The Residuary Clause – Handling the Leftovers

The Residuary Clause – Handling the Leftovers

We are reaching the end of our discussion about Wills.  The Will is the most basic and fundamental document of your Estate Plan.  Any individual can benefit from having a Will, even if they do not have much.  Unfortunately, after a divorce, if you did not have much before the divorce, you probably have less than half when it is done, because the lawyers always get their due.  However, assuming I handle your divorce economically, we would try to preserve as much as possible, for you to build forward.  If you have children, the greater goal is to preserve the post-divorce wealth, let you use and grow that wealth, and then pass along as much as possible to care for your children.  Having a Will allows you to avoid probate, and let your Estate avoid other fees after your passing.

Assuming you have applied the many tools discussed in prior blogs and dealt with all the special items and gifting, you may still have some leftovers.  You may also not have a lot of special gifting to do, in which case everything is a leftover.  It is also possible that you made your Will, but as time passes, things change, and you never changed your Will to keep up.  Therefore, these new or other things need some way to pass under your Will.  The way we cover this unknown is the “Residuary Clause”.  The Residuary Clause functions as the catchall provision that ensures that the Will disposes of all property included in your Estate.

The law gives a broad and open-ended definition for a residuary devise or gift to encompass an almost unlimited array of property, unless the Will provides otherwise.  Essentially, unless something is specifically gifted in the Will, everything could go by way of the residuary clause.  If you failed to include, if the intended gift is defective, void or lapsed, whatever there may be is saved by the residuary clause. 

There may be a variety of special issues that come up regarding residual property to flow through this clause.  As I caution throughout my blogs, you must consider each case on its own.  Your unique facts and variables will offer something different every time.  You may fall into a simple general application, but you may have some little item that makes your situation special, so always have complete disclosure, full show and tell, with your Estate Planner, so that we can work to create the results you want. 

For the sake of story telling, let’s assume there is some problem with your Will when you pass.  The law favors people having Wills rather than passing with a Will, so the court will do whatever is reasonable and practical to find a valid Will.  The primary reason is that if there is some expression of your intent to pass your things to your heirs or designates, the court will try to respect your intent and fins a Will.  Sometimes, this simple Residuary Clause can be the primary valid remainder of a defective Will, so at least some of your intent can be supported.  However, if your Will is terminally defective, and the Residuary Clause fails to save the Will, then your things will pass to heir under the laws of intestacy.

While we are getting ahead of ourselves, in a more comprehensive Estate Plan, there is usually a Will AND a Trust, a very standard practice is to have the Residuary Clause pass all remaining property to your Trust.  This is referred to as a “Pour Over” to an existing trust.  It is also common for a Trust to be created by this “Pour Over”.

Another very common technique is to have the Residuary Clause pass the remainder of your property to a number of heirs, such as your children of grand children.  All of the rules and ways to give to a group of people, as we discussed in prior blogs, apply to the Residuary, as if it is a Will in the Will.  Gifts can be general or specific.  Gifts can be fractional to individuals or classes.  What seems to be an emergency net, can be the best way to direct to any number of heirs or recipients in a broad manner.

Next time, we are going to continue our wrap up phase on Wills and talk about Charitable Devises and other issues.  After that, I hope to have special discussions on taxes.  In the meantime, I hope you will review your Estate Plan with you're “A” Team, or at least begin to seek out an Estate Planning Attorney to start this process.  Stay tuned for future blogs.  However, if you have any questions, feel free to respond below, or if you are interested in learning more about an Estate Plan, Wills, Trusts, Advanced Healthcare Directives, or Divorce, Custody, Visitation, Child Support, Spousal Support, Property Division, Modifications, Remarriage, or Pre-Nuptial Agreements, please contact me at please contact me at fbegun@gmail.com, or through my other websites, www.fcbegun.com, or www.linkedin.com for Fred Begun.

Passing the Buck - Business Interest Transfers

Passing the Buck - Business Interest Transfers

A special concern in Estate Planning, and for that matter Financial Planning, Tax Management and all aspects of wealth transfer is the handing of business interests.  Whether we are talking about Mom & Pop’s Restaurant or Entrepreneur’s Tech Corp., our society has long valued and respected the ability to create a business, and the wealth related thereto.  Unfortunately, the passing of that value has been both attacked and praised over the years.  These businesses can be held in various formats, most notably as a sole proprietorship, a general partnership, a limited partnership, a limited liability partnership, or various corporation formats, such as a limited liability company, an S corp or C corp.  The various formats provide different options, traps and opportunities.

First off, lets consider the sole proprietorship, which is typically the small business with a single owner, and which is most commonly seen.  Sometimes this is simply the DBA, reported on someone’s Schedule C tax returns, and is frequently not severable from the person himself or herself.  This lack of separation between business and person is a prime reason for the early and careful planning for transition.  In most cases, these businesses die with their creator/owner.  Frequently, the plan is more for the liquidation of any asset value and the passing of money.  As this is a very common business interaction for the Estate Planner, the attorney and the client must figure out early on, what is the client’s real desire for the business and make sure that desire is realistic.  After a thorough planning discussion, sometimes these views change.  If the real business is the personal knowledge, expertise, technique and connection of the client, then it may be not be transferable at death or retirement.  However, if there are others that could transition in, then there are options.  Maybe there is a trusted manager or employee.  Maybe that is a family member.  If so, planning options might include:  1) Reorganization of the business into a more readily transferable format, like a corporation, so that ownership can be bought or transferred over time, allowing a vesting transition.  2) Sale of the business during the owner’s lifetime.  Not only does this remove your client from the business, hopefully with cash value to invest or live on, but if done while a vital going concern, it may maximize value, rather than an after death fire sale.  3) Devise the business and assets upon death.  You can pass your business in your Will, but this is less desirable, in part due to players and readiness to take on the business, but also due to taxes and liquidity issues for the recipient.  Also, some businesses may require licensed or certified individuals, such as accountants, doctors and lawyers, so the practical aspects of operation pending devise are simply not present.  4) Sale at Death is an option.  However, this usually means charging your executor with the task of finding a buyer after your death or if no buyer is viable, liquidating the business.  Unless there is a plan for operation during transition, it is possible that the business would be treated as marginal and discounted buy aggressive buyers. 

