Many Los Angeles area families have a vacation home. It may be a getaway cottage in Big Sur or a place farther north in Napa or Sonoma wine county. Regardless of the location, when people draft their estate plan, they generally leave the property to their children.

While it may sound great to inherit all or part of a vacation home, that inheritance can come with a hefty price. There are property taxes, maintenance and potentially a mortgage. If it hasn’t been used for awhile, extensive upgrades may be necessary. Then there’s the issue of who gets it on special holidays like Memorial Day, Fourth of July, Labor Day and New Year’s.

The costs associated with a vacation home may be more than heirs can afford to manage. An inheritance that’s meant to be a generous gift can result in uncomfortable disputes and leave those who are unable to pay to keep the home out in the cold.

One solution is to make the property a limited liability corporation. Under an LLC, the owner(s) can:

— Put in place a management structure, including a calendar of when the property will be used and by whom

— Designate conditions for the sale of the property, including whom it can be sold to and for how much

— Provide funding for help with upkeep of the property

Parents can transfer shares in the LLC any time while they’re alive or wait to have the transfer made after they’ve died.

As with any asset that you intend to leave to a family member or other heirAA, it’s wise to find out whether they even want it. Discussing your estate plan with your family when you develop it is a good idea. It may be uncomfortable, but it can save conflict among family members after you’re gone. Your California estate planning attorney can help facilitate these conversations and answer any questions that you or your family members have.

Source: Boston Globe, “Leaving the summer cottage to your children? Consider an LLC,” Lynn Asinof, Nov. 25, 2016

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With a Republican president in the White House next year and a Republican-controlled Congress, some people who have considerable assets to leave to their heirs are hoping that the estate tax (sometimes referred to by those opposed to it as the “death tax”) will be repealed.

The majority of Americans don’t have to pay a federal estate tax. For 2016, it applies to estates valued at $5,450,000 or more. That number rises to $5,490,000 in 2017.

A federal estate tax repeal may not be as easy as it seems. Even though the Republicans will continue to be the majority party in the Senate, they don’t have enough votes required (60) to hold off a filibuster of such legislation by the Democrats. Even if the estate tax is repealed, it could be replaced by one or more other regulations, such as a capital gains reporting requirement at death.

Even if it is repealed, there could be a sunset provision that would prevent the change from going into effect for years. Of course, Republicans could opt to keep the estate tax as a negotiating tactic with Democrats to get something else they’d like even more.

This uncertainty shouldn’t keep people from going forward with their estate planning. Both state and federal laws will always be changing. Experienced California estate planning attorneys keep abreast of these changes so that they can appropriately advise their clients. The important thing is to ensure that your wishes for your estate are codified and that your heirs and beneficiaries are spared as much expense and complication as possible after you’re gone.

Source: WealthManagement.com, “The Future Of Estate Planning And Potential Repeal Under President Trump,” Nov. 16, 2016

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A person who dies without having a will is said to die intestate, which opens up a battle for the belongings of the decedent. California laws cover what is to happen to the person’s estate when this situation occurs. Understanding how the succession laws impact the estate is something that can help anyone who has a loved one who passed away without a will.

How are assets classified?

Assets in these cases are classified as community property or separate property. Community property is any property that was obtained during a marriage. Separate property is any property that the decedent acquired before the marriage or in certain other instances. If a person wasn’t married when he or she passed away, one’s property is considered separate property.

How are the types of property passed down?

If the decedent was married, all of the community property will become the property of the surviving spouse. Property that was separate property, including property that was amassed by a single person, is distributed according to the order of succession in the state’s probate laws.

If the single person had children, the children would each get an equal share of the property. A married person’s separate property would be divided between the surviving spouse and children with the spouse getting either half or one-third of the property. The children would then divide the remaining separate property.

A married decedent without children and whose parents are still living would have one’s separate property divided between the spouse and the decedent’s surviving parents. If the person’s parents aren’t alive but he or she has siblings, the siblings would get the portion of the decedent’s estate that would have passed down to his or her parents.

What happens if the person was single and didn’t have children, siblings, or surviving parents?

The person’s assets would pass down to other relatives. These could include nieces, nephews, cousins, aunts, uncles, and siblings of a spouse who has already passed away. If the person didn’t have any surviving relatives at all, the person’s estate would become the property of California.

What should I do if my family member died without a will?

