Half of Americans are Wrong

A new survey discovers what Americans believe about estate planning and what they are wrong about.

Roughly half of Americans are wrong. No, that is not about politics and the roughly half of Americans who are on the other side of the aisle as you.

It is about estate planning.

A survey conducted by WealthCounsel revealed that roughly half of Americans believe estate planning is only for the wealthy and almost the same number of people believe they do not have enough wealth to plan for their estates.

These findings were reported by Wills, Trusts & Estates Prof Blog in "Survey Reveals Helpful Insights for the Future of Estate Planning."

Estate planning is not just for the wealthy.

Families can benefit from estate planning regardless the amount of assets they have. It is even beneficial to have an estate plan when you do not have any assets other than personal property.

The estate plan can be used to make sure the people who do get your personal property after you pass away are the people you wish to have it. But, an estate plan is about much more than property.

Estate planning is used to determine who will care for your minor children if something happens to you. It is also used to make important decisions in advance about the care you will receive at the end of your life and who will speak on your behalf when you are unable to do so.

Do not let a lack of (perceived) wealth stop you from estate planning. No matter how much money you have, having an estate plan will make things easier for you and your family.

A qualified estate planning attorney should be consulted to educate you on your options.

To speak with an estate planning attorney in Orange County, Long Beach or Corona, call 800-220-4205 for a private consultation. Or visit our website at www.OCElderLaw.com for more information. We handle all aspects of elder law, wills and trusts, asset protection and retirement planning. See why Marty Burbank and Josh Ramirez are the experts in estate planning in California.

Reference: Wills, Trusts & Estates Prof Blog (Oct. 21, 2016) "Survey Reveals Helpful Insights for the Future of Estate Planning."

Creating Incentives for Your Children

The wealthy have always struggled with how to incentivize their children to work hard for themselves and not just rely on family wealth and an inheritance.

One common concern among wealthy people is that leaving their wealth to their children may cause them harm. Many fear their children will stop working for themselves and just spend their parents' money.

There are many examples of wealthy heirs doing just that.

Recently, The Economist's 1843 Magazine looked at how wealthy people have addressed this dilemma over the centuries in "How to Make Inheritance an Incentive."

Andrew Carnegie, for example, famously left nothing for his heirs.

Today, using incentive trusts is a common method.

These trusts only give money to beneficiaries when certain benchmarks are met, such as getting a college degree and getting a job with trust payments tied to salary. How well these incentive trusts work, however, is up for debate.

Oftentimes, they have the unintended consequence of punishing children for doing things their parents would actually approve. For example, by giving a child more money from the trust based on how much they earn might discourage them from taking an easy or part-time job, but the child would also be discouraged from taking a lower paying public service job.

Incentive trusts can be written in such a way that heirs are encouraged to do appropriate things, but they need to be flexible.

It can be a good idea to give the trustee some discretion to make trust disbursements in accordance with conduct the trustee thinks the parents would have approved. Choosing a qualified trust administrator is an important process. For more information, please call 800-220-4205 to speak to a certified estate planning attorney about the best way to consider the administrator for your family trust. At OC Elder Law, we have the experience to help you with this important decision. Visit www.OCElderLaw.com for more information.

Reference: 1843 Magazine (Oct. 13, 2016) "How to Make Inheritance an Incentive."

Why the Wealthy Pay Less Income Tax

The Presidential election has brought attention to the fact that many wealthy people in the U.S. pay little income tax. Experts suggest that the issues discussed in the election are not the biggest reason for the phenomenon.

During the course of the Presidential election cycle Donald Trump has received criticism for breaking tradition and not releasing his income tax returns. While he has said it is because he is under audit, his opponent speculated that his returns might reveal that he did not pay income tax at all or that he is not as wealthy as he claims. Some of the mystery was solved when the New York Times published three pages from his leaked state tax returns from 1995.

The returns revealed that he could have avoided paying any federal income tax for up to 18 years because he had taken an almost $1 billion business loss that year. Trump seemed to confirm that was the case during a debate with Hillary Clinton.

However, as The Atlantic points out in "The Tax Code for the Ultra-Rich vs. The One for Everyone Else," the reason Trump pays little income tax is not the reason most of the wealthy also pay little.

The bigger issue is the way in which capital gains are taxed or in some cases not taxed. Capital gains are not taxed until they are realized, that is until the underlying asset is transferred. If the owner of the asset passes away without having sold the asset, then his or her heirs receive the asset with a step-up basis. They do not have to pay capital gains on any increased value of the asset that accrued before they received it when they decide to sell it.

As part of his plan for estate tax reform, President Obama has proposed eliminating this step-up basis.

Whether or not you agree with the wisdom of the current laws that allow many wealthy people to pay little in income tax, it is important to know the real reason it happens because that is what politicians are likely to be looking at when the estate tax comes up again in Congress.

Be sure to speak with a certified California estate tax planning attorney for your particular situation. Visit our website for more information, or call 800-220-4205 to speak with a California estate planning attorney in Orange County, Corona or Long Beach.

Reference: The Atlantic (Oct. 15, 2016) "The Tax Code for the Ultra-Rich vs. The One for Everyone Else."

Enforcing Charitable Pledges in a Trust

A lawsuit brought by Duke University has brought media attention to charitable pledges and whether they are enforceable against an estate.

It is common for wealthy people to make pledges to donate money to charity at some future date. Doing so gives the wealthy person time to come up with the liquid assets to donate, if necessary, and lets the charity know when to expect donations.

It also allows donors to keep their assets and profit off them in the time between when the pledge is made and when it is fulfilled. However, what happens if the pledge is not fulfilled?

