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LEGAL RECAP: Estate Planning – 06/19-22/17

Legal Recap of the Week

Don’t Be Left in the Dark – Part One

Too often, beneficiaries do not receive adequate communication about their inheritance. Beneficiaries have rights and they need not sit by idly and wait until the trust/estate representative voluntarily provides material information. On the other side of the coin, trustees and executors have obligations they must fulfill, while acting in the best interest of the beneficiaries.

Read Rob’s advice

Don’t Be Left in the Dark – Part Two

In Part One of this series, we discovered that some beneficiaries do not receive adequate communication about their inheritance, while some trustees and executors have obligations they must fulfill, while acting in the best interest of the beneficiaries. What obligations do trustees have and what rights do Trust beneficiaries have?

Find out now

QUESTION: Are You Confident About Your Estate Planning Team?

Estate Planning is not static nor is it an individual endeavor. Estate Planning evolves over time. It’s a “team sport”. If you have a team, you might as well assemble the strongest team possible. In this article we talk about what comprises an estate planning team: both professional advisors and personal folks (e.g. family and/or friends). Who are candidates to assist you, as needed? There’s no time like the present to: reflect on what team members are in place; decide whether or not these people are still the best suited to fill their position; and take affirmative steps to substitute for and add team members, as necessary or appropriate.

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LEGAL READ: Estate Planning for IRAs – 7 Important Rules to Know

Many people have a significant portion of their wealth in their Individual Retirement Accounts (IRAs). Yet, the rules related to inheriting an IRA are often shrouded in mystery. The IRA owner should be sure he or she has primary and contingent beneficiary designations on file with the IRA custodian and that IRA planning is coordinated with his or her estate planning. People inheriting an IRA should obtain legal, financial and tax advice and proceed with great care before taking any action with respect to the IRA being inherited. Here is some good general insight.

Find out more

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This article is intended to provide information of a general nature, and should not be relied upon as legal, tax, financial and/or business advice. Readers should obtain and rely upon specific advice only from their own qualified professional advisors. This communication is not intended or written to be used, for the purpose of: i) avoiding penalties under the Internal Revenue Code; or ii) promoting, marketing, or recommending to another party any matters addressed herein.

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Mr. Silverman is an attorney with R. Silverman Law Group, 1855 Olympic Blvd., Suite 125, Walnut Creek, CA 94596; (925) 705-4474; rsilverman@rsilvermanlaw.com.

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REAL ESTATE LEGAL SERVICES: Need to find a real estate attorney in Walnut Creek CA? Contact Robert Silverman at 925-705-4474 for legal advice on Real Estate Titling, Limited Liability Company (LLC) Formation, Purchase/Sale Transactions (Residential & Commercial), Commercial Leasing, Real Estate Legal Representation, Joint Ownership (aka T.I.C or Equity Share) Agreements, Buyer/Seller Disputes, and Promissory Notes & Deeds of Trust.

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LEGAL READ: Estate Planning for IRAs – 7 Important Rules to Know

IRA Word Cloud Concept angled with great terms such as individual, retirement, account, plan and more.By Robert J. Silverman, Attorney at Law

INTRO: Many people have a significant portion of their wealth in their Individual Retirement Accounts (IRAs). Yet, the rules related to inheriting an IRA are often shrouded in mystery. The IRA owner should be sure he or she has primary and contingent beneficiary designations on file with the IRA custodian and that IRA planning is coordinated with his or her estate planning. People inheriting an IRA should obtain legal, financial and tax advice and proceed with great care before taking any action with respect to the IRA being inherited. Here is some good general insight.

Many people establish an Individual Retirement Account (“IRA”) and much is written about these interesting investment vehicles. They are highly touted because they can be funded with pre-tax dollars (i.e. taxpayers can receive a tax deduction for IRA contributions, up to certain limits). Moreover, these accounts are able to grow on a tax deferred basis until funds are withdrawn, subject to certain penalties that can be imposed if the IRA owner withdraws before reaching the age of 59 1/2, and subject to mandatory minimum required distributions the year after the IRA owner turns 70 1/2.

Despite the fact that aging workers and retirees have built up substantial wealth in IRAs, and that IRAs commonly represent a very significant percentage of a person’s total assets, the topic of inheriting IRAs doesn’t receive a lot of media coverage. Even the basic rules and issues involved in inheriting IRAs are sometimes unknown to or misunderstood by IRA owners.

So, what should an IRA owner know and what should an IRA inheritor know about this subject? Below are important pieces of the puzzle, but first a caveat: whether you are an IRA owner or IRA inheritor, be sure to talk to your financial and tax advisors about all relevant details and alternatives before taking any action, as IRA rules and exceptions are many and complex!

