Patricia Leong

New Year Probate Changes

January 29, 2012 by Patricia Leong Leave a Comment

As of the first of this year, there was a big change in Probate law for the State of California. There are two standard types of Probate in California: a court probate, which typically last nine months to a year, or what is known as “summary probate.” Summary probate, also known as “small estates probate,” can happen as soon as 40 days after someone’s death. It is as simple as the preparation of a form and attachment of a death certificate. The form must comply with State law, and must be accepted by financial institutions. If real property (which is land) is involved, there is a process that just involves filing with the Court, having it approved, and recording the Court’s order with the County Recorder.

The big change this year is the change in amount that qualifies for this shorter process. As of January 1, 2012, as long as the estate does not exceed $150,000, this process can be utilized to collect assets. Prior to January first, the amount was $100,000. This means that heirs can collect assets in a way that is much faster and less costly. To determine whether this method is applicable, one must determine the fair market value of the asset. For example, if the asset is stock, it is based on the current stock price. If the asset is real property, there is a process to have a court approved appraiser value the property to determine if it qualifies.

This change in law will be a great benefit to the many heirs who are trying to collect assets upon the loss of a loved one. It will save time and money, and a great deal of stress. Often, I find that clients are asked for probate papers, otherwise known as a Letter Testamentary, by a financial institution, when this summary probate procedure can be utilized. If you are not sure, it can be well worth the effort to consult with an attorney to find out if you are dealing with an estate that is subject to these new rules.

I Do (or Not?)

December 4, 2011 by Patricia Leong Leave a Comment

For people who are living together and building families, getting married is not always automatic. Some couples, for various legal reasons, can’t get married. Some people choose not to get married. I’d like to address some of the legal ramifications of the impact of getting married versus not getting married.

As same gender couples can testify, there are some significant legal benefits that married couples have. For example, a widowed spouse, as well as a divorced spouse of marriages lasting 10 years or more, can receive a higher Social Security payment during retirement, based on the Social Security payment due to the higher earning spouse.

Married couples can file a joint Federal Tax Return, which may be either an advantage or disadvantage, depending on the relative income levels of the couple. In many cases, a spouse is entitled to an ongoing portion of a pension should the pensioner pass away. With regard to health insurance benefits, some companies allow the designation of a domestic partner, but many do not. This means that company health insurance benefits may not be available to a partner when the couple is not married. In this day of the high cost of medical insurance, this can be a very significant cost. If hospitalized, a partner often does not get the respect that a spouse would get when receiving information or making decisions regarding medical care, particularly if there is a not a written Power of Attorney.

According to the United States Government Accountability Office (GAO), there are 1,138 statutory rights gained by a couple who gets married. Marriage also means that spouses have legal responsibilities for each other. Some couples choose not to marry deliberately for economic reasons, such as the loss of a pension by a widow or widower. If one partner has significant liabilities or chronic illness, they may not wish to impose potential liabilities on the other. In our complex society, we may marry for love, but are subject to the law, for better or for worse.

Turning Eighteen

November 6, 2011 by Patricia Leong Leave a Comment

In California, the age of majority is 18. Once a young man or woman reaches 18 years of age, he or she is considered an adult for all purposes other than drinking alcohol. How does this impact the young person and the parents?

One of things that often surprises parents is that the young person’s right to privacy outweighs all rights that the parents have with regard to the child. This means that legally, the parent has no rights to see college grades or medical information. This, despite the fact that the parent is paying for the service. One of the most important things that a parent may consider is to have the young person sign an Advance Health Care Directive. This allows the parent (should the young person designate him or her) to make medical decisions in case of emergency.

Despite the fact that the young person is an adult, the parent may still be held legally responsible for the acts of the young person. For example, driving the family car and having an accident can expose the parent to liability, if the parent is still the owner of the car and carries the insurance. Putting the car into the child’s name and getting a separate insurance policy mitigates this risk, however the insurance will be at a significantly higher price.

The California State Bar has two publications that can be very helpful to teenagers and their parents in terms of understanding these legal issues. The first is called “Kids and the Law: An A-Z Guide for Parents.” The brochure explains what rights and responsibilities that a parent has with regard to a child, and what protections and rights that the child has. The second is called “When You Become 18: A Survival Guide for Teenagers.” These helpful publications can be ordered by looking online at www.calbar.ca.gov under public services.

Legal Lines – What About Your Pet

October 1, 2011 by Patricia Leong Leave a Comment

For many of us, pets contribute greatly to our happiness and well-being. Because they are such an important part of our lives, we worry about what would happen if we are hospitalized or otherwise unavailable.

The most important thing is to make a plan. Consider who might be willing to take your pet. Is that person is capable of the care that your pet requires? Have a discussion to be sure they are indeed willing to become the pet’s new owner, with all of the responsibilities that go along with pet ownership. You may also wish to have a backup person, should the first person be unable or unwilling to take the pet when the time comes. Another thing to think about: Is there a need to have someone who can take custody of the pet temporarily, if there is travel or other arrangements that need to be made?