The first thing you should do is to learn about how these laws will impact the estate. Once you have this information, you can find out what steps you need to take to get the estate settled.

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When people remarry, they often rewrite their wills to ensure that their new spouses are covered. Unfortunately, their children from previous marriages and relationships may be left without any inheritance, even if that’s not what their parents intended.

Sometimes people designate that their spouses receive all of their assets if they predecease them, and they stipulate that if they don’t predecease their spouses, everything goes to their children. Unfortunately, if the parent dies before the stepparent, that stepparent has no legal obligation to share any of the inheritance with the kids.

If a parent had a life insurance policy with the kids listed as the beneficiaries, they would still be entitled to those funds, regardless of what is stipulated in the will. The same is true of retirement and brokerage accounts where they were listed as beneficiaries.

That’s why it’s essential when drafting or revising your estate plan to include a new spouse to stipulate that your children and/or other family members will receive a share of your assets if that’s what you want. Otherwise, you may create some serious animosity between your kids and your spouse.

People who find themselves in this situation after a parent dies may be able to work something out with their stepparent so that they at least get some items that have sentimental value to them. As we saw in the case of comedian Robin Williams, his children and his widow ended up in a legal battle over relatively small but sentimental items like watches, a bicycle and his awards. despite the fact that he had a detailed estate plan.

An experienced California estate planning attorney can help you draft or redraft your estate plan to help ensure that your children are not unintentionally excluded from a portion of your assets after your remarriage. You can also designate that they get any items of value to them without having to fight for them.

Source: MarketWatch, “My stepmother inherited my father’s estate when he died — what can I do?,” Quentin Fottrell, Nov. 18, 2016

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Many people who draft their estate plan are surprised by the number of assets they have, large and small, that need to be considered. An experienced California estate planning attorney will help you ensure that you’ve codified how you want those assets disbursed and whom you want to put in charge of various aspects of your estate, including your financial and health care powers of attorney, trustees, executors and agents. The more thought you’ve given to these questions before you and your attorney start working together, the smoother and less time consuming the process will be.

One increasingly common type of asset that people often fail to consider before they begin drafting their will, trust and other estate planning documents is digital assets. This September, a new law went into effect here in California called the Revised Uniform Fiduciary Access to Digital Data Act. It allows designated fiduciaries to access and control a person’s digital assets and communications in order to administer that person’s estate.

An increasingly significant part of our financial and personal lives is now online. Digital assets include everything from bank accounts to data stored in the “cloud” to emails, social media accounts and blogs. Therefore, as you’re designating people to handle your estate after you’re gone or no longer able to do so yourself, it’s important to name one or more persons to be in charge of managing your digital assets.

It’s generally best if the person you designate to manage these assets is tech savvy enough to handle the job without relying on someone you may not know for assistance. That person doesn’t have to be an internet technology wizard. However, it’s probably best not to choose a brother who’s been living in the mountains of Tibet for years or your uncle who still relies on his Blackberry. However, as with all of your fiduciaries, it’s essential to choose someone you trust. Your attorney can provide guidance on this and all other estate planning matters.

Source: Lake County News, “Estate Planning: Important but sometimes unaddressed estate planning issues,” Dennis Fordham, Nov. 12, 2016

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When you’re developing your estate plan, you need to determine what will happen not just to your primary residence but to your vacation home(s). Whether it’s a centuries-old house by the ocean that’s been in your family for generations or a mountain cabin where you spend Christmas vacations every year, these properties can have not just significant monetary value, but great sentimental value.

A qualified personal residence trust can hold all of your properties for a specified period of time. You can then transfer them to your children or other heirs at a reduced gift tax rate.

These specialized trusts aren’t necessarily beneficial for everyone. The estate tax exemption is currently almost $11 million. However, if your assets are well above that or if you expect the property value to increase substantially, a QPRT is worth considering.

That value is assessed and set when the trust is set up, so if it appreciates over the years, the estate tax won’t increase accordingly. The longer a property is held in the trust, the greater the gift tax discount is. When the trust’s term is up, the beneficiaries own the property.

Terms are generally established based on the grantor’s life expectancy. If the grantor dies before the end of the term, the property goes back into the estate and the QPRT is negated.

These trusts can be structured in multiple ways. You can establish a separate QPRT for each property or include them all in one. You can also establish multiple QPRTs for one property, with a portion designated for each child.

