Celebrities Who Failed To Recognize Unborn Children in Their Wills: An Avoidable Problem

Having an estate plan that protects and provides for your loved ones is not only smart, it’s necessary. Without one, your family, friends, or the charitable organizations you wish to provide for may not receive your gifts. 

It’s also important to remember to update your estate planning documents whenever something changes which would affect your intentions. Two famous artists failed to recognize their unborn children in their Wills, which lead to unintended consequences. Unintended consequences that could have been avoided.

1. Michael Crichton. Crichton was a best-selling author, physician, producer, director, and screenwriter. He was most known for his work in science fiction including books such as Jurassic Park, Andromeda Strain, The Lost World, and many more.

a. Sadly, he died of cancer in 2008 leaving behind a grown daughter from a previous marriage as well as his current wife, Sherri Alexander, who was pregnant with his son.  As a self-admitted workaholic, Crichton never got around to updating his estate plan to provide for his unborn son.

b. When he passed, his net worth was approximately $175 million. Sherri Alexander filed a lawsuit against the estate to include her son in the will. However, Crichton's grown daughter, Taylor, opposed the lawsuit and a long and drawn out court battle ensued. A judge ruled that the son would inherit, but it likely cost millions of dollars in attorneys’ fees and much stress before that decision was made. 

2.Heath Ledger. Ledger, an Australian director and actor, was most known for his role as the Joker in Dark Knight. Although only 28-years-old, his estate had a net worth of approximately $16 million. His will left his entire estate to his parents and three sisters.  He failed to update his will even when he had a child (Matilda) with Michelle Williams and died from an accidental overdose of prescription drugs in 2008. 

a. The ensuing family legal battles lasted for over five years. Similar to Crichton’s situation, Ledger’s daughter was able to inherit – but again, not without spending a lot of money on litigation.

No One Likes To Think About Death, But It’s Necessary:

Most people don’t like to think about their own death and dealing with estate planning documents often forces us to do just that. However, as these situations show, it’s an important and necessary task to undertake. 

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Are Handwritten Intentions Enforceable? Princess Diana Thought So…

Princess Diana of Wales was one of the world’s most loved celebrities – and one of the richest.  Her tragic death in 1997 was world news. The majority of her estate, reportedly worth $40 million at the time of her death, was divided between Prince William and Prince Harry in her estate plan. 

However, she also wrote a “letter of wishes” that directed her executors to give a number of personal effects to her godchildren. Those executors, her mother and her sister, went to court and had it ruled unenforceable. 

Holographic Wills – Sometimes Enforceable, Sometimes Not:

Princess Diana’s letter of wishes is similar to what’s known as a “holographic” will in the United States. In its most simple terms, it is a handwritten document which may or may not have to be signed. 

State laws vary on whether holographic wills can be enforced and how they must be prepared.  Approximately half of U.S. states allow them and those require the matter to be probated. Some of the issues which frequently arise concerning holographic wills include:

1. Validity. Did the decedent write the will? In contested cases, handwriting experts are often used to determine validity.

2. Undue Influence. Was the decedent unduly influenced to create the will? That’s difficult to prove – or disprove – as they do not have to be witnessed.

3. Intentions. Does the will accurately describe the decedent’s intentions? Again, without witnesses (creating an actual last will and testament generally requires two), that becomes difficult to answer.

The question becomes – if you believe that no one will contest your holographic will (and it is legal in your state), should you skip the lawyers altogether? The answer is NO.

Don’t Subject Your Wishes to Scrutiny:

The whole purpose of creating a document, any document, which spells out your intentions upon death is to make it enforceable. Although last will and testaments still go through probate, they provide the court with a signed and witnessed document which is likely to reflect your intentions. Holographic wills are less likely to hold up in court and will be subject to a great deal more scrutiny.

The bottom line is that creating a will, a trust, or any other type of estate planning document is easy – when handled by an estate planning attorney. In effect, the process is simple and consists of having a conversation about your intentions, listing assets, and creating a legal document which will carry those intentions out. Sadly, Princess Diana’s godchildren got nothing. Don’t let someone else decide what you did, or did not, intend. 

Contact our office now and we’ll show you which types of estate planning documents are best for you and your goals.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

3 Mega-Celebrities Who Died Without Any Estate Plan: Let’s Learn From Their Mistakes

A Will or more comprehensive revocable trust-based estate plan, documents who gets what (and when) after you die. Without a Will or estate plan in place, the state decides how to distribute your belongings. In many cases, your assets may end up in the hands of complete strangers.  That’s exactly what happened to these three mega-celebrities:

1. James Dean. Dean died intestate (without a will) in 1955 at the age of 24. State law awarded most of his meager estate (he had only made three movies) to his father – now most of that is in the hands of his father’s relatives. 

His father did use some of that money to create a foundation to maximize the commercial value of his name, likeliness, and image. Ironically, Dean has consistently been one of the top 10 highest earning deceased celebrities up until 2012. His income in 2015 alone was $8.5 million and he’s been deceased for over 60 years!

2. Jimi Hendrix. Legendary singer and guitarist Jimi Hendrix died intestate in 1970 at the age of 27. Like Dean, the state awarded most of his estate to his father who created a family trust. 

By 2002, his father had grown trust to $80 million. Jimi’s father left the fortune to his adopted daughter. In turn, she created trusts for almost everyone in the family – except Jimi’s own brother Leon. Although he sued, he never got a dime of the estate now worth $175 million. Clearly there’s another story there.

3. Pablo Picasso. Famous painter Pablo Picasso died intestate in 1973 at the age of 91. Given his age, it’s surprising that he did not assign a beneficiary to his estate (which today would have been valued at nearly $200 million). 

His heirs, including Paloma Picasso, battled in courts with everyone who wanted part of his fortune – including the French government who alleged that Picasso owed millions in back taxes. His children received the bulk of his estate in the end, but not without a great deal of heartache.

