Not long ago I received a call from Mary, a client of mine who lives in a large Orange County retirement community. My client’s 87 year old brother Bill lives in the same community, a few door down, and is having some health problems. (As they used to say on Dragnet, the names have been changed to protect the innocent.)

At the time Mary set up her estate plan about ten year ago, she nominated her brother’s son, her nephew, as her successor trustee, and agent under power of attorney for property and health care. Mary and her brother live in the same retirement community a few doors away from each other.

It turns out that the nephew was also the person nominated by Mary’s brother to serve as his trustee and agent, and according to my client, the nephew is doing a very poor job. The nephew used to live nearby in Long Beach, but is now retired himself and has moved about 20 miles away. He constantly complains to Mary about all the time it takes him, and what a burden it is for him to be looking after his father. He rarely visits or calls Bill to check on him. “I just want time to enjoy my own life”, the nephew told Mary. My client is lucky that she had the opportunty to see her future trustee, and health care agent in action and to see his real motivation. Most of us aren’t this lucky.

Seeing the nephew’s performance on behalf of Bill, my client told me to revise her estate plan immediately and to remove any mention of her nephew. This time she choose a private professional fiduciary to do these jobs for her.

We all want someone who cares about us and for us, and who will make our financial and physical well-being a high priority, not a burdensome afterthought.

I believe that the most important estate planning decisions that most people make have to do with picking the right people to take over the management of their health care and financial affairs when they are no longer able to do so. I shudder to think of the treatment my client would have received at the hands of the nephew given the way he neglects the needs of his father.

Moral to this story - take out your estate documents every few years and review your choices for successor trustees, and power of attorney agents. Chances are you maybe surprised when you see who you named five years ago.

Tune in next week for some tips on how to pick a trustee, health care agent or power of attorney agent.

James D. Perry

Yesterday the U.S. Supreme Court ruled the daughter of a DuPont Company worker is out of luck in her effort to collect his retirement benefits.

The justices, in a unanimous decision, said Kari Kennedy can collect nothing from DuPont because companies are bound by what a worker puts down on forms designating who is to receive retirement and other benefits after his death.

In this case, William Kennedy divorced his wife of 22 years and she waived her rights to the retirement money in their divorce decree. Kari Kennedy said her father wanted her to have the money after his death. But Kennedy never changed his beneficiary on the retirement account, after the divorce was final and the Court ruled that DuPont was right to pay $402,000 to Liv Kennedy, his ex-wife.

Divorce and Estate Planning lawyers are trained to advise their clients to check beneficiaries designations after a divorce, and to contact their retirement plan and annuity administrators to request change of beneficiary forms. Unfortunately many like Mr. Kennedy never get around to following the advice.

This is the time of year when most of us are pulling together our income records to take to the tax preparer. As you fumble through those retirement account statements, and search for records relating to taxes and investments - take an extra moment to think about who you might have named as your beneficiaries on retirement accounts, life insurance and annuities. If need be, call your agent or custodian and ask for a copy of the beneficiary designation.

If there has been a major change in the composition of your family due to birth, death, marriage, divorce or just a change of heart, consider making changes to your estate plan documents and beneficiary designations. Don’t just say your going to do it, do it.

James D. Perry

Wow, the banks have been getting hit hard again in the stock market. It’s hard to believe that you can buy a share of Citigroup and a share of Bank of America for a less than 10 bucks.  I don’t know about you, but it doesn’t give me a lot of comfort with our banking system. Putting what’s left under the mattress is starting to look like a reasonable alternative.

In the short term, the financial bailout plan signed into law in October benefits persons who have trusts, because bank accounts owned by Living Trusts can get more FDIC insurance than accounts owned by individuals. Living Trust accounts get the maximum FDIC insurance for every qualified beneficiary.

Until December 31, 2009, when the financial bail-out package expires, the FDIC now insures “qualifying beneficiaries” for $250,000 each. A qualifying beneficiary is a spouse, child, grandchild, parent, or sibling of the account owner. The account must be owned creators or grantors of the living trust.

Here is how it works:

A single parent in Orange County sets up a living trust naming her two children as the beneficiaries after he or she dies, the bank account owned by the trust is insured up to $500,000: 2 beneficiaries at $250,000 each.

If you and your spouse and I set up a living trust and all three of your children are the beneficiaries after you both die, the trust account is ensured for up to $1,500,000.  $250,000 for each (child) beneficiary and for each owner. (3 beneficiaries x $250,000 x 2 owners = 1,500,000).