1) The beneficiary designation on file with the IRA custodian (i.e. financial institution) at the time of the IRA owner’s death governs who is entitled to inherit the IRA, and the IRA goes to the beneficiary without being subject to probate. The IRA owner’s Living Trust or Will does not control this unless there is no beneficiary designated or no beneficiary alive upon the owner’s death.

2) It is imperative that you confirm that your IRA custodian has a beneficiary designation on file that: a) lists the primary beneficiary(ies) you want to inherit your IRA (and if multiple beneficiaries, the fractional interest to go to each); and b) designates a secondary/contingent beneficiary(ies) – in case the primary beneficiary predeceases you.

3) If you are the designated beneficiary and thus inherit all or a portion of an IRA, you have the choice to: a) continue to own the IRA as an “inherited IRA” or “stretch IRA”, which enables you to enjoy tax deferred growth of the IRA assets over your life expectancy OR b) cash out the IRA, pay all of the deferred taxes and be left with the remaining post-tax funds that will no longer be in a tax-deferred vehicle. Note that spouse beneficiaries have additional options.

4) IRA inheritors choosing to keep an IRA must be very careful in giving instructions to the IRA custodian. If you are not the IRA owner’s spouse, the IRA must not be put into your name or touch your hands in any manner; rather, it must stay in the name of the deceased IRA owner, with you listed as the beneficiary.

5) An IRA owner needs to coordinate estate planning of other assets – e.g. via terms of a living trust and/or a Will – to make sure everything is integrated. Absent such coordination, unintended consequences can occur. For example, suppose a person has a $500,000 IRA and $1.5 Million of other net assets. The IRA owner has a Living Trust that provides for cash gifts of $100,000 to each of his five grandchildren ($500,000 total) and the balance to his children. The IRA owner is under the impression that the $500,000 IRA will satisfy the $500,000 of cash gifts to the grandchildren specified in his Trust. However, if no express language to that effect is stated in the Trust, the result will be that the grandchildren receive the $500,000 IRA from the IRA custodian as the designated beneficiaries and an additional $500,000 in cash gifts from the trustee of the Trust.

6) If you have charitable intent, consider the tax efficiency of designating a charity as beneficiary of your IRA. Unlike with loved ones, the charity will not incur the burden of paying deferred income tax when the charity withdraws the IRA assets.

7) If you have minor or young adult children, you should discuss with your estate planning attorney the pros and cons of naming your Living Trust, rather than the children directly, as beneficiaries or contingent beneficiaries of your IRA.

This article is intended to provide information of a general nature, and should not be relied upon as legal, tax, financial and/or business advice. Readers should obtain and rely upon specific advice only from their own qualified professional advisors. This communication is not intended or written to be used, for the purpose of: i) avoiding penalties under the Internal Revenue Code; or ii) promoting, marketing, or recommending to another party any matters addressed herein.

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Mr. Silverman is an attorney with R. Silverman Law Group, 1855 Olympic Blvd., Suite 125, Walnut Creek, CA 94596; (925) 705-4474; rsilverman@rsilvermanlaw.com.

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ESTATE & TRUST ADMINISTRATION: Need to find an experienced estate & trust administrator in Walnut Creek CA? Contact Robert Silverman at 925-705-4474 for legal advice on a Revocable Living Trust, “Summary” Estate Administration, Trust/Estate Beneficiary Representation and Will & Trust Disputes.

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QUESTION: Are You Confident About Your Estate Planning Team?

Photo of R. Silverman Law Group TeamBy Robert J. Silverman, Attorney at Law

INTRO: Estate Planning is not static nor is it an individual endeavor. Estate Planning evolves over time. It’s a “team sport”. If you have a team, you might as well assemble the strongest team possible. In this article we talk about what comprises an estate planning team: both professional advisors and personal folks (e.g. family and/or friends). Who are candidates to assist you, as needed? There’s no time like the present to: reflect on what team members are in place; decide whether or not these people are still the best suited to fill their position; and take affirmative steps to substitute for and add team members, as necessary or appropriate.

As always, the first question about estate planning is: do you have an estate plan? Naturally, if the answer is no, you should change that by working with an experienced estate planning attorney to establish and obtain advice about core documents, including a living trust, will, power of attorney and advance health care directive.

If you have an estate plan, the next question is: when was the last time you had it reviewed and updated with legal counsel? Consumers sometime view estate planning as a static, one time event. It’s not. Your life and those of your loved ones change. Your financial situation has ups and downs. New tax law is passed. Estate planning law and practice evolves. As I’ve written frequently, it’s generally a great idea to engage in a comprehensive estate planning review at least every 3-5 years, or sooner if anything material changes in your financial or personal life.

