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The KRASA LAW, Inc. Estate Planning Blog

Wednesday, February 18, 2015

Treasure in Laundry

Jerry Seinfeld has a very famous routine about the irrational nature of team loyalty in sports.  I love the Green Bay Packers, but what am I really rooting for?  Seinfeld points out that I’m not really rooting for any of the players because they change teams with frequency.  What I’m really rooting for, Seinfeld contends, is laundry.  “I want my team’s clothes to beat the clothes from another city.”  If a player wears a Packers uniform, I love him.  If he signs with another team and comes back to Green Bay, I boo him because he’s now wearing a different shirt!  As Seinfeld says: “Laundry.  We’re rooting, screaming about laundry!”

Despite Seinfeld’s mockery, sports laundry is very important to me.  I love the green and gold uniforms of the Green Bay Packers but my greatest sports laundry weakness is hockey sweaters (true hockey fans refer to hockey jerseys as “sweaters” since the original uniforms were essentially sweaters).   My mother purchased my first hockey sweater for me when I was in Sixth Grade at Pacific Grove Middle School.  This was one year prior to the formation of the San Jose Sharks and I picked the New York Rangers as my favorite hockey team (I still like the Rangers, but the Sharks have emerged as my number one hockey team now).  I wore my Rangers sweater almost every day.  I had visions of collecting a hockey sweater from every team in the NHL.

While I do not have a hockey sweater for every team in the NHL, I do have enough hockey sweaters to wear a different one every day of the month.  I have sweaters from current teams such as the Sharks, Rangers, and Red Wings but my true passion is collecting sweaters of defunct hockey teams such as the Quebec Nordiques, the Hartford Whalers, and the Oakland Seals.  My favorite hockey sweaters include a replica gold University of Minnesota Women’s Golden Gophers alternate sweater (one I had to campaign the manufacturer and the school to reproduce) featuring the legendary Amanda Kessel’s number 8, and a replica U.S. Olympic hockey sweater signed by two-time U.S. Women’s Olympic Hockey Silver medalist Kelli Stack.

My wife tries to limit my hockey sweater purchases.  My defense is that at least I’m not buying game-worn sweaters which are three to four times as expensive or even more.  However, a few recent articles in the news make it seem that spending more for game-used items might make economic sense in the long run.  

Various media outlets, including SB Nation, reported that a couple purchased a vintage West Point sweater at a Goodwill store in the North Carolina mountains for 58 cents.  It turns out that the sweater belonged to legendary Green Bay Packers coach Vince Lombardi when he was an assistant coach at West Point.  The sweater recently sold at an auction house for over $43,000. 

In a similar story, a recent piece from Antiques Roadshow  featured a Chicago Blackhawks sweater from the 1938 season that was worn by Virgil Johnson and is currently owned by his grandson.  The sweater is estimated to be worth as much as $10,000.  

Unlike the many people who likely discarded the Lombardi West Point sweater over the years, at least Virgil Johnson’s family realized that the Blackhawks sweater might have some value and chose to keep it.  How many family members have unwittingly discarded West Point sweaters, Blackhawks sweaters, and other items of tangible personal property from a decedent’s estate?  

These stories serve to demonstrate the importance of detailing any item of tangible personal property you think might have unique value that is not obvious on the surface.  Furthermore, in the administration and settlement of an estate, it is important to verify the value of items that might appear to be junk – there could be a hidden treasure!

Although none of my hockey sweaters are worth anything monetarily, I know that they would be equally valuable to my son as they are to me.  At four-years-old, he wonders why he doesn’t have 30-something hockey sweaters in his collection.  I told him that he needs to stop growing before he amasses his own hockey wardrobe, though he’s already up to six hockey sweaters by my last count!

(Recommended reading: The Hockey Sweater by Roch Carrier, a legendary Canadian children’s story.)    

KRASA LAW 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 with a competent attorney who is licensed to practice law in your community.  


Monday, February 9, 2015

More Estate Planning Failures of the Rich and Famous

The best way to illustrate the importance of good estate planning is to share stories of what goes wrong when people fail to address this important topic.  Celebrities give us no shortage of estate planning “counter examples.”  I have several posters in my office entitled, “Estate Planning Mistakes of the Rich and Famous,” published by Insurance News Net Magazine.

