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The KRASA LAW, Inc. Estate Planning Blog

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.


Friday, September 19, 2014

Learning from Joan Rivers

An essential element of estate planning is to make your health care wishes clear and legally enforceable.  The most basic method for accomplishing this task is to execute an Advance Health Care Directive (“AHCD”) that features two key components.

First, an AHCD allows you to name a health care agent who is empowered to make health care decisions on your behalf should you become mentally incapacitated.  It’s a good idea to also name at least one or two alternate agents in case the first person named is for any reason unable or unwilling to act as your health care agent.  

Second, an AHCD allows you to express guidelines as to how your agent should make health care decisions on your behalf.  Often referred to as a “living will,” you are able to express directions in a variety of scenarios such as treatment for the alleviation of pain and end of life decisions with respect to the continuance or cessation of artificial life support.  If you want more detailed legally enforceable orders with respect to your health care wishes, as well as executing an AHCD, you might decide to execute a Physician Order for Life Sustaining Treatment form (“POLST”).  The POLST must be signed by a physician in order to be effective.

In addition to an AHCD and possibly a POLST, it is essential to execute a “HIPAA Waiver,” authorizing health care providers to disclose your otherwise protected private health information to your health care agents and other parties who might need access to that information in order to carry out their duties on your behalf in the event of your incapacity.  

Not only do these documents ensure that your wishes are carried out to the greatest extent possible, but having a clearly articulated plan with designated decision-makers often lessens the burden placed on the family in making these serious and often painful decisions.  However, there is one more important aspect to comprehensive health care planning that we can learn – not from an attorney or a physician – but from the legendary comedian, Joan Rivers.

Joan Rivers died earlier this month at the age of at the age of 81.  Her only daughter, Melissa Rivers, had to make the heart-wrenching decision to withdraw artificial life support after she went into cardiac arrest following a surgical procedure.  In the aftermath of her death, a video clip surfaced from an episode of the reality program, Joan & Melissa, from 2012 when Joan was about to have an earlier surgery.  In the touching clip, Joan says to her daughter: “If anything happens, Melissa, I’ve had a great life.  If I died this morning, nobody would say ‘so young.’  I’ve had an amazing life, if it ended right now – amazing life!”  

While it is never an easy decision to withdraw artificial life support for a loved one, one can only assume that conversations such as the one that Joan had with Melissa give the health care agent permission to make such a decision, reduce the guilt the agent experiences, and even nudge the agent into making the decision that you would want.  

So many of the examples I use to illustrate the importance of properly drafted estate planning center upon mistakes of the rich and famous.  In this case, Joan Rivers gives us an example of how to do things right.  Not only is it essential to have the proper legal documents in place, but it is also important to have personal conversations with your agents.  While it might appear to be an uncomfortable topic, Joan Rivers’ example demonstrates that such conversations do not have to be sophisticated or lengthy.  In fact, a few simple words can have immeasurable value.  

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 establish an attorney/client relationship.  Before acting on any of the information presented in this article, it is essential to consult with a qualified attorney who is licensed to practice law in your community.       


Friday, September 5, 2014

A "Need-to-Know" Basis

A common theme when it comes to the settlement a decedent’s estate is the beneficiaries expecting to receive their expected inheritance immediately.  Unless a beneficiary is also the executor or successor trustee, generally beneficiaries have no concept of tasks required to properly settle a decedent’s estate including taking inventory of the assets, obtaining appraisals of the assets, paying final bills, filing final tax returns, and sending any required notices to various agencies.  This process often takes several months with a trust administration and much longer with a probate, yet beneficiaries often suspect something is afoul if they are not given information about the estate immediately.  Below is an outline of the various requirements a trustee has to disclose information concerning a trust.

Living Trust When Trust Maker is Living

Most clients who establish proper estate planning use a living trust as their primary document.  A living trust is revocable while the trust maker is living, meaning that the trust maker is free to make any change he or she wishes or even revoke the trust all together.  Only after the trust maker passes away does the trust become irrevocable.

While the trust is still revocable, the persons who are named as beneficiaries upon the trust maker’s death have no right to know what is in the trust, what the trust says, or how the trust is being administered.  The reason is simple: the beneficiaries at this stage do not have any vested interest in the trust; they merely have an “expectancy.”  The trust maker is still free to change his or her mind about who the beneficiaries should be and the amount they should receive.  Thus a person could be named as a beneficiary of the living trust today and could be entirely excluded from receiving anything from the trust tomorrow.  The decision of who inherits, what a person inherits, and how a person inherits is solely at the discretion of the trust maker.

Living Trust Upon Death of Trust Maker

Upon the death of a trust maker, the trust generally becomes irrevocable.  (One major exception to this rule is if a married couple creates a joint trust and the first spouse passes away.  It will then depend upon how the trust is structured as to whether the trust remains revocable by the surviving spouse or whether a portion of the trust becomes irrevocable.  This outline assumes a trust with a single trust maker.)  

When a trust becomes irrevocable due to the trust maker’s death, all beneficiaries named in the trust and all heirs of the decedent are entitled to a notice prescribed by California Probate Code 16061.7 within 60 days of the death of the decedent.  The required notice must include information such as, but not limited to, the fact that the decedent died, that the decedent had a trust, that due to the decedent’s death all or a portion of the trust has become irrevocable, the name and address of each trustee, the address of the principal place of administration, and a notice that upon reasonable request, the beneficiaries and heirs are entitled to a true and complete copy of the trust.

Ongoing Right to Information After Death of Trust Maker

Sometimes, after a trust becomes irrevocable due to the decedent’s death, the trust might be structured in such a way as to provide for one or more current beneficiaries and then, after their death(s), to provide for one or more remainder beneficiaries.  In general, only the current beneficiaries are entitled to an annual accounting of the trustee’s administration of the trust.  The remainder beneficiaries are generally not entitled to an annual accounting, though under certain circumstances they might be able to request certain information from the trustee.

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.  You should consult with a qualified attorney licensed to practice law in your community before acting upon any of the information presented in this article.              


Monday, August 25, 2014

Ice, Ice Baby

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

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

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

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

Traditional Planned Giving Strategies

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

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

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

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


Other Planned Gifts

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

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

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

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

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

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


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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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