Category: Estate Planning

By Roy Schneider, Esq.

Congratulations! You are a homeowner. You achieved the American dream (or at least part of it) and now you own a piece of real estate in one of the most desirable parts of the United States – California.

For a lot of people their house is their largest asset, and the value of this asset will only grow with time. Thus, if you bought your house 10-15 years ago, the chances are that by now your house has already doubled or even tripled in value, which, of course, is a good thing, except, when it is time to pay taxes.

Nothing is Certain but Death and Taxes

Death is not the topic most people like to think about. Unfortunately, it happens to the best of us, sometimes unexpectedly, and it is a good idea to have your estate planning documents in order sooner rather than later, otherwise, your loved ones might pay a hefty price for your procrastination. Coping with death of a loved one is hard, couple it with the necessity to face expensive and time-consuming administration procedures and outrageous estate taxes, and it might just be the proverbial straw that broke the camel’s back.

Depending on the size of one’s estate, as much as forty percent (40%) of it could be decimated by taxes. Currently, individuals may pass estate and gift tax-free, up to five million four hundred fifty thousand dollars ($5,450,000.00) in assets to his or her beneficiaries. This five million four hundred fifty thousand dollars ($5,450,000.00) credit is commonly referred to as the “unified credit” as provided in the tax code. It is indexed to inflation and will increase each year.  All assets above this five million four hundred fifty thousand dollars ($5,450,000.00) credit are exposed to the estate tax. A couple can pass on a total of ten million nine hundred thousand dollars  ($10,9000.00), however it is a complicated process which requires the assistance of an estate planning attorney. 

Final Thoughts

I’d like to leave you with this – if you are a homeowner and you live in California you might want to consider establishing a living trust to avoid unnecessary expenses and headache of a lengthy probate proceeding for your loved ones upon your death, even if the estate tax is  not a concern. Seeing an estate planning attorney might do you good regardless. You might not need a living trust right now, but it is always good to know your options. Usually, the first consultation with our office is free, so you do not risk anything, but will gain a valuable insight on your estate planning situation.  Our office provides and Estate Planning Questionnaire for you to complete and which will assist our estate planning attorney to formulate the best plan for you.

Finally, if you decide that you want a living trust, than please do yourself a favor and choose a reputable lawyer to do your estate planning. I am aware that these days there are places where you can buy a living trust for about $400 – $600. DO NOT BUY IT! I cannot stress it enough. In estate planning there is no such thing as “one trust fits all”. Most likely you will end up with a product you do not need at all. Every trust and every estate plan is one of a kind, just like people. You might be able to save some money now but your loved ones will be paying dearly later. Remember the old saying – stingy always pays twice. Plus, if your estate plan is prepared by a reputable attorney, he or she will notify you of any changes in the law that might affect your estate plan, and advise you what changes, if any, are necessary to be made to your estate planning documents, so that your personal representative will have no “surprises” later.

Contact Schneiders & Associates, L.L.P. today for your estate planning questionnaire and to schedule your complimentary consultation.  During your consultation, our estate planning attorney will review your family and financial situation, discuss your wishes, answer your questions and suggest strategies to protect your family, wealth and legacy. 

By William Starr, Esq.

Determining the mental capacity of an individual can be a tricky endeavor.  That is why experienced doctors, psychiatrists, and psychologists are necessary to diagnose and document a mental disorder.  However, in making a will or an estate, a different standard of mental capacity is used.

Testamentary capacity refers to a person’s ability to understand and execute a will or estate plan. As a general rule, a person of ordinarily intelligence over the age of eighteen is deemed competent to make a will.  In order to meet the testamentary capacity standard the person must be: (1) able to understand that they are signing a will or estate plan; (2) identify the property to be distributed; and (3), and identify and understand who is affected by the will, such as who the beneficiaries are. Generally, these are simple burdens to meet and a person to be mentally deficient in the everyday sense of the term may be found to have testamentary capacity to execute a will or estate plan.  Therefore, just because an individual is residing in a hospital, nursing home, or skilled nursing facility, does not automatically mean they are incapable of making a will.  However, because a person’s residence in one of those facilities may denote ill health, it could expose the will to challenges in court.

For instance, if the testator of a will suffers from paranoid delusions, he or she may make changes to a testamentary document based on beliefs that have no basis in reality. If a disinherited heir can show that a testator suffered from such insane delusions when the changes were made, he or she can have the will invalidated. Similarly a person suffering from dementia or Alzheimer’s disease may be declared unfit to make a will. If a person suffers from a mental or physical disability that prevents them from understanding that a will is an instrument that is meant to direct how assets are to be distributed in the event of his or her death, that person is not capable of executing a valid will.