There are so many examples that there are now five such posters with different examples of poor celebrity estate planning.  In a previous column, I shared some of the stories from the original poster.  Below are a few more in this never-ending supply of cautionary celebrity estate planning stories as provided by Insurance News Net Magazine.  

Elizabeth Edwards:

Elizabeth Edwards attempted to disinherit her husband, former Presidential candidate John Edwards.  However, North Carolina law does not allow the disinheritance of a spouse.  It became a question of whether or not he could contest the estate plan and if so, whether or not the attorneys who drafted the estate plan would be liable to her intended beneficiaries for malpractice.

Dennis Hopper:
At the end of the famous Hollywood actor’s life, he was battling both cancer and his fifth wife.  In the midst of his divorce proceeding, he attempted to change the beneficiary to his $1 million life insurance policy but was denied due to technical glitches.  He died before he could address the issues with his beneficiary form.  A court battled ensued.  This illustrates the need to update estate planning and beneficiary designations as soon as life changes occur.

Gary Coleman:

The former child actor divorced his wife two years before his death.  After he unexpectedly died, his ex-wife claimed that she was entitled to his estate because of a handwritten will that was executed before his divorce.  Other wills surfaced and there was debate about which will controlled.  

Marlon Brando:

After Marlon Brando died, his housekeeper claimed that he had promised to give her a house that he bought in the San Fernando Valley.  However, it was an oral promise which is not sufficient estate planning.  If this were truly his intent, he should have made it legally effective by formally amending his written estate plan.

Redd Foxx:

Upon his death, Redd Foxx had virtually no assets yet owed the IRS $3.6 million in taxes.  Furthermore, his executor was not able to track his royalties and other income, further complicating the settlement of his estate.

KRASA LAW 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.     


Wednesday, February 4, 2015

The Business of a Legacy

A few weeks ago, Selma opened in theaters across the country.  The movie focuses upon the 1965 voting rights marches led by several civil rights leaders, including Dr. Martin Luther King.  As reported in an article by Gene Demby entitled, “King’s Family Builds Its Own Legacy of Legal Battles,” published on NPR''s website, the film brings to the forefront the business of a legacy.

Most Americans are familiar with Dr. Martin Luther King’s image, his powerful speeches, and the prominent role that he played in society.  However, the makers of Selma encountered many legal obstacles in their efforts to recreate history for purposes of the story.  For example, without being able to secure licensing to use famous King speeches, the film’s writers had to write new speeches from scratch that captured the same spirit but eschewed the exact language King had used.  

Selma is only one example of many.  In recent years, PBS and USA Today encountered legal problems with using King’s image and publishing his speeches respectively without the estate’s permission.  To complicate matters even further, King’s children – the co-owners of his image and intellectual property rights – are not always in agreement about when and for what purpose to authorize the use of their father’s legacy and how much to charge for it.  

There are many other examples of images and intellectual property that have value long after a prominent figure dies.  

Although Marilyn Monroe was only 36 years of age when she passed away, she had the foresight to create a will.  However, she did not put enough thought into her will and left the majority of her estate to her acting coach with the “hope” that he would donate it to charity.  The charitable intent was not legally enforceable due to the manner in which she wrote her will and her acting coach never carried that wish out.  When he died in the early 1980s and left everything to his wife – a woman Marilyn had never met – she claimed that she had the rights to Marilyn’s image.  A court upheld that claim and the person earning millions of dollars per year from Marilyn’s image turned out to be a woman she never even met.  

After Elvis Presley’s death in 1977, his estate encountered legal trouble due to the management of the estate and poor tax reporting.  Presley’s ex-wife and the mother of his only child, Priscilla Presley, was advised to sell Elvis’ famous home, Graceland, in order to avoid bankruptcy.  Instead, she converted it into a tourist attraction which generated a healthy and steady stream of income.  Later, the estate pursued legal battles over the right to control and profit from Presley’s image and pursued acquiring intellectual property rights which created major changes to copyright and trademark law.

