Why Your Child Should Not Inherit Large Sums of Money at 18

Posted by in Estate Planning, Living Trust on September 25th, 2009

At age 18, your child is an adult by law and possesses newly acquired legal rights.  One legal right is that your child is now allowed to inherit the full amount of whatever he or she is entitled to under your will or by intestacy laws.  Whether it be a large savings account or life insurance, your adult child will inherit the entire lump sum.  And by allowing your child to inherit this large sum of money at 18, you are giving them complete control over your money.  This is an idea that should unnerve most parents.  Think about the temptations you personally would have faced at 18.  Suddenly, hundreds of thousands of dollars is yours without a parental eye watching over you.  A will alone will not have the power to dictate your child’s spending decisions.  The money will be in the hands of your child without any binding instructions or rules.  As you look at your child, think about whether your child would be responsible and spend it on his or her education or blow your money living like a rockstar?  In most cases,
 
If you were not intending to give them control over such a large sum of money when they turned 18, why allow that to happen should you not be around.  Your child does not have to face this type of temptation.  You can still control the financial future of your child, deciding when and how much your child will receive, by putting a trust in place.  By creating a trust you can make the financial decisions for your child such as setting aside money for college, or whatever you may want for your child.  More importantly, you can keep the money out of your child’s hands until you feel that he or she is ready to handle and manage your money wisely or according to your intentions.  Planning ahead gives you the control you want so that you feel secure about your child’s financial future. 
Contributions from Joyce Park

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When Probate Can Be A Good Thing

Posted by in Estate Planning, Probate on September 25th, 2009

For most people, avoiding probate is generally the better course to take in creating an estate plan. However, in rare instances probate may actually be the better course. Michael Jackson’s estate seems to be one of these rare cases.

One of the main benefits of probate is that the entire process is under court supervision. For most small to mid-sized estates, this may be an unnecessary and lengthy process. But conversely, where an estate is substantial in size and plagued with a long list of creditors, court supervision can help smooth out problems. Court supervision guarantees an accurate accounting of the assets and debt and will greatly deter false creditor claims from being filed against the estate. And even better, if a creditor’s claim is not asserted within a four month period the claim is barred forever.

Michael Jackson’s estate is rumored to be worth $500 million but more than half of that amount ($300 million) is owed to creditors. Yet, Michael Jackson’s apparent desire to keep his estate administration out of the public eye took precedence over warding off bad creditors and frivolous lawsuits.

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Unmarried and non-traditional couples need to do their estate planning

Posted by in Estate Planning on August 31st, 2009

Many people who are in a committed partnership are at risk of passing their estate in a manner that does not suit their needs and desires. Due to outdated estate planning and probate laws, unmarried couples face a variety of issues that do not concern their married counterparts. These issues, in effect, often deny unmarried couples the important protections and benefits enjoyed by married couples. 

 For example, these laws include a number of provisions that protect married persons by assuring that surviving spouses are provided for should the deceased spouse purposely or inadvertently fail to provide for them. Unmarried couples are provided with no such protections, regardless of their commitment and dedication to the partnership. This is due to the fact that these laws grant protection to “spouses,” and “spouses” is often interpreted to mean opposite sex people who are married. Without a will, a surviving partner may be excluded from having any share in their deceased partner’s estate.

 
  These laws also negatively impact unmarried couples when it comes to government and corporate pensions, estate taxes, and rights regarding care and management of finances for disabled partners. For example, Social Security spousal benefits are only available to spouses. Similarly, employer-sponsored pensions often do not entitle suriving partners to benefits. Unmarried couples are also negatively affected with regard to estate taxes. Tax provisions often allow married couples to defer estate taxes until after the second spouse dies. This privilege is not extended to unmarried couples. Lastly, unmarried partners do not have automatic rights regarding care for and management of finances for their disabled partners.
 
   In short, every unmarried person who is in a committed partnership should have an estate plan in place.
Contributions from Diana Tran

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Invest in an Estate Plan During a Recession

Posted by in Estate Planning, Living Trust, Probate on August 13th, 2009

In a recession, the last thing you want is money being wasted on unnecessary, avoidable costs. But this is exactly what will happen if you do not protect your family and loved ones by setting up an estate plan. On your long list of expenses, an estate plan should be near the top of the list. In a shaky economy where people are worried about their future, an estate plan brings security and peace of mind that your loved ones are protected should anything happen to you. Without a proper estate plan in place, your estate may have to pay for the high costs of probate proceedings and attorney’s fees. This means less money or even no money for your loved ones. And in the situation where your estate has no money, your heirs will have to bear the high costs of wrapping up your estate.

While a will may be sufficient for some people, a proper estate plan may need more than just a will. Along with the will, a durable power of attorney is an instrument that will allow you to appoint someone to make financial decisions for you should you become incapacitated. Moreover, an advanced healthcare directive allows you to appoint someone to carry out your health wishes. Planning ahead and designating someone will negate the need for court supervision, therefore, saving unnecessary court costs. In addition to the will, durable power of attorney and advanced healthcare directive, a living trust may be needed. For example, a home worth $100,000 or more will subject your estate to the full probate process. The high costs of probate may be reduced by having a will in place, but having a living trust will avoid probate altogether.