If you have an estate plan, you also have an estate planning team. The team may seem to consist of just your estate planning lawyer. Who else might you consider or hire to be part of your team? Albeit some of these team members play smaller and some larger roles, they might include (among others) the following professionals, as merited – your:

    • tax accountant;
    • financial advisor;
    • insurance (life, disability, long term care, etc.) agent(s);
    • business attorney;
    • banker;
    • real estate agent;
    • mortgage broker

If you have read my articles before, you know I place a high value on hiring excellent professional advisors. A solid investment in the right professional team members can pay off handsomely in helping you make a series of important decisions throughout your life. People establish and continue relationships with various professional team members for a whole host of reasons. Interestingly, these reasons often do not include that the client is extremely confident about the ability, responsiveness and ethics of a particular advisor.

In my view, it’s very important to evaluate carefully when hiring, and re-evaluate at appropriate intervals, your level of confidence in each of your professional advisors. If it’s anything but very high, you should really make a change or add a team member who can fill a particular need in an expert manner. We are fortunate to live in an area in which there are many fine professionals from whom one can choose.

Aside from professional advisors, you’ll need to assemble the right “personal team members” – typically loved ones and/or close friends (and in appropriate circumstances, private or institutional fiduciaries). These are folks you appoint to serve, at the appropriate time when called upon, a critical role in your estate plan, including:

  • The successor trustee(s) of your living trust;
  • The executor and successor executor(s) of your will;
  • The person(s) you nominate in your will to serve as guardian of your minor children;
  • The primary and successor agents you nominate in your Advance Health Care Directive to make medical decisions if you become incapacitated;
  • The primary and successor agents you designate under your Durable Power of Attorney to handle your financial matters if you become unable to do so.

Just as it’s important to have a full, excellent team of professional estate planning team members, it’s essential that your estate planning documents designate the key personal team members who are most likely to carry out your affairs responsibly and in accordance with your wishes when the need arises. Your estate planning attorney can and should play a valuable role in helping you identify sound, objective criteria for making these appointments.

Of course, subjective and emotional issues should not be ignored or dismissed; however, a seasoned estate planning attorney and other professional team members can be very helpful in identifying potential conflicts, warning signs, risks and problems with a client’s initial instincts about who will fill these personal team member positions. The neutral “reality check” such professionals are able to present – particularly when based on many years of actual experience helping people plan and administer trusts/estates – should provide powerful assistance in helping you appoint an estate planning team in which you have justifiable confidence.

Do you remember those you chose (when your documents were originally drafted or last revised) as primary and alternates for each of the handful of critical roles I identified above? If not, it should only take a few minutes to pull out your documents and check. If you don’t feel very strongly that these are your best current candidates, be proactive and work with your estate planning attorney to re-evaluate these prior decisions and revise your documents to set up the optimal team.

This article is intended to provide information of a general nature, and should not be relied upon as legal, tax, financial and/or business advice. Readers should obtain and rely upon specific advice only from their own qualified professional advisors. This communication is not intended or written to be used, for the purpose of: i) avoiding penalties under the Internal Revenue Code; or ii) promoting, marketing, or recommending to another party any matters addressed herein.

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Mr. Silverman is an attorney with R. Silverman Law Group, 1855 Olympic Blvd., Suite 125, Walnut Creek, CA 94596; (925) 705-4474; rsilverman@rsilvermanlaw.com.

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ESTATE LEGAL SERVICES: Need to find an estate planning attorney in Walnut Creek CA? Contact Robert Silverman at 925-705-4474 for legal advice on Revocable Living Trust, Wills, Durable Power of Attorney, Advance Health Care Directive, Special Needs Trusts, and Irrevocable Trusts & Advanced Estate Planning, including Irrevocable Life Insurance Trust (ILIT), Qualified Personal Residence Trust (QPRT), Defective Grantor Trust (IDGT), Grantor Retained Annuity Trust (GRAT), “Crummey Trust”, and various types of Charitable Trusts.

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Don’t Be Left in the Dark – Part Two

Flashlight. 3D illustration on dark blue backgroundBy Robert J. Silverman, Attorney at Law

In Part One of this series, we discovered that some beneficiaries do not receive adequate communication about their inheritance, while some trustees and executors have obligations they must fulfill, while acting in the best interest of the beneficiaries. What obligations do trustees have and what rights do Trust beneficiaries have?

First, within 60 days of a Trust becoming partly or fully irrevocable (e.g. upon the death of the person who established the Trust), trustees must send a “Trustee Notification,” containing certain prescribed information about the trust administration, to all beneficiaries and heirs. This mandatory notification informs the recipients, in part, that they may request a full and complete copy of the Trust. Of course, every recipient should make this request and then read the Trust carefully.