Although the average person does not have an image or intellectual property that is as valuable as the examples above, these stories do illustrate some important points that everybody should keep in mind.  First, everybody has an interest in how they will be remembered.  For some like King, Monroe, and Presley, that memory is on a global scale.  For others, it is limited to family, friends, and the local community, but is no less significant.  Second, whatever value a person’s estate has – whether it’s millions of dollars or only hundreds of dollars – most people want to be able to transfer that value to the beneficiaries of their choice in a specific time and manner and want to be able to protect their beneficiaries from unscrupulous individuals.  Finally, most people agree that they do not want their loved ones fighting over their legacy or their assets upon death and want to think about creative solutions to prevent or resolve potential conflict.  A properly drafted estate plan can protect these wishes for everybody, regardless of fame or fortune.  

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

Disclaimer: This article is intended 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 a competent attorney who is licensed to practice law in your community.    


Friday, January 9, 2015

Pour Over Will – Superfluous, Necessary, or Both?

An essential component of a trust-based estate plan is to ensure that all of your assets – with a few exceptions – are titled to your trust.  Picture your trust as an empty basket and all of your assets as eggs: you need to make sure your eggs are in the basket.  One of the many benefits of a trust-based estate plan is the avoidance of a conservatorship in the event of incapacity and the avoidance of probate upon death.  However, if you do not have the majority of your eggs in the basket, you might end up with the very same costly and time-consuming court procedure you were trying to avoid.

It is not possible to over-emphasize the importance of making sure your eggs are in the basket.  However, a thorough estate plan includes a “Plan B” in the event that some of your eggs never end up in the basket during your lifetime.

A “pour over will” is a will that simply names your trust as the beneficiary.  If all of your eggs were already in the basket at the time of your death, then the pour over will is superfluous.  However, if there were some assets that were not transferred to your trust during your lifetime, having a pour over will ensures that those forgotten eggs end up in the basket and your wishes about where your assets should go at death are carried out properly.

If a pour over will puts your eggs in the basket upon your death, why not simply rely on the pour over will to do your trust funding in the first place?  The answer is that there is a limit on how many eggs can be transferred to the basket through the pour over will without the necessity of a probate.  In California, that limit is $150,000 of personal property and $50,000 of real property.  If the total value of your assets that are outside of the trust exceeds those limits, then your estate will be subject to probate and one of the key purposes of establishing your trust – probate avoidance – will be frustrated.

If the total value of the non-trust assets does not exceed the limits described above, having the pour over will in place will allow your successor Trustee to to take control of those “loose eggs” by signing a “small estate affidavit” without the involvement of the courts.  

Retirement plans – such as 401(k) plans and IRA’s – cannot be titled to your trust during your lifetime.  However, if you have a properly designated beneficiary named on such accounts, those assets will be transferred to your beneficiary without the necessity of a probate.  Beware of failing to name a proper designated beneficiary however.  Naming a person who is deceased or simply naming your “estate” will cause that asset be subject to probate if it exceeds $150,000. Furthermore, failure to name a proper beneficiary on a retirement plan often unnecessarily accelerates income tax for your beneficiaries.  

Although your estate will be subject to probate if your “loose” eggs at death exceed the value limitations described, at least your pour over will nevertheless transfers those eggs to your trust upon death to ensure that your wishes are carried out.  This is why a pour over will is both superfluous and necessary: it is superfluous if you properly title all of your assets to your trust during your lifetime; it is necessary in the event that you accidentally leave some of your eggs outside of your basket at the time of your death.

KRASA LAW 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, it is essential that you consult a competent attorney licensed to practice law in your community.     



Friday, December 26, 2014

Putting your Virtual Eggs in your Basket

Most comprehensive estate plans center upon a revocable living trust.  However, drafting and executing a detailed and thoughtful revocable living trust is only part of the planning process.  Another key part is making sure that your assets are titled to your trust.  This process of re-titling your assets to your living trust is often referred to as “trust funding.”  You could have the most beautiful, precise, and detailed trust, but if it is not property funded, it will create the same unnecessary adverse consequences that you were trying to avoid by drafting your estate plan in the first place.

I often use the “eggs in the basket” analogy.  Picture your trust as an empty “basket” and all of your assets as “eggs.”  It is critical to put your “eggs” in your “basket” in order for your estate plan to function properly.  

As I wrote in my last column, some “eggs” are more obvious than others.  Most people can easily think about their checking and savings accounts, certificates of deposit accounts, brokerage accounts, stocks, business interests, and real property.  Other “eggs” might be more abstract such as equity in club memberships or even your spot on the incredibly long waiting list for Green Bay Packers season tickets.  

