The KRASA LAW, Inc. Estate Planning Blog

Friday, August 7, 2015

The Legacy of Place

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

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

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

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

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

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

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

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

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

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

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

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

Friday, July 24, 2015

X Marks the Spot

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

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

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

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

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

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

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

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

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

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

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

Friday, July 10, 2015

Life After Death: Posthumously Conceived Children and Survivor Benefits

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

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

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

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

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

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

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

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

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

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

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

Monday, July 6, 2015

Court Comedy

As an English Major, I have always enjoyed a good play on words.  Sometimes, a play on words is the result of clever wit.  Often, a play on words is an unintentional consequence of the idiosyncrasies of the English language.  Below are real quotes from witnesses and lawyers in courtrooms across the country.  These quotes and more can be found in Disorder in the Court by Charles M. Sevilla.

ATTORNEY: What is your date of birth?
WITNESS: July 18th.
ATTORNEY: What year?
WITNESS: Every year.
ATTORNEY: What gear were you in at the moment of the impact?
WITNESS: Gucci sweats and Reeboks.
ATTORNEY: This myasthenia gravis, does it affect your memory at all?
ATTORNEY: And in what ways does it affect your memory?
WITNESS: I forget.
ATTORNEY: You forget? Can you give us an example of something you forgot?
ATTORNEY: How old is your son, the one living with you?
WITNESS: Thirty-eight or thirty-five, I can't remember which.
ATTORNEY: How long has he lived with you?
WITNESS: Forty-five years.
ATTORNEY: What was the first thing your husband said to you that morning?
WITNESS: He said, "Where am I, Cathy?"
ATTORNEY: And why did that upset you?
WITNESS: My name is Susan.
ATTORNEY: Do you know if your daughter has ever been involved in voodoo?
WITNESS: We both do.
WITNESS: Yes, voodoo.
ATTORNEY: Now doctor, isn't it true that when a person dies in his sleep, he doesn't know about it until the next morning?
WITNESS: Did you actually pass the bar exam?
ATTORNEY: The youngest son, the twenty-year-old, how old is he?
WITNESS: Uh, he's twenty-one.
ATTORNEY: Were you present when your picture was taken?
WITNESS: Would you repeat the question?
ATTORNEY: So the date of conception (of the baby) was August 8th?
ATTORNEY: And what were you doing at that time?
ATTORNEY: She had three children, right?
ATTORNEY: How many were boys?
ATTORNEY: Were there any girls?
ATTORNEY: How was your first marriage terminated?
WITNESS: By death.
ATTORNEY: And by whose death was it terminated?
ATTORNEY: Can you describe the individual?
WITNESS: He was about medium height and had a beard
ATTORNEY: Was this a male or a female?
ATTORNEY: Is your appearance here this morning pursuant to a deposition notice which I sent to your attorney?
WITNESS: No, this is how I dress when I go to work.
ATTORNEY: Doctor, how many of your autopsies have you performed on dead people?
WITNESS: All my autopsies are performed on dead people
ATTORNEY: ALL your responses MUST be oral, OK? What school did you go to?
ATTORNEY: Do you recall the time that you examined the body?
WITNESS: The autopsy started around 8:30 p.m.
ATTORNEY: And Mr. Denton was dead at the time?
WITNESS: No, he was sitting on the table wondering why I was doing an autopsy on him!
ATTORNEY: Doctor, before you performed the autopsy, did you check for a pulse?
ATTORNEY: Did you check for blood pressure?
ATTORNEY: Did you check for breathing?
ATTORNEY: So, then it is possible that the patient was alive when you began the autopsy?
ATTORNEY: How can you be so sure, Doctor?
WITNESS: Because his brain was sitting on my desk in a jar.
ATTORNEY: But could the patient have still been alive, nevertheless?
WITNESS: Yes, it is possible that he could have been alive and practicing law.

Friday, June 12, 2015

The Clayton Election: A Twist on the A/B Trust

A common estate planning technique for married couples is the A/B Trust.  Upon the death of the first spouse, an A/B Trust will subdivide into two sub-trusts: a revocable A Trust to hold the surviving spouse’s share of the estate and an irrevocable B Trust to hold the deceased spouse’s share of the estate.  There are typically three main reasons for married couples to structure their trust in this manner.