The trustee also has a fiduciary duty – that is, a duty to act in the best interest of all of the Trust beneficiaries, A trustee has specific duties, including to timely: keep the beneficiaries reasonably informed; provide an accounting of the Trust assets, income and expenses; faithfully follow the Trust terms and conditions; and distribute to the beneficiaries their Trust shares.

Often, I hear from clients, prospective clients and professional advisors about beneficiaries who are being kept in the dark about their inheritance. Sadly, some beneficiaries mistakenly think that their only choice is to wait indefinitely and hope that the trustee eventually provides them with material information and distributions.

I have been hired to advocate for many Trust beneficiaries. In most cases, after I make reasonable requests of the trustee or his attorney, things resolve amicably. Litigation is infrequently necessary. Fortunately, when litigation is initiated, Judges tend to be sympathetic to beneficiaries who have been ignored or mistreated, and harsh on trustees who have been recalcitrant.

Trust and (Probate/Estate) beneficiaries should not be shy about hiring an attorney to be advised about: their rights and the Trustee’s obligations; and what demands should be made to ensure that their rights are protected.

This article is intended to provide information of a general nature, and should not be relied upon as legal, tax, financial and/or business advice. Readers should obtain and rely upon specific advice only from their own qualified professional advisors. This communication is not intended or written to be used, for the purpose of: i) avoiding penalties under the Internal Revenue Code; or ii) promoting, marketing, or recommending to another party any matters addressed herein.

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Mr. Silverman is an attorney with R. Silverman Law Group, 1855 Olympic Blvd., Suite 125, Walnut Creek, CA 94596; (925) 705-4474; rsilverman@rsilvermanlaw.com.

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ESTATE LEGAL SERVICES: Need to find an estate planning attorney in Walnut Creek CA? Contact Robert Silverman at 925-705-4474 for legal advice on Revocable Living Trust, Wills, Durable Power of Attorney, Advance Health Care Directive, Special Needs Trusts, and Irrevocable Trusts & Advanced Estate Planning, including Irrevocable Life Insurance Trust (ILIT), Qualified Personal Residence Trust (QPRT), Defective Grantor Trust (IDGT), Grantor Retained Annuity Trust (GRAT), “Crummey Trust”, and various types of Charitable Trusts.

Read more

Don’t Be Left in the Dark – Part One

Flashlight. 3D illustration on dark blue backgroundBy Robert J. Silverman, Attorney at Law

Too often, beneficiaries do not receive adequate communication about their inheritance. Beneficiaries have rights and they need not sit by idly and wait until the trust/estate representative voluntarily provides material information. On the other side of the coin, trustees and executors have obligations they must fulfill, while acting in the best interest of the beneficiaries.

What if a deceased loved one made provisions for you to inherit, and yet after a reasonable period of time you have received no significant correspondence, documents, information or distributions? This is way more common than it should be.

The rights of the inheritor (beneficiary) and the obligations of the estate representative depend upon whether the decedent had a Living Trust or just a Will (or neither). In any event, estate representatives are legally obliged to provide meaningful, timely information to beneficiaries and heirs of the decedent.

If the person from whom you were to inherit had no Living Trust and owned more than $150,000 of assets in his or her name (other than joint accounts or those governed by beneficiary designation), the assets will be subject to Probate – a court-supervised estate administration proceeding.

The Probate proceeding is typically initiated by someone like me – a Trust/Estate attorney. Such attorney is hired by the Executor who is nominated in the decedent’s Will (or if there’s no Will, then usually by a close relative who petitions to be appointed Administrator; the equivalent of an Executor). I then prepare and file with the Probate Court a Petition for Probate and extensive related paperwork and advise the Executor during the many months while the Probate is pending. The process is overseen by the Judge, whose primary purpose is to protect the estate’s beneficiaries.

Pursuant to many laws, local rules and oversight by the Judge, beneficiaries are generally well protected during the Probate process. Thus, this article focuses more on situations in which the decedent planned well by establishing and fully funding a Revocable Living Trust. In such cases, Probate is avoided and the administration of the Trust is handled privately, without court intervention or oversight by a Judge. The successor trustee nominated in the Trust document handles the administration. So, what obligations do trustees have and what rights do Trust beneficiaries have?

PART TWO: More advice from Rob in Don’t Be Left in the Dark – Part Two.

This article is intended to provide information of a general nature, and should not be relied upon as legal, tax, financial and/or business advice. Readers should obtain and rely upon specific advice only from their own qualified professional advisors. This communication is not intended or written to be used, for the purpose of: i) avoiding penalties under the Internal Revenue Code; or ii) promoting, marketing, or recommending to another party any matters addressed herein.

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Mr. Silverman is an attorney with R. Silverman Law Group, 1855 Olympic Blvd., Suite 125, Walnut Creek, CA 94596; (925) 705-4474; rsilverman@rsilvermanlaw.com.