Despite the differences in age, the above celebrities left millions of dollars on the table and started an avalanche of lawsuits by those who wanted a piece of the pie. The takeaway? Do not follow in their footsteps!

Make Your Intentions Crystal Clear Through Your Estate Plan:

Regardless of whether you’re a famous actor, singer or painter – or a regular working Joe or Jane, you have the power to make sure that your family, friends, or organizations get what you want them to have. The process is simple – make your intentions crystal clear by creating your estate plan, which we refer to as a Family Legacy Protection Plan, properly drafted by an experienced estate planning attorney.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Over 70% of Elvis Presley’s Estate Paid in Taxes & Fees: How To Avoid Unnecessary Taxes

Legendary singer and actor, Elvis Presley, earned over a billion dollars throughout his somewhat short career. That’s a Billion [with a capital B]. However, when the “King of Rock & Roll” died in 1977, his estate’s net worth was only $10 million. 

Of that, over 70% went to pay taxes and fees. That left someone who had earned over a billion dollars with only about $3 million (this time with an M) in the end. So, where did the money go and, more importantly, how can you avoid the same trap?

Where Did The Money Go?

It seems incomprehensible that someone who earned so much ended up with so little. Since Presley’s death, there have been many accusations made about his business manager, “Colonel” Tom Parker,” and his financial manager—Elvis’s very own father Vernon.

1.    “Colonel” Tom Parker.  Presley’s manager may have discovered him, but he was later accused of charging unreasonable and exorbitant commissions compared to industry averages. In fact, unlike most managers who get 10 or 20 percent, Parker’s deal with Elvis was 50/50.

a. It was later revealed that Parker was actually an illegal immigrant from Holland, who was born under an entirely different name, never obtained a green card, and refused to let Elvis tour overseas because he couldn’t go with him.

b.    If that weren’t enough, Parker also had a gambling problem and rumors say that he often lost more than $1 million in a night. After the truth came out, Parker’s rights to Elvis’s estate were terminated.

2.    Vernon Presley. Elvis’s father, Vernon Presley, was very involved with his son’s finances. However, many believe that he may not have had enough business savvy to manage such a large enterprise. 

 a.  Very little was done to invest profits and a trust was never created to avoid millions of dollars in estate taxes and fees which nearly bankrupted the estate itself. Had he sought the help of advisors, things might have turned out differently.

After Vernon died, Elvis’s only child, Lisa Marie, sold most of Elvis’s trademark rights for over $100 million. Perhaps she should have gotten involved sooner…

How To Protect Yourself Against Unnecessary Taxes:

Regardless of whether you earn a billion dollars and are known as a “King” or are simply a hard working Joe, do everything you can to protect yourself against taxes. In most situations, that means creating a trust that, if properly funded, will not be subject to probate and some of the taxes that associated with passing assets from one generation to the next.

Make the most of your hard earned income! Call our office today to find out about estate planning and how it can provide for and protect you and your family for generations to come.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Kaley Cuoco’s “Ironclad” Prenup Challenged: Can A Prenup Be Bulletproof?

The Big Bang Theory actress Kaley Cuoco, is one of the highest paid actresses on television. She earns one million dollars per episode and has a net worth of Forty-four million dollars ($44 Million). Before she married tennis star Ryan Sweeting in 2013, Cuoco asked him to sign a prenuptial agreement (generally referred to as a “Prenup”). 

After less than two years of marriage, Cuoco filed for divorce. She assumed the prenup would be valid. However, Sweeting alleges that the prenup shouldn’t be enforced and he wants spousal support. So, is The Big Bang Theory star’s Prenup ironclad? A better question might be—is it possible to create a Prenup that is bulletproof?

Cuoco Was Smart, But…

Cuoco was certainly smart to have Sweeting sign a prenuptial agreement as his net worth was only about two million dollars versus her 44 million. However, while a well-written prenup generally addresses asset division and support issues, they are not always ironclad. 

In this case, Sweeting alleges that his circumstances have substantially changed due to numerous sports injuries and an addiction to pain killers which have prevented him from earning a living as a tennis player. So, while he didn’t need support when the prenup was signed, he does now. 

3 Ways to Invalidate a Prenup:

There are generally three ways to invalidate a prenup, by proving:

1. Unconscionability. This is a legal term of art meaning that, under the circumstances, it would be grossly unfair to enforce the document. To overcome it, Cuoco would likely have to prove that Sweeting was represented by an independent attorney who advised him of the consequences before signing.  

2. Coercion. Legal contracts can be deemed void when one party was coerced into signing it. In its harshest terms, that equates to being forced to sign something at gunpoint. In this case, it means that either Sweeting wasn’t given enough time to read it or didn’t voluntarily sign it. 

3. Fraud. Sweeting could also allege that Cuoco lied about her net worth and that, based on her fraudulent activity, the prenup shouldn’t be enforced.

If Cuoco’s attorney did his or her job correctly, which seems to be the case, it’s most likely that she’ll prevail.

Don’t Risk Your Wealth:

Prenuptial agreements, part of a strong estate plan, should always be prepared by experienced attorneys (a different one for each party) who know how to comply with the laws of that particular state and take into account what changes in the relationship might affect the validity of the prenup. 

Today, 50% of all first marriages end in divorce; more than 70% of all second marriages do so. It makes sense to plan for the worst and hope for the best. Certainly, don’t risk your wealth and future by failing to have as ironclad a Prenup (or “Postnup” – an agreement made after marriage) as possible. It’s easier to accomplish than you would think and we can provide you with the tools you need to do just that.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Investment, Insurance, Annuity, and Retirement Planning Considerations

If your clients choose to use a Standalone Retirement Trust (SRT) to provide asset protection benefits for their beneficiaries, then the tax-related asset allocation strategy would be essentially the same as without an SRT, with one small exception.