1.  Estate Tax

For many years, the most common reason for the A/B Trust structure was planning for the estate tax which is a tax on inheritance.  While the estate tax rate has varied over the years, it had been as high as 55%.  

However, each individual has an estate tax exemption: an amount of assets that are exempt from the estate tax upon death.  The exemption has changed over time, slowly rising from $600,000 in 1997 to $5,430,000 in 2015.  

When the estate tax exemption was lower, an A/B Trust structure was a popular estate tax planning device because it allowed married couples to combine their estate tax exemptions.  For example, if a couple in 1997 had an estate worth $1,000,000, one spouse’s estate tax exemption ($600,000 at the time) would not be enough to prevent application of the estate tax and the $400,000 difference would be taxed at an extraordinary rate.  With an A/B Trust structure that allows both spouses to combine their estate tax exemptions, the entire estate would be free from estate tax because the married couple jointly would have $1,200,000 worth of estate tax exemption.

In 2015, with the estate tax exemption at $5,430,000 per person, few married couples need an A/B Trust structure for estate tax purposes because one spouse’s exemption is often enough to cover the entire estate.  Furthermore, other tools such as “portability” have been introduced to make A/B Trusts less relevant for estate tax purposes to the vast majority of estates.

2.  Control

Independent of any estate tax concerns, some married couples still like the concept of an A/B Trust structure because they are worried that a surviving spouse might change the beneficiaries of the trust after the death of the first spouse.  This is a common concern with blended families where there are separate children of one or both spouses.  This is also a concern even when there are joint children as some people worry that a surviving spouse might lose mental capacity and be subject to undue influence to change the agreed upon estate plan.

While the surviving spouse will generally have the authority to modify the provisions of the revocable A Trust, the surviving spouse will often be prevented from changing the beneficiaries of the irrevocable B Trust after the death of the surviving spouse.  Furthermore, an A/B Trust can be designed to limit the surviving spouse’s access to the B Trust or can require that a child of the deceased spouse or other trusted individual serve as co-trustee or sole trustee of the B Trust.  The idea is to provide a lifetime benefit to the surviving spouse with respect to the deceased spouse’s share of the estate, but ultimately ensure that the deceased spouse’s beneficiaries receive the intended inheritance after the death of the surviving spouse.

3.  Asset Protection

With the high number of lawsuits that are filed each year, and the fact that the number one reason for bankruptcy in the United States is unpaid medical bills, many people are worried about asset protection.  The general rule in California, as with most states, is that individuals cannot create trusts for themselves with their own assets and give themselves asset protection.  

However, if structured properly, individuals can create trusts for third parties that provide a significant degree of asset protection.  The B Trust is a trust established by a third party (the deceased spouse) for the benefit of the surviving spouse.  As a result, if structured properly, the A/B Trust structure can provide the surviving spouse with a degree of asset protection.

A Twist on the A/B Trust

While many couples may feel that the A/B Trust structure is no longer necessary for estate tax purposes, they might still like the control or asset protection features.  However, in such a situation, a traditional A/B Trust structure might not be ideal.

With a traditional A/B Trust, the B Trust is designed to utilize the deceased spouse’s estate tax exemption, often mitigating or eliminating the application of the estate tax.  This estate tax benefit comes with a catch: assets held in the B Trust will not receive a “step-up” in basis for capital gains tax purposes upon the death of the surviving spouse.  

As a result, the children or other remainder beneficiaries of a B Trust are often forced to realize significant capital gains tax on securities or real property if there was significant appreciation between the death of the first spouse and the death of the surviving spouse.

If it is a choice between the application of the estate tax and the application of the capital gains tax, then typically the capital gains tax is the better tax.  However, for the vast majority of estates where there will be no estate tax regardless of whether there is a traditional A/B Trust structure because of today’s very high estate tax exemption, a traditional A/B Trust structure can unnecessarily cause higher capital gains tax.