Sometimes, there is no one that you can think of who would be willing or able to take your pet. Other local options include the Guardian Program run by the Animal Rescue Foundation (ARF), and the SIDO program run by the San Francisco SPCA. Both have arrangements where they agree to care for a pet temporarily while finding it a new home, and both require advance screening and paperwork prior to making such a commitment.

Once you have decided who is going to take your pet, it is a good idea to put the arrangements in writing. Instructions regarding the ownership of your pet can be done in a Will or a Trust. Often, pet owners will make a gift to the new owner to ease the financial burden on the new owner, informally ensuring that funds are available if needed. If you wish to document the arrangement more formally, California law allows for a Trust to be set up specifically to take care of your pet. Making a plan, and having it in writing ensures that your loving companion gets the care you would desire.

Living Trust

September 8, 2011 by Patricia Leong Leave a Comment

When you set up a Living Trust, it is critical that the followup work of moving the assets into the Trust is tackled and completed accurately.

Most people’s largest asset is their residence. To put the residence into the Trust, you must execute a valid Deed, which must be recorded at the County Recorder’s office where the property is located. This also applies to any rental property that you may own. It is also a good idea to contact your liability (homeowners) insurance agent to request that the Trust be added as an endorsee on the policy.

Next on the list are cash and investment accounts. Such items as checking accounts, savings accounts, CDs, brokerage accounts, mutual fund accounts, DRIP (stock) accounts require a change in ownership to the Trust. You will need to contact the financial institution holding the account and find out the procedures for making the change into your Trust. Be careful. Some institutions have a policy of closing the old account and opening a new Trust account. This can cause you a problem if you have a checking account you want to change, but you have automatic deposit or bill payment from that account. If you choose to leave the account out of Trust, you can request the institution to designate a beneficiary for the account. These are often called “POD” (Pay on Death) or “TOD” (Transfer on Death).

Transferring accounts into your Trust does not include such items as IRAs, 401(k)s, Annuities, and other retirement or tax deferred accounts that may hold stocks or mutual funds. These types of accounts pass according the beneficiary designation form that you have filed with the company. Life insurance is also handled by beneficiary form. It is a good idea to review the forms periodically to be sure that they are correct, but the account name will never change to the name of the Trust.

Your Trust is designed to keep your assets out of Probate Court, saving your Estate time and money. For maximum effect, you need to ensure that your assets are in your Trust.

Legal Lines: Re-Financing

August 4, 2011 by Patricia Leong Leave a Comment

During the last few years, mortgage rates have been so attractive, it is unusual to find someone who has not refinanced their home or rental property. Many lenders are not willing to finance a property that is held by a Living Trust, resulting in the homeowner agreeing to remove the property from the Living Trust in order to get the loan. Commonly, the Title Company handling the escrow for the refinance will create and record a Deed to remove the property from the Living Trust. The refinance of the mortgage loan is completed, and all is well.

Or is it? Now the property is out of the Living Trust, and has lost the protections that the homeowner intended when he or she spent the time and money to set up a Living Trust. Many times the homeowner is unaware that the property is out of the Living Trust, or has been reassured that the property would be put back into the Living Trust at the conclusion of the refinance process, and occasionally that is true. However, I have seen many times that the transfer back into the Living Trust has never occurred.

There are a number of problems this can create. Depending on what the Deed taking the property out of the Living Trust says, if it is a joint Living Trust, and one of the spouses passes away, a Probate can be required to put the deceased spouse’s share back into the Living Trust. The goal of setting up a Living Trust is to make things easier, but having to do an unexpected Probate is frustrating and expensive.

I tell all of my clients to call me if they refinance, so that we can ensure that this does not happen to them. Want an easy way to check on whether your home is in your Living Trust? Take a look at your current property tax bill. If you have refinanced, and the letters “TR” are not after your name, you should investigate. Better to find out now than later!

Legal Lines – Community Property

July 10, 2011 by Patricia Leong Leave a Comment

Although most people have heard the term “community property,” many people are unaware of what it means and how it affects them. Most of the United States have marriage and inheritance laws based on English law, with the exception
of Louisiana, which is based on French law, and eight states, including California, where our laws come from our Spanish heritage.

Under English law, historically wives were protected in case of divorce or their husband’s death by certain laws such as the right of dowry and the giving of alimony. Under Spanish law, both husband and wife are considered to have
contributed their efforts to better the family, creating a “community.”

The result of this is that all assets earned during the marriage, or purchased with those earnings, are community property, owned equally.

For estate planning purposes, it is important to be aware that there are two different types of property in a marriage. “Separate property” is property that is either brought to the marriage, or acquired by gift or inheritance.

Many of my clients are concerned that when they make gifts to their children, or give assets to their children upon their death, that the assets could be taken away in a child’s divorce. Often a child will automatically add the spouse’s name when inheriting an asset. This makes it difficult to identify the inheritance.