In the last decade, an entirely new category of “eggs” has emerged: digital assets.  Digital assets include sent and received emails, email accounts, digital music, digital photographs, digital videos, gaming accounts, software licenses, social-network accounts, file-sharing accounts, financial accounts, domain registrations, Domain Name System (DNS) service accounts, blogs, listservs, web-hosting accounts, tax-preparation service accounts, online stores, online auction sites, online accounts, Bitcoin accounts, and other digital assets that don’t even exist yet!  

Digital assets are sometimes referred to as the “new frontier” in estate planning.  In the last several years there have been court battles over parents’ access to their deceased son’s email accounts and the ability of family members of a decedent to shut-down certain social networking sites.  Although this is still a new area of the law, there are two key steps you can take to give your loved ones more control over your digital assets in the event of incapacity or upon death.  

First, you should sign a document that assigns all of your right, title, and interest in your digital assets to your revocable living trust.  The act of executing such an assignment should effectively transfer your digital assets to your trust, putting your virtual “eggs” in your “basket.”

Second, both your revocable living trust and your financial power of attorney document should include specific language that expressly gives your fiduciary the right to access, use, control, modify, archive, transfer, and delete your digital assets.  The language should also expressly give your fiduciary authority over your physical devices – such as desktop computers, laptop computers, tablets, storage devices, and mobile telephones – as well as access and control of digital assets stored on the cloud.    

Working with a qualified attorney to make sure that your estate plan addresses your digital assets can help to avoid unnecessary barriers and expense for your loved ones in the event of your incapacity and upon your death.      

KRASA LAW is located at 704-D Forest Avenue, Pacific Grove, 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, it is essential that you consult a competent attorney who is licensed to practice law in your community.  


Friday, December 12, 2014

"Hidden Assets" - The Green Bay Packers Teach an Esate Planning Lesson

Even though I grew up on the Monterey Peninsula and have no family connection to the Midwest, I have been a genuine “Cheesehead” Packer Backer since I was in elementary school.  I always enjoyed watching football in the elements, I liked the idea of a major professional sports team in a small town, and I appreciated the history of Vince Lombardi and the “frozen tundra” of legendary Lambeau Field.  On the other hand, my wife is a big Patriots fan because she grew up in New England.  We both originally competed to influence our four-year-old son to root for our respective teams and I ended up being far more successful than my wife in “brainwashing” him (her term).

We recently took a trip to Lambeau Field to watch the Packers play the Patriots.  (The Packers were victorious!)  On the night before the game, we took a tour of the famous football stadium and our guide mentioned that if we were to put our son on a waiting list for season tickets, he would be eligible in approximately 1,200 to 1,500 years!  

Our guide explained that the reason for the unbelievably long wait is due to the fact that the Packers allow fans on the season ticket waiting list to transfer their spot in line through their estate plans.  As a result, the vast majority of spots on the season ticket waiting list never become available to the team to be given to the next person in line.  Our guide mentioned that the Packers have very specific rules about how fans on the season ticket waiting list can transfer their spots in line upon death and limitations on who may receive a spot in line through an estate plan: only certain members of the immediate family.    

While most people are aware of their “obvious” assets such as real property, bank accounts, stocks, and retirement plans, they might not think about “hidden” assets that can be transferred such as club memberships, intellectual property rights, and apparently even a spot in a long and coveted line!  

These “hidden” assets could be inadvertently neglected in even the most detailed and complete estate plans.  Furthermore, just as with the Packers season ticket waiting list example, often organizations in charge of such “hidden” assets have very specific rules about how such assets can be transferred at death and to whom.  Such rules cannot be found in the Probate Code or other public resources and are therefore often overlooked.  

In planning your estate or reviewing an existing estate plan, you should think about whether you have any “hidden” assets and double check with the organizations governing such assets to make sure your estate plan is in compliance with the organization’s rules about the transfer of such assets upon death.

KRASA LAW is located at 704-D Forest Avenue, Pacific Grove, 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, it is imperative that you consult with a competent attorney who is licensed to practice law in your community.  


Monday, December 1, 2014

Sentimental Estate Planning

In Tim O’Brien’s famous novel about the Vietnam War, The Things They Carried, the soldiers all carry physical trinkets that have symbolic meaning, each revealing deeper truths about their personal stories.  The novel illustrates the fact that items of tangible personal property often have high sentimental value regardless of their actual fair market value.  As a result, items of tangible personal property can be an important component of an estate plan.  There are several methods for distributing items of tangible personal property through an estate plan.