One popular solution is to structure an A/B Trust with a “Clayton Election.”  The idea behind the Clayton Election is to still require an A/B split.  However, the surviving spouse is given the option to choose the tax treatment of the B Trust: either keep it as a traditional B Trust which provides estate tax protection but often results in higher capital gains tax, or treat it as a “QTIP Trust” which does not provide estate tax protection but is more favorable with respect to the capital gains tax.  


With the dramatic changes in estate tax laws over the past decade, married couples should reevaluate whether they need or want an A/B Trust structure.  One option would be to entirely eliminate the A/B Trust structure.  However, if there is concern or interest in control or asset protection, then perhaps a Clayton Election is preferable to a traditional A/B Trust structure.   

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

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

Friday, June 5, 2015

Avoiding a Vocabulary Argument

As a proud holder of a Bachelor’s of Arts degree in English Literature from Saint Michael’s College in Vermont, I appreciate a good vocabulary argument.  I can remember long nights with my college roommate where we would engage in “dictionary battles,” challenging each other’s definition and pronunciation knowledge.  I’m pretty sure this is a typical college pastime enjoyed for generations at colleges and universities throughout the country.  However, as a lawyer in the “real world,” there are times when it is best to avoid a vocabulary argument.

The purpose of estate planning is to provide an efficient mechanism for trusted individuals to act upon your behalf in the event of your incapacity and upon your death.  Once you are no longer able to act, all that is left is the language of your estate planning documents.  I am a big proponent of drafting documents that have clear and detailed provisions.  If there is a question about the meaning of a term, I want there to be language that explains the intent in multiple ways.  This is a situation where redundant text is preferred so that there can be no debate.

I recently found myself engaged in a vocabulary argument with a major bank.  My client’s mother, who is mentally incapacitated, owns a safe deposit box at a local branch.  My client wanted to use the authority granted under his mother’s power of attorney to access the safe deposit box.  The power of attorney was drafted by a different attorney and it was a “statutory” power of attorney, a standard form set forth by the California Probate Code.  

I eschew the use of the statutory power of attorney because I feel that the language is typically too vague.  Whereas the power of attorney documents I typically draft have an entire paragraph devoted to safe deposit boxes, the statutory power of attorney does not have any language specifically referring to safe deposit boxes.  The closest provision I could find was “banking and other financial institution transactions.”  

The bank’s legal department upon reviewing the power of attorney stated that my client did not have the authority to access his mother’s safe deposit box.  The legal department concluded that safe deposit boxes are not included within the meaning of “banking and other financial institution transactions.”  The legal department suggested that my client petition the Court for the authority to enter the safe deposit box which would have cost thousands of dollars and months of delay.  

Upon what basis could the legal department claim that a safe deposit box is not included within the meaning of “banking and other financial institution transactions”?  Logically, safe deposit boxes should be included within that definition.  After all, safe deposit boxes are located at and controlled by banks.  I was ready to challenge the bank’s conclusion but I knew that I needed to search for authority to support my position as logic alone is not enough.

Fortunately, the California Probate Code has an answer.  The state legislature over the years has realized that detail matters.  Sections 4450 through 4465 go into great detail as to the meaning of the general statements of powers in a California statutory power of attorney.  In reviewing those sections, I came across California Probate Code Section 4455(g) which states in part: “In a statutory form power of attorney, the language granting power with respect to banking and other financial institution transactions empowers the agent to . . . [e]nter a safe deposit box or vault and withdraw or add to the contents.”  I found the “magic bullet!”  

I photocopied the section and sent it to the bank’s legal department.  Shortly thereafter, the bank reversed its position and granted my client access to his mother’s safe deposit box.  I had the “dictionary battle,” saving my client the hassle and expense of unnecessary court intervention.  

Without the Probate Code’s specific definition of the term, “banking and other financial institution transactions,” we would have had a major problem.  The incident reiterated the importance of detailed provisions.  Many clients conflate length with complexity.  They feel that their situations are “too simple” for a thick estate plan.  On the contrary, a plan that includes robust language and detailed provisions to cover all bases is actually simpler and easier in the long run.  Although in this example we were saved by the Probate Code, it would have been even easier and simpler to have had the definition within the body of the power of attorney document itself.