A general partnership is an association formed by 2 or more persons to carry on a business, as co-owners, for profit.  A partnership is a very personal business arrangement, dealing as much with personalities as it is with rights of control and management.  A death of a partner does not automatically dissolve a partnership, but will disassociate the deceased partner.  The surviving partners have the right to continue the partnership business, but there will be an obligation to buy out the deceased partner’s interest.  The manner and method of determining the value of the deceased partners interest, and the method of paying out that value to the estate, survivors or heirs may be delineated in the partnership agreement or buy law.  It should go without saying that in preparing the Estate Plan, the review of the Partnership Agreement is crucial.  As with sole proprietorships, the same issues of liquidity, taxes, valuation and buy out.  So too with partnerships, if the partner seeking the Estate Planning has a desire for the business to continue on, there may be issues of changing format of the business, perhaps even to incorporate, as that will be a more durable entity.  Finally, there may be other issues relative the devise of the interest, execution of a buy out agreement, or even sale or liquidation, all of which may have to be monitored by the executor. 

A limited partnership has at least one general partner and one or more limited partners.  The business of the limited partnership is under the management and control of the general partner.  As such, the limited partner has no right to participate in management or control.  An interest in a limited partnership is essentially personal property of the investor.  There should be a limited partnership agreement, which will define the terms and conditions for the transfer of such interest.  It may provide for the liquidation to or through the general partner, or some other format of buy out.  Death of the general partner, who has management rights and obligations is treated differently from the death of a limited partner.  As with general partnerships, the same issues of liquidity, taxes, valuation and buy out.

A limited liability company is an unincorporated business entity that combines certain attributes of a partnership and a corporation.  On one hand they may have less formalities than a corporation and more flexible structures and participations.  On the other hand, they are not uniformly used throughout the US, they may have different treatments state to state and may have unusual tax treatment.  Like a limited partnership, participation in an LLC is treated lie personal property or other investments.  You can share in gains or losses, but not in management or control.  Like a partnership with an agreement, the LLC should have its controlling documents, including the Articles of Organization and the Operating Agreement, which will give guidance.  There may be buy sell agreements to consider in the Estate Planning process.  There may also be issues of the number of members in the LLC.  Therefore it may be interests in the LLC that are devised by a Will or simple the liquidated value, after your executor has been directed accordingly.

More common is the limited liability partnership, which is treated like a general partnership, but has taxes generally imposed upon corporations.  LLPs differ from general partnerships in that only the general partner has control, whereas all of the partners in the LLP share in the control of the LLP.  Otherwise death and planning for an LLP will be treated much the same as that of the general partnership noted above.  Again, in the Estate Planning process, access to and review of the partnership agreement is a necessity, if for no other reason than to identify and fully understand the buy-sell or buyout arrangements.

 

Finally, on to corporations or corporate securities.  Shares of publicly traded corporations are freely transferable, so this presents little concern.  In some instances, there may be some restrictions on the transfer of stock, but this would be more for significant blocks of publicly traded corporations or if the stock is in a closely held corporation, such as the S Corp.  These restricted or closely held stock, frequently have some trust or voting restriction.  For the closely held C Corp or S Corp, you need to be aware of tax considerations and other concerns if the stock is to be held by a trust.  Tax planning can be crucial here.  Transfers of stock in publicly traded corporations rarely offer these same concerns. 

As I caution throughout my blogs, you must consider each case on its own.  Your unique facts and variables will offer something different every time.  You may fall into a simple general application, but you may have some little item that makes your situation special, so always have complete disclosure, full show and tell, with your Estate Planner and the rest of your “A” Team of advisors, so that we can work in concert to create the results you want.  

As for these considerations during or after a divorce, it is very likely that a family business could be the biggest asset of a family.  Obviously, ownership usually goes to the party that runs the business or holds the licenses.  Even so, value is usually allocated accordingly.  For a partnership format, we typically see some struggle with value and buy out.  In a stock situation, we usually see the same thing, but sometimes, there may be a stock transfer.  We need to be aware of any limitation on transfers in case diluting ownership raises red flags.  While we have a hard time looking a day ahead, especially when mired in a divorce, the foresight to consider long ranging issues for eventual passage of this value and wealth, may impact how you value and fight over an asset in the present.

When we meet next, we are going to enter the wrap up phase on Wills, with some assorted issues, such as Charitable Devises and Residual Devises and after that, I hope to have special discussions on taxes.  In the meantime, I hope you will review your Estate Plan with you're “A” Team, or at least begin to seek out an Estate Planning Attorney to start this process.  Stay tuned for future blogs.  However, if you have any questions, feel free to respond below, or if you are interested in learning more about an Estate Plan, Wills, Trusts, Advanced Healthcare Directives, or Divorce, Custody, Visitation, Child Support, Spousal Support, Property Division, Modifications, Remarriage, or Pre-Nuptial Agreements, please contact me at please contact me at fbegun@gmail.com, or through my other websites, www.fcbegun.com, or www.linkedin.com for Fred Begun.

Welcome to the ABA Journal Blog Readers!