The answer to that question has been in the news recently as Duke University filed a lawsuit against the estate of Aubrey McClendon and her $10 million unfulfilled pledge.

The Wills, Trusts & Estates Prof Blog looked at some ways a court might decide to enforce the pledge in "History of Charitable Pledges."

Basically, courts will first look to see if there is an enforceable contract, either bilateral or unilateral. Failing that, the court might try to use a legal doctrine known as “promissory estoppel.” In layman's language that means something like, "You made a promise and the other party relied on it. You received some benefit from your promise, so you should not be able to disavow it."

The bottom line is that the legal system has a public policy preference of seeing that charitable pledges are fulfilled and will seek legal ways they can be enforced. If you have questions about a charitable gift trust in California, please visit our website at www.OCElderLaw.com and schedule a private consultation with one of our trust attorneys in Orange County, Corona, Long Beach, Palm Springs or Palm Desert. We have certified Elder Law Attorneys on staff available to help. Call 800-220-4205 for a consultation.

Reference: Wills, Trusts & Estates Prof Blog (Oct. 9, 2016) "History of Charitable Pledges."

Estate Sale Agent Concerns

Estates sales can be an excellent way to get rid of personal possessions either as part of the estate administration process or for an elderly person preparing to move into a nursing home. Be careful when picking an agent to handle the sale.

Estate sales are increasingly popular as older Americans seek to get rid of a lifetime's worth of personal possessions they no longer need. This is especially the case as they prepare to move into smaller residences or nursing homes.

They are also popular with estate administrators who need to dispose of a deceased person's personal property and who do not have time to sell it all themselves. However, as estate sales have grown in popularity, more problems with estate sales agents are being reported.

This issue was picked up by the New York Times in "It Pays to Be Wary When Hiring an Estate Sales Agent."

Some people have reported that the estate sales agents they have hired have paid much later than expected, paid them less than promised and even bounced checks. To avoid having these problems with the estate sales agent you hire it pays to do your homework on the agent.

Do not just pick the cheapest agent you talk to. Ask around and speak to other people who have had estate sales about their experiences with agents. You want to make sure that you hire someone with a track record of expertise and fair dealing.

It is also important that you have a signed contract with the agent and that you get a copy of the contract for yourself. You might also consider speaking to an estate attorney and asking if the attorney knows reputable agents in the area. For more information, please contact our office at 800-220-4205, or visit our website at www.OCElderLaw.com.  We have Estate Planning Attorneys in Orange County, Long Beach, Corona, Palm Springs and Palm Desert.

Reference: New York Times (Sept. 23, 2016) "It Pays to Be Wary When Hiring an Estate Sales Agent."

Wyly Estate in More Legal Trouble

The SEC is seeking contempt charges against the executor of Charles Wyly's estate for failing to pay a multimillion dollar fine.

Charles Wyly and his brother Sam were well-known and wealthy Texas businessmen with billions in assets. The Securities and Exchange Commission alleges many of the assets were gainedfraudulently.

Before a court could render a judgment Charles Wyly passed away and the case became the responsibility of his estate and its executor, Wyly's son-in-law Donald Miller. 

In February of 2015, the estate was ordered to pay a fine of $101.2 million. That judgment is still under appeal, but that has not stopped the SEC from demanding payment, which the estate has failed to pay. 

In its latest move the SEC has asked that the estate be held in contempt of court for not paying up, according to Private Wealth in "SEC Eyes Contempt for Wyly Estate's Failure To Pay $101M."

It appears the estate may have made a basic mistake. 

While it appealed the judgment, the estate did not request a stay of the judgment pending that appeal. That means the estate has to pay the fine even though a court could eventually decide to overturn the judgment.

This should serve as a reminder to executors everywhere that they need to be very careful how they go about the business of handling the estate. It is important to make sure everything is done properly, especially when the estate is involved in litigation against the government.

If you need help navigating these postmortem issues, request a consultation with an estate planning attorney in Orange County, Corona or Long Beach can help you navigate these postmortem issues.

Reference: Private Wealth (Sept. 7, 2016) "SEC Eyes Contempt for Wyly Estate's Failure To Pay $101M."

Retirement Planning and Your Estate

Even if you do not consider yourself to be wealthy it is important to keep your estate plan in mind when retirement planning.

It can be tempting to think of different types of life planning in isolation. People do not necessarily start planning for how they want to live in retirement when they decide what courses to take in college and what type of career they would like to have.

Similarly, many people do not think about their estate planning when they are planning for their retirements. Estate planning is often left for much later.

However, this can be a mistake as Life Health Pro explains in "Bequest goals: more than just an issue for the wealthy."

The primary reason for this is that if you would like someone else to have a given asset after you pass away, then you need to make it so your retirement plan preserves that asset and that you do not have to use it. For example, if you would like to leave your home to your children, then your retirement plan needs to be sufficient enough for you not to have to sell the home to have funds to live on when you are no longer working.

This is true whether you have a large mansion or a more modest house.

What this means is that you should not think of life as entirely separate stages when you do your planning. Think about what type of estate you want to leave behind when you plan for your retirement and act accordingly.

To have your specific issues addressed, please call one of our California estate planning attorneys at 800-220-4205, or visit our website at www.OCElderLaw.com for more information. We have offices in Orange County, Corona, Long Beach, Palm Springs and Palm Desert, or we can visit you in the privacy of your own home.

Reference: Life Health Pro (Aug. 9, 2016) "Bequest goals: more than just an issue for the wealthy."