it all figured out.  While I was running beside him to catch him in case he fell (and running out of breath in the process), he said to me: “Dada, go far away – I don’t need your help anymore!”  Although I was very proud of him for picking it up so quickly, part of me was a little disappointed that such an epic milestone was achieved without much effort.  

As parents, our children reach various milestones all the time.  At each stage, we launch them a little further into independence and eventually adulthood.  Estate planning often represents the final launch – the ultimate transition from one generation to the next.  It is the culmination of a lifetime of planning, teaching, preparing, and loving our children.  

KRASA LAW, Inc. is located at 704-D Forest Avenue, Pacific Grove, California 93950 and Kyle may be reached at 831-920-0205.

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


Friday, August 7, 2015

The Legacy of Place

My wife, son, and I are fortunate enough to live in the same house my grandparents owned since the 1950’s.  I was very close to my grandparents and spent a lot of time in the house in my childhood.  Each part of the house and its yard is filled with numerous memories and stories.

Because my grandparents’ house was closer to my school, my mother would often bring me to their house in the morning and I would walk or ride my bike through the woods to school, first to Forest Grove Elementary School and then to Pacific Grove Middle School.

Recently my son started kindergarten at Forest Grove Elementary School.  For his first day of school, my wife, son, and I all walked together along the same path through the woods.  It is very special to me that my son is literally following in my footsteps.  

Forest Grove Elementary School is another sacred place in my childhood.  Three levels of playgrounds surrounded by the forest, inspiring teachers, and great friends created wonderful experiences that defined my adolescence.  I am excited for my son to have similar experiences that he will treasure for his entire life.

Place is important to the human experience.  Wuthering Heights, The Mill on the Floss, and Howards End all center upon the notion that a place is often a character in the stories of our lives and can have as much of an impact on our lives as other persons.  

I feel a sense of wonderment when I visit Lambeau Field in Green Bay.  Standing at the end zone on the Lambeau Field tour, I think about the fact that “right there” is where Bart Starr ran the football in for a quarterback sneak to win the 1967 NFL Championship, commonly referred to as the “Ice Bowl.”  Even though the game took place more than a decade before I was born, I have seen the video clip of that famous play enough times to almost convince myself that I attended the game.  

I realize that the sod, grass, and chalk lines are not the same as on the famous day in 1967.  However, I tell myself that I’m standing near the same geographical coordinates as where Bart Starr completed one of the most famous plays in Packer history.  That concept means something to me.

I have yet to visit the Lake District in England but when I eventually make that journey, I’m going to try to find those daffodils “fluttering and dancing in the breeze” by that lake that William Wordsworth writes about in I Wandered Lonely as a Cloud.  I would love to make an expedition in the Catskills Mountains of New York in search of the cantilevered rock by the waterfall as depicted in my favorite painting, Asher B. Durand’s Kindred Spirits.  

Estate planning is, in the broad sense, about passing a legacy to the next generation.  For many people, that legacy often includes sacred places such as the family residence, the family vacation house, a ballpark, a favorite travel destination, or simply a place to watch the sunset.  In some cases, like in the example of my grandparents’ house, the passing of one sacred place (their home) can enable the passing of another sacred place (the local elementary school).  

With thoughtful estate planning, not only can certain places be passed to future generations, but the sacred sense of place can also be admired and enjoyed by loved ones for years to come.

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

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


Friday, July 24, 2015

X Marks the Spot

Popstar Taylor Swift – who is always on top of what is hip and trendy – was recently quoted as saying that young fans never request her to sign autographs.  Instead, her fans request that she take selfies with them.  In this modern age where most people have cameras built into their cellphones and thus are ready to snap a picture at any time, it makes sense that an autograph collection is now as quaint as a typewriter or a record player.  With respect to legal documents, however, the signed name is still paramount.

In a typical estate planning portfolio, I require my clients to sign their names to various documents 15 to 20 times!  Each type of document requires its own set of execution procedures.  Some documents, such as the wills, are witnessed by two disinterested adults.  Other documents, such as trusts, powers of attorney, and deeds, are typically notarized.  If a document is notarized, the client must also sign the corresponding page in my notary book.

By the time my clients have completed all of their signatures, I joke that now they know how celebrities feel.  If Ms. Swift is correct (and when has she ever not been correct?), that joke won’t make sense in the future.  

Often, my clients’ hands get so tired from signing their name so often that they comment their signatures looked very different at the beginning of our signing session than at the end when they no longer have the stamina to write neatly.  

Sometimes, I will have older clients who physically struggle to sign their names legibly.  One time, I felt so bad about asking my client to sign so many documents that I started to wonder if there were a few documents that were less important and that we could somehow skip.  As I went through my mental checklist of each estate planning document and whether or not it was really necessary, I reminded myself of the purpose of each document.  I realized that there was nothing superfluous and my client soldiered on.  A few months later, she had a health problem and she needed several of the documents that she had signed.  Fortunately, neither of us folded under the pressure during the signing session and she had her documents properly in place.      