It is never wise to cut corners when drafting or executing an estate plan.  A competent attorney can help you make sure that all questions are answered, avoiding any unnecessary and expensive vocabulary arguments.     

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

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

Monday, June 1, 2015

Urgent! - Act Before You Can Think!

I have a bad habit of staying up way past my “bedtime.”  Occasionally, I’ll have the TV on and there is one commercial that runs very late at night constantly.  The commercial advertises an opportunity to be part of a “trial” for a cosmetic product and have a chance to be in a commercial.  The ad says that there is a “limit” to the number of participants.  Those with last names beginning with A through L should call right way and those with last names beginning with M through Z should call the next morning at 9:00 am.  It always makes me chuckle because of course it doesn’t really matter when you call or what letter your last name begins with: the idea is to create a sense of urgency to get you to pick up the phone right away.  

The sense of urgency is a common strategy to fool people into acting before thinking.  Unfortunately, it works very well and sometimes it is used for purposes less innocuous than trying out cosmetic products.  

In my last column I wrote about a common scam where a letter is sent to potential victims informing them that they have won a sweepstakes and encouraging them to take steps that will eventually lead to fraud and theft.  The letter uses many psychological techniques such as utilizing the names of well-known and trusted companies, ostensibly giving the recipient a check, not asking for personal information right away, giving instructions not to discuss the matter with third parties, and conveying the message that action must be taken right away.  

Another scam I often see has to do with copies of deeds to real property.  A common aspect of estate planning involves executing and recording deeds to transfer real property into or out of a revocable living trust or a legal entity such as an LLC.  Typically, the attorney will prepare the deeds for the client to sign and will then send them to the county to be recorded.  After several weeks, the local recorder returns the original deeds to the client.  The same process will occur any time real property is bought and sold or any time a mortgage is paid off.  These transactions are public records.  There are several deceitful companies that try to take advantage of unsuspecting property owners.  

The companies will send the property owners a notice that is designed to appear that the sender is a government agency.  The notice will often reference various legal code sections implying that the property owner is required by law to act within a relatively short period of time.  The notice urges the property owner to send a check for $80 or more in order to obtain a copy of the deed.  However, (1) there is really no legal requirement for the property owner to do anything, (2) the property owner often already has a copy of the deed, and (3) if the property owner were to need another copy of the deed, such a copy could be obtained directly from the county or from a reputable service for less than $10.  

The word, “urgent,” written on the envelope and on the notice will often be enough for the property owner to immediately send payment without thinking.  By the time the unnecessary and overpriced copy of the deed is sent the property owner, the property owner has often had enough time to realize that it was a scam.  

I recently discovered another similar situation where a company purporting to provide help to consumers sent an “urgent notice” to my client about his “limited time” to exit his timeshare.  The letter directed the recipient to call for a “complimentary consultation.”  This was of a particular concern to my client because he had hired me years earlier to help him dispose of his timeshare.  He thought that the notice meant that he did not properly dispose of this timeshare and that he owed unpaid dues and fees.  

I was immediately suspicious of the notice because I knew that we had successfully disposed of the timeshare years before.  I had copies of the legal paperwork in my file demonstrating that he no longer owned the timeshare.  I called the company that sent him the notice and confirmed that it uses public databases of timeshare owners.  The company admitted that the database could be outdated and that it sends thousands of notices to possible timeshare owners “fishing” for responses.  Again, the sense of urgency that the letter created triggered an immediate response.

With the amount of personal information that is available to the public today, these deceitful practices will likely increase.  Always view any such communication with skepticism, particularly if the notice implies that you must act right away.  When in doubt, search the Internet for the name of the organization or ask a trusted advisor to review the communication on your behalf.  

The best practice might be to wait a few days despite the ostensible urgency of the situation to think about it a little further.  Once you have calmed your nerves and you are able to think rationally, you will be in a better position to distinguish between a legitimate notice that needs to be addressed and deceitful advertisements that can be dismissed.    

