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We frequently get calls from beneficiaries wanting to change the title to California vacation homes. They already have a probate process in another state and merely need help “transferring title.” However, transferring title to real property after the death of an owner is usually not a simple process. If there is no joint tenant on the property, and the property is not in a Trust, a probate will be required to transfer title to the heirs or beneficiaries of a Will.

An ancillary probate is a probate proceeding for a decedent who was a resident of another state or country. This comes up frequently when residents of another state have a vacation home in California worth more than $150,000. In this case, there will be a primary probate in the decedent’s home state and then an ancillary probate in California. Unfortunately, the distinction between a primary and ancillary property is merely semantic. The same rules and procedures must be followed for an ancillary probate as they would for a primary probate. This means the process will take a minimum of four months, requires a formal petition and at least two hearings, the property must be inventoried and appraised and a publication must be made in a local paper.

An ancillary probate can be avoided if the property is in a Trust. An uncomplicated trust set up in California funded with the California real property will allow a much simpler transfer of title to that property. Furthermore, even a Trust set up in another state can hold real property in California.

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The U.S. House of Representatives voted earlier this month to repeal the Federal Estate Tax. Republicans have long voiced their opposition over this tax but a vote to repeal hasn’t occurred in over a decade. The measure passed with 240 in favor and only 179 opposed. The vote breakdown was almost entirely on party lines with 7 Democrats joining Republicans in favor of repeal. However, there aren’t enough votes in the Senate and the President would likely veto the repeal so Estate Taxes aren’t going away anytime soon. However, this move sets up a potential repeal in the future especially if Republicans gain more seats in both houses of Congress and the Presidency in 2018.

As previously discussed here, the Estate Tax exclusion amount is currently $5,430,000 (and is indexed for inflation). So, if you die with less than that amount in your estate, you pay no estate taxes. The Tax Policy Center estimates that only 2 out of every 1,000 people who die pay any estate taxes. Most families won’t have to worry about this tax at all. The President’s Budget includes a provision lowering the exclusion amount to $3,500,000 which would open that tax liability for more individuals and families, but the vast majority of Americans would still be entirely unaffected by this tax. It will be very interesting to see what happens to the Estate Tax in the next few years.

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Bankruptcy can disrupt your estate plan. We previously discussed here the problem bankruptcy creates if you have assets in joint tenancy with a bankruptcy debtor. However, bankruptcy can also effect your estate plan for your beneficiaries if certain precautions are not followed. A recent case, Frealy v. Reynolds, highlights this problem. A Trust beneficiary was part of bankruptcy and the bankruptcy Trustee attempted to get all of the beneficiary’s interest in a Trust to pay off creditors. The Ninth Circuit ruled that a bankruptcy trustee’s recovery was limited to 25% pursuant to the Probate Code. However, 25% is still a large amount.

Imagine the situation of leaving your entire trust estate to two children outright and free of trust. You think this is fair and equitable. However, if one of them is in a bankruptcy, his share will be greatly reduced after the bankruptcy court takes 25% to pay off your child’s creditors. Your intention of providing equally for your children has now been disrupted.

A more effective approach would leave the bankrupt child’s assets to a spendthrift Trust or keep the assets retained in Trust with spendthrift provisions. The Trustee could have the discretion to distribute to the child but not if the money will be used to pay creditors. The Trustee would not be obligated to make payments and therefore the beneficiary is not considered the owner of the assets. Since the beneficiary is not the owner the bankruptcy court cannot compel the distributions which would go to the creditors. Instead, the Trustee may wait until the bankruptcy proceedings are over to make any distributions to the beneficiary.

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California has roughly 900 new laws that will go into effect in 2015. Some of the highlights are: Immigrant Driver’s Licenses The DMV will now issue driver’s licenses to undocumented immigrants if they meet every qualification including passing a driving test.
Plastic Bag Ban Grocery stores will stop using single-use plastic bags and stores will be allowed to charge $.10 for paper bags. Residential Care Facilities The state may block admissions to residential care facilities that have been cited for violations. Facilities for the elderly must have at least one (1) carbon monoxide detector installed Residential care facilities have only 10 days to remedy license deficiencies. State Amphibian For the first time, California has an official state amphibian. It is the red-legged frog who was popularized in Mark Twain’s “The Celebrated Jumping Frog of Calaveras County.” Absentee Voting Absentee ballots mailed on election day will be counted if they arrive within three days. Previously, absentee ballots had to be mailed before election day. You can read about more important new laws in the LA Times here.