It is not entirely uncommon that disinherited heirs complain that a caretaker or a new acquaintance brainwashed the testator into changing his or her will. This is not an accusation of incapacity to make the will, but rather a claim of undue influence. If the third party suggested making the changes, if the third party threatened to withhold care if the will was not changed, or if the third party did anything at all to produce a will that would not be the testator’s intent absent that influence, the will may be set aside for undue influence. Regardless of the reason for the challenge, these determinations will only be made after the testator’s death if the will is presented to a court and challenged. For this reason, it is especially important for the testator to be as thorough as possible in making an estate plan and making sure that any changes are made with the assistance of an experienced estate planning attorney.

Contact the experienced Estate Planning attorneys at Schneiders & Associates, LLP to schedule a no charge consultation for your Estate Planning matters.

By Roy Schneider, Esq.

In order to predict how much your estate will have to pay in taxes, you must first determine the value of the estate. To determine this, many assets might have to be appraised at fair market value. The estate includes all assets including real estate, cash, securities, stocks, bonds, business interests, loans receivable, furnishings, jewelry, and other valuables, such as intellectual property, including patents, trademarks and copyrights.

Once your total worth is established, you can subtract liabilities like mortgages, credit cards, other legitimate debts, funeral expenses, medical bills, and the administrative cost to settle your estate including attorney, accounting and appraisal fees, storage and shipping fees, insurances, and court fees. The result will be your estate’s net worth.  The administrative expenses will likely total roughly 5% of the total estate. Any assets that is bequeathed to charity through a trust or will escapes taxation, and the value of those assets must be subtracted from the total. Any assets transferred to a surviving spouse are not subject to taxation as long as your spouse is a US citizen.  There are different and complex rules when a surviving spouse is a non-US citizen.

If the net worth of an estate is less than the federal and state exemptions, no taxes must be paid (California no longer has a state inheritance tax, although other states do). However, the value of assets over the exemptions will be taxed. The amount over the exemptions is referred to as the taxable estate. A testator’s assets are taxed by the state in which the will is probated. Taxes paid by the estate to the state may be deducted for Federal tax purposes. The Federal exemption was $5.45 million in 2016 and is slated to increase in 2017, by the rate of inflation as determined in the Federal Estate Tax legislation. Any amount above the Federal exemption is taxed at the rate of 40%.

If an estate earns money while it is being administered and distributed, for example, if real estate is rented or businesses continue to operate, it will be necessary for the estate to complete an income tax return and pay federal and state taxes on the income it receives. The net income of the estate can be added to the taxable portion of the estate if it is over the federal or state exemption. It is important to be aware that the laws surrounding estate taxes have changed frequently and, given the current crop of Presidential candidates, it may change again.  Thus it is necessary to have a seasoned professional assist in navigating the process, and to notify you if changes in the laws will affect your estate plan.  If your estate is one that may be subject to estate tax, there are a number of safe and well-tested means by which such tax can be minimized and even completely eliminated.

If you have any questions regarding your will, trust or estate plan in general, or because you are concerned about having your heirs pay an estate tax, please call and make an appointment with one of the knowledgeable estate planning attorneys at Schneiders & Associates, L.L.P.

By Roy Schneider, Esq.

We admit some aspects of business communications, including banking and shopping are more efficient with the ease and convenience of the internet. With this being true, it may seem logical to some to turn to the internet when creating a legal document such as a Will or Trust. Certainly, there are several software applications, websites, and do-it yourself books advertising how easy and inexpensive it is. However, a Will or Trust is one of the most important of your financial planning documents, and you should know, while the internet can be a wonderful tool, it also contains a tremendous amount of erroneous, misleading, and even dangerous information.

We hold true to the saying that at ounce of prevention is worth a pound of cure. If you engage the services of a qualified estate planning attorney, you will find that creating a Will or Trust ends up being a more efficient, less expensive process.

The need for an estate planning attorney is inarguable in each of these situations:

• Your estate is large enough to make estate planning guidance necessary (in California more than $250,000 in liquid assets), you have minor children, or you own real estate of any value

• You want to disinherit an heir

• You have concerns that someone may contest your Will or Trust

• You worry that someone will claim your mind wasn’t sound at the signing of your estate planning instruments.