Occasionally, clients might be physically challenged to the point where they are unable to sign their names.  The question arises as to whether they are able to write an “X” or some other mark in place of their name.  Although the law has not yet caught up to the concept of using a selfie as a replacement for a signature, there are specific rules that allow a signature by mark to be effective under certain circumstances.

Pursuant to both the California Civil Code and the California Code of Civil Procedure, signers who are unable to write their names may instead make a mark.  Two witnesses who should not be relatives or have any connection to the transaction must sign their names near the mark acknowledging that the signer in fact made the mark.  Furthermore, one of the witnesses must write the signer’s name near the mark.  

Such a mark may be notarized as well, provided that the same procedure is followed.  The notary should record the witnesses’ names in the notary journal and the witnesses should sign the journal as well.  

The “signature by mark” procedure is a practical approach to lessen the burden on those who are physically unable to sign their full names.  If the law ever does catch up to the modern phenomenon described by Ms. Swift, it is unclear whether that would further lessen the burden or cause a new problem of having to “dress-up” just to execute a document.

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

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


Friday, July 10, 2015

Life After Death: Posthumously Conceived Children and Survivor Benefits

Often, surviving spouses and children of a decedent are entitled to certain Social Security and other benefits.  Similarly, if a child was conceived during the decedent’s lifetime but born after the parent’s death, such children will often still be considered children of the decedent and likewise entitled to certain Social Security benefits.  

However, science is often one step ahead of the law and modern technology introduced a new concept that challenged courts, attorneys, and legislatures for years: posthumously conceived children.  If a decedent’s genetic material is used to conceive children after the decedent’s death, do such posthumously conceived children have a right to survivor benefits?

That very question ended up in the United States Supreme Court in a 2012 case, Astrue v. Capato.  A married couple wanted to have children but the husband discovered that he had cancer.  Fearing that chemotherapy would make him sterile, he had some of his sperm frozen.  After his death, his widow used the frozen sperm to give birth to twins.  After their births, the widow filed for Social Security dependents’ benefits on their behalf.  The Social Security Administration denied the benefits due to the fact that under their state’s law (Florida), posthumously conceived children are not considered children of a decedent for inheritance purposes.  The U.S. Supreme Court held that determination for federal survivor’s benefits for posthumously conceived children will depend upon the law of the state where the decedent was domiciled.  

Using state law to determine whether posthumously conceived children are entitled to federal survivor benefits means that there will be different results in different states.  The U.S. Supreme Court’s opinion affirms the conclusions of a federal appellate court that ruled in favor Social Security benefits for posthumously conceived children in Arizona but declined Social Security benefits for posthumously conceived children in California.

In the Federal Ninth Circuit Court of Appeals case of Gillett-Netting v. Barhart from 2004, a married couple from Arizona planned on having children.  Similar to the Astrue v. Capato case above, the husband was diagnosed with cancer and decided to freeze his sperm prior to undergoing chemotherapy.  He confirmed that he wanted his wife to have a child with his frozen sperm after his death.  Several months after the husband’s death, the wife became pregnant through in vitro fertilization and later gave birth to twins.  

The wife filed for Social Security dependents’ benefits.  Although the Social Security Administration denied the claim, she successfully appealed the decision to the Ninth Circuit which concluded that, under Arizona law, the twins were considered the children of the decedent despite the posthumous conception.  

A few years later, a similar case again came before the same Federal Ninth Circuit Court of Appeals.  In Vernoff v. Astrue from 2009, a California man died from an apparent drug overdose.  After his death, his wife arranged to have five vials of her husband’s sperm extracted from his body and later underwent an in vitro fertilization procedure.  She later gave birth to a baby girl.  When she filed for Social Security dependents’ survivor’s benefits for her daughter, the Social Security Administration denied the claim.  On appeal, the Ninth Circuit this time ruled against the posthumously conceived child from being entitled to receiving Social Security benefits due to California laws defining children of a decedent.

Under California law, posthumously conceived children are only considered children of a decedent for inheritance purposes if, prior to the decedent’s death, the decedent specifies in writing that his or her genetic material shall be used for the posthumous conception of a child.  Since the husband never signed such a writing, the posthumously conceived daughter was not considered his child under California law.  As a result, the Ninth Circuit held that she was not entitled to Social Security benefits.

If you have genetic material saved that could be used to conceive children posthumously, it is of paramount importance to learn your state’s rules with regard to this subject.  It is equally important to execute a written document in compliance with your state’s laws that clearly outlines your intent with regard to posthumously conceived children.

KRASA LAW, Inc. is located at 704-D Forest Avenue, Pacific Grove, California 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 establish an attorney/client relationship.  Before acting on any of the information presented in this article, you should consult an attorney who is licensed to practice law in your community.   


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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.

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