Welcome to the ABA Journal Blog Readers!

 

Hello All.  I have decided to kick out our follow up discussion on joint ownership of real property and our wrap up on Wills.  Instead, I wanted to share some news.

I have just been informed that this humble blog has now been picked up by the American Bar Association Journal and the blogs that they host and have in their directory.  The imbedded link is:

http://www.abajournal.com/blawg/Estate_Planning_for_the_Recently_Divorced/       

The ABAJournal.com has created four features designed for lawyers, bloggers and our readers.  Also, the ABAJournal has partnered with Justia.com, the leading legal information portal, to create a search engine covering all of the 3,800 blogs in our directory -- including yours. It's like Google for lawyers, pinpointing in an instant the most sophisticated and up-to-date commentary by legal professionals on any topic. Use the search box at the top of any of our pages (including their homepage: www.abajournal.com), and on the search results page click on the "Blawg Results" tab. Plus you can subscribe to an RSS feed of any search to follow the results in your feed reader.

As some of you have seen me through my Facebook page, you might also see me through the ABAJournal Facebook Page.  If you're a member of Facebook, one of the most popular social networking sites, you can become a fan of the ABA Journal.   The ABA Journal Facebook page features our latest headlines, recent covers, and special announcements. “Like” our page: http://www.facebook.com/abajournal. 

Thanks for sharing in this success.  When we meet next, we are going to enter the wrap up phase on Wills, with some assorted issues and after that, I hope to have special discussions on taxes.  In the meantime, I hope you will review your Estate Plan with you're “A” Team, or at least begin to seek out an Estate Planning Attorney to start this process.  Stay tuned for future blogs.  However, if you have any questions, feel free to respond below, or if you are interested in learning more about an Estate Plan, Wills, Trusts, Advanced Healthcare Directives, or Divorce, Custody, Visitation, Child Support, Spousal Support, Property Division, Modifications, Remarriage, or Pre-Nuptial Agreements, please contact me at please contact me at fbegun@gmail.com, or through my other websites, www.fcbegun.com, or www.linkedin.com for Fred Begun.

Shared Interests In Land

Shared Interests in Land

 

Coming to the end of our discussion on the gifting of real property, I wanted to share some information on various topics.  First is shared or joint interests in land.  One of the most common developments over property under Estate Planning is the giving joint interests in land.  Easiest scenario is where you have a home and you give it to your children upon your death.  How do you do that and how will they own it?

Basically put, a joint interest in land is where two or more persons own shares, equal or unequal, under a title created by a single will or transfer that is expressly declared to be a joint tenancy.  We see this in several formats.  We will discuss Joint Tenancy, Tenancy in Common, Partnership Interests and Community Property.

The most common form of this type of transfer is the “Joint Tenancy”.  With a Joint Tenancy, the law creates equal rights in all persons receiving the property with a “right of survivorship”.  That is to say, that of the several equal owners of the inherited property, as they die, their interest immediately passes equally to the remaining joint tenants.  Obviously, with a simple example of two children, when the first child dies, the second child inherits the entire gift of land.  Fun with math, if there are 3 children, each has a 1/3 undivided interest, and when the first child dies, the 2 survivors get and divide that first child’s 1/3 interest, and then they each have a 1/2 undivided interest.

Another form of joint ownership is a common tenancy, more commonly called Tenancy in Common.  A Tenancy in Common is another shared ownership where each party takes an interest in the property, but with no rights of survivorship.  Thus when each tenant in common passes, their fractional interest does not automatically go to the other common tenants, but rather as they may declare in their will or by law.  This is a more common format for having unequal shares over time.  Thus, more fun with math, if there are 3 children, each has a 1/3 undivided interest in common, and when the first child dies, the 2 survivors still have their 1/3 interest each, but the first to die may pass their 1/3 to their two children, so each grandchild has 1/2  of 1/3, or 1/6 each, and the surviving children still have each child’s original 1/3 interest.

Another form of joint ownership could be a Partnership, holding land for a partnership purpose.  While people think of partnerships commonly as a business, there is no limit to relatives being partners, or even married persons.

Finally, I also mentioned Community Property.  This is a common, if not default position of joint ownership between a husband and wife, also with rights of survivorship.  I would also venture to guess, while I have not yet seen specific law addressing the point, since California has had recent changes relative to same-sex marriage, the husband and wife language for community property will likely be broadened to allow community property ownership between spouses, gender neutral and more generically.

A final concept to be clear on.  The current law in California states a clear presumption, that if the gift in your Will is not clear as to any express form of shared ownership, the courts would presume that the joint gift will create a Tenancy in Common, with any benefits or burderns created by that form of title.  Most notably, the presumptions of survivorship.  This may be a critical concern in your drafting of the Will.

 

I don’t want to overload you, so we’ll end here, but next time we will discuss what happens with these various joint ownerships.  After we finish talking about Real Estate, we will wrap up Wills by talking about giving the family business and lastly, we will go over residuary gifts.  We will also have a specific discussion about gifts to minors.  We will wrap up wills with some other discussions including charitable gifts.  After that, I hope to have special discussions on taxes.  In the meantime, I hope you will review your Estate Plan with you're “A” Team, or at least begin to seek out an Estate Planning Attorney to start this process.  Stay tuned for future blogs.  However, if you have any questions, feel free to respond below, or if you are interested in learning more about an Estate Plan, Wills, Trusts, Advanced Healthcare Directives, or Divorce, Custody, Visitation, Child Support, Spousal Support, Property Division, Modifications, Remarriage, or Pre-Nuptial Agreements, please contact me at please contact me at fbegun@gmail.com, or through my other websites, www.fcbegun.com, or www.linkedin.com for Fred Begun.