One way I am helping clients protect their children is to leave a child’s inheritance in trust. In this way, the child can have control, and yet it is easy to identify that the asset is an inheritance, which is clearly separate property. This protects the child in case of divorce, while making the inheritance available for his or her enjoyment. If the child truly wishes to make a gift of the property to his or her spouse, it can be achieved. However, it is a decision made thoughtfully, with an awareness of the consequences, rather than a casual action which could have serious consequences.

Legal Lines – Guardianship

June 7, 2011 by Patricia Leong Leave a Comment

Who is going to take care of my child if I cannot? That is the first and foremost consideration of Estate Planning for parents with children under the age of 18. This brings up the question of Guardianship. There are two types of Guardianships in California.

A Guardian of the Person is someone who is appointed by the Court to be responsible for the child’s physical well being. Parents typically nominate the guardian in their Wills. If there is no Will, the family member who wishes Guardianship will apply to the Court. Either way, the Court does an independent investigation, and makes the appointment. Interestingly, the guardian and the caregiver can actually be separate people. The guardian decides what is the best living situation for the child, which may or may not be with the guardian. For example, I have named my 22 year old daughter as guardian for her 13 year old brother. She may decide that he would be better off living with his grandparents or family friends, depending on life circumstances at that time. The choice would be likely be different at age 13 than age 16.

A Guardian of the Estate is someone appointed by the Court to be responsible for the child’s money. It is unusual for children to have or receive money in their own names, as most people hold funds for children in custodial accounts. It is also extremely undesirable; therefore most people leave inheritances to children in a Trust. If funds are held under a Court Guardianship, the Guardian must report to the Court each year, and the child receives the funds outright at when reaching the age of adulthood (18 in California). Going to Court is always expensive, eating away at the funds, which are limited to investing in Money Markets or CDs. Another point to consider: How many 18 year olds are capable of making good choices when faced with a large sum of money? It is important to be educated when making choices to protect your children. I’d be happy to discuss these matters with you.

Legal Lines – Getting Organized

May 8, 2011 by Patricia Leong Leave a Comment

When I see new clients, one of the first things I ask them is whether they have any existing estate planning documents. Is there a Trust, Will, Financial Power of Attorney, Advance Health Care Directive? Often I find out that clients have to search through their files to bring me the requested paperwork. Documents are missing pages, several copies of the same thing—many with no signatures. Some people are fearful of throwing anything away; others are foes of clutter, shredding everything in sight!

It is important to keep a copy on hand of each of these documents, and to keep the Original Signature Documents in a Safe Deposit Box or Fire Safe. Unsigned copies should be shredded, to avoid creating confusion. Only the most current documents should be kept, and the rest shredded. ONE EXCEPTION: you should never shred your original Trust, unless it has been revoked. Changes to your Trust, such as Amendments or Restatements should be kept with your Trust, since they are tied to the existence of the original Trust.

Your Executor/Trustee should know that you have a Trust and your Attorney’s information. One of my clients was a niece helping her very ill uncle. The only way we found out that he had a Trust was to look at the title for his house. Then she had to hunt through all of his records to find the documents. Since she was able to find his Trust and Power of Attorney, I was able to help her take charge of his accounts for his benefit very quickly; otherwise we would have had to go to Court to apply for a Conservatorship, which defeats the purpose of having your Estate Planning documents done in the first place.

Tax season is over. Now is the time to make a point of organizing all your paperwork while we are in between seasons and busy holidays.

Legal Lines – Selecting a Trustee

April 12, 2011 by Patricia Leong Leave a Comment

One of the questions people ask me is, “How do I choose a Trustee of my Trust?” For some clients, it is very obvious to them who it should be, such as the oldest child, a brother or sister. But for many, it is not so obvious.

There are two qualities I consider the most important in choosing a Trustee. The first is integrity. A Trust is a written contract, and it’s not a coincidence that the word “trust” is used as a title. These days, it seems like Probate is a dirty word, but it is good to remember that the Probate Judge serves as watchdog to see that things are done correctly. Instead of having the Judge set the timetable and make sure that your wishes are carried out, you are relying on the honesty of the Trustee to manage and distribute your Trust according to your written document.

The second is an ability to get things done. If the Trustee is a procrastinator, it is a real problem. Many people do not like to deal with paperwork, but that is a big part of the job of Trustee. The Trustee has to figure out how to collect and manage the Trust assets, file taxes, and keep beneficiaries informed.

If a Trustee does not carry out his or her duties in an honest or timely way, then often the only thing that a beneficiary can do is to hire an attorney and take the Trustee to Probate Court. This is a heavy burden on a beneficiary, since it is costly to start litigation, especially if the beneficiary waiting for his or her inheritance. People set up Trusts to save time and money, so choosing the right Trustee is a crucial part of making it work.