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

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

Monday, May 11, 2015

Did You Really Hit the Jackpot?

An important-looking letter arrives in the mail.  You are informed that you just won a cash prize of millions of dollars.  The letter includes a check for a “partial payment.”  You are instructed to deposit the check and to call a toll-free number to claim the rest of your prize.  But you must act quickly, without delay!  It sounds too good to be true but you’ve heard of the sweepstakes company before and you’ve seen the advertisements on television where lives have changed because of a similar award.  The letter is not asking for money or any personal information – in fact, it accompanies a check made out to you for several thousand dollars!  What could be the harm in depositing the check and seeing what happens?

Unfortunately, there could be a lot of harm.  I recently reviewed such a letter for a client.  I am glad that the client contacted me to determine whether this letter was legitimate rather than calling the company directly.  Although I was immediately skeptical, as an attorney I knew that I had to do my due diligence to verify that the letter was indeed a scam.  If I had simply dismissed it without conducting a proper investigation and I turned out to be wrong, my client would have missed out on millions of dollars in prize money and I’d have to call my malpractice insurance carrier.

The letter appeared to be from a famous, reputable sweepstakes company.  The company’s readily identifiable logo was featured in the center of the letterhead.  But a close examination of the letter raised many red flags.

First, the letter instructs the recipient to call a specified telephone number “without delay.”  A reputable sweepstakes company would likely give the recipient a reasonable amount of time to respond.  

Second, the letter warns the recipient that federal and state laws require that the prize be kept “strictly confidential” and that disclosing to third parties the fact that the recipient is a winner will void the prize.  This would mean that the client contacting his/her attorney or other trusted advisor would invalidate the gift.  A reputable sweepstakes company would likely expect the recipient to obtain professional advice.  Furthermore, a reputable sweepstakes company would have nothing to fear if an attorney were to be involved.  

Third, the bottom of the letter featured logos of many famous companies that seemed to have no relation to the content of the letter.  The companies ostensibly represented included a lottery, a news publication, and a financial investment firm.  It made no sense for all of these companies’ logos to be disjointedly represented in a prize award letter.

I then examined the check for a partial payment of $7,000.  It was made out to the client and was from a reputable bank.  However, the payer in the top left-hand corner was not the sweepstakes company.  Instead, it was purportedly from a different corporation.  I had never heard of the corporation so I searched for it on the Internet.  The company was legitimate, but it was a shipping / freight company.  Why would a shipping / freight company be issuing checks on behalf of a sweepstakes company?  Why didn’t the letter provide an explanation for the connection between the shipping / freight company and the sweepstakes company?  

I called the shipping / freight company and asked to speak to the accounting department.  I explained to the representative from the accounting department that I had a check that was issued to my client purportedly from the shipping / freight company in connection with a sweepstakes.  The representative was familiar with the situation.  She asked me if it were in the amount of around $7,000 and I confirmed.  She stated that it was a fraudulent check, that a scam artist has been issuing counterfeit checks from the company to individuals and that they have blocked payment from such checks.  I thanked the accounting representative for her help.

I then did a quick search of the internet for “sweepstakes scams.”  I found an article that described many common such scams.  The article even quoted a representative from the famous, reputable sweepstakes company who said that notification of prizes over $10,000 do not come in the form of a letter but rather from an unannounced personal visit.  The article further described many common sweepstakes scams, one of them that fit the profile of my client’s situation.

The scam artist creates a fake letter from a famous sweepstakes company, figuring that the recipient will let his/her guard down if they think they recognize the source.  The letter includes a bogus check with instructions to call the “claims manager.”  When the client calls the claims manager, the manager will congratulate the client on winning the grand prize, will explain that taxes and fees must be paid in order to claim the millions of dollars, but that the sweepstakes company is advancing a partial payment to cover the fees.  The recipient is instructed to deposit the check and immediately wire the funds to s specified bank account.  Once those funds are received, the recipient will receive the rest of the prize.

By the time the banks realize that it is a fraudulent check, the scam artists has already taken thousands of dollars from the recipient.  The recipient might further be liable to the company whose identity was stolen and purportedly issued the check.  Instead of winning millions of dollars, the “lucky” recipient is scammed out of thousands of dollars.

