Los Angeles Probate and Trust Lawyer Blog

An article posted at Coloradoan.com written by James L. Watts, outlines many reasons why it is not just the wealthy that benefit from an estate plan. Excluding possible federal estate tax exposure, Mr. Watts offers motivation in the article to those whose wealth is well under the current exemption amount to prepare an estate plan.

Additionally, in California, a comprehensive estate plan can provide for incapacity of the individual, liquidity of assets at death and avoidance of probate.

For the next two years, 2011 and 2012, married couples have a unique estate planning opportunity available to them that has never existed. The fact that this opportunity may not exist at the beginning of 2013, makes planning decisions revolving around this opportunity even more complex. For the next two years, a spouse can inherit their deceased spouse's estate and gift tax exemptions to the extent those exemptions are unused. This is called portability of the deceased spouse's exemption.

Traditionally, spouses would include exemption planning in their estate plan to preserve the first-to-die unified credit by creating a separate exemption trust funded with assets valued up to the exemption amount for the year that their spouse passed away.

For 2011 and 2012, that type of planning is not necessary as portability allows the living spouse to inherit the deceased spouse's exemption. This will make estate plans more simplified for the two years portability is in existence, but it is not without certain concerns.

One concern is that if an estate plan omits exemption planning and a spouse passes away in 2013, the deceased spouse's exemption will be lost leaving the surviving spouse's estate vulnerable to greater estate tax liability. Another is that the surviving spouse, to preserve the decedent's exemption, must file a federal estate tax return in a timely fashion even if the assets are not greater than the exemption amount for those two years (currently $5 million). Additionally, the asset protection of the exemption trust for the surviving spouse is lost.

I was standing in line at the market the other day and I noticed a storyline on the first page of a weekly fan magazine that stated "Elizabeth Taylor's Estate Begins Probate." I was puzzled, and always am, when people of means, who are presumably surrounded by business people and lawyers, don't have an estate plan in effect which would, at the very least, avoid probate.

So, I did a little research. It turns out that the estate is not being probated. Ms. Taylor had a revocable trust at the time of her death. However, the attorneys for the trust opted for a court proceeding which is commonly referred to as a Creditor's Claim process for trust administrations.

The probate court has jurisdiction over trust matters. The Creditors Claim process brought in a trust administration is voluntarily filed in the probate court. The Creditors Claim process in a probate is mandatory.

After receiving notice, if a creditor does not file a timely claim against the trust (within 4 months of published notice or 60 days from date notice is mailed or from date of personal service, whichever is later) the creditor's claim would be barred.

There are numerous benefits for opting to initiating the Creditors Claim process in court for a trust administration. The procedure limits the 1 year limitations period in which creditors would otherwise have to file claims, it will force noticed creditors to pursue their claims, or not, allowing the administration of the trust to move ahead without fear of a lurking outstanding claim, if a claim is questionable it can be addressed in a limited period and distributees don't need to worry about a properly noticed creditor pursuing the claim against the beneficiary's inheritance from the decedent's trust .

In August 2010, SB 105 was passed by the legislature. There is a new Probate Code Section (21362) updating the previous definition of "care custodian." This Section addresses gifts that become irrevocable after January 1, 2011.

This Code states that a care custodian will no longer include "a person who provided services without remuneration if the person had a personal relationship with the dependent adult (1) at least 90 days before providing those services, (2) at least 6 months before the dependent adult's death, and (3) before the dependent adult was admitted to hospice care, if the dependent adult was admitted to hospice care."

And if all this is too confusing, or you are not certain if a gift will be disqualified under the statute, an independent attorney can provide a Certificate of Independent Review.

A Certificate of Independent Review mandates an attorney that is, well, obviously independent from the situation to counsel the client regarding the "nature and consequences of the intended transfer." Under California Probate Code 21370, the independent attorney is described as an attorney who "has no legal, business, financial, professional, or personal relationship with the beneficiary of a donative transfer at issue under this part, and who would not be appointed as a fiduciary or receive any pecuniary benefit as a result of the operation of the instrument containing the donative transfer at issue under this part."