The Life Estate

The Life Estate

 

Sorry for the generalizations and digressions over the last few weeks, but home improvements can take away from one’s time and focus.  When last we spoke, we were talking about the inheritance of property, land, homes, and other real estate.  As ownership of real property offers particular and unique benefits and obligations, the gifting of such property under a Will is something routinely done, but that requires special attention to determine and accomplish the desires of the gifter in the Estate Plan.  It is possible to gift the use of property to one person, while gifting the ownership of the property to someone else.  The gift of use is called a Life Estate.

A Life Estate is a gift measured by the life of the person holding it or by the life of another person.  Fancy lawyers call this second Life Estate per autre vie, life of another.  A Life Estate may be created by a Will.  When that is done, it is generally created upon the death of the testator or the person making the Will.   When a Life Estate is created, then there is also a remainder interest created, known as remainder beneficiaries, being who will receive the property upon the death of the Life Estate holder, or the triggering autre vie.

There are no magic words to create this Life Estate, but it is frequently left to simple language and basic interpretation.  For instance, someone could say in their Will, “I leave our home to my wife, and upon her death to our children.”  The wife will have the home for so long as she is alive, and then the children get the house.  A more controlling or spiteful spouse might say, “ I leave my house to my wife, for so long as she remains single, and then to my children”.  Sounds weird, but if you know that the house is owned solely by the husband, and that this was a second wife, and that the children were from a first marriage, then it begins to make sense.  Frequently, Life Estates are used to give the family continued use, but then the property would go to a charity.  Consider a gift such as, “I leave our home to my wife, and upon her death to our Church”.  Seems generous, but what about family.  If these people have no children or immediate family, and have an affinity to their church, why not?  Finally, there could be tax incentives in gifting to charity part of one’s estate while leaving other aspects of use or gift to the family.

Lawful Life Estates are not really recommended because they are generally inflexible arrangements.  The Life Estate holder, is frequently also referred to as a Life Tenant, because the right to use is essentially the same as someone who is renting or using a property.   One problem can be where the Life Estate holder and the remainder beneficiaries have different interests.  Also, the Life Estate Holder has an obligation to not damage or waste the property, as they have a duty to remainder beneficiaries.

Next time we will talk about shared interests in property and some other complications that can come with Real Estate.  After we finish talking about Real Estate, we will wrap up Wills by talking about giving the family business and lastly, we will go over residuary gifts.  We will also have a specific discussion about gifts to minors.  We will wrap up wills with some other discussions including charitable gifts.  After that, I hope to have special discussions on taxes.  In the meantime, I hope you will review your Estate Plan with you're “A” Team, or at least begin to seek out an Estate Planning Attorney to start this process.  Stay tuned for future blogs.  However, if you have any questions, feel free to respond below, or if you are interested in learning more about an Estate Plan, Wills, Trusts, Advanced Healthcare Directives, or Divorce, Custody, Visitation, Child Support, Spousal Support, Property Division, Modifications, Remarriage, or Pre-Nuptial Agreements, please contact me at please contact me at fbegun@gmail.com, or through my other websites, www.fcbegun.com, or www.linkedin.com for Fred Begun.

Money Lost and Found – Show Me The Money! - Revisited

Money Lost and Found – Show Me The Money! - Revisited

I originally posted this blog article on 5/23/13.  However, I just saw a new "Pre-Tax Season" Posting on Yahoo at http://finance.yahoo.com/news/celebrities-aren-t-the-only-ones-leaving-unclaimed-cash-on-the-table-164350769.html, so while I am behind on my blogging due to home improvement time constraints, I thought a little freshen up on a really useful blog.  Some old and some new as follows:

Over the last few weeks, I’ve been starting to tell you that following a divorce you have many reasons to revise or create an Estate Plan.  I have glossed over the basic likely components of an Estate Plan, and once again, an Estate Plan is generally composed of a Will, a Trust, Powers of Attorney and an Advanced Healthcare Directive.  I want to take a break from the law and give you some tools to find what has been lost.

Usually a few times a year, frequently before the holidays or tax season, you hear a news story about how the government has billions of dollars that no one has claimed.  From time to time I go to a number of websites and look under the names of family and friends only to find that there is money out there that can’t find them.  Sometimes it is pennies, and other times, thousands of dollars. I found several hundred dollars of a rental deposit for my brother, but I also found several thousand dollars of stock and dividends for my wife, from her deceased father’s last long term job, because her father did not have a will.  Probate can be a long and painful process, but it only took us several months to organize and present all the birth, death, marriage and address information to verify the claim, but by the time we were done, my wife thought it was OK to be married to a lawyer sometimes.  Trying to be a good lawyer, estate planning, divorce or otherwise, I want to help people make and preserve money. 

Most recently, I saw an article online,  $58 billion unclaimed: Is some of it yours? by Melanie Hicken @CNNMoney January 27, 2013, citing several links to help you find money or property help by the government.

• State-held unclaimed property: Visit NAUPA's unclaimed.org for a map with links to each state's program.
• Life insurance: For benefits not held by the state, check the insurer's site directly. For example, MetLife has an online search.
• Pensions: For Pension Benefit Guaranty Corp. benefits, visit the agency's online search directory.
• U.S. savings bonds: More than 45 million matured savings bonds, worth nearly $16 billion, remain unredeemed, according to the U.S. Department of the Treasury. To search the database, visit treasuryhunt.gov.
• Tax refunds: In 2011, the Internal Revenue Service said it had $153.3 million in tax refund checks that were undeliverable. To make sure you've received your checks, visit the IRS's Where's my refund? tool.