On the one hand, the letter and the check seemed authentic.  The scam artist used psychological methods to encourage the recipient to let his/her guard down, to make it seem initially that there would be no harm in following through since no money or financial information is immediately requested.  Furthermore, to ensure rash decision-making, the letter claims that the recipient must act quickly and refrain from discussing the prize with anyone.  On the other hand, it did not take much effort or research to confirm that the letter was indeed a scam.  However, it is much more difficult for the supposed "winner" to confirm that such a letter was a scam than for a third party to do so because of the emotion involved.   

If you ever receive notifications of prizes, unclaimed property, or instructions indicating that you are under any sort of legal obligation to take action, always share such communications with trusted advisors.  Often an independent third party is more equipped to evaluate the veracity of such a notification then the person who is already contemplating how to spend the prize money.

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 taking action on any of the information presented in this article, you should consult a competent attorney who is licensed to practice law in your community.                

Monday, April 20, 2015

The Best Asset to Pass to Future Generations

I was very close to all four of my grandparents, especially my father’s parents.  I grew-up two miles away and often went to their house before and after school.  From an early age, they shared their family history with me, especially stories about how they escaped Communist Czechoslovakia and made a new life in the United States.  Although I remember many of their stories, as a young child it was hard for me to fully comprehend the scenario, especially without the benefit of a deep and mature understanding of the political situation at the time.

My grandfather died in 1993 and my grandmother died ten years later in 2003.  Fortunately, the details of their lives in Czechoslovakia and their daring escape across the border into West Germany were not lost.  They took the time to write their memoirs so that their history could be passed on to future generations.  From time to time I re-read their memoirs and always learn something new.

My grandfather spent his early adulthood in the travel and hospitality industries.  He traveled throughout Europe participating in many sports including ice hockey, tennis, swimming, skiing, and golf.  He worked at many resorts and spas and had contacts throughout Europe.  Through his work and his travels, he learned German and English as well as Czech.  While working at a travel office on Brno, Czechoslovakia, he met my grandmother.

My grandparents both described how they lived in fear when Hitler took their country in 1938 and 1939.  They also spoke of the danger during WWII of the American bombers flying overhead and how they built a makeshift shelter in the mountains.  At one point, my grandfather hid in the basement of his office during a bombing and didn’t think that he would survive.  In the midst of this danger, my father was born in Brno, Czechoslovakia.    

My grandparents described the euphoric feeling of seeing the American soldiers march through their town at the conclusion of WWII.  Because of his connections, his knowledge of the area, and his ability to speak English, my grandfather was hired by the American military after the War as an interpreter.  He also promoted tourism in Czechoslovakia among the American soldiers and military personnel who were stationed in Germany.  For three years, they lived in relative freedom, associating with the American military, going to parties at the Officers’ Club, and enjoying many outdoor activities.

However, when the Czech Coup occurred in 1948, my grandfather was viewed upon with suspicion since he never joined the Communist Party and had many connections with American, British, and Canadian military attaches.  He lost his job with the Ministry of Foreign Trade and knew that he had to escape the country otherwise he would be arrested as an enemy of the state.  My grandparents decided their best chance to escape would be to cross the border into Germany through twenty miles of thick forest in the countryside.

Due to a series of events, my grandmother and my father (who was three-years-old at the time) had to cross the border before my grandfather.  They were led by a guide for the first part of the journey.  However, within several miles of the German border, the guide stated that he could not continue any further because of personal danger.  My grandmother was left with her young son to complete the journey.  She was not strong enough to carry him and had to encourage him to keep walking.  He would occasionally sit down, cry, and refuse to walk but he would always snap out of it and continue forward.  They eventually made it to Germany where they were placed in a refugee camp.

My grandfather made the journey across the border through the same forest about a week later.  He was picked up by American soldiers in Germany and they were able to reunite him with my grandmother and father.  

Because of my grandfather’s connections, he was able to obtain a Visa to move to the United States with one catch: my father had the whooping cough and would not be permitted to accompany my grandparents.  They ended up entrusting his care with a foster family in Switzerland until he recovered.  About six months later, he was reunited with my grandparents in New York.