There are a number of alternatives to QPRTs, and these trusts aren’t right for everyone. It’s important that your children or heirs want the property and have the same sentimental attachment to it that you do. As one tax manager notes, “You have to make sure the whole family is on the same page.” Further, because the heirs are responsible for upkeep expenses once the term ends, a QPRT is best for families where those heirs can afford to take care of it.

An experienced California estate planning attorney can review QPRTs and other options for keeping your vacation home in the family while minimizing the tax burden on your heirs. You can then decide which is best for you and your family.

Source: Barrons, “Holding Vacation Homes In a Trust Can Help Heirs,” Matt Miller, Nov. 05, 2016

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Being named as the executor of someone’s estate, or the trustee of a trust, can seem like an overwhelming responsibility. In order to avoid being overwhelmed, it is important to understand your duties as executor or trustee. While below are some of the basics concerning your new duties, the advice of legal counsel while managing an estate or a trust can be very beneficial.

The difference between a trustee and an executor

While the duties share some commonalities, an executor is responsible for managing the estate and setting the affairs of a deceased individual. A trustee is considered the legal owner of a trust and is responsible for managing its assets, filing tax returns and handling the asset distribution as stated in the trust’s terms.

Expectations of the executor

In general, the executor is required to represent the estate for legal purposes. This includes hiring an estate attorney and attending any court proceedings regarding the estate.

You will also have to manage the affairs and expenses of the estate. Executors use the funds of the estate to pay out any debts or expenses. They also must collect any income that is owed to the estate. Estate assets may need to be appraised and/or revalued, as well.

Another responsibility executors have is filing the estate tax return with the Internal Revenue Service. Prior to filing, executors must request an Employer Identification Number from the IRS to be registered as belonging to the estate. You must also notify the estate beneficiaries to inform them of their interests and distribute any remaining assets to them.

If you decide that the responsibilities of an executor are too much, you can either defer to an alternative individual named in the will or petition the court to name have another executor appointed.

Expectations of the trustee

A trustee has a fiduciary responsibility to the trust. This means that the trustee is always expected to act in the best interests of the trust and its beneficiaries.

At the time you assume your role as trustee, you will have to ensure that not only are the assets that are held in the trust safe, but that they are also under your control. You must understand the terms described in the trust document, as well as know who the beneficiaries are and verify that all prior records are updated and in order.

If the trust document requires it, you may have to invest the assets of the trust. This must be done to preserve the assets for all current and future beneficiaries. This does not mean you have to make investing decisions on your own, however. Instead, it allows you to consult a professional to determine the best options for the trust.

You will be responsible for administering the trust according to its specified terms. This includes distributing assets to the beneficiaries as determined by the trust agreement. Other duties include making decisions on behalf of the trust, preparing any necessary documents such as tax returns and statements and keeping in touch with the beneficiaries on a regular basis.

If you decide that you cannot perform the duties of a trustee, the trust agreement should either name a successor or provide you with the information on how to appoint another individual to the role.

If you have been named an executor or trustee, it is important that you understand your duties and options. For advice on managing an estate or trust, contact an attorney experienced in estate or trust management.

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When Californians apply for Medi-Cal, which is our state’s version of Medicaid, they often believe that by listing their home as exemption, they are protecting it from being taken to repay the benefits they’ve received from Medi-Cal. However, that’s not the case. Just because an asset is listed as exempt on the application, that doesn’t mean that it’s exempt from benefits recovery action.

If you or a loved one needs to apply for the Medi-Cal program, there are ways to protect your home for yourself and your heirs. The people at Medi-Cal can’t offer advice on how to exempt your home from a Medi-Cal lien, but a California estate planning attorney with experience helping seniors with their unique issues can provide valuable guidance. Following are several options:

— An irrevocable living trust: This type of trust lets you protect your home from a Medi-Cal lien without having to give it to your children, who may not yet want it or be able to handle the mortgage. In California, unlike other states, you can’t be ruled ineligible for Medi-Cal because you transferred your home and other exempt assets before or during the Medi-Cal eligibility period.– Give the home to a family member: If you have a child or other trusted family member who’s financially able to afford the maintenance and taxes on the home, as well as pay any remaining mortgage, this is an option. However, the person to whom you give the house wouldn’t fare as well under the tax code as if he or she inherited it after your death.– Life estate: Under California law, a life estate allows a person to keep a property for the remainder of their life and then pass it to their heirs. This lets them avoid a Medi-Cal lien on the property, while allowing their heirs to take advantage of the Internal Revenue Service “step-up basis” so that they won’t be taxed on any increase in value of the property. They only face taxes on any increases from the property’s fair market value at the time of the homeowner’s death.