From the new Yahoo posting - The best place to start looking for unclaimed money in your name is through the national database, MissingMoney.com, which lets you search by state for free and has been endorsed by NAUPA. You can also contact your state’s unclaimed property office directly.  The good news is that, unlike federal tax refunds, most claims can be filed in perpetuity, even heirs of people who left cash behind can file claims to recover it. But be sure to check your state's laws, which can vary based on the type of property and how long it's been unclaimed.

 From my point of view, the moral of this story is that a good Estate Plan has everything included and nothing should be lost to you or your family.  My Estate Planning process causes my clients to review their records, dredge their memory and organize their thoughts.  Will everything always be included?  Probably not.  However, at the conclusion of a Divorce, you have a really good picture of what you have, so strike while the iron is hot.  Even so, now you have a list of some resources to Show You The Money!  I would love to hear from you that you checked out these links and were able to find some money lost to you, your family or friends.  Share your success stories.  Good luck and happy hunting.

In the days that follow, I will give you more reasons to create, review and revise your Estate Plan. However, if you are interested in learning more about an Estate Plan, Wills, Trusts, Advanced Healthcare Directives, or Divorce, Custody, Visitation, Child Support, Spousal Support, Property Division, Modifications, Remarriage, or Pre-Nuptial Agreements, and you live in Santa Clara County or thereabout, please contact me at http://www.fcbegun.com/, fbegun@gmail.com or at http://www.linkedin.com for Fred Begun

The Home Front

The Home Front

Hello Folks.  A little delay in further posts on my blog.  Currently undergoing the pleasure of home improvements.  More precisely a full kitchen remodel with some adjoining rooms.  Floors, cabinets, appliances, basically the works.  So that is my excuse for not getting back on track.

That said, there is a good point to this story.   Estate Planning is a tool to plan for the the future, with awareness of what you have.  Many times, when I start to work with a new client, through my detailed process, we usually discover some assets that have been forgotten.  Maybe the retirement account or life insurance policy for that 2 year job, 20 years ago.  For most people, their house and their retirement may be the single most important assets they have.  As such, take care of what you have and plan for more, bigger, better in the future.  Maybe that remodel is a good use of your time and money.  Thanks for reading this little digression and a statement for common sense.  Next blog will hopefully be back on track.

After we finish talking about Real Estate, we will wrap up Wills by talking about giving the family business and lastly, we will go over residuary gifts.  We will also have a specific discussion about gifts to minors.  We will wrap up Wills with some other discussions including charitable gifts.  After that, I hope to have special discussions on taxes.  In the meantime, I hope you will let the New Year trigger a review of your Estate Plan with your “A” Team, or at least begin to seek out an Estate Planning Attorney to start this process.  Stay tuned for future blogs.  However, if you have any questions, feel free to respond below, or if you are interested in learning more about an Estate Plan, Wills, Trusts, Advanced Healthcare Directives, or Divorce, Custody, Visitation, Child Support, Spousal Support, Property Division, Modifications, Remarriage, or Pre-Nuptial Agreements, please contact me at please contact me at fbegun@gmail.com, or through my other websites, www.fcbegun.com, or www.linkedin.com for Fred Begun.

Happy New Year . . . Now What?

Happy New Year . . . Now What?

Happy New Year to you and yours.  My posts have been a bit more sporadic since Thanksgiving thanks to friends and family and down time well spent.  I sincerely hope you have all had a happy holidays with family, friends, feasting and fun.

A gentle reminder, while some people change the smoke detector batteries every January 1st, a new year is a great time to consider your family and your planning. Do you have a will? Do you need a trust? Do you have health care directives? My suggestion is that you now take time to review your important financial and legal papers and consider talking to your Estate Planner. If you don't have one, I would be glad to consult with you and see if I can help you plan for your family and your future.

Thanks for reading my greeting and shameless plug for work.  Next time we will get back talking about Wills and a few special features of such gifting, including giving use versus giving ownership, in a discussion of Life Estate or gifts of Fee Interests, and the gifting of single properties to multiple owners, and the creation of joint ownership. 

After we finish talking about Real Estate, we will wrap up Wills by talking about giving the family business and lastly, we will go over residuary gifts.  We will also have a specific discussion about gifts to minors.  We will wrap up Wills with some other discussions including charitable gifts.  After that, I hope to have special discussions on taxes.  In the meantime, I hope you will let the New Year trigger a review of your Estate Plan with your “A” Team, or at least begin to seek out an Estate Planning Attorney to start this process.  Stay tuned for future blogs.  However, if you have any questions, feel free to respond below, or if you are interested in learning more about an Estate Plan, Wills, Trusts, Advanced Healthcare Directives, or Divorce, Custody, Visitation, Child Support, Spousal Support, Property Division, Modifications, Remarriage, or Pre-Nuptial Agreements, please contact me at please contact me at fbegun@gmail.com, or through my other websites, www.fcbegun.com, or www.linkedin.com for Fred Begun.

Land Ho!

Land Ho!

 

I hope you all had a good Thanksgiving holiday.  I enjoyed a little break from blogging over the last few weeks, so I hope we are all back freshly revived from turkey comas and ready to think about Estate Planning.  Even so, we are still in the midst of the holiday season.  A time for family and friends.  As I noted in my pre-Thanksgiving blog, I hope you can look around at others over the holiday season and be thankful for those there.  I hope you can understand and appreciate those not able to be with you this year, and the roll that you still play in each others lives.  It is just this role that links into Estate Planning.  When last we discussed specific topics, we were talking about gifts under wills.  This blog will focus on gift of Real Property, or land, under your will.