They had a very difficult time finding work and supporting themselves.  But again through my grandfather’s connections, he was hired to teach Czech at the Defense Language Institute in Monterey, California.  My grandparents were finally able to rebuild their lives and establish a solid foundation for my father, my son, and me in one of the most beautiful and exclusive places in the world.  What a legacy for a couple of Czech refugees: from Hitler’s invasion, to enduring WWII, to escaping Communist Czechoslovakia, to hard times in New York, to building an ideal life on the Monterey Peninsula!  

Among the assets my grandparents were able to pass onto future generations – a house, a club membership, and family heirlooms – their stories and their written memoirs are among the most treasured and significant.  Traditional estate planning naturally focuses upon material assets.  But, finding a way to also transfer family values, history, and stories to future generations so that they can understand their roots and their family’s place in the world is priceless.

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

Tuesday, April 7, 2015

Who Gets Robin Williams’ Tuxedo?

SFGATE recently reported that there is a dispute over the distribution of late actor Robin Williams’ estate.  His children contend that his estate plan leaves all of his assets to them.  His wife by a later marriage insists that certain items of tangible personal property were intended for her to keep.  The items in question include the tuxedo he was wearing when they were married, their wedding presents, family photos, and memorabilia including some awards.  Both sides are currently working on trying to resolve the disagreement outside of court.  The episode illustrates the ambiguity that can arise with respect to the distribution of tangible personal property.

“Real property” is land and anything growing on, attached to, or erected on it.  This includes houses, buildings, farms, etc.  “Non-tangible personal property” includes bank accounts, investment accounts, stocks, bonds, and businesses.  “Tangible personal property” includes movable physical items such as jewelry, artwork, knickknacks, and clothing – including tuxedos.

Most estate plans focus on real property and non-tangible personal property.  Such assets are often either re-titled to a revocable living trust or name a trust or a specific person or organization as the designated beneficiary.  Tangible personal property often does not have title and is thus not typically thought of as being trust property.  

However most estate plans transfer tangible personal property to a trust, either by a general assignment of personal property (i.e., a document that states all personal property – including tangible personal property – is transferred to the trust), or by a “pour-over will” which states that any assets that were not transferred to the trust during the trust-maker’s lifetime will be transferred to the trust upon death.

When Robin Williams created his trust and presumably left everything to his children, was he thinking about his tangible personal property?  Did he contemplate that “everything” would include the wedding gifts he and his spouse received and the tuxedo he wore at the wedding?  This is likely the key question at the heart of the impasse between his children and his wife.

If Williams had intended to allow his wife to keep certain items of tangible personal property, he could have included clauses in his trust that distributed those items to her before the rest of his trust estate was distributed to his children.  Some clients feel that including such clauses in the body of the trust is overwhelming, especially after spending so much time making decisions on “big picture” issues when designing their estate plan.  Furthermore, they fear that they might change their minds about certain items and worry about the effort and expense of executing a formal amendment each time they have a change of heart.  Such clients prefer to handle the distribution of tangible personal property by a separate writing executed sometime after the trust is established.

Although the law allows for the distribution of tangible personal property by a separate writing executed after the date of the trust, there are many technical rules for such a document to be legally effective.  Unknowingly violating these technical rules could accidentally void the separate writing, thereby frustrating the intent of the trust-maker.  A comprehensive trust should specifically allow for the distribution of tangible personal property by separate writing.  Furthermore, since the terms of a trust control how a trust can be properly amended and thus legally enforceable, a comprehensive trust will also state that any separate writing purporting to distribute items of tangible personal property that is signed and dated shall be an effective amendment to the trust.    

Although there are often articles in the news about disputes over items of tangible personal property, it is likely that in the vast majority of circumstances, the distribution of tangible personal property after the death of a loved one is handled fairly and efficiently.  However, it is worth contemplating whether there are certain sentimental items that should be specifically addressed within the estate plan.