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ESTATE LEGAL SERVICES: Need to find an estate planning attorney in Walnut Creek CA? Contact Robert Silverman at 925-705-4474 for legal advice on Revocable Living Trust, Wills, Durable Power of Attorney, Advance Health Care Directive, Special Needs Trusts, and Irrevocable Trusts & Advanced Estate Planning, including Irrevocable Life Insurance Trust (ILIT), Qualified Personal Residence Trust (QPRT), Defective Grantor Trust (IDGT), Grantor Retained Annuity Trust (GRAT), “Crummey Trust”, and various types of Charitable Trusts.

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ADVANCE HEALTH CARE DIRECTIVES: An Important Part of Your Estate Plan

Nurse holding elderly persons handBy Robert J. Silverman, Attorney at Law

INTRO: Quite often, we hear people say things like: “the most important thing is our health” and “if you have your health, you have everything”. It is so true, yet nevertheless, Advance Health Care Directives tend to be the “poor step-child” of estate planning, typically taking a distant back seat to trusts, wills and powers of attorney. Accordingly, I thought it might be helpful for this article to focus strictly upon Advance Health Care Directives. Hopefully, you will find informative the basics and nuances described in the article. As always, if I can advise and/or assist you or others you know, don’t hesitate to contact me. Thanks, Rob.

Of all of the core estate planning documents I draft for clients, the Advance Health Care Directive (AHD) is arguably the most important. After all, nothing is more essential than our health. Yet, the other three core estate planning documents – Trust, Will, Durable Power of Attorney – all tend to get more attention.

Simply put, if you are a legal adult (at least 18 years old), you should have an AHD. Why? What does an AHD accomplish? First and foremost, it enables you to appoint someone you trust to communicate with health care providers about your health care needs if you are ever unable to do so yourself.

Additionally, your preferences about many health care issues are inserted into the document as “directives” that can be carried out by your agent. These may include, among others, decisions about whether or not you would want your agent to have the discretion, under certain circumstances, to withhold or withdraw “heroic measures” to keep you alive; organ donations; autopsy; disposition of remains.

It is awkward for many people to discuss the above-referenced kinds of directives with family and/or friends. But, if your agent ever needs to invoke these AHD provisions, it can be a huge source of comfort and relief to your family and friends that your agent knows that your wishes are being honored.

Some people fear they are ceding valuable control by doing an AHD. The fact is that you can revoke the AHD and establish a new one, with a different agent, any time and as many times as you wish. Furthermore, the law in California is crystal clear that as long as you are capable of articulating your health care needs to physicians and other providers, your decisions control and your agent has absolutely no authority.

The real danger is if you become incapacitated and you do not have an AHD in place. In that instant, court proceedings could be initiated, resulting in someone being appointed to make your health care decisions whom you would never have chosen and don’t want.

In many states, different (and sometimes multiple) documents are legislated and/or used commonly, including Living Wills, Medical Directives, Health Care Powers of Attorney, Health Care Proxies, and others. For many years, California law provided for the use of a Durable Power of Attorney for Health Care Power (DPAHC) but there were also other documents in use with various titles, including Natural Death Act and Directive to Physicians. Then, in 2000, California’s AHD law was enacted to consolidate the various forms that indicated health preferences. Generally, validity requires that the principal’s signature on an AHD be notarized or witnessed by two individuals.

If you have an older DPAHC, it is not, per se, invalid; however, you should be on alert about a few things. One is that for many years, a DPAHC was effective for only seven (7) years after executing it. So, some people believe they still have an effective document but it may, in fact, be expired.

Another word of caution is that in 2003, HIPAA, a federal privacy law became effective, under which strict rules govern when and to whom a health care provider may disclose “protected health information”. All properly drafted AHDs should have a HIPAA Release provision (or alternatively, an applicable HIPPA release form attached to the AHD), specifically authorizing health care providers to turn over your medical records to your appointed AHD agent. NOTE: shockingly, some of the most common forms (pre-printed by large organizations) still do not contain a HIPAA release.

A word to the wise – if you have a valid AHD, and you only appointed one agent, consider establishing a new one in which you designate a primary agent and at least one alternative agent. Without an alternate agent listed, if you and your agent (e.g. spouse or child) are in a common accident or your agent is for some reason unable or unwilling to serve upon your incapacity, nobody you trust will have legal authority to make your medical decisions on your behalf.

This article is intended to provide information of a general nature, and should not be relied upon as legal, tax, financial and/or business advice. Readers should obtain and rely upon specific advice only from their own qualified professional advisors. This communication is not intended or written to be used, for the purpose of: i) avoiding penalties under the Internal Revenue Code; or ii) promoting, marketing, or recommending to another party any matters addressed herein.

