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The KRASA LAW, Inc. Estate Planning Blog

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.  


Wednesday, August 20, 2014

The Bar Exam - 10 Years Later

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

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

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

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

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

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

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

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

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

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

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

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


Friday, July 25, 2014

The ABC's of Legal Titles


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

J.D.

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

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

LL.M

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

Esq.

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

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

CLS

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

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

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


Friday, July 11, 2014

Why Silver is Better than Gold

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

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

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

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

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

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

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

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

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

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

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


Friday, June 27, 2014

What the Donald Sterling Episode Teaches Us about Living Trusts

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

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

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

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

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

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

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

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

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

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

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

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

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

 


Friday, June 13, 2014

A Proustian Stanley Cup Final

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

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

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

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

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

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

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

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

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

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


Thursday, June 12, 2014

Anatomy of a Trust

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

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

1.  Grantor

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

2.  Trustee     

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

3.  Beneficiary

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

Creating a Living Trust

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

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

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

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

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

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

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

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

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

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


Wednesday, May 21, 2014

The Answer Book

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

Below are some sample provisions that illustrate its comprehensive nature.

1.  Rules of Language Construction and Definitions

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

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

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

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

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

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

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

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

2.  Rules to Avoid Mischief

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

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

3.  Rules that Keep Up with Science

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

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

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

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


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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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