KRASA LAW is located at 704-D Forest Avenue, Pacific Grove, California, and Kyle may be reached at 831-920-0205831-920-0205.
Disclaimer: This article is for general information only.  Reading this article does not establish an attorney/client relationship.  Before acting on any of the information presented in this article, you should consult with a competent attorney who is licensed to practice law in your community.  

Friday, March 20, 2015

Liz Taylor’s Diamond is No Best Friend

Marilyn Monroe famously informed the world that “diamonds are a girl’s best friend” in the 1953 movie, Gentlemen Prefer Blondes.  Apparently fellow Hollywood legend, Richard Burton, heeded that advice: he gave his then wife, Liz Taylor, a heart-shaped diamond known as the “Taj Mahal” for her 40th birthday.  In the aftermath of Liz Taylor’s death, the diamond is proving to be no “best friend” at all and is the center of a legal dispute involving her estate.

According to the LA Times, Taylor’s successor trustees hired Christie’s auction house to sell her personal property at auction.  The diamond was sold for more than $8 million to an anonymous buyer.  However, months later the buyer returned the diamond to Christie’s claiming that it was not from the Mughal Empire as he/she had thought.  Christie’s agreed to cancel the sale despite the fact that Christie’s made no guarantee as to the diamond’s history other than the fact that it was of “Indian origin.”  

After agreeing to cancel the sale in order to appease the buyer, Christie’s then insisted that the trustees return the proceeds from the sale of the diamond.  The trustees countered that the auction house violated its agreement with the trust by canceling the sale and is opposed to returning the proceeds.  Christie’s argues that it upheld its contract by successfully selling over $183.5 million worth of Taylor’s personal property and that the diamond represents a small portion of the overall sale, implying that the trustees shouldn’t have a problem returning the proceeds since the sale of the other personal property was so successful.  

It is up to the courts to determine who will prevail in this dispute.  However, an interesting question arises: did the law require the trustees to file a suit in this case?

The California Probate Code details several duties of trustees that are relevant in this example:   

Duty of Loyalty: a trustee must administer the trust solely in the interest of the beneficiaries.  Regardless of whether the trustees personally feel Christie’s is at fault, the trustees must consider the interests of the beneficiaries in every decision they make.   

Duty of Impartiality: a trustee must deal impartially with all beneficiaries.  If some beneficiaries feel that they should be happy with the proceeds from the sale of the other assets and should return the proceeds from the sale of the diamond but other beneficiaries feel differently, the trustee must take into account the differing interests of the beneficiaries.   

Duty to Control and Preserve Trust Property: a trustee must “take reasonable steps” to keep control and preserve trust property.  “Trust property” would include the proceeds from the sale of the diamond.  The trustee must proceed with caution before simply handing over almost $8 million in proceeds from the sale of the diamond just because Christie’s makes such a demand.   

Duty to Make Trust Property Productive: a trustee must make property productive.  Would returning the proceeds from the sale of the diamond be counterproductive?     

Duty to Enforce Claims: a trustee must “take reasonable steps to enforce claims that are part of the trust property.”  Fighting the insistence from Christie’s to return the proceeds from the sale of the diamond and pursuing a breach of contract suit against the auction house are certainly “claims that are part of the trust property.”  However, what are “reasonable steps” in this scenario?  Do the trustees need to factor in the expense of litigation, the delay of court proceedings, and the possible bad press as a result of a potential court battle?    

Duty to Defend Action: a trustee must “take reasonable steps to defend actions that may result in a loss to the trust.”  Trying to stop Christie’s from taking the proceeds back is certainly defending an action that might result in a loss to the trust.  Is participating in a court battle in this situation “reasonable”?   

This dispute concerning Liz Taylor’s diamond illustrates all the factors that prudent trustees must weigh when determining what action to take with respect to the administration of a trust.  Trustees cannot simply be driven by how they personally feel about the situation.  Instead, trustees have legal obligations to the beneficiaries of the trust and the intent of the decedent’s estate plan as a whole that often limits their options and dictates how they proceed.  

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 create an attorney/client relationship.  Before acting on any of the information presented in this article, you should consult a competent attorney who is licensed to practice law in your community.        

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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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