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Mr. Silverman is an attorney with R. Silverman Law Group, 1855 Olympic Blvd., Suite 125, Walnut Creek, CA 94596; (925) 705-4474; rsilverman@rsilvermanlaw.com.

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ESTATE & TRUST ADMINISTRATION: Need to find an experienced estate & trust administrator in Walnut Creek CA? Contact Robert Silverman at 925-705-4474 for legal advice on a Revocable Living Trust, “Summary” Estate Administration, Trust/Estate Beneficiary Representation and Will & Trust Disputes.

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LEGAL READ FROM ROB: Five Estate Planning Myths

Illustration how to protect your assetsBy Robert J. Silverman, Attorney at Law

Today’s article covers common estate planning myths. You can likely debunk many of these myths without my help. Nevertheless, I hope each of you learns something new here!

A considerable number of myths exist about Estate Planning. While misconceptions may be less prevalent due to increased media coverage and more sophisticated consumers, I still encounter quite a few. Below, I’ve outlined some of the more common misconceptions, and I attempt to set the record straight as to each.

 

(1) Myth: If you are not wealthy or if you have a Will, you don’t need a Revocable Living Trust (“Trust”).

Reality: California Residents who die with or without a Will (and have no Trust), owning an aggregate of more than $150,000* of assets are generally subject to probate. Probate is a public, court supervised estate administration process that typically takes nine months to a year, or longer; requires a great deal of paperwork and hassle; and involves substantial attorneys’ fees, executor fees and costs.

*Certain kinds of assets, such as joint or P.O.D. accounts, joint tenancy assets, and insurance and retirement accounts with designated beneficiaries are not included (they’re also exempt from probate).

Fortunately, all assets titled in a Trust are exempt from Probate. So, regardless of one’s level of wealth and particularly for those who own a home and/or any other real estate, a Trust is an excellent “Will substitute” and probate avoidance vehicle. Note that even if you have a Trust, it is important to also have a “pour-over” Will – a safety net to ensure that any non-trust assets are distributed per your wishes.

(2) Myth: It is time-consuming and complicated to establish and manage a Trust.

Reality: A Trust: a) takes little more time to establish than a Will; b) does not need to be significantly more complicated than a comprehensive Will; c) is typically quite straightforward to fund (i.e. to retitle your assets in the Trust); and d) is managed nearly identically to the way one manages assets without a Trust, other than the need to observe some minor formalities.

(3) Myth: A Trust has income tax implications and triggers extra filing requirements.

Reality: When you establish a Trust for yourself (or you and your spouse) no additional income taxes or property taxes are triggered and there are no additional income tax filing requirements during your life.

(4) Myth: You should be afraid to do a Trust because doing so will lock you into the decisions you make.

Reality: A Revocable Living Trust is revocable (though there is seldom any reason to revoke it) and may be amended any time you wish. As your personal, familial and financial circumstances change, it is quite easy and affordable to work with your estate planning attorney to review and revise your document so that it continues to reflect your current wishes.

The above is in contrast to Irrevocable Trusts, which are used only in limited, specialized situations (e.g. when people gift to minors, young adults or anyone who receives government benefits for special needs; and when very affluent people gift to loved ones and/or charitable organizations for Federal Estate and Gift Tax mitigation purposes).

(5) Myth: If I sign a Power of Attorney, I don’t need a Will or Trust.

Reality: Every adult should have a Power of Attorney. It gives someone you trust the power to transact financial business for you in the event of your incapacity. If you become incapacitated and have no valid Power of Attorney, an expensive and cumbersome Conservatorship court proceeding will likely be necessary to vest someone with legal authority to manage your finances. As helpful as a Power of Attorney is, however, it’s only operative during your life; when you’re gone, it ceases to operate and your Trust and/or Will then become the governing document(s).

This article is intended to provide information of a general nature, and should not be relied upon as legal, tax, financial and/or business advice. Readers should obtain and rely upon specific advice only from their own qualified professional advisors. This communication is not intended or written to be used, for the purpose of: i) avoiding penalties under the Internal Revenue Code; or ii) promoting, marketing, or recommending to another party any matters addressed herein.

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Mr. Silverman is an attorney with R. Silverman Law Group, 1855 Olympic Blvd., Suite 125, Walnut Creek, CA 94596; (925) 705-4474; rsilverman@rsilvermanlaw.com.