Mistakes and Omissions

Mistakes and omissions can lead to survivors of the deceased in court spending thousands of dollars to contest ambiguously worded or incomplete estate planning instruments. The Estate Planning Attorneys at Schneiders & Associates, LLP, are often asked to repair such estate planning instruments  prepared by a non-attorney third party or by the decedent, that have mistakes or significant omissions.

Evidence that Online Wills or Trusts Are Not Foolproof

Evidence that many other complications can arise when an individual creates a Will or Trust using generalized online directions can be found in the following facts:

• California has its own rules (e.g. requiring differing numbers of disinterested party signatures)

• Even uncontested Wills can languish in probate if not executed in an exacting fashion

• Estate planning attorneys find legal software programs inadequate since the customer is not informed as to the meaning of the various options available

• Even legal websites themselves recommend bringing in an attorney in all but the very simplest cases

Areas that Frequently Cause Problems 

Self-constructed Wills or Trusts often become problematic when the testator or settlor:

• Names an executor or trustee who has no financial or legal knowledge
• Leaves a bequest to a pet  (legally, you must leave the bequest to an appointed caretaker)
• Puts conditions on payouts that are difficult, or impossible, to enforce
• Makes unusual end-of-life decisions or puts living will information into the testamentary document
• Designates guardians for children, but neglects to name successor guardians
• Neglects to coordinate beneficiary designations where, for example, the Will or Trust and insurance policy designations contradict one another
• Leaves funeral instructions into a Will since the document will most likely not be read until after the funeral has taken place
• Leaves inexact or ambiguous instructions dealing with blended families
• Neglects to mention small items in the estate plan which, though of small financial value, are meaningful to loved ones and may cause contention

Just as most of us are not equipped to do our own plumbing repairs or automotive repairs, most of us do not have the background or experience to create our own legal documents, even with the help of written directions. Contact the attorneys at Schneiders & Associates, LLP to schedule a no charge consultation for your Estate Planning matters. Before your consultation, we will send you an Estate Planning Questionnaire (for couples) (for individuals) that will help us and you prepare for your meeting.

In order to ensure that you leave your assets in the hands of those you wish, and to avoid leaving your loved ones with bitter disputes and expensive probate costs, it is advisable that you consult with an experienced estate planning attorney at Schneiders & Associates, LLP when devising a meaningful estate plan.

By Roy Schneider, Esq.

The law allows a person preparing a will or trust to have almost complete control over his or her assets after the testator or settlor passes on, but there are limits to such power. A person can restrict a property from being sold, or make sure that it is used for a specific purpose. A property can be bequeathed to a family member as long on condition that the person maintains the family business in a specific city, or exercises daily, or places flowers on the deceased’s grave every week, or engages in any other behavior the testator or settlor desires. This freedom, however, is not without limits. The time limit on this ability is called the rule against perpetuities. The rule is also referred to as the “dead man’s hand” statute.

The rule against perpetuities is complex and rarely utilized. It is an ancient common law rule which limits the length of time property can be tied up.  At the time of the passing of the testator or settlor , the heirs of the estate are locked in. These heirs are referred to as “lives in being.” For the purposes of this rule, if a child is conceived but not yet born at the time of the testator’s death, it will be considered a life in being. Once the last living heir named in the will passes away, the restrictions on the property will continue in place as the testator desired for 21 years. The idea is that a testator or settlor may control his or her assets for a full generation after his or her death. The rule is notoriously difficult to apply properly. When it does apply, the conditions on the bequest are abandoned and the gift returns to the residual estate.  Some states have repealed this Rule and allow for Dynasty Trusts that can go on in perpetuity if necessary.  Although not often used and often not recommended, it is an option some testators and settlors wish to consider.  California continues with the common law Rule but also provides an easier to understand and more readily ascertainable standard.  In lieu of the 21 years after the death of some individual then alive, one can provide that the interest must vest or terminates with 90 years after creating of the dispositive instrument.

What makes this Rule, even more confusing is that, when an individual writes a will or trust he or she may make gifts to potential children or grandchildren. These children and grandchildren, however, may not be born until years later. If a child has been born at the time the decedent passes away, he or she is subject to the restrictions on the bequest during his or her lifetime. If a grandchild is conceived and born after the decedent’s death, however, the child may avoid the restrictions 21 years after the death of the last heir alive at the time of the decedent’s death. There is no way to predict when this might occur.