 Consider skewing your investment plan toward: 

1. Loading retirement accounts and inherited retirement accounts with bonds, Real Estate Investment Trusts (“REITs”), and other assets that produce income taxed as ordinary income;

2. Housing stocks, Exchange-Traded Funds (“ETFs”), and other qualified-dividend generating investments in taxable accounts; and

3. Placing any high-growth assets in Roth or inherited Roth IRAs.

WARNING: SRT Tax Consequences:

That one small exception is that if your SRT is designed as an accumulation trust (necessary for asset protection), then the undistributed Required Minimum Distributions (RMDs) accumulating in the trust will face tightly compressed trust tax rates. If the undistributed annual RMDs exceed $12,400 (2016), the SRT is hit with a 39.6% marginal tax rate, possibly much higher than a beneficiary's personal income tax rates. For this reason, you might select very low-growth assets you believe belong in a client’s total portfolio for the accumulation SRT. Examples of these assets might be cash, short-term bonds, etc.

Always Use an SRT?

1. Of course not. No planning is one-size-fits all. There may be cases where your client’s circumstances do not warrant the hassle and expense of creating an SRT. An example might be if the inherited IRA is quite small in relation to all the other assets your client is protecting. In such cases, here are some other approaches to consider:

2. For clients who are still working but not fully funding their workplace retirement plan (e.g. 401(k), 403(b), 457, SIMPLE IRA, SEP IRA, etc.) accelerate the depletion of the beneficiary IRA and use the extra taxable cash flow to max out tax-deferrals into the workplace plan. If for every dollar pulled from the inherited IRA an additional dollar is contributed to the workplace plan, the tax impact is neutral but the assets are now easily consolidated into a single account.

3. For clients who are in retirement, if the optimal liquidation strategy in their case is to consume qualified assets first (as might be the case for those who enjoy a window of low income tax rates between retirement and deliberately delayed Social Security benefits), then consider consuming the inherited IRAs first of all.

4.       Depending on the circumstances, it may make sense for the client to hasten withdrawals from the inherited IRA to fund 529 plan contributions, to fund life insurance premiums, to fund Roth IRA conversions, HSA contributions, etc., in order to pass assets to heirs through those sorts of channels instead.

As a note to insurance agents or annuity-oriented brokers, though qualified longevity annuity contracts (QLACs) were approved in 2014 for a portion of the assets in one’s own IRA, they are not allowed in inherited IRAs.  And while life insurance is allowable in ERISA plans, it is not allowable in inherited IRAs any more than in one’s own IRA.

Team Up with Us:

We’d be happy to answer all SRT and retirement protection questions.  Please feel free to call with questions or if you’d like help planning for a client.  It takes a village.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Caution: Creditors Now Have Easy Access to Inherited IRAs

Do you have IRAs or other retirement accounts that you plan to leave to your loved ones?  If so, proceed with caution.  Most people don’t know the law has changed: inherited retirement accounts no longer have asset protection, meaning they can be seized by strangers.

How Can Inherited IRAs Be Protected?  Enter the Standalone Retirement Trust

Fortunately, retirement account protection still exists but only if you take action.  Many people like you are using Standalone Retirement Trusts (SRT) to protect retirement assets.  The SRT is a special type of revocable trust just for retirement accounts. 

A properly drafted SRT:

●       Protects the inherited retirement accounts from creditors as well as predators and lawsuits

●       Ensures that inherited retirement accounts remain in your bloodline and out of the hands of a daughter-in-law or son-in-law or former daughter-in-law or son-in-law

●       Allows for experienced investment management and oversight of the assets by a professional trustee

●       Prevents the beneficiary from gambling away the inherited retirement account or blowing it all on exotic vacations, expensive jewelry, designer shoes, and fast cars

●       Enables proper planning for a special needs beneficiary

●       Permits you to name minor beneficiaries such as grandchildren without the need for a court-supervised guardianship

●       Facilitates generation-skipping transfer tax planning to ensure that estate taxes are minimized or even eliminated at each generation of your family

 The Bottom Line on Protecting Inherited IRAs

Unfortunately, the Supreme Court decision has made outright beneficiary designations for IRAs and other retirement accounts risky business.  However, we are here to help you decide whether an SRT is a good fit for you and to answer your questions about protecting your retirement accounts.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

5 Reasons to Protect Your Retirement Accounts Now

During your lifetime, your retirement account has asset protection, but as soon as you pass that account to a loved one, that protection evaporates. This means one lawsuit and POOF! Your life long, hard earned savings could be gone.

Fortunately, there is an answer.  A special trust called a “Standalone Retirement Trust” (SRT) can protect inherited assets from your beneficiaries’ creditors.  We’ll show you what we mean.

When your spouse, child, or other loved one inherits your retirement account, their creditors have the power to seize it and take it as their own.

If you’re like most people, you’re thinking of protecting your retirement account?  Here are 5 reasons we think you’re right.

1. You have substantial combined retirement plans.  Spouses can use an SRT to shield one or the other from creditors. 

2. You believe your beneficiary may be “less than frugal” with the funds.  Anyone concerned about how their beneficiary will spend the inheritance should absolutely consider an SRT as you can provide oversight and instruction on how much they receive – and when. 

3. You are concerned about lawsuits, divorce, or other possible legal actions.  If your beneficiary is part of a lawsuit, is about to divorce, file for bankruptcy, or is involved in any type of legal action, an SRT can protect the assets they inherit from those creditors. 

4. You have beneficiaries who receive assistance.  If one of your beneficiaries receives, or may qualify for, a need-based governmental assistance program, it’s important to know that inheriting from an IRA may cause them to lose those benefits. An SRT can avoid disqualification. 

5. You are remarried with children from a previous marriage.  If you are remarried and have children from a previous marriage, your spouse could intentionally (or even unintentionally) disinherit your children.  You can avoid this by naming the spouse as a lifetime beneficiary of the trust and then having assets pass onto your children after his or her death.