As previously discussed, under California law, all property is either real or personal.  Civil Code §657.  Further, the Code defines “Real Property” as land, that which is affixed to land, that which is incidental or appurtenant to land, and that which is immovable by law.  Civil Code §658.  And for those who want to get picky, Land is the material of Earth.  Civil Code §659.  Generally speaking, most of us understand Real Property to be synonymous to land, real estate, buildings, and anything erected on, affixed to or growing on the land.

In California, as well as many other places, real property represents a significant aspect of personal wealth and thus is a major element of concern in any Estate Plan.  A family residence may be the single largest asset and source of value a family may have.  Similarly, a major area for investment for some individuals or families may be in commercial property.  This is real property where businesses are operated.  Whether this be a store, a warehouse, an office building or even a farm, land is a huge source of value and an integral element of the Estate Plan.

As part of the Estate Planning process, we must determine what is to be done with property upon death.  Is there a spouse and if so, will the spouse be able to take over the use, control, benefit and operation of the property?  Obviously, continued use of the family residence by family members may be dictated.   If so, if the property to be given to that spouse or relative, or should some other arrangement be made?  Sometimes, occupancy and ownership are not the same.  Maybe larger more complex models will shift us into a Trust scenario, but for the time being, we will focus on the transfer of land by Wills. 

  

When we talk about a gift or devise of real property, since all real property is unique, it will be classified as a specific devise.  We discussed these specific gifts, when we talked about “types” of gifts in my October 27, 2013 blog.  This classification of “specific gift” means that the unique item of property will be specifically identified and should not be adversely affected by other gifts or rights.  This is important as we discussed with regard to ademption and abatement and related rights.  It is possible to make your Estate Plan, and make this specific gift of this parcel to my son and this parcel to my daughter.  However, between the time you make the Estate Plan and the time you pass, what happens if you sell one of those parcels?  As such, the take away here is that whenever you make a significant change in your holdings, you should revisit and maybe revise your Estate Plan to avoid forcing issues of ademption or abatement.

On the other hand, there can be a general gift of real property, but that usually takes the form of a gift of “all real property I have, equally to my children”, such that specific parcels or buildings, and the specific or singular heir may not be identified expressly.  This gives your greater flexibility and freedom to manage your Estate as you please, and less of a reason to revise your Estate Plan, but if specific gifts are important, this method is not as effective, though you avoid the likelihood of undesirable or harsh results of ademption or abatement. 

Finally, in addition to the specific or general gift, you could have a residuary devise of real property, such that you give certain properties to certain recipients, but have all remaining real property going to the “catch all” recipient.  Typically, we see residual recipients as a surviving spouse, the favored child, or even a certain charity.

As ownership of real property offer particular and unique benefits and obligations, the gifting of such property under a Will is something routinely done, but that requires special attention to determine and accomplish the desires of the gifter in the Estate Plan.  Next time we will talk about a few special features of such gifting, including giving use versus ownership, in a discussion of Life Estate or gifts of Fee Interests, and the gifting of single properties to multiple owners, and the creation of joint ownership. 

After we finish talking about Real Estate, we will wrap up Wills by talking about giving the family business and lastly, we will go over residuary gifts.  We will also have a specific discussion about gifts to minors.  We will wrap up wills with some other discussions including charitable gifts.  After that, I hope to have special discussions on taxes.  In the meantime, I hope you will review your Estate Plan with you're “A” Team, or at least begin to seek out an Estate Planning Attorney to start this process.  Stay tuned for future blogs.  However, if you have any questions, feel free to respond below, or if you are interested in learning more about an Estate Plan, Wills, Trusts, Advanced Healthcare Directives, or Divorce, Custody, Visitation, Child Support, Spousal Support, Property Division, Modifications, Remarriage, or Pre-Nuptial Agreements, please contact me at please contact me at fbegun@gmail.com, or through my other websites, www.fcbegun.com, or www.linkedin.com for Fred Begun.

Thanksgiving Thoughts

Thanksgiving Thoughts

Thanksgiving is always a good time to reflect.  Some reflect on good food and hope for good football.  Other reflect on friends and family, with comings and goings.  Others still make a custom of sharing what they are thankful for.  I will leave you to your own family, friends and traditions.

For those who have been following my blog for the last several months, you know that I stress the need for an Estate Plan, especially if you have family, people and stuff.  Blending this with the Thanksgiving thinking, as you look around the dinner table for those present and missing, or look around the TV room for who is watching the game and who is with you, irrespective of the game, you can have those special thoughts too.  Memories as well as thoughts for the future.  And that is OK.  If those thoughts lead you to think of how you want to care for these people, then we can discuss an Estate Plan.  If those thoughts lead you to think who will care for you, that is OK too.  You can make arrangements to be clear as to how you want to be taken care of, and again we can discuss an Estate Plan.  Remember, Estate Planning is about more than money.

I believe that everyone can benefit from an Estate Plan.  I think the most basic of Estate Plans should have your Will, your Advanced Healthcare Directive and your Power of Attorney.  If your finances or desires justify, then some form of Trust can easily be added to your Estate Plan.  Your Will and Trust will tell the world how you want your things handled.  Your Advanced Healthcare Directive will tell the world how you want to be handled in the event that you cannot care for yourself, temporarily or permanently.  Your Power of Attorney tells the world who you have entrusted to handle your finances in the event that you cannot do so, temporarily or permanently.

I hope you can look around the table and be thankful for those there.  I hope you can understand and appreciate those not able to be with you this year, and the roll you still play in each others lives.  I hope and wish a Happy Thanksgiving for everyone. 