1.  Part of the Residue
If you are not sure how to divide up items of tangible personal property, or if you do not feel that any item has a particular significance to a specific beneficiary, then you may want to consider allowing items of tangible personal property to be distributed as part of the “residue” of your estate.  For example, if you decide to leave your estate to your three children in equal shares, your Fiduciary will be instructed to distribute your items of tangible personal property as evenly as possible.  Rather than cutting into thirds your piano, your hockey sticks, and your Gwen Stefani poster, your Fiduciary and beneficiaries might agree that Ray gets the piano, Gordie gets the hockey sticks, and Pharrell gets the Gwen poster.   

2.  Specific Method
You might be concerned that your Fiduciary and beneficiaries will have trouble in determining how to evenly or fairly distribute items of tangible personal property.  In order to prevent arguments and ill will, another option is to set forth a specific method for allowing the beneficiaries to choose items of tangible personal property in a fair manner.  For example, your Fiduciary might ask each of your beneficiaries to draw straws or pull a name out of a hat to determine an order of selecting items of tangible personal property.  

3.  Specific Gifts
If you are pretty sure that a particular beneficiary should receive a specific item of tangible personal property, you may specify such a gift in your will or trust prior to your Fiduciary distributing the remainder of your estate.  For example, you could specify that Ray is to receive your piano, Gordie gets your hockey sticks, and Pharrell gets the Gwen Stefani poster regardless of their particular value and that the rest of your estate is to be evenly divided.  If you choose this method, you’ll want a specific instruction in the event that your named beneficiary pre-deceases you.  If you think any such item might have a high value (such as the Gwen poster), you’ll want to consider whether to include a provision that states whether the specific item of tangible personal property is subject to death taxes.

4.  Separate Writing
When drafting your estate plan, you might not be sure whether you want to direct specific items of tangible personal property to certain beneficiaries.  Instead, you might decide that you prefer to make a list in the future instructing your Fiduciary on how to distribute such items.  With this method, if you later change your mind, it would be rather simple to execute a new separate writing rather than going through the expense and effort of formally amending your estate plan.  

For years, the California Probate Code did not permit reference to a separate writing that was not in existence at the time the estate plan was executed.  The concern was that a devious person after the death of the testator might create a false writing naming a different beneficiary. However, utilizing a later-created separate writing proved to be a popular for its flexibility and simplicity.  Finally, the California legislature passed what is now Probate Code Section 6132 which allows for the disposition of tangible personal property by a later writing under certain conditions.  The conditions include limitations on what types of items and the value of such items that may be distributed in this manner.  

Some observers worry that these limitations could inadvertently invalidate a testator’s wishes.  As a fail-safe, for trust-based estate plans, you might want to consider specifically allowing for the disposition of tangible personal property by a separate signed writing and instructing that such a signed writing shall be considered a valid trust amendment.  

KRASA LAW 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 relying upon any of the information included in this article, you should consult a competent attorney who is licensed to practice law in your community.  


Friday, November 14, 2014

Is it Really Possible to "Cruise Off into the Sunset"?

Seniors and their families often worry about affording the high costs of long-term care.  By many estimates, the average cost of a nursing home is now more than $80,000 per year.  Naturally, many people hope for better alternatives.

An idea that has been floated in chain emails, blogs, and chat rooms for years has been the concept of “cruising off into the sunset.”  The premise is that the average annual nursing home is more expensive than the average annual cost of booking back-to-back luxury cruises.  When faced with a choice between being “stuck” in a dreary nursing home or traveling the world in style on a fabulous ship, the latter certainly seems more appealing and empowering.  

A popular anonymously-written argument in support of this idea sounds convincing on the surface:

“Gratuities will only be $10 per day.

You will have as many as 10 meals a day if you can waddle to the restaurant, or you can have room service (which means you can have breakfast in bed every day of the week).

Cruise ships have as many as three swimming pools, a workout room, free washers and dryers, and shows every night.

Cruise ships have free toothpaste and razors, and free soap and shampoo.

The crew on cruise ships will even treat you like a customer, not a patient.  An extra $5 worth of tips will have the entire staff scrambling to help you.

You will get to meet new people every 7 or 14 days.