Your home is likely the single most valuable asset you have, so it’s important to protect it. That’s why it’s wise to seek legal guidance before applying for Medi-Cal.

Source: A Place for Mom, “How Can You Protect Your Assets from a Medicaid Lien?,” Kimberley Fowler, accessed Nov. 03, 2016

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If a parent dies and you’re the executor of the will, one of the first things you have to do is take stock of exactly what is in the house. The will may lay out what possessions go to which heirs, or it may give you more general directions about splitting things up evenly. Either way, protecting those assets after a parent’s passing is crucial, even if is means taking the drastic step of changing the locks on the family home.

Who has the keys?

One issue that can arise is that you may not actually know who has the keys. Was your parent’s key the last one left? Did he or she give keys to neighbors in case of an emergency? Were any friends and family members given these spare keys? Which of the other heirs have made copies over the years? If you know the answers and are 100 percent confident, you may be able to gather up those dispersed keys and be done with it, but it’s often easier just to change the locks so that you know beyond a shadow of a doubt that you and only you can go into the home.

Missing assets

If you don’t change the locks, you could start going through things and find out that certain assets are missing. Since you can’t guarantee that a brother, sister, or other family member didn’t come in and remove them before you started taking inventory, you then don’t know if the will is out of date – maybe your parent sold the assets at a garage sale years ago and forgot to update the paperwork – or if someone is trying to sneak specific assets out so that no one else can get them.

Asset arguments

These missing assets can also easily lead to arguments. If one family member decides to take something, but the will you’re trying to execute leaves it to someone else, you then face the complicated task of taking the assets back and giving them to the right person. Distributing assets from a centralized location can be hard enough when there are disagreements; it’s harder when you have to physically confiscate them first.

For example, maybe your father had an old sailboat. He decided to leave it to your youngest sibling since everyone else was already getting something with equal monetary value. That sibling is planning to sell the boat. However, your eldest sibling has memories of riding on the boat with dad and wants to keep it in the family for sentimental reasons. Without consulting the will, he or she takes the boat and brings it to a summer cottage. As you can imagine, going to retrieve it can be complicated, costly, and highly emotional. You avoid all of this if you make sure the right people get the right assets from the very beginning.

Telling everyone

If you are going to change the locks, experts note that you should tell everyone. Send a text message, an email message, or a letter. That way, you have it all in writing and you know everyone understands what’s going on. Tell them you want to protect the house from thieves – remember, you don’t know who has spare keys outside of the family – and get everything in order in a controlled environment. Telling them helps to keep lines of communication open, it keeps your siblings from feeling like you’re trying to pull a fast one, and it helps you execute the will quickly, efficiently, and accurately.

As you do this, be sure you know the rights, responsibilities and powers you have as an executor of the will. Don’t let anyone push you into anything that goes against the will, and be sure that you understand every detail in this legally-binding document.

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For California families who own farms or ranches, estate planning is essential to help ensure that the businesses they’ve worked so hard to build and maintain continue on successfully when they’re no longer around. However, as with all types of estate planning, too often it gets neglected.

Succession planning, just like all estate planning, involves contemplating one’s own death or at least a time when they’re no longer able to manage their affairs. Many people also put it off because they think it’s too costly. However, as one California estate planning attorney notes, failure to develop a plan “could be disastrous for heirs when it comes to control of the assets and taxes.” He says that leaving matters for your children to fight over in court “is about the worst thing you can do.”

In addition to laying out your intentions for your business and keeping the farm or ranch in the family, a properly-drafted estate plan can save your heirs from having to pay unnecessary taxes down the line. It’s essential, as with any estate plan, to keep it updated as changes to your family occur.

Estate planning for farmers and ranchers is unique because their children may not be willing or able to carry on the family business. For children who aren’t involved in continuing the family business, there are ways to leave them money, such as a life insurance policy or irrevocable life insurance trust.

A California estate planning attorney with experience in developing plans for farms and ranches can help you develop a plan that is right for your business and your family. By doing this, you help ensure that the land and business you love will be in good hands when you’re gone.

Source: AgNet West, “Succession Plans can Assure Farms Stay in the Family,” Oct. 20, 2016

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