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We have previously discussed the importance of keeping your estate plan up-to-date. It’s a good rule of thumb to have an experienced estate planning attorney review your documents at least every five years. Out dated documents may have unnecessary provisions that can be very detrimental.

Recently, we are seeing a lot of clients who have an A/B split trust which may be unnecessary for their current situation. Back in the days of low estate tax exemption amounts, A/B Trusts were a convenient and effective way of reducing estate tax liability. However, the current estate tax exemption amount is $5,340,000 in 2014 and will rise to $5,430,000 in 2015. This means that you won’t pay a penny in estate taxes if your estate is less than the exemption amount.

Not so long ago, the estate tax exemption was only $1,500,000 (in 2005) so many trusts had A/B split provisions automatically placed in the document. This is great for reducing estate tax liability but can restrict the use of Trust funds for the Surviving Spouse. Under a trust with a A/B split, when the first spouse dies, 50% of the assets are transferred into a Decedent’s Trust (also called a Trust B) which usually cannot be amended or revoked by the Surviving Spouse. Also, the Surviving Spouse generally does not have access to principal and can only receive the income from the assets in this Trust. It can be difficult explaining to a Surviving Spouse that she doesn’t actually have use of all of the Trust funds when her spouse dies.

However, a benefit of the A/B split is that your Surviving Spouse cannot disinherit your beneficiaries. This is important especially in blended families where both spouses have children from prior marriages. Under the A/B split a Surviving Spouse cannot change the provisions of the Decedent’s Spouses’ Trust and therefore cannot disinherit step-children.

If your assets have changed significantly since your trust was initially created, or you no longer believe that an A/B split Trust is right for you contact an experienced estate planning attorney.
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As Palm Desert estate planning attorneys, we frequently see clients with beneficiary designation issues. A recent article in the Wall Street Journal highlights this integral part of estate planning. A Will or Trust is very important but will not work for assets with beneficiary designations. Every year you should check your beneficiary designations to confirm they are valid and accurate.

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Some celebrity estates are embroiled in the media and legal battles while others remain private and relatively peaceful. Here are some lessons learned from the estates of the rich and famous.

Fund Your Revocable Trust

Recently deceased Paul Walker set up a trust for the benefit of his minor daughter. However, he failed to fund it so it will eventually be funded under the terms of his pour-over will when the probate is closed. His will and his reportedly $25,000,000 in assets is now public record through the probate court proceedings in Santa Barbara, California.

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As estate planning lawyers in Palm Springs, we frequently get asked by clients to prepare deeds transferring property to children. As we have previously discussed, using deeds as an estate plan is very risky and not recommended. A recent bankruptcy ruling in Oklahoma highlights this problem:

Whether for carpentry or estate planning, it is usually a good idea to use the right tool for

the job. Unfortunately, when it comes to estate planning and asset transfer, people are

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As Estate Planning attorneys in La Quinta, we frequently get calls from beneficiaries who have just received notice that they are named in a trust. Sometimes they require our services; sometimes they do not. Below is a guide to help trust beneficiaries through the murky waters of trust administrations.

Step 1: Read the entire Trust and all amendments

If you do not have a copy of the trust, request one. In California, all beneficiaries are entitled to a copy of the trust instrument and all amendments. If something is unclear in the trust, ask questions. You may be able to get satisfactory answers from the Trustee or the Trustee’s attorney. If you don’t you may need to contact a lawyer.

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The IRS recently declared that same-sex married couples will enjoy the same tax treatment as straight couples beginning on September 16, 2013. This is an important decision since the practical realities of life post-DOMA were uncertain. Now, same-sex married persons can file joint returns, amend previous returns and request refunds for the past three years. Additionally, the IRS explained that it will recognize any legal marriage irrespective of the state of residence of the filers. This means that a gay couple in Kansas could travel to Washington and get legally married and this marriage would be recognized by the IRS. When the Kansas couple returns to their home state they must file as a married couple on their federal income tax returns. (They would not be able to file as a married couple for their state tax returns, however.)