Next time we will get back on track and discuss gifts of Real Property.  After that, we will talk about giving the family business.  Following those specific discussions, we will go over residuary gifts.  We will also have a specific discussion about gifts to minors.  We will wrap up wills with some other discussions including charitable gifts.  After that, I hope to have special discussions on taxes.  In the meantime, I hope you will review your Estate Plan with you're “A” Team, or at least begin to seek out an Estate Planning Attorney to start this process.  Stay tuned for future blogs.  However, if you have any questions, feel free to respond below, or if you are interested in learning more about an Estate Plan, Wills, Trusts, Advanced Healthcare Directives, or Divorce, Custody, Visitation, Child Support, Spousal Support, Property Division, Modifications, Remarriage, or Pre-Nuptial Agreements, please contact me at please contact me at fbegun@gmail.com, or through my other websites, www.fcbegun.com, or www.linkedin.com for Fred Begun.

Opportunity to Get Informed

From time to time, I enjoy the privilege of digressing from my educational blog, to talk about different things.  In this instance, it is the Opportunity to Get Informed.  In this day and age, technology seeping into every aspect of your life, information is everywhere, whether you want it or not.  Sometimes, you might need to actively seek out info.

On November 16, 2013 I will be exhibiting at the Activities Wellness & Lifestyle Expo at the Santa Clara Convention Center.  You might be saying, what does a lawyer have to do with wellness or lifestyles.  Gotcha!  My link into this topic is for Financial Wellness through sound Estate Planning. The current list of exhibits include insurance, banking, and financial.  for thos of you have been following my blog, and recall my article "The 'A' Team", published 6/9/13, understand how much I value these advisers in your life, and hope to be one of your "A" Team as well.

Featured speakers at the Activities Wellness & Lifestyle Expo will address the Affordable Healthcare Act (Obamacare) among other topics.  I'm sure there will be other exhibitors focusing on personal health and wellness, and a variety of other services, but we are all looking for business and looking to help our people.

Come by my booth to say hello.  I would love to meet people who have read some of my blogs.  I will be there to answer questions about Estate Planning and Family Law, and will do my best to direct you to other legal professionals, if I cannot specifically help you.  Also, I will have a variety of raffle prizes as well as a little fun in games of chance for you to win various other prizes.

Here is a link for a flyer on the Expo: 

http://www.activitieswellnesslifestyleexpo.com/flyer.html

Next week we will get back into some more discussion of gifts under wills, focusing on Real Property and after that, we will talk about giving the family business.  Following those specific discussions, we will go over residuary gifts.  We will also have a specific discussion about gifts to minors.  We will wrap up wills with some other discussions including charitable gifts.  After that, I hope to have special discussions on taxes.  In the meantime, I hope you will review your Estate Plan with you're “A” Team, or at least begin to seek out an Estate Planning Attorney to start this process.  Stay tuned for future blogs.  However, if you have any questions, feel free to respond below, or if you are interested in learning more about an Estate Plan, Wills, Trusts, Advanced Healthcare Directives, or Divorce, Custody, Visitation, Child Support, Spousal Support, Property Division, Modifications, Remarriage, or Pre-Nuptial Agreements, please contact me at please contact me at fbegun@gmail.com, or through my other websites, www.fcbegun.com, or www.linkedin.com for Fred Begun.

Gifts Under Your Will – Specific Gift Types

Gifts Under Your Will – Specific Gift Types

When talking about types of gifts under your Will, there are a few basic notions to consider.  First, what is being given, money, personal property, real property, and how these are distinguished under the law.  Next, whether the gift is specific, general or demonstrative.  Then there is some wrap up of these concepts.

In California, all property is either real or personal.  Civil Code §657.  The distinction is that Real Property is land and all things attached or incidental or appurtenant to land, not readily moveable.  Civil Code §658.  Personal Property is everything that is not Real Property, or pretty much everything else.  Civil Code §663.  Personal Property is then broken down into other considerations, such as tangible, being actual things you can touch or hold, and intangible, such as rights and privileges.  Tangibles are things like cars, antiques, art, jewelry and even pets.  Before you get goofy on who cares about things you can’t hold, how about patents, copyrights, and stocks, which now a days seems even more significant in wealth.

When dealing with the drafting of your Will, whether real property or personal property, whether tangible or intangible, the key to success in the gifting it in the proper identification of the unique item being given. While most of us may know what “my gold ring” might mean, what if you have more than one?  The goal is specificity to avoid confusion.  Problem is that lawyers are creatures of habit and history.  We tend to use language that beckons to formalities of the past.  It is best to try to draft with clear, simple language, knowable in basic context.  As they say in the military, KISS – Keep It Simple, Stupid.

That was more on the what, so, focusing on Personal Property first, now on to the how and why.  A “Specific Gift” is a gift of specifically identifiable property.  PC §21117(a).  Again, a Specific Gift could be tangible, like the family piano, or intangible, like Apple stock.  It simply must be described with sufficient specificity.  Why do a Specific Gift?  Personal reasons mainly, but sometimes the identification and division has other impact.  A Specific Gift also entitles the recipient to all income derived on that item after the date of death, less any expenses related.  A Specific Gift also gets preference.  As you recall, when discussing Abatement, if other gifts have to be abated, Specific Gifts will be last to be abated for satisfaction issues.  The biggest problem with Specific Gifts is that your holdings change over time, and therefore, these specifics might change too.  A gift of my “100 shares of Apple stock” is great, when that is all you have.  But what happens years later if the Apple stock is long gone, or if you now have 10,000 shares?  The devil is in the details.  Good intentions and great details may lead to lack of clarity and confusion.