 You’ve Worked Hard To Protect & Grow Your Wealth – Let’s Keep It That Way

You worked hard to save the money in those retirement accounts and your beneficiaries’ creditors shouldn’t be able take it from them. Let us show you how an SRT can help you protect your assets as well as provide tax deferred growth. NOW is the best time.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

How To Avoid Creditors Inheriting from You

Most people plan to leave a retirement account, such as an Individual Retirement Account (“IRA”), Roth IRA, 401 (k) Plan, 403 (b) plan, Employee Stock Ownership Plan (“ESOPs”), for their surviving spouse to live on when he or she passes away.

Surprisingly, this oft used planning device can be nullified—because it can be seized in a divorce, lawsuit, or bankruptcy. As such, your spouse can end up lacking the resources he or she planned on having as a source of retirement income.

3 Options Available To Surviving Spouses:

When your surviving spouse inherits your IRA, he or she generally has three options:

 1. Cash out the inherited IRA and pay the associated income tax. 

 WARNING: The cashed-out IRA will not have creditor protection and accelerates taxation.

 2. Maintain the IRA as an inherited IRA. 

  WARNING: The cashed-out IRA will not have creditor protection.

 3. Roll over the inherited IRA and treat it as his or her own.

  WARNING: The cashed-out IRA will not have creditor protection.

It is understandable why man become frustrated when realizing that a predator can swoop in and take their hard earned money; fortunately, there’s a solution and that solution is a retirement trust.

 Standalone Retirement Trusts Provide Protection:

A Standalone Retirement Trust (“SRT”) is a special type of trust designed to be the beneficiary of your retirement accounts after you die. It can protect your assets from creditors.  In fact, we can include trust provisions which specifically benefit your spouse in situations such as:

1.      Second marriages

2.      Divorce

3.      Lawsuits from car accidents, malpractice, or tenants

4.      Business failure

5.      Bankruptcy

6.      Medicaid qualification 

 Want To Know More? 

The bottom line is that a properly drafted SRT is often your best option for protecting your retirement assets (and providing the bonus of tax deferred growth). Want to know more?  Contact us today to schedule a conversation.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

3 Simple Ways to Avoid Probate Costs

The Bad News:

Probated estates are subject to a variety of costs from attorneys, executors, appraisers, accountants, courts, and state law. Depending on the probate's complexity, fees can run into tens of thousands of dollars.

The Good News:

Probate costs can be reduced by avoiding probate. It’s really that simple.

Here are three simple ways to avoid probate costs by avoiding probate:

       1.Name a Beneficiary:

The probate process determines who gets what when there is no beneficiary designation.  So, naming a beneficiary is the easiest way to avoid probate. Common beneficiary designation assets include: 

A. Life insurance

B. Annuities

C. Retirement plans

        2. Create and Fund a Revocable Living Trust: 

A revocable living trust owns your property, yet you remain in charge of all legal decisions until your death. After your death, your named trustee manages your assets—according to your wishes. A trust works well if properly created and funded by an experienced estate planning attorney.

        3. Own Property Jointly:

Probate can be avoided if the property you own is held jointly with a right of survivorship. There are several ways that you can establish joint ownership of property such as:

A. Joint tenancy with right of survivorship – ownership simply transfers to other tenants upon your death;

B.     Tenancy by its entirety—is a form of joint tenancy with right of survivorship, but only for married couples in some states;

C.     Community property—property obtained during a marriage in some states;

State laws play an important role here. We can help you determine which form of joint ownership, if any, is a good fit for you. 

We Have the Tools to Help You:

Contact our office today.  We’ll help you decide whether it makes sense to avoid probate in your particular case and, if so, the best way to do so.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

This Probate Is Taking Forever! [How To Avoid The Mess Before It Occurs]

After a loved one dies, his or her estate must be settled. While most people want the settlement process to be done ASAP, probate can take between 18 and 24 months. Yes, you heard that right. Such time delays create unnecessary problems.

 5 Reasons Probate Takes So Long:

 There are many reasons why probating a will takes so long. Here are five of the most common: 

 1.      Paperwork:

Managing probate required paperwork can be a monumental undertaking with structured timelines and court-imposed deadlines.

 2.      Complexity:

Estates with numerous or complicated assets simply take longer to probate as there are more items to be accounted for and valued.

 3.      Probate court caseload:

Particularly in California, our probate courts are dealing with high caseloads, budget cuts, and limited staff. 

 4.      Challenges to the will:

Heirs, beneficiaries, and those, who thought they’d be beneficiaries, can object to and challenge the will’s terms and legality. While state law dictates how long they have to object, will challenges can add years to the process.  Common challenges include that the testator was:

•  Lacking testamentary capacity

•   Delusional

•   Subject to undue influence

•   A victim of fraud

 5.      Creditor Notification:

A will’s executor must notify the decedent’s creditors so they have time to submit claims for debts. This time period varies from state to state as well, but it is generally six to nine months.

The bottom line is that, while most state probate laws are designed to keep the process moving along in a timely manner, that's more of a plan than a reality. 

 Simply Put, Avoiding Probate with a Trust Is Better:

Simply put, having assets in a trust is better. Administration generally only takes six to eight months total—meaning that the process is not tied up in court, beneficiaries get assets faster, costs are reduced, and stress levels are kept to a minimum.  

Take Action Now:

First, if you need help settling a probate estate, we can help you move the process along and remove some of the burden so you can move on with your life. Second, we can help you make sure you never burden your loved ones the way you’ve been burden. How? We’ll show you how to avoid probate with a trust.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Avoiding The Public Scrutiny That Is Probate

Most people think of probate as a private process. However, since Wills are filed at the courthouse, probated estates become a matter of public record. That means your nosey neighbor, or any other person, can simply go down to the courthouse or hop online and find out about your probate. Now, that is a result that most of our client’s hope to avoid. 

 Why A Probate Equates To All Of Your Assets Becoming Public Record:

 After a death, most states require that whoever has possession of the deceased person’s will must file it with the probate court – even if there won’t be any probate court proceedings.  While Nellie may be an annoyance and have no other reason to view the information other than curiosity, others can get access to your public records and make your beneficiaries’ lives miserable, such as:

 1.      Financial predators:

While today's digital world is convenient, it's also dangerous.  Financial predators find ways to access information online. Since courts are part of a bureaucratic process that often moves slower than a glacier, months can elapse before you (or the court) realizes that your beneficiaries have been swindled.

