A large inheritance received during a time of grief would seem like a great comfort. Without proper thought and consideration, though, that windfall can create more problems than solutions.

If the assets from a generous California will or trust have been passed to you, it’s likely that you have never more wealth at one time in your life. The gift that was supposed to make your future easier is now an enormous responsibility. How do you proceed?

Grief and finances are not compatible. Asset decisions can wait until enough time has passed for you to feel fully competent to deal with the inheritance. Until that day comes, place new money in a safe, not-so-easily-accessible place, like a money market account rather than a tempting checking account.

Professional help can be abundantly useful following an inheritance. Estates planning attorneys and financial advisers have knowledge and skills that can supplement what you already know. Strategies can be designed to preserve the new wealth while meeting your personal goals.

The impact of taxes upon the inheritance and individual assets must be weighed. Figure out what, if any, tax implications exist at federal and state levels. Some states – not California – have inheritance taxes. If your assets originated in one of those states, you may be liable for an unexpected tax payment.

Consult with an expert about paying off your debt. You may be surprised to learn that hanging on to some of it, like a mortgage, may work in your financial favor.

Relatives and friends you never knew you had, investment firms and charities will be attracted to your new financial state. Add them to your plans, if you choose, but make the plan first.

An inheritance can be simultaneously thrilling and daunting. Estate planning lawyers suggest making no rash moves. Wealth brings comfort, but accepting and managing it comes with a learning curve.

Source: redding.com, “Lewis Chamberlain: Coping with an inheritance” Lewis Chamberlain, Oct. 19, 2013

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Dying debt free in Los Angeles may be a goal, but it’s often not a reality. In many states, leftover debt following a person’s death is an estate’s problem, not a direct concern for heirs. In California, community property laws sometimes force surviving spouses to pay a deceased spouse’s bills.

Certain debt ownership circumstances affect heirs, in and out of California. The death of a joint debt holder or co-signer shifts liability to the surviving debtor. Some loan agreements and estate plans acknowledge the hardship a surviving joint debtor faces. An executor or estate administration representative can tell you whether a decedent’s estate provides debt coverage for these bills.

Community property laws may not require an heir to pay all the debt left behind by a deceased relative. Creditors probably will attempt collection anyway, even when debt is not your responsibility. An estate planning attorney or estate administrator will identify which debt does and does not belong to an estate.

One of the many duties a California executor performs is letting creditors and affected businesses know a person has died. The Social Security Administration and credit reporting agencies are on the list. The agencies will ensure credit is no longer issued, which discourages identity thieves.

While spouses may be responsible, authorized users of a decedent’s credit card are not liable for debt. You shared the use of credit but carry no burden for it. Don’t invite fraud charges by continuing to use the card after the decedent’s death.

Curb the urge to divide assets before the estate settlement. Estate assets and debts must be balanced before beneficiaries are eligible for inheritances. When debts are higher than estate assets, there may be nothing to divide.

Community property laws affecting the responsibility for estate debt are complicated. It’s advisable for heirs to contact financial and legal professionals before taking any action, however well-meaning, affecting an estate.

Source: moneytalksnews.com, “Debt After Death: 10 Things You Need to Know” Trisha Sherven, Oct. 07, 2013

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Los Angeles residents may overlook the valuable, invisible assets they own known as intellectual property. For estate administration purposes, website domains and blogs, images, art or music you share through social media sites are assets that belong to you and, if you so designate, your heirs.

Tupac Shakur died violently in 1996, in the prime of his hip-hop career. “All Eyez on Me,” released the same year, was the first of three albums Tupac agreed to make for now-defunct Death Row Records.

Afeni Shakur was appointed estate administrator after her son’s death. The following year, Death Row Records and Afeni agreed to a settlement that gave the estate rights to Tupac’s original recordings.

Afeni accepted a deal that Death Row would pay the estate for an album of previous-unreleased Tupac recordings at the end of ten years. Royalties from all albums were included in the contract.

Death Row Records entered a deal with a record distributor in 2003 that included Tupac’s recordings. The distributor, now called Entertainment One, was forbidden to assign distribution rights for Tupac’s music without the Shakur estate’s permission.