A “General Gift” is a gift defined by exclusion, that is, a general gift is a transfer from the general assets of a person, that does not give specific property.  PC §21117(b).  Also capable of being tangible or intangible, it is typically, “all” of the property or a specified amount of a general lump of property.  An example is a “pecuniary gift” or a gift of money.  “I give $10,000 to my sister” is a general gift, in that specific currency is not identified and it is a fixed sum.  Unless otherwise stated, pecuniary gifts will also generally accrue interest.  The problem of a pecuniary gift is that it presumes there is money to dole out.

Another “General Gift” is a demonstrative gift, which is general gift, but from a specified fund or property from which the transfer is primarily to be made.  PC §21117(c).  Thus the gift comes from the estate generally, without being a certain item.  For example, you could give, “two horses from my herd that I keep at Ranch X”. 

A final thought for General Gifting is another pecuniary gift, but this time the right to certain money, but over time.  This is an Annuity under PC §21117(e).  For example, all profit from Ranch X, paid annually, is an annuity.   An annuity may designate a specific fund or property as the source of the periodic payment.

These are some examples of gifts pertaining to personal property.  Next time we will discuss gifts of Real Property.  After that, we will talk about giving the family business.  Following those specific discussions, we will go over residuary gifts.  We will also have a specific discussion about gifts to minors.  We will wrap up wills with some other discussions including charitable gifts.  After that, I hope to have special discussions on taxes.  In the meantime, I hope you will review your Estate Plan with you're “A” Team, or at least begin to seek out an Estate Planning Attorney to start this process.  Stay tuned for future blogs.  However, if you have any questions, feel free to respond below, or if you are interested in learning more about an Estate Plan, Wills, Trusts, Advanced Healthcare Directives, or Divorce, Custody, Visitation, Child Support, Spousal Support, Property Division, Modifications, Remarriage, or Pre-Nuptial Agreements, please contact me at please contact me at fbegun@gmail.com, or through my other websites, www.fcbegun.com, or www.linkedin.com for Fred Begun.

Gifts Under Your Will - Failures

Gifts Under Your Will - Failures

In recent blogs, we have been talking about gifting under your Will.  Last week, conditional gifts, were those with strings attached.  What happens if gifts go wrong?  How can that be?  You mean that your dying wish was not respected?  Perhaps you made a gift, but you did something to the object of the gift prior to death, and never changed your will.  Or something worse, your precious stuff was unwanted?  Yup, this happens.

One category of gift failures is Ademption.  Ademption is the extinction or withdrawal of a gift because you, the gifter, did something that essentially revoked the gift or acted with an intent to revoke.  Most common form of ademption is where the item is gone or extinguished.  Thus, if a gift is made in a Will of a certain thing, say a building, and you, the Testator of your Will, decide to sell the building, or it is condemned, foreclosed, or even lost by destruction, that gift may be adeemed.  If your gift is gone, you may get nothing.  But in the law, words are critical, so “may” is very important.

The law does not like ademption, so there are laws that seek to save the gift, in some part or in kind.  Look to PC §21131 and following to address a variety of circumstances.  So if the building was sold, you may get the money from the sale of the building instead of the building or comparable value received from the loss of the building.  It may be that all you get is whatever is leftover.  However, there can be circumstances where the property is sold to care for the testator, and thus this need in the present overrides a right in the future.  Moral of this story, we need to consider the specific facts and circumstances of any specific gift, depending on whether you are the giver or the givee.  Better moral, review and revise your Estate Plan periodically so that you leave more to your heirs, with clear intent, and not create a squabble over your bones.

Another type of ademption is by advancement.  Just like it sounds, if someone is given something as and advance against their inheritance, they don’t get to double dip and get it twice.  They must account for what they got and get only what they are due.  This advance will be treated as a satisfaction of the inheritance in the Will, if the Will provides for a deduction of the lifetime gift, that there is a writing made with the Will that says the gift is an advance against an inheritance, that the receipt and advancement is acknowledged by the recipient, or that specific property is already given over, and is unique enough to not be given again.  One problem with advancements is that sometimes we are giving percentages or values, and not so much a specific thing.  In that case, we will need to determine the value or percent given and create an appropriate offset.  The possible arguments here are obvious.

Another category of gift failures would be abatement.  If there are more gifts than assets to go around, and all gifts cannot be satisfied in full, then the law kicks in to dictate what we look at, how we gather it together and how we give it out.  PC § 21400 and following gives us the order of abatement and abatement within classes, and as one might expect, we eliminate from the more general first, and try to satisfy the more specific.  For example, anything not included in the Will, an omitted asset, maybe acquired after the Will was made, will get absorbed, along with anything caught in the residuary gifts, and will be used to try to satisfy specific gifts.  Also, gifts to friends or charities will be absorbed in order to allow gifts to the family to take priority.  If you want things done differently, the same moral to the story, review and revise your Estate Plan periodically so that you leave more to your heirs, with clear intent, and not create a squabble over your bones.

In the future, we will be talking about specific gifts of money and personal property.  After that we will talk about real estate.  Then we will talk about giving the family business.  Following those specific discussions, we will go over residuary gifts.  We will also have a specific discussion about gifts to minors.  We will wrap up wills with some other discussions including charitable gifts.  After that, I hope to have special discussions on taxes.  In the meantime, I hope you will review your Estate Plan with you're “A” Team, or at least begin to seek out an Estate Planning Attorney to start this process.  Stay tuned for future blogs.  However, if you have any questions, feel free to respond below, or if you are interested in learning more about an Estate Plan, Wills, Trusts, Advanced Healthcare Directives, or Divorce, Custody, Visitation, Child Support, Spousal Support, Property Division, Modifications, Remarriage, or Pre-Nuptial Agreements, please contact me at please contact me at fbegun@gmail.com, or through my other websites, www.fcbegun.com, or www.linkedin.com for Fred Begun.