 2.      Charities:

Even the most well-meaning charities can become an annoyance when money is considered “up for grabs.” This is especially true in an estate situation when those inheriting assets want to do the right thing and honor their loved one. 

 3.      Will Challengers:

Public record documents such as probate provide those with an interest (whether valid or invalid) to challenge the will. This can equate to added costs and time defending the will.

 Avoid Your Estate Becoming Public With A Trust:

 Trusts are never filed with a court, either before or after your death. Probate courts are not involved in supervising your trust administration. So, you can avoid busy bodies and predators by creating a trust. While some state laws require a total, or partial, disclosure of the trust to beneficiaries, it is still the best way to keep your legal affairs private. Did you hear that, Nellie?

 Contact us today and let us help you create a trust to avoid probate and keep your family and financial affairs private.

 If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

How to Avoid Sending Your Loved Ones Through Probate

Today many people are using a revocable living trust instead of a will or joint ownership as the foundation of their estate plan. When properly prepared, a living trust will avoid the public, costly and time-consuming court processes of conservatorship or guardianship (due to incapacity) or probate (after death). Still, many people make a big mistake that sends their assets and loved ones right into the court system: they fail to fund their trust.

 What Does it Mean to Fund Your Trust?

 Funding a trust is simply the process of transferring assets from your name into your trust.  You should also change most beneficiary designations to your trust.

 Funding is accomplished in several different ways:

 1.      Changing the title of the asset from your individual name (or joint names if you’re married) to the name of your trust – for example, from John Smith to John Smith, Trustee of the John Smith Living Trust dated December 1, 2015.

2.      Assigning your interest in an asset without a title (such as artwork, jewelry, collectibles or antiques) to your trust.

3.      Changing the primary or contingent beneficiary of the asset to your trust.

 What Happens to Assets Left Out of Your Trust?

 For many people avoiding conservatorship or guardianship and probate are the main reasons they set up a revocable living trust. Unfortunately, you may believe that once you sign your trust agreement, you’re done. But if you fail to take the next step to change titles and beneficiary designations and then become mentally incompetent or die, your assets and loved ones will end up in probate court.

 Which Assets Should, and Should Not, Be Funded Into Your Trust?

 In general, you will probably want to fund the following assets into your trust:

1.      Real estate – homes, rental properties, vacant land and timeshares

2.      Bank and credit union accounts – checking, savings, CDs

3.      Safe deposit boxes

4.      Investment accounts – brokerage, agency, custody

5.      Notes payable to you

6.      Life insurance – if you don’t have an irrevocable life insurance trust

7.      Business interests

8.      Intellectual property

9.      Oil and gas interests

10.  Personal effects – artwork, jewelry, collectibles, antiques.

On the other hand, you will probably not want to fund the following assets into your trust:

1.      IRA’s and other tax-deferred retirement accounts – only the beneficiary should be changed

2.      Incentive stock options and Section 1244 stock

3.      Interests in professional corporations

4.      Foreign assets – in some countries funding an asset into a U.S.-based trust causes adverse tax consequences, while in other countries trusts aren’t recognized or are ignored due to forced heirship laws

5.      UTMA and UGMA accounts – your minor grandchild is the owner, not you as the custodian; instead, name a successor custodian

6.      Cars, trucks boats, motorcycles and scooters –most states allow a small amount of assets, including vehicles, to pass outside of probate, in others a beneficiary can be designated for vehicles, and in others, vehicles don’t have to go through probate at all.

 It’s important to work closely with your attorney to determine what should go into your trust and what should stay out.  Also, before purchasing new assets, consult with your attorney to find out how to title the account or deed or who to designate as the beneficiary.

 What Are the Benefits of Funding Your Trust?

 Funding your trust makes it possible to obtain the best results from your trust-based estate plan:

 1.      Your incapacity trustee instead of a conservatorship or guardianship judge will take control of your trust assets if you become mentally incompetent.

2.      Your settlement trustee instead of a probate judge will take control of your trust assets after your death.

3.      Your trust will be easier to update as your wishes and circumstances change instead of doing things piecemeal through joint ownership, payable on death or transfer on death accounts, or individual beneficiary designations.

4.      Your final wishes will remain a private family matter instead of being publicized in the local probate court records.

5.      Your incapacity or settlement trustee will have direct access to your trust assets without the need for obtaining a court order.

6.      Your incapacity or settlement trustee will be able to manage, invest, sell and reinvest your trust assets without court intervention.

 The Bottom Line on Trust Funding

Many people like the cost and time savings, plus the added control over assets a living trust offers. Yet in the end an unfunded trust isn’t worth the paper it’s written on. We are available to answer your questions about funding your trust and look forward to working with you and your advisors on all of your estate planning needs.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Take Control of Your Wealth Distribution!—Wills v. Trusts

You work hard for your money and want to ensure that your wealth distribution goes according to your wishes upon death. Sadly, many people simply don't understand the difference between wills and trusts and how they can affect inheritance. Don’t be one of them!  Take control of your wealth distribution by understanding what wills don’t control and the benefits of a trust.

 5 Things a Will Does NOT Control:

Most people believe that a will encompasses and controls all of your assets. That is simply not the case. Proper asset ownership for will-based plans can be confusing. However, the bottom line is that a will only controls assets in individual names; it does not control:

1.    Trust assets

2.    Retirement accounts / pension plans

3.    Life insurance

4.    Annuities

5.    Employee benefits

While having a will allows you to avoid having a court decide who gets what, a trust can generally protect you even further. 