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ESTATE LEGAL SERVICES: Need to find an estate planning attorney in Walnut Creek CA? Contact Robert Silverman at 925-705-4474 for legal advice on Revocable Living Trust, Wills, Durable Power of Attorney, Advance Health Care Directive, Special Needs Trusts, and Irrevocable Trusts & Advanced Estate Planning, including Irrevocable Life Insurance Trust (ILIT), Qualified Personal Residence Trust (QPRT), Defective Grantor Trust (IDGT), Grantor Retained Annuity Trust (GRAT), “Crummey Trust”, and various types of Charitable Trusts.

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LEGAL READ: Pitfalls of Intra-Family Real Estate Transactions – Part Two

Home For Sale Real Estate Sign in Front of New House.By Robert J. Silverman, Attorney at Law

INTRO: In Part One of this series, I spoke about real estate transactions that frequently involve overlapping estate planning considerations, and often require amending the client’s estate planning documents (including, primarily, their Living Trusts). Here are more transactions that offer potential pitfalls.

Living Trust/Will – When people gift property to one but not all of their loved ones, they’re often inclined to adjust (i.e. increase) how much their other loved ones (those not receiving the real estate gift) will receive on the owner’s death. When owners fail to work with their estate planning attorney to affirmatively make such formal estate planning document changes, troublesome unintended consequences can result.

Mortgages – When a gifted property still has a mortgage, the transfer by gift or sale nearly always gives the lender the option to call the full loan balance due immediately.

Fractional Interest Gifts – If a fractional interest in real estate is gifted, key decisions should be made and steps should be taken in addition to those set forth above. These include decisions and agreements among the co-owners about: titling; management; respective rights and obligations; and succession of interests if a co-owner dies. Accordingly, it is generally wise to have an attorney draft a comprehensive “co-ownership” agreement.

This article is intended to provide information of a general nature, and should not be relied upon as legal, tax, financial and/or business advice. Readers should obtain and rely upon specific advice only from their own qualified professional advisors. This communication is not intended or written to be used, for the purpose of: i) avoiding penalties under the Internal Revenue Code; or ii) promoting, marketing, or recommending to another party any matters addressed herein.

===

Mr. Silverman is an attorney with R. Silverman Law Group, 1855 Olympic Blvd., Suite 125, Walnut Creek, CA 94596; (925) 705-4474; rsilverman@rsilvermanlaw.com.

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REAL ESTATE LEGAL SERVICES: Need to find a real estate attorney in Walnut Creek CA? Contact Robert Silverman at 925-705-4474 for legal advice on Real Estate Titling, Limited Liability Company (LLC) Formation, Purchase/Sale Transactions (Residential & Commercial), Commercial Leasing, Real Estate Legal Representation, Joint Ownership (aka T.I.C or Equity Share) Agreements, Buyer/Seller Disputes, and Promissory Notes & Deeds of Trust.

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ADVICE FROM ROB: Business Services

By Robert J. Silverman, Attorney at Law

Owners of ongoing businesses are nearly always cognizant about how critical it is to operate in an efficient, cost-effective manner while eliminating or reducing risk to the extent doing so is reasonably possible. In their endeavor to do so, they should obtain legal counsel in connection with: purchasing a business; business entity formation (e.g. forming LLCs and/or Corporations); employee (H.R.) matters; customer and vendor contracts; and legal aspects of acquiring companies or selling the business.

Prospective Business Purchase

Prospective business owners must protect themselves when purchasing a business. They can best do so by conducting extensive due diligence about the prospective business and the industry of which the business is a part. Once the decision is made to move forward on a purchase, legal counsel should be hired to help the prospective buyer make the offer, negotiate final terms, document the agreement and see the process through until close of escrow.

Business Entity Formation

In today’s business world, every owner should readily acknowledge that operating any business comes with certain risks. Owners should always purchase and maintain adequate insurance coverage to obtain what they and their insurance advisors believe is a sufficient scope and amount of coverage for potential business-related liabilities.

Nevertheless, it is impossible to commercially insure for every business risk. Nearly all business owners should therefore embrace the benefit of owning and operating their business in the form of an appropriate business entity, such as a corporation or Limited Liability Company (LLC). Making a relatively modest investment of time and money (attorneys’ fees and related costs) can effectively protect a business owner’s other investments and personal assets from business-related liabilities.

Many important legal and tax consequences should be considered before deciding whether or not to form a business entity; and, if it is advisable, which kind of entity to form. In any event, the time and fees required to form and operate a business in the form of a recommended business entity typically far outweigh the unlimited exposure (beyond applicable insurance coverage) a business owner has when operating as a sole proprietorship or simple partnership.