The knowledgeable estate planning attorneys at Schneiders & Associates, LLP can help you in planning your estate in all respects, including dealing with the very complex Rule Against Perpetuities.  

If you have any questions regarding your or estate plan in general, or would like a no-charge consultation about a plan that is just right for you, or amending an existing plan, please make an appointment with one of the knowledgeable estate planning attorneys at Schneiders & Associates, L.L.P.

There are several reasons that a will may prove invalid. It is important for testators to be aware of these pitfalls in order to avoid them.

1. Improper Execution The requirements vary from state to state, but California requires a valid will to be witnessed by two people not named in the will. Some jurisdictions require the document to be notarized as well, but not California. Although these restrictions may be relaxed if the will is holographic (handwritten), it is best to satisfy these requirements to ensure that the testamentary document will be honored by the probate court.  If you had your will prepared outside of California, you may want one of the estate planning attorneys at Schneiders & Associates, L.L.P. to review to make sure it complies with the requirements of California law.
2. Lack of Testamentary Capacity Anyone over the age of 18 is presumed to understand what a will is. At the end of life, individuals are often not in the best state of mind. If court finds that an individual is suffering from dementia, is under the influence of drugs or alcohol, or is incapable of understanding the document being executed for some other reason, the court may invalidate the will on the grounds that the individual does not have testamentary capacity.
3. Replacement by a Later Will Whenever an individual writes a new will, it invalidates all wills made previously. This means that a will might be believed to be valid for months until a more recently executed document surfaces. The newest will always takes precedence, controlling how assets should be distributed.  One method to help avoid multiple and inconsistent wills being found at the time of the testator’s death is to have the originals kept with a depository and to destroy former wills.  Schneiders & Associates, L.L.P. maintain original will for our clients in a safe and secure manner and without charge.
4. Lack of Required Content Every will is required to contain certain provisions to carry out its purpose. These provisions ensure that the testator understands the reason for executing the document.   It should be clear that the document is intended to be a will. The document should demonstrate an individual’s wishes in regard to what should happen to his or her property after death. A proper will should also include a provision to appoint an executor to act as an agent for the estate and enforce the terms of the will. If the document lacks any of these provisions, the will may be declared invalid.  Most of the estate planning clients at Schneiders & Associates, L.L.P, utilize trusts as their principal means of disposition on death.  In those cases, the will typically leaves assets not mentioned in the trust, and which may require probate, to be distributed to the trust.  This is called a “pour-over will” because the assets subject to probate are poured over into the trust.
5. Undue influence or fraud A will that was executed under undue influence, coercion or fraud will be invalidated by a court. If a will has been presented to a testator for a signature as if it were any other document, like a power of attorney or a business contract, the court will find that the will was fraudulently obtained and will not honor it. If an individual providing end of life care with exclusive access to the testator threatens to stop care unless a will is modified, that modification is considered to be the result of undue influence and the court will not accept it.

If you have any questions regarding your will or estate plan in general, please call and make an appointment with one of the knowledgeable estate planning attorneys at Schneiders & Associates, L.L.P.

By Roy Schneider, Esq.

Many people are confused by advance directives. They are unsure what type of directives are out there, and whether they even need directives at all, especially if they are young. There are a couple types of advance directives which you should consider having prepared. One is commonly referred to as a “living will”, which communicates what type of life support and medical treatments, if any, such as ventilators or a feeding tube, you wish to receive. Another type is called a health care power of attorney. In a health care power of attorney, you give someone the power to make health care decisions for you in the event you are unable to do so for yourself.   Often, these two types of advance directives are combined in one instrument. If you are 18 or over, it’s time to establish your health care directives. Although no one thinks they will be in a medical situation requiring a directive at such a young age, it happens every day in the United States. People of all ages are involved in tragic accidents that couldn’t be foreseen and could result in life support being used. If you plan in advance, you can make sure you receive the type of medical care you wish, and you can avoid a lot of heartache to your family, who may be forced to guess what you would want done.

Many people do not want to do health care directives because they may believe some of the common misperceptions that exist about them. People are often frightened to name someone to make health care decisions for them, because they fear they will give up the right to make decisions for themselves. However, an individual always has the right, if he or she is competent, to revoke the directive or make his or her own decisions.  Some also fear they will not be treated if they have a health care directive. This is also a common myth – the directive simply informs caregivers of the person you designate to make health care decisions and the type of treatment you’d like to receive in various situations.  Planning ahead can ensure that your treatment preferences are carried out while providing some peace of mind to your loved ones who are in a position to direct them.