 5 Benefits of a Living Trust:

 While there are many benefits to a living trust, here are five of the key highlights:

1.    Avoiding the public, costly and time-consuming court processes at death (probate);

2.    Avoiding the same regarding incapacity (conservatorship or guardianship);

3.    Providing for spouses without disinheriting children;

4.    Saving estate taxes in some cases;

5.    Protecting inheritances for children and grandchildren from the courts, creditors, spouses, divorce proceedings, and irresponsible spending.

 There are many types of assets which can be funded into your trust, such as real estate, bank accounts, investment accounts, and intellectual property rights. Others might include:

1.    Notes payable to you

2.    Life insurance – if you don’t have an irrevocable life insurance trust

3.    Business interests

4.    Oil and gas interests

5.    Personal effects – artwork, jewelry, collectibles, antiques

 It’s important to work closely with your estate planning attorney to make certain that all of your assets are distributed according to your wishes—and done so with the least amount of cost and time delay. Contact us today for more information about wills, trusts, and other financial planning issues and let us help you decide what’s best for your situation!

 If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

The Rules On Making Your Inheritance Last

A 2012 study by Ohio State researcher Jay Zagorsky, found that about one-third of Americans who receive an inheritance have negative savings within two years of getting their money, and of those who receive $100,000 or more, nearly one in five spend, donate or simply lose it all.  If you are about to receive an inheritance, there are several steps you can take to insure your funds will last longer than a few years.

Don’t Make Any Hasty Decisions. 

Once you receive your money, don’t make any hasty decisions about what to do with it.  Instead, park the funds in a safe place such as a savings account, money market, or CD until you have had enough time to put together a long term financial plan.  If you don’t already have one, set up an emergency fund that will cover six months of expenses.  If you already have an emergency fund, consider adding to it to cover one year of expenses.  If you are married, you will need to decide early on if you want to keep your inheritance in your separate name or place the funds in joint names with your spouse.  If you are considering giving some of your inheritance to your children, you could invoke a gift tax or negative income tax consequences and should only proceed with gifting once you understand all of the consequences.

 Still Working?  Put Away More Towards Your Retirement. 

If you are working and are not contributing the maximum to your 401(k), bump up your withholding, particularly if you are not meeting your employer’s match.  If your employer does not offer a 401(k), start funding an IRA.  Note that if you have inherited a traditional IRA, any withdrawals you make will be included in your taxable income.  You can minimize the income tax consequences by only taking required distributions and leaving the balance invested inside of the inherited IRA. 

Hire a Team of Professional Advisors. 

This section is crucial to ensuring that your inheritance is properly protected, managed, and grows over your lifetime.  A financial advisor will help analyze your current finances and build a solid financial foundation to include investment advice, insurance (life, long term care, and liability), credit and debt management, college savings, and retirement planning.  Your advisor can also help you look into the future and plan for long term financial goals, such as purchasing a first or second home or starting a charitable foundation.  An accountant will help you determine cash flow and minimize capital gains and other income taxes.  An estate planning attorney will help you create or update your estate plan (everyone needs a will, revocable trust, advance medical directive and durable power of attorney), decrease or eliminate estate taxes (federal and/or state), set up a gifting strategy, meet your charitable goals, create a family legacy, and protect your inheritance from creditors, predators, and lawsuits. 

If your inheritance is large enough, it has the potential to last your lifetime.  Don’t go it alone.  We are here to answer any questions you have about receiving, growing, donating, protecting and ultimately passing on your inheritance to your loved ones.   

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

What the Recently Released 2016 IRS Inflation Adjustments Mean for You

The Internal Revenue Service recently released the official inflation adjustments affecting the 2016 federal reporting for estate taxes, gift taxes, generation-skipping transfer taxes, and estate and trust income taxes. These changes will affect the way your accountant and your attorney help you plan as 2015 comes to an end.

 2016 Federal Estate Tax Exemption:

 In 2016 the estate tax exemption will be $5,450,000.  This is an increase of $20,000 over the 2015 exemption and a total increase of $1,950,000 since 2009. The maximum federal estate tax rate remains unchanged at 40%.

 What this means is that a person can die in 2016 with up to $5,450,000 of assets before his or her estate will need to file an estate tax return. Of course, there are certain circumstances where an estate tax return will still be necessary – such as to elect “portability” or if a person made substantial gifts during their life. The exact deadline to file an estate tax return varies depending on a person’s date of death, because an estate tax return is due within nine months of the deceased person’s date of death.

 Although the estate tax exemption has been increasing and now generally means that most people don’t need to worry about estate taxes, almost everyone still needs a will or a trust to ensure that their assets pass to their intended beneficiaries.

 2016 Federal Lifetime Gift Tax Exemption:

 In 2016 the lifetime gift tax exemption will also be $5,450,000.  This is an increase of $20,000 over the 2015 exemption and a total increase of $1,950,000 since 2009. The maximum federal gift tax rate remains unchanged at 40%.

 What this means is that if a person makes any taxable gifts in 2016 (in general a taxable gift is one that exceeds the annual gift tax exclusion – see more on that below), then they will need to file a federal gift tax return. For taxable gifts made in 2016, the gift tax return is due on or before April 17, 2017 (the same day as your 2016 income taxes).

 2016 Federal Generation-Skipping Transfer Tax Exemption:

 In 2015 the exemption from generation-skipping transfer taxes (GSTT) will also be $5,450,000.  This is an increase of $20,000 over the 2015 exemption and a total increase of $1,950,000 since 2009. The maximum federal GSTT rate remains unchanged at 40%.

 What this means is that if a person makes any transfers that are subject to the GSTT in 2016, then they will need to file a federal gift tax return.  For generation-skipping transfers made during 2016, the gift tax return is due on or before April 17, 2017 (the same date as your income taxes for 2016). If the generation-skipping transfer does not exceed $5,450,000, then no GSTT will be due; instead, the transferor’s GSTT exemption will be reduced by the amount of the transfer.