Is your T.V. broken?  Does your light bulb need changing?  Do you need to have the mattress replaced?  No Problem! The crew will fix everything and apologize for your inconvenience.

You’ll have clean sheets and towels every day, and you don't even have to ask for them.

If you fall in the nursing home and break a hip you are on Medicare; if you fall and break a hip on the ship, they will upgrade you to a suite for the rest of your life.”

Adding legitimacy to this argument, in 2004, physicians Lee A. Lindquist and Robert M. Golub published “Cruise Ship Care: A Proposed Alternative to Assisted Living Facilities” in the Journal of American Geriatrics Society.  They argued that for some seniors, a cruise ship could be a better alternative to traditional assisted living.  Furthermore, many stories surfaced in the media of seniors who lived on cruise ships for years, most notably Bea Muller, who was a permanent resident on Cunard’s Queen Elizabeth 2 from January 2000 until it was retired in November 2008.

Unfortunately, when carefully examined, the cruise-ship-alternative to traditional long-term care does not withstand scrutiny.  Sarah Stevenson in her blog, “Is a Cruise Ship Retirement Cheaper Than Assisted Living?,” which was posted on www.aplaceformom.com on February 22, 2013, points out many of the “impractical realities” of cruise ships as substitutes for long-term care.  Her arguments are paraphrased below.  

First, the logistics are difficult.  Your private area on a cruise ship is a small room typically only large enough to fit a bed.  You have no place to keep any possessions other than a suitcase full of clothes.  Furthermore, you often are required to disembark from the ship at least every thirty days and you will constantly have to book new cruises, hoping to continually find good deals.  These constant arrangements can be burdensome and unsettling.

Second, most seniors who need long-term care need help with activities of daily living such as bathing, dressing, and grooming.  No matter how much you might be willing to tip the crew on a cruise ship, you’re not likely to find staff willing to act as your personal attendant.  

Third, many seniors have mobility problems.  The narrow hallways and multiple levels of cruise ships are not conducive to passengers with mobility problems, particularly in bad weather when turbulence could be an issue.  

Fourth, many seniors need constant access to physicians.  Although cruise ships often have a doctor on board, they are not prepared to deal with the wide assortment of medical issues that a passenger might possess.  Furthermore, being stranded at sea is the worst time to need the urgent medical care of a specialist.  In an emergency, you might need to be airlifted off the ship which would not only result in significant cost, but could also create further medical problems.

Finally, being an oceanic vagabond means that you will not be able to see your family and friends with any regularity.  Furthermore, any acquaintance you meet on the ship will likely be off the ship by the next week.  Therefore, it would be impossible to establish and maintain in-depth human contact which would likely lead to isolation and depression.

KRASA LAW is located at 704-D Forest Avenue, Pacific Grove, 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, consult with a competent attorney licensed to practice law in your community.


Tuesday, November 4, 2014

Taking Control of Your Health Care

 

A key aspect of estate planning is to plan for health care decisions in the event of incapacity.  Below is an overview of the most common health care planning documents.  

Advance Health Care Directive

An Advance Health Care Directive (“AHCD”) has two main features.  First, it allows you to name an agent to make health care decisions on your behalf if you are unable to do so.  Commonly referred to as a “health care power of attorney,” it is essential to name an agent and at least one or two alternates in the event that the first agent is for any reason unable or unwilling to act.  In selecting a health care agent, it is important to consider whether a particular candidate will be able to make difficult decisions in a crisis, will be available and responsive, will be a strong advocate on your behalf, and will be able to carry out your wishes even if they differ from the agent’s personal values.  

Second, an AHCD allows you to instruct your agent on how to make your health care decisions.  Often referred to as a “Living Will,” this feature allows you to give guidelines such as the use and extent of artificial life support, measures to alleviate pain even if such measures might hasten your death, decisions regarding organ donation,  and decisions related to the disposition of your remains.  

The statutory California AHCD form allows you to give general guidelines whereas other versions of an AHCD, such as the “Five Wishes” form, allow you to go into great detail with regard to health care instructions.

An AHCD should also list the name and contact information of your primary physician in the event that the health care providers need your medical records or need to consult with your doctor regarding your care.

In order to be effective, an AHCD in California must either be notarized or witnessed.  Furthermore, if the AHCD is executed in a skilled nursing facility, an additional signature by a “patient advocate” or “ombudsman” is required.   