General Business Counsel

Almost every business can benefit from having a “go to” business attorney who can provide ongoing advice and help with general business matters. Such general matters can include, but are not limited to:

  • Vendor Contracts
  • Customer Contracts
  • Independent Contractor Agreements
  • Employee matters
  • Acquiring another business
  • Offering to sell and selling or gifting fractional interests in the business (e.g. fractional LLC membership interests or corporate shares)
  • Insurance matters
  • Establishing business retirement plans
  • Disputes or potential disputes with customers, vendors, employees
  • Selling the entire business

This article is intended to provide information of a general nature, and should not be relied upon as legal, tax, financial and/or business advice. Readers should obtain and rely upon specific advice only from their own qualified professional advisors. This communication is not intended or written to be used, for the purpose of: i) avoiding penalties under the Internal Revenue Code; or ii) promoting, marketing, or recommending to another party any matters addressed herein.

Please contact us at R. Silverman Law Group to discuss how we may best assist you with all of your Estate Planning, Trust Administration, Probate, Real Estate, Business or related legal needs.

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LEGAL READ: Pitfalls of Intra-Family Real Estate Transactions – Part One

Home For Sale Real Estate Sign in Front of New House.By Robert J. Silverman, Attorney at Law

INTRO: Estate planning and real estate are the areas upon which my law practice is focused. As such, I periodically advise and assist clients with intra-family real estate transactions. These real estate transactions frequently involve overlapping estate planning considerations, and often require amending the client’s estate planning documents (including, primarily, their Living Trusts). I have seen too many of these transactions cause big problems when people proceed without comprehensive legal and/or tax advice. So, I thought I’d use this article to outline some of the important potential pitfalls – many of which are not intuitive or apparent to laypeople.

Many clients ask me to advise them about how to best structure a gift (or sale) to a loved one of all or a fractional interest in real estate. I enjoy helping clients strategize about, structure, document and implement such transactions.

All too often, I hear about an intra-family gift or sale after it has already been completed. The owners sometime tell me they handled it themselves because it was “very straightforward.” Unfortunately, when I’m consulted “after the fact,” I frequently need to apprise such clients that they made costly strategic and/or procedural errors.

Handling an intra-family real estate transaction without obtaining professional legal and tax advice is perilous. Even seemingly simple arrangements can have dramatic implications, many of which are not apparent to laypeople.

Here, I’m able to only scratch the surface about common pitfalls. So, this piece is intended to serve as an overview of some of the many and varied components in this complex arena. In doing so, I hope that the reader will embrace the importance of obtaining comprehensive professional advice before entering into any intra-family real estate transaction.

These transactions (which include the seemingly innocuous act of “adding someone to the title” of your property) may involve some or all of these important considerations, among others:

Federal Gift Tax & Estate Tax – Gifting property of a value that exceeds certain threshold amounts can trigger tax reporting requirements. One can unwittingly use portions of one’s Federal Gift Tax and Estate Tax exemptions in an inefficient manner, and thus negatively affect potential future tax liability (under this specialized and complicated federal tax system).

Income Tax – A gift of a full or partial interest in a property can have income tax consequences. Many elderly people gift real property to their children without understanding the future income tax consequences for the children (when the children later sell the property). Many times, these income tax ramifications are such that an elder is better advised to retain the property until his or her death. Also, if the elderly person needs funds to maintain or enhance his or her lifestyle, alternative strategies may make more sense than gifting or selling (such as renting out the property; taking out a loan; or obtaining a reverse mortgage).

Property Tax – Valuable property tax reassessment exclusions may apply, including those available for many parent-child real estate transfers. One should be advised about whether the particular transaction renders it eligible for reassessment exclusion, and certain forms must be timely completed and filed with the Assessor. If these rules and procedures are not strictly followed, the benefit may be forfeited.

PART TWO: More transaction advice from Rob in Pitfalls of Intra-Family Real Estate Transactions – Part Two.

This article is intended to provide information of a general nature, and should not be relied upon as legal, tax, financial and/or business advice. Readers should obtain and rely upon specific advice only from their own qualified professional advisors. This communication is not intended or written to be used, for the purpose of: i) avoiding penalties under the Internal Revenue Code; or ii) promoting, marketing, or recommending to another party any matters addressed herein.

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Mr. Silverman is an attorney with R. Silverman Law Group, 1855 Olympic Blvd., Suite 125, Walnut Creek, CA 94596; (925) 705-4474; rsilverman@rsilvermanlaw.com.

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ESTATE LEGAL SERVICES: Need to find an estate planning attorney in Walnut Creek CA? Contact Robert Silverman at 925-705-4474 for legal advice on Revocable Living Trust, Wills, Durable Power of Attorney, Advance Health Care Directive, Special Needs Trusts, and Irrevocable Trusts & Advanced Estate Planning, including Irrevocable Life Insurance Trust (ILIT), Qualified Personal Residence Trust (QPRT), Defective Grantor Trust (IDGT), Grantor Retained Annuity Trust (GRAT), “Crummey Trust”, and various types of Charitable Trusts.

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