 For example, if Bob has not made any prior generation-skipping transfers and makes one of $500,000 in 2016, then his GSTT exemption will be reduced to $4,950,000 ($5,450,000 GSTT exemption - $500,000 generation-skipping transfer = $4,950,000 GSTT exemption remaining). The generation-skipping transfer tax is a complex tax, so you’ll definitely want to check with your accountant and attorney before making any large gifts during 2016 (or 2015 for that matter).

 2016 Annual Gift Tax Exclusion:

 In 2016, the annual gift tax exclusion will remain at $14,000. However, one adjustment is happening next year - the first $148,000 of gifts to a spouse who is not a U.S. citizen are not included in the total amount of taxable gifts.  This is an increase of $1,000 above the 2015 exclusion.

 Here’s how the annual gift tax exclusion works. If you make gifts to the same person that are $14,000 or less, then no gift tax return will probably be necessary. However, if the gifts to one person exceed $14,000 in 2016, then you’ll need to file a federal gift tax return.  For taxable gifts made in 2016, the gift tax return is due on or before April 17, 2017 (the same day as 2016 income tax returns).

 If the taxable gift does not exceed $5,450,000, then no gift tax will be due; instead, the lifetime gift tax exemption of the person who made the gift will be reduced by the amount of the taxable gift.

 For example, if Bob has not made any taxable gifts in prior years and makes a gift of $500,000 to his daughter in 2016, then Bob’s lifetime gift tax exemption will be reduced to $4,964,000 ($500,000 gift - $14,000 annual exclusion = $486,000 taxable gift; $5,450,000 lifetime gift tax exemption - $486,000 taxable gift = $4,964,000 lifetime gift tax exemption remaining). As you can see, the interplay between the annual gift tax exclusion and the gift tax exemption can become complex once you add multiple gifts and recipients, so you’ll want to check with your accountant or attorney before making any substantial gifts.

2016 Estate and Trust Income Tax Brackets:

 Finally, estates and trusts will be subject to the following income tax brackets in 2016:

If Taxable Income Is:                          The Tax Is:

 Not over $2,550                                  15% of the taxable income

Over $2,550 but                                  $382.50 plus 25% of

not over $5,950                                   the excess over $2,550

Over $5,950 but                                  $1,232.50 plus 28% of

not over $9,050                                   the excess over $5,950

Over $9,050 but                                  $2,100.50 plus 33% of

not over $12,400                                 the excess over $9,050

Over $12,400                                      $3,206 plus 39.6% of

                                                            the excess over $12,400

The income tax rates for estates and trusts are very compressed. An estate or trust will hit the top 39.6% rate at only $12,400 of taxable income in 2016.  Estates and trusts are also potentially subject to the 3.8% net investment income tax (on top of the above rates), depending on their income level and source of income.

 Bottom line: if you’re a trustee or executor, you should talk to your accountant and attorney now to ensure that you’re making the most income tax efficient decisions possible given the circumstances of the estate or trust.

 If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Annual Summary: The Six Hottest Estate Planning Topics in 2015

In case you missed any of them, here is a rundown of six hottest estate planning topics we covered this past year:

A.    5 Things You Need to Know About the ABLE Act: 

On December 19, 2014, President Obama signed the Achieving a Better Life Experience Act (ABLE Act) into law.  The Act will allow certain individuals with disabilities to establish tax-free savings accounts that can be used to cover expenses not otherwise covered by government sponsored programs.  This blog covers five important things you need to know about the Act:

1.      What an ABLE account is,

2.      Who can set one up,

3.      Contribution limits,

4.      What expenses can be paid from an ABLE account, and

5.      When they will be available

Federal regulations were issued in June and several states have already passed or are in the process of passing implementing legislation. Talk with us now if you think an ABLE account might be a good fit for your plan.

B.    4 Steps to Stop Mail Addressed to a Deceased Person: 

One of the first things you should do as a newly appointed executor of a deceased person’s probate estate or successor trustee of a deceased Grantor’s trust, is ask the post office to forward the deceased person’s mail to your address. Regrettably, along with important pieces of mail, many not-so-important pieces – catalogs, solicitations, and plain old junk mail – will end up in your mailbox. On the other hand, you may have purchased a home from a deceased person’s estate or trust and have received some of their mail at your new address. This blog covers four steps you can take to stop mail addressed to a deceased person, which can help to reduce the pile of annoying junk mail and protect against post-mortem identify theft.

C.    Financial Firms Roll Out Form Aimed at Stopping Financial Elder Abuse:

With cases of financial exploitation of the elderly on the rise, advisors who work with older clients are looking for ways to head off the abuse before it happens. Enter the “Emergency Contact Authorization Form” - a document in which clients can list a trusted person who should be contacted if an advisor suspects a client is starting to lose their mental capacity or, worse yet, being financially abused or scammed. This blog covers how the Emergency Contact Authorization Form works and what steps can be taken to protect you or a loved one from financial elder abuse. Learn today whether this option should be added to your plan.

D.    What You Need to Know About the Final Portability Rules: 

This summer the IRS issued the final rules governing the “portability election” as it relates to the federal estate tax exemption.  This blog covers:

1.      What the “portability election” is;

2.      How the election is made;

3.      Which estates are subject to the final rules;

4.      What the final rules provide; and

5.      How they will affect existing estate plans and recent widows and widowers.

The “portability election” can be a great planning option. But, it only works well if your will or trust has been designed with portability in mind. Portability was first introduced in 2011 and the IRS has (finally) provided final rules on how it works. If you haven’t updated your will or trust since 2011, now is the time to see whether portability-based planning is right for you and your family.

E.    These States Will Usher in Changes to Their Death Taxes in 2016: 

In 2015 there are still 20 U.S. jurisdictions that collect a death tax at the state level. This blog outlines changes that will occur in 2016 to state death taxes in the following states:  Connecticut, Delaware, District of Columbia, Hawaii, Maine, Maryland, Minnesota, New York, Rhode Island, Tennessee and Washington. If you live or own real estate in any of these states, you will want to read this blog to understand how these changes may affect your estate and your estate plan.