POLST Form

A POLST (“Physicians Order for Life Sustaining Treatment”) form is an optional additional document that you should review with your doctor.  It allows you to create even more specific instructions than the AHCD and is used for specific purposes such as:

(1)  Whether or not to administer CPR in the event that you have no pulse and are not breathing;

(2)  Whether you desire “full treatment,” “selective treatment,” or “comfort-focused treatment” in the event that you    have a pulse and/or are breathing;

(3)  Whether to administer feeding tubes on a long-term basis, a trial basis, or not at all.

In order for a POLST form to be effective, it must be signed by a licensed physician.  The purpose of requiring a physician’s signature is two-fold.  First, it forces you to have a discussion about the ramifications of these various choices with a medical professional.  Second, by having a physician’s signature, health care professionals are required to follow the order and are less likely to hesitate when executing difficult decisions.  

HIPAA Waiver

HIPAA, the “Health Insurance Portability and Accountability Act,” protects medical privacy by restricting health care professionals from releasing your health information.  While the concept of medical privacy is generally a good idea, it can become a problem if your agents are unable to access key information about your health and therefore unable to make informed decisions about your care.  By signing a HIPAA Waiver, you are authorizing health care professionals to disclose your otherwise protected health information to your health care agents and releasing the health care professionals from any liability for doing so.  Although it is a simple document, it is essential.  

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

Disclaimer: This article is for general information only.  Reading this article does not create an attorney/client relationship.  Before acting upon 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 24, 2014

A Hidden Tax?

I have two conflicting perspectives when I create estate plans for clients.  First, in drafting the documents, I try to think of every possible contingency in case my clients never revisit their estate plan in the event of changing circumstances.  Second, I try to remind my clients that it is a mistake to believe that estate planning is a one-time event when in actuality it is a lifetime process that should be reviewed periodically.  Personal situations and the law can change over time, leaving clients with what were once state-of-the-art plans that are now outdated.

While it is easy to foresee some possible changes such as the incapacity of a trustee or the death of a beneficiary, it is much more difficult to predict other changes, especially changes in tax law.  The massive change to the estate tax brought by the American Taxpayer Relief Act (“ATRA”) that was passed last year had major impact on existing estate plans.  One such area of that impact involves capital gains tax.

A common estate plan for a married couple is an “A/B Trust.”  Upon the death of the first spouse, the trust splits into a revocable “A Trust” for the surviving spouse’s share of the estate and an irrevocable “B Trust” for the deceased spouse’s share of the estate.  Prior to ATRA, the creation of the “B Trust” was critical in eliminating or mitigating the application of the estate tax (sometimes referred to as the “death tax”).  The creation of the “B Trust” came at a cost: while it helped with regard to the estate tax, it had the potential to create an otherwise unnecessary capital gains tax if there was significant appreciation in securities or real property after the death of the first spouse.  When the federal estate tax was approximately 50% and the state and federal capital gains tax combined was 25%, it made sense to choose the capital gains tax over the estate tax.  

However, in the wake of ATRA, the creation of the “B Trust” is not critical for the majority of families in order to avoid the estate tax.  The result is that instead of choosing between a potentially high estate tax and a lower capital gains tax, the existence of the “B Trust” unnecessarily creates potential additional capital gains tax without having any tax benefit.  The potential capital gains tax is lurking in the “B Trust” and might not be discovered until years after the first spouse’s death.  For clients who still have traditional “A/B Trusts,” they might want to consider one of two options.  
First, if married clients are comfortable with the surviving spouse having the authority to completely change the estate plan after the death of the first spouse, they might want to consider creating a “Disclaimer Trust” which does not require that the trust subdivide into an “A Trust” and a “B Trust” at the death of the first spouse.  This option gives the surviving spouse the power to decide at the death of the first spouse whether the family’s current circumstances and the tax law in effect at that time make the estate tax or the capital gains tax a bigger concern.

Second, if married clients like the idea of the deceased spouse’s share becoming irrevocable to protect the estate planning wishes of the first spouse, they might want to consider creating a “Clayton Election Trust” which allows the surviving spouse to choose the tax treatment of the deceased spouse’s irrevocable trust: either a traditional “B Trust” which focuses on estate tax protection and risks capital gains tax, or a “C Trust” (often referred to as a “QTIP Trust”) which focuses on capital gains tax protection and risks estate tax.  