Estate administration duties grew complex when Death Row went bankrupt in 2006. As a result, the estate received $100,000 that led to a 2007 album of never-before released Tupac music. Death Row’s sale to WIDEAwake Death Row Entertainment included the initial Tupac contract and subsequent estate and distribution agreements.

The unresolved $1.1 million lawsuit brought by Afeni against Death Row Acquisition LLC and Entertainment One stated Death Row had no right to sell intellectual property it did not own. The complaint alleges Tupac’s estate never got the royalties or unreleased master recordings it was promised, now in the possession of Entertainment One.

California estate plans increasingly require consideration of intangible assets. The time and effort invested now in safeguarding intellectual property can help heirs and estate mangers avoid future costly litigation.

Source: courthousenews.com, “Tupac’s Mom Sues for Royalties & Masters” Matt Reynolds, Sep. 26, 2013

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Silly Bands and Pogs from the 1990s and Cabbage Patch Dolls from the 1980s were collectibles that some people bought in quantity, with the idea that someday those childhood toys would be “worth something.” Other than niche buyers, who today values a Cabbage Patch Doll the way they did in 1985?

Extreme value fluctuation is possible with some assets, which makes it difficult to design estate plans. Think of the value of your home during the recent recession. Although California real estate prices rebounded, property values fell through the floor a few years ago. The asset you thought you had wasn’t worth what you thought it was. Then, things changed again.

The value of assets determines how you will divide and shield them from losing worth. You can’t plan when you don’t know the value of what you own. The Internal Revenue Service may not put the same price tag on your assets that you do or a professional appraiser does.

Like Elvis, Michael Jackson’s estate became more valuable after his death than when he was alive. Jackson’s music soared in popularity upon the singer’s 2009 death, spiking previously-declining royalties by millions of dollars.

Planning and estate administration get very complicated when assets hold unsteady values. Most individuals don’t have royalties to worry about, but they do have collections of art, family businesses and, increasingly, intellectual property – assets that can lose and gain value rapidly before or after you die.

Attorneys suggest establishing asset values in detail while you’re alive, with projected values for when you’re not. The IRS is slightly flexible about property valuation. Estates have the option for asset valuations on a date of death or six months later.

The Silly Bands you own may mean the world to you but, during estate planning, you have to worry what value your assets have to the open market, your heirs and, without a doubt, the IRS.

Source: nytimes.com, “Putting an Estate Value on the Assets Unique to You” Paul Sullivan, Sep. 27, 2013

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Financial elder abuse can be prevented by a carefully-crafted estate plan, provided the documents are in place while an individual is relatively young and healthy. Wills drafted in advanced age can invite legal contests among heirs and beneficiaries.

Huguette Clark came from “old money” and a lot of it. Clark inherited $300 million from her mining mogul father, some of which she used to purchase a California mansion and other magnificent homes.

The extremely private heiress outlived all her close relatives. By choice, she spent the last 20 years of her long life in a hospital. About five years before she died in 2011, Clark created two distinctly opposite wills.

One will stipulated the majority of Clark’s vast fortune should go to distant family members. Less than six weeks later, a second will left instructions to split the estate among completely different beneficiaries, including art institutions.

Huguette’s family members petitioned a probate court in 2010, questioning the activities of the estate’s two managers. Relatives felt the administrators and Clark’s caregivers took advantage of the heiress’s advanced age and declining health. The assertions were never proven to be true.

A trial for resolving problems with the Clark immense estate was averted with the approval of a settlement that combined some elements of both wills. Twenty of Clark’s relatives will share more than $34 million. The $85 million California mansion will become part of an estimated $100 million arts foundation. Ten million was set aside for a Washington art gallery.

Clark’s long-time nurse and the disputed estate managers were cut out of the inheritance. The nurse also was ordered to forfeit $5 million of $30 million in gifts given to the caregiver by Huguette while the heiress was alive.

Age can diminish the ability of an individual to make sounds decisions about finances. Early estate planning greatly reduces chances for legal disputes and elder financial fraud.