Probate costs and attorney’s fees will be taken out of your estate. This is money you hoped to pass on to your loved ones. As previously mentioned, if your estate does not have money or not enough, your loved ones will be burdened with thousands and thousands of dollars in court costs and attorney’s fees on top of all the other expenses. Rather than receiving any money, your loved ones may have to pay money. In a time where people are trying to save money and find ways to cut their losses, you should protect them from such risks. This kind of mess is the absolute last thing you would want to leave behind in a recession period. People during a recession have enough to worry about. Money is precious but so is time. This is time that can be spent dealing with other difficulties involved in a recession.

It is undeniable that there are only positive aspects to having a proper estate plan in place. These benefits are even more important during a recession period where money is tight and future uncertain. By making the choice to forgo an estate plan and save the money you would have spent on an estate plan, you are not really saving money at all. Compared to probate proceedings, setting up an estate plan is relatively inexpensive. However, if costs ranging from 1200 – 3000 is too much for you to afford right now, you can pick up an estate planning book and create an estate plan on your own. It is better than not doing anything. It is not enough to simply hope that things will work out on their own. Instead, plan ahead and make sure that things will work out according to your wishes.

Contributions from Joyce Park, attorney at law

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Impending Custody Battle Over Michael Jackson’s Children

Posted by in Estate Planning, Guardianship of Children on July 16th, 2009

Last week, Katherine Jackson, Jackson’s mother, gained temporary guardianship over Jackson’s three children.  Katherine is taking aggressive legal action to gain permanent custody over the children.  On the otherhand, while Rowe is in the process of applying for custody, she seems hesitant about entering this custody battle, and rightfully so.  Although she possesses a powerful legal advantage as the natural, biological mother of the two oldest children, the fact that Jackson’s will appoints his mother as guardians of his children will be given substantial weight.  In a situation such as this one where a natural parent remains alive, a valid will speaks on behalf of Jackson, and the court will give Jackson’s wishes equal weight. 
 
Moreover, the court will look at other factors such as the children’s safety, health and welfare along with stability and continuity of environment.  The courts will look at both sides to determine where the children’s interest will be best served.  The last thing the court will want to do is cause the children more stress and hardship during an already difficult time.  The fact that Rowe’s custody of the two oldest children will separate the children will be taken into consideration.  Addtionally, Katherine Jackson long-standing relationship with the children will be weighed against the absence of any relationship with the children on Rowe’s part.  And finally, I am sure the court will take into account that at every opportunity Debbie Rowe has had, she has basically sold her parenting rights to Michael Jackson and that would seem to indicate that she has little interest in her children. As of now, it seems unlikely that the court will separate the children by taking the two oldest children out of a familiar and loving environment where they are receiving the care and support they need. 
 
As for the third and youngest child birthed by a surrogate mother, Jackson’s parents are likely to gain custody if met in court by the surrogate mother.  Because the surrogate mother is not genetically the mother of the child, she does not possess rights of a natural parent, if any rights at all. 
The latest rumors are that Rowe and the Jacksons will come to a financial arrangement sometime in the near future.
Contributions by Joyce Park

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Analyzing Michael Jackson’s Will

Posted by in Estate Planning, Guardianship of Children, Probate on July 7th, 2009

I took a quick look at Michael Jackson’s will and not surprisingly it is quite similar to the wills I prepare for my client everyday.  His will is only a few pages long and accomplishes three basic things

  1. Appoints executors for his will
  2. Expresses his preference as to whom should be the guardian for his children
  3. Transfers all of his assets to his trust

These are the primary purposes of a typical pour-over will that anyone who owns a home and has children should have.  While the typical pour-over will is designed to avoid the probate process, Michael Jackson’s estate is an example of an estate that would benefit from being subject to probate.  Since we have huge aseets and many creditors involved and complicated child custody issues, a probate court is probably the best place to resolve these issues.  While the legal fees are likely to be significant, the complexity of his estate would be incurred whether or not he used a living trust to own his assets.

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Michael Jackson may have a will after all

Posted by in Estate Planning, Estate Taxes, Guardianship of Children, Living Trust, Probate on June 30th, 2009

Now news reports are indicating that Michael Jackson does have a will and depending on how well it has been drafted, it will likely be the subject of litigation for years to come.  However, unless Michael Jackson created a living trust, it is likely that his estate will still be subject to probate and if his estate still has a sizeable value, millions of dollars in estate taxes will likely need to be paid.

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Michael Jackson and his estate planning

Posted by in Estate Planning, Estate Taxes, Guardianship of Children, Living Trust, Probate on June 30th, 2009

With the shocking passing of pop icon Michael Jackson, many questions are arising about what happens next to his children and his estate.   The primary issues  regarding his estate and family will be

  1. Who will be the Guardian to his children ( Two with Debbie Rowe and one by surrogate)?
  2. What is the value of his estate (including the likely residual income stream), does the value exceed his debts and as a result of the valuation how much will his estate owe in federal estate taxes (45%)?
  3. Since it appears he did not have a living trust, most of his assets (including the Neverland Ranch) will be subject to the probate process in California.  This will likely cause his estate to incur hundreds of thousands if not millions of dollars in probate attorneys fees.  The probate process will likely drag on for years.

These issues while magnified by the amount of money involved and the notoriety of the person who died, are still the same issues faced by a typical Orange County resident who passes on with a home and children.

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Brian Chew, Attorney at Law

Posted by in Uncategorized on June 28th, 2009

Welcome to my estate planning blog where I will be commenting on various estate planning issues as well as my reaction to current events.  I am a sole practitioner estate planning attorney based in Irvine, CA and I specialize in wills and living trusts as well as asset protection and business law.  For information about my firm, please visit OC Wills and Trust Attorneys

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