Even after the death of the first spouse, it is still possible to change the structure of an existing trust to eliminate the traditional “B Trust” and its potential negative consequences.  A detailed trust might include “Trust Protector” provisions that give an individual the authority to modify an irrevocable trust to reflect tax or other legal changes.  If the trust does not have “Trust Protector” provisions, there are several provisions in the California Probate Code that allow for the modification or termination of an irrevocable trust upon petition to the Court under certain circumstances.  

While a good estate plan will attempt to navigate as many possible changes in the law, it is still prudent to have your estate planned reviewed by a competent attorney every few years to make sure that your plan is up-to-date and still reflects your wishes and creates the best possible results for you and your family.  

KRASA LAW is located at 704-D Forest Avenue, Pacific Grove, 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.  Because the law is so complex and everybody’s situation is unique, you should consult with a competent attorney licensed to practice law in your community before acting upon any of the information presented in this article.  


Tuesday, October 7, 2014

Perpetual Values

Even though I grew up in the temperate climate of the Monterey Peninsula, my favorite sport as a kid was hockey.  I was very close to my paternal grandparents who were refugees from Czechoslovakia.  Prior to World War II, my grandfather – Karel A. Krasa – was a prominent hockey player, coach, and manager.  He was even featured in an article from The Hockey News in 1949.  He would tell me stories about playing hockey on frozen ponds in Bohemia.  Without any frozen ponds on the Monterey Peninsula, I started on inline skates and occasionally made the trip to our closest ice rink in San Jose.  One would think that my grandfather would be thrilled that I carried on the tradition.  However, he was very practical.  He often told me I should play golf instead since we were surrounded by world-famous golf courses instead of hockey rinks.  I know that he was proud nevertheless.

When my son was two, I started taking him to ice skating lessons in San Jose.  Originally we were in a “parent/tot” class that was held on Wednesday evenings.  I would leave work early once a week, pick him up, and together we would make the journey to Sharks Ice.  He later “graduated” to a Saturday morning class and I soon realized that I was not going to be able to “undo” what I had started: he developed a passion for hockey and as long as Monterey didn’t get a new ice rink, I knew I was destined to commute to San Jose and beyond for the rest of his childhood!  I also continue my passion and play hockey in San Jose about once a week as well.  I often joke that although I only live a few miles from my office, I still “get my commute in” for hockey twice a week.  

One might wonder why I go to all this trouble just to get my son some ice time.  First, I do it because it is a passion that we now both share.  Developing and nurturing passions makes life much more rewarding and fulfilling.  It’s worth all the time, trouble, and expense to see my son grinning behind his protective facemask, celebrating a goal, and giving fist-bumps to his imaginary teammates on the bench.  Additionally, hockey teaches him coordination, patience, perseverance, hard work, how to follow instructions, how to work cooperatively with others, and discipline.  Whether he becomes a star college or NHL player or not, his ice time each week has immeasurable intrinsic value.  I therefore am willing and eager to keep this weekly (and soon-to-be more frequent) commute up for as long as my son enjoys the sport.  However, what would happen if my wife and I passed away prior to my son growing up?  Would his guardian take the time and effort to continue to nurture this passion and other passions that he might develop?

Parents often assume that they will always be around to raise their children.  However, it is of critical importance to make sure that there is a detailed plan in place in the event that tragedy strikes.  Naming appropriate guardians in the event of your incapacity or death is the first critical step.  Another critical question is: “How would you like your children to be raised if you were not there?”  The most common answer is: “The same way I raise them.”  But what is that way and how do you express it?

First, you want to think about your values.  Are there certain books or movies that embrace those values?  What relationship would you like your children to have with their religion as they grow up?  What spiritual activities would you want them to participate in?  Is your family’s ethnic or cultural background important to you and how would you want your guardian to foster your children’s experience and knowledge of that heritage?  And yes, how much hockey do you want your child to play?!  The answers to these questions can often help you to formulate guidelines for how you would want your guardian to raise your child in your absence and can even aide in the selection of the most suitable person to fill that critical role.

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

This article is for general information only.  Reading this article does not create an attorney/client relationship.  Before acting on any if the information presented in this article, make sure that you consult a competent attorney 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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