Source: usatoday.com, “Heiress Huguette Clark’s will settled, with $300M at stake” No author given, Sep. 24, 2013

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California estate planning laws include ways Los Angeles residents can circumvent probate. Some probated estate issues take a long time to resolve and devalue an estate. In many cases, probate functions simply to verify the validity of a will so the last desires of a decedent take place.

Living trusts and property joint tenancy move assets to beneficiaries without probate. Realistically, unless an estate plan is updated each time an asset is accumulated, there is no way every asset can be shifted to a trust prior to death. The straggling asset solution is often an open-ended will, which does go to probate.

Another popular probate avoidance approach involves sharing property ownership with an heir, usually a spouse. Right of survivorship allows a property owner to absorb an asset like a home upon a co-owner’s death. Joint tenancy becomes a probate issue when co-owner’s deaths don’t occur as estate planners anticipated. Problems also surface for individuals who don’t want a co-owner to have complete asset control.

Probate fears are reasonable for high-value and complex estates, but not so much for a modest number of assets. California’s laws permit estates up to $100,000 to settle without probate.

Creditor protection is one reason trusts are popular, but California protects probated estates from long-term creditor claims. Creditors must file a claim within four months of an executor appointment to receive estate proceeds. A creditor who waits longer is likely to go unpaid.

Estate planners and heirs are sensitive to the time probate issues take to settle. In truth, uncomplicated probate settlements take just a few months. Another advantage of probate is the court’s power. Decisions made by a probate court are final, which dispenses with ongoing, estate-shrinking arguments among family members.

Analysts believe making probate avoidance the sole theme of an estate plan is short-sighted. Each client and each estate are as unique as the legal advice that accompany them.

Source: lifehealthpro.com, “6 reasons why probate isn’t that bad” Tom Nawrocki, Sep. 13, 2013

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Beneficiaries do not have to be named in a will to receive assets from an estate. A life insurance policy is an example. The proceeds from the policy go to the assigned beneficiary, whether or not that person is also named in a Los Angeles will, trust or other estate planning document.

Heirs may be confused or suspicious of conflicting recipients of estate assets, especially when the beneficiary is not a spouse, child or some other immediate relative of the decedent. Asset distribution grows more complex and costly when issues are forced to probate, like an estate whose former owner died intestate – without drafting a will.

Estate administration is a legal reference to the handling of intestate assets which frequently must pass through probate to be resolved. Heirs of small California estates can avoid probate, even without a will, by signing a declaration that an estate is valued at less than $150,000.

The heir who submits the declaration must fit eligibility requirements, work in a time frame, provide required documents and realize responsibilities come with benefits. The declarer takes on the estate’s debts, which are deducted from assets.

Since the guidance of a will is lost, a dispute could arise over which heir is qualified to submit the declaration. Potential heirs could be minor children who cannot sign legal documents.

Probate allows an adult to sign a child’s declaration, but the purpose is to avoid court. An adult who does not wish to establish guardianship may petition the court under the Uniform Transfers to Minors Act for the estate assets to be sequestered in a custodial account until the child is an adult.

The legal scrambling that takes place following an intestate death can be avoided by estate planning. Wills are basic documents that provide asset distribution instructions and the decedent’s desires for the care of a non-adult child.

Source: elderlaw.sonomaportal.com, “How to guard teenager’s inheritance?” Len Tillem and Rosie McNichol, Sep. 05, 2013

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Grief and duty mix following a family member’s death. Relatives nearest to the deceased are often assigned the roles of executors and trustees with time-sensitive duties to perform. Fiduciary responsibility begins the moment someone dies and continues until estate assets are distributed, as directed by the decedent or a court.

Fiduciaries for an estate have an obligation to work in the best interests of heirs and beneficiaries, which includes keeping them informed. In California, the will of a decedent must be filed with the county clerk’s office in the county where the maker of the will or testator died. The filing must take place within 30 days of the testator’s death or knowledge of the death.

When an estate plan contains a trust, the trustee – who may or may not be the executor – must let heirs know of the document’s existence. California laws require heirs to be notified about trusts within 60 days of a death.