If you are interested in learning more about the benefits of an Advance Health Care Directive and Health Care Power of Attorney, either in conjunction with an over-all estate plan or as standalone  documents, please feel free to contact the knowledgeable estate planning attorneys at Schneiders & Associates, L.L.P.

By Roy Schneider, Esq.  

The loss of a loved one is a difficult time, often made more stressful when one has to handle the affairs of the deceased. This may be a great undertaking or rather minimal work, depending upon the level of estate planning done prior to death.

Tasks that have to be performed after the passing of a loved one will vary based on whether the departed individual had a trust or will, or died intestate with no estate plan in place. In determining whether probate (a court-managed process where the assets of the deceased are managed and distributed) is needed, the assets owned by the individual, and whether these assets are held by a trust, titled in joint tenancy or under a “payable on death” arrangement, must be considered. It’s important to understand that assets titled jointly with another person are not probate assets or assets subject to the terms of a trust and will normally pass outright to the surviving joint owner. This may or may not be what the decedent intended.  Also, assets such as life insurance and retirement assets that name a beneficiary will pass to the named beneficiaries outside of the court probate or trust administration process.  Such transfer could be problematic if any of the beneficiaries are minors.  If the deceased relative had formed a trust and during his or her life retitled the assets into that trust, those trust assets will also not pass through the probate process and be administered according to the explicit terms of the trust instrument.

If property is held in other states, it is important to note that each state’s rules may be slightly different so it is important to seek proper legal advice if you are charged with handling the affairs of a deceased family member or friend. Assuming probate is required, there will be a process that you must follow to either file the will and ask to be appointed as the executor (assuming you were named executor in the will) or file for probate of the estate without a will (this is referred to as dying “intestate” which simply means dying without a will). Also, there will be a process to publish notice to creditors and you may be required to send each creditor specific notice of the death. Those creditors will have a certain amount of time to file a claim against the estate assets. If a legitimate creditor files a claim, the claim can be paid out of the estate assets. Depending on the location of assets, some state’s laws impose a state death tax (sometimes referred to as “inheritance taxes”) that have to be paid and, if the estate is large enough, a federal estate tax return may also have to be filed along with any taxes which may be due.

Only after the estate is fully administered, whether through the probate or trust administration process, creditors paid, and tax returns filed and taxes paid, can the estate be fully distributed to the named beneficiaries or heirs. Given the many steps, and complexities of probate, you should seek legal counsel to help you through the process.  If you are facing the prospects of handling the affairs of friend or relative and wish to understand your fiduciary and other important obligations, please contact the estate planning attorneys at Schneiders & Associates, L.L.P., to arrange for a consultation.

By Roy Schneider, Esq.

When creating a trust, it is common practice that the person doing the estate planning will name themselves as trustee and will appoint a successor trustee to handle matters once they pass on.  If you have been named successor trustee for a person that has died, it is important that you hire a wills, trusts and estates attorney to assist you in carrying out your duties. Although the attorney that originally created the estate plan would most likely be more familiar with the situation, you are not legally required to hire that same attorney. You can hire any attorney that you please in order to determine what your obligations are.

If the decedent had a will it is common that the successor trustee is also named as the executor.  Although the role of executor is similar to that of trustee, there are technical differences. If there was a will, you should consult with an attorney to determine if a court probate process will be required to administer the estate. If all assets were titled in the trust prior to the person’s death, or passed by beneficiary designation, such as in the case of life insurance and retirement plan assets (such as 401ks, IRAs, etc.), then a court probate may not be needed. However, if there were accounts or real estate in the person’s name alone that were not covered by the trust, a court probate may be necessary.

During the probate process, all of the deceased person’s assets must be collected and accounted for. This includes all bank accounts, stocks, bonds, mutual funds, investment accounts, retirement assets, life insurance, cars, personal belongings and real estate. All of these assets should be valued and listed on one or more inventories. Depending upon the value of the assets, an estate tax return may be needed. You should be aware of any final expenses, the person’s final income tax returns, and any creditors. Although this process is lengthy, once all of the appropriate steps are taken, the assets will be distributed and the estate will come to a close.

If you have been named a successor trustee, an experienced estate planning attorney at Schneiders & Associates, L.L.P. can help you through this process and make sure you carry out your legal duties as required.  Contact us for a consultation today.