F.    IRS Releases 2016 Inflation Adjustments for Estate Tax and Related Exemptions and Estate and Trust Income Tax Brackets: 

In October, the Internal Revenue Service released the official inflation adjustments that will affect 2016 federal reporting for estate taxes, gift taxes, generation-skipping transfer taxes, and estate and trust income taxes.  This blog lists the 2016 transfer tax exemptions along with the 2016 income tax brackets for estates and trusts. This important information helps you plan the receipt of income that you can control (such as a large capital gain resulting from a sale of an asset), gifts to family members or charities, and deductions.

 As you can see, a great deal has changed over 2015. If your will, trust, power of attorney, health care directive, or other estate planning documents are more than two years old, they may be in need of an update. Contact us today to see how you can use these updated laws to improve your estate plan and protect your family.

 If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Here’s How to Protect Yourself After Fifty (50)

In 2008, the National Association of Estate Planners & Councils (NAEPC), in conjunction with Rep. Mike Thompson (D-CA) and 49 of his colleagues, helped pass a law which declared the third week in October “National Estate Planning Awareness Week.”  This year National Estate Planning Awareness Week falls on October 19 through 25.

 What is the Purpose of National Estate Planning Awareness Week?

 Americans face many challenges with regard to saving, investing, and planning for their financial futures.  For example:

1.  The majority of Americans over age 65 are totally dependent on their Social Security checks. With proper knowledge and planning, future generations can have a more secure retirement. An estate planning attorney and financial advisor can work with you to develop a plan to achieving a secure retirement.

2.  An estimated 56% of Americans do not have an estate plan, making estate planning one of the most overlooked areas of personal financial management.  Don’t wait until a crisis happens - planning now can minimize fees and avoid potentially costly probate or guardianship court proceedings. A well-designed estate plan can also protect you in the event of sickness or disability by giving your family (or another trusted person) the authority to manage your bills and investments. You can also use your plan to protect special needs children, provide for your long-term care needs, and minimize income taxes on the distribution of retirement assets. 

3.  Many mistakenly believe that since they are not “rich” they do not need a financial plan or an estate plan. This attitude is harmful in the long run and can be avoided by working with a proactive estate planning attorney and financial advisor.

 With these issues in mind, National Estate Planning Awareness Week was created to help Americans understand what estate planning is, why they need to do it, and how they can assemble a qualified team of professionals to assist in this important process.

 If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Early Predictions About 2016 Estate Tax, Gift Tax, GST Tax and Annual Gift Tax Limits

Early Predictions About 2016 Estate Tax, Gift Tax, GST Tax and Annual Gift Tax Limits

Under current law the federal estate tax, gift tax, and generation-skipping transfer tax exemptions have become unified and are indexed for inflation on an annual basis.  Since 2011, the exemption and tax rate has changed as follows:

            Year    Exemption       Tax Rate

            2011    $5,000,000      35%

            2012    $5,120,000      35%

            2013    $5,250,000      40%

            2014    $5,340,000      40%

            2015    $5,430,000      40%

The annual exclusion from gift taxes is also indexed for inflation on an annual basis but only in $1,000 increments.  Since 2011, the annual gift tax exclusion has changed as follows:

            Year    Exclusion       

            2011    $13,000          

            2012    $13,000          

            2013    $14,000          

            2014    $14,000         

            2015    $14,000          

While the IRS will not officially release the 2016 inflation-indexed exemption and exclusion until later in October, Wolters Kluwer Tax & Accounting has released its 2016 predictions based on historical inflationary trends.  According to Wolters, the exemption should end up at $5,450,000 in 2016, or $10,900,000 for married couples.  While this is a mere $20,000 per individual / $40,000 per married couple increase over the 2015 exemption, it is a whopping $450,000 per individual / $900,000 per married couple increase since 2011. Unfortunately, Wolters anticipates that the annual gift exclusion will remain at $14,000 for 2016.

Wealthy individuals and couples should continue to monitor these inflation-indexed numbers and plan accordingly. We will update you on the official 2016 numbers once the IRS releases them.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Asset Protection: Why Vampires Need Estate Planning

Yes, even the undead need an estate plan. After you stop laughing you need to hear me out. As we’ve learned from the likes of The Vampire Chronicles, the Twilight saga, and HBO’s True Blood, vampires aren’t immortal.  They do die, and it’s usually unexpected and messy.

While vampires aren’t good candidates for life insurance and probably don’t need an Advance Healthcare Directive (after all, their wounds seem to heal quickly and they never end up in the hospital), they should have a Power of Attorney to allow Mrs. Dracula or Dracula Jr. to manage finances just in case they need to take an extended trip. 

And what happens if Dracula is sued? A good asset protection plan will insure that his hard earned assets aren’t wasted away defending an expensive lawsuit and snatched up by a judgment holder.

And of course Dracula could cross paths with Buffy the Vampire Slayer or run out of gas in the middle of the desert at dawn.  While not likely, these things are nonetheless possible and will lead to that messy and unexpected death.  That’s where a will and trust come in handy – directing who will be in charge of settling Dracula’s final affairs and who will inherit his worldly possessions.  And what about Dracula Jr., what if he’s still a toddler or an adult who isn’t financially savvy?  A trust can be used to protect Jr. in either situation.  And then there’s always the concern that Mrs. Dracula will remarry.  A trust can be used to provide for Mrs. Dracula during her lifetime but insure that what’s left when she bursts into flames goes to Dracula Jr. and his children.  Oh, and these trusts can include creditor protection and tax planning that’s designed to minimize taxes for years to come.

If it’s clear that even the undead need an estate plan, what about you?  What are you, a mere mortal, waiting for?  Without an estate plan your final wishes will remain a mystery.  Worse yet, your state’s laws will provide your estate with a default plan that your loves ones will be stuck with and probably isn’t the plan you would have wanted.  Now is the time to create your estate plan on your own terms.  Please call our office now to arrange for your estate planning consultation.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.