To be clear, the words “heir” and “beneficiary” sometimes are used interchangeably, but there is a difference. Heirs are members of a family entitled to an inheritance. Spouses, children, siblings and parents top the list. Uncles, aunts and cousins are also considered heirs, when applicable. Anyone who inherits without holding one of these titles, an unrelated person or distant relative, is known as a beneficiary.

Fiduciaries come in all levels of competency from unprepared to uncertain to professional. Through ignorance or willfulness, some fiduciaries breach duties toward people they have promised to benefit. The loss of trust between an executor or trustee and heirs easily can lead to a court battle like a will contest. The costs for resolving problems in court may shrink the estate.

Heirs and beneficiaries are often advised to retain an estate planning attorney to understand their rights of inheritance. Counsel is also appropriate when concerns arise about a fiduciary’s actions.

Source: blogs.sacbee.com, “When is notice required to be given of the existence of a will or trust?” Claudia Buck, Sep. 01, 2013

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You don’t have to be a television, movie or music legend in Los Angeles to want control over inheritances you leave for heirs. If you think your estate plan is fine without a trust, you might be right. Then again, you might be missing something.

Trusts are legal workhorses designed for particular purposes. More than one kind of trust is available, depending on how you’d like your estate administration to be handled.

What can a trust do that other estate planning instruments cannot? No attorney will suggest that a trust replace a will, living will or power of attorney. Those documents form the foundation of an estate plan. Trusts elevate the power an individual has over asset distribution and protection from probate, taxes and creditors.

Federal estate tax worries are not a problem for the majority of California residents. At least for this year, the IRS won’t become interested unless an estate’s value is at least $5.25 million. So, why bother with a trust when taxes are no problem?

Wills are public records and trusts are not. Assets placed in a trust no longer belong to an individual, although a grantor – person who establishes the trust – can maintain control over the parked assets during life as a trustee and beneficiary.

A revocable living trust allows a grantor to change his or her mind about the trust’s contents or the trust itself. A manager is designated to take control the trust when the grantor becomes incapacitated or dies.

Trusts are helpful for parents who wish to control the flow of assets to children by staggering distribution over years or decades. Single individuals may benefit from the establishment of a trust as well as people with complicated relationships, like multiple marriages and children from previous relationships.

Trusts aren’t necessary for everyone but can be useful for anyone, rich or not-so-rich, depending on estate planning goals.

Source: miamiherald.com, “Age-old question: Do I need a trust?” Julie Landry Laviolette, Aug. 23, 2013

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The parents of baby boomers have reached an advanced age. The children of the World War II generation are baby boomers. Members of the country’s largest-ever generation were born between 1946 and 1964, which means some Los Angeles boomers are already grandparents living in retirement.

The boomer generation is becoming aware of the importance of estate planning through the deaths of their parents. Unfortunate but unavoidable mortality forces boomers to consider what they want to leave behind for heirs and beneficiaries in a will or trust.

Some strategies boomers use to create or update estate plans will depend on experiences they have or had as heirs. For example, the boomer heir of a parent who dies intestate – without a will – may be forced into a probate battle with family members. No one wants someone they love to have that asset-depleting, energy-exhausting experience.

Boomers may be less likely to hold back on sharing estate planning information than their parents were. A person unpleasantly surprised by a parent’s final wishes is likely to make sure his own children are not shaken up when they become heirs. Most people do not want estate plan aftershocks like the sudden job of a fiduciary.

Children of boomers should ask parents about eventual financial wishes. Estate planning attorneys recommend approaching the subject from a viewpoint that benefits parents. Asking about the existence and location of a will is not greedy. The knowledge is helpful to people assigned to distribute the parents’ assets.

Discuss parental incapacity; it’s a common situation for aging parents. Adult children must be aware of parents’ health and financial choices, in case the day comes when parents are incapable of making those decisions.

Estate planning issues are sensitive. Sometimes the best generation-to-generation inheritance discussions are in the presence of a legal adviser, who can make the interchange comfortable and productive for both sides.

Source: mainstreet.com, “Estate Planning for the Echo-Boom Generations” Steven Orlowski, Aug. 19, 2013

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