These FDIC limits are per bank not per bank account at the same bank.  If a California living trust owner has more than one account at the same bank, these limits apply to all their accounts there.

Be sure and confirm this with your banker in writing and avoid relying on any other informal sources. You can get some help with this handy calculator on the FDIC website.

In an article in yesterday’s Los Angeles Times, Delia Fernandez, a Certified Financial Planner outlined the long term care strategies available to an elderly couple in a decling real estate market.   Ann Marsh, the writer for the LA Times called me for information on the Medi-Cal Rules.  Check out the article if you get a chance.

 A large number of the elderly and disabled persons who receive long term care in nursing homes are eligible to financial assistance in paying the nursing home throught the Medi-Cal program.  As an elder law attorney I assist clients with eligibity for Medi-Cal Long Term Care.  

 Eligible single persons are limited to $2000 in countable assets.  Married couples are allowed to have considerably more assets so the a spouse at home is not impoverished before the ill spouse can qualify for Medi-Cal assitance.  Certain assets are exempt including the family home house, household goods and most personal property, and a car.

James D. Perry

 Yesterday in an article for The Wall Street Journal, Jonathan Weisman reported that once President-elect Obama takes office next week, Democrats in Congress will act quickly to end the repeal of the federal estate tax that’s scheduled to take place on January 1, 2010.

In his article, Weisman summarizes the interesting history of the forces behind President Bush’s 2001 legislation that led to the gradual increase of the estate tax exemption from $1,000,000 to the current $3,500,000 exemption. The article also reports that if the current exemption is locked in for the next 10 years, then only about 2% of estates will be subject to the estate tax and the U.S. Treasury will lose around $324 billion more than if the estate tax exemption is allowed to revert back to the pre-2001 amount of $1,000,000 - what it’s currently scheduled to do in 2011.

What does this mean for you and your family?  If you are like most of my clients, you will be more than covered by the $3,500,000 exemption –at least until the economy improves, houses start appreciating in value at double digit rates, and the stock market shoots up about 60%.

When all of those good things happen you can start to worry about estate taxes if you want.  As for me, I take the  Bobbie Mcferrin approach,  ”don’t worry, be happy” –  it’s estate tax repeal that is dead, not you.

On December 29th a California court of appeal upheld a century old law of inheritance. Under the law in intestacy (when you die without a will) your estate is distributed to your “legal heirs” In California if you die “intestate” without a surviving spouse, domestic partner, surviving children or surviving descendents of deceased children, your estate will go to your parents if they are still living.

In this case the facts state that Leslie Shellenbarger was born in 1963, and died in 2005. His only surviving heirs were his mother Laura and his father Clifford, who were married for a short time more than 40 years ago. In 1962 Clifford moved to Michigan, leaving Laura and their one-year old daughter Michele in New Mexico with no means of support. Laura was pregnant with Lesley at that time.

In 1964, Clifford obtained a judgment of marital dissolution and was ordered to pay $10 a week for Michelle’s and Lesley’s support. The order later increased the support to $25 a week per child. The record shows that Clifford had no relationship with his son Les and failed to pay the court order child support for years – the unpaid support grew to more than $35,000.

After Leslie died, his mother Laura asked the Probate Court to award the entire estate to her, based on the theory that it would be unfair that his father should reap a financial windfall after the death of his son, because he never saw his son and failed to pay for his support during the 42 years he lived.

In the end the Probate Court decided that the law is the law. Clifford was awarded half of the estate. The Court of Appeal held that a California Probate Court may not, on principles of equity or fairness, disinherit a natural parent from distribution in child’s estate when child died without a will. Failure to pay child support or lack of a meaningful parent-child relationship does not affect parent’s rights as an intestate heir.

Moral to the story. If you have legal heirs who you don’t like and who always treated you like dirt, give them the boobie prize, write a Will.

James D. Perry

As we welcomed in the New Year we also welcomed in the largest exemption from federal estate taxes ever - the new exemption is $1,500,000 more than last year’s exemption, which is the largest year to year increase ever.

That’s right, the federal estate tax exemption now stands at a whopping $3,500,000, meaning that married couples who take advantage of the AB Trust system can combine their exemptions and pass $7,000,000 on to their loved ones free from the federal estate tax. A single person can pass $3,500,000 without estate tax. This will eliminate the worry about federal estate taxes for most people.

The new year also brings an increase in the annual exclusion for gifting from $12,000 to $13,000, but the lifetime gifting exclusion still remains the same as it has been for many years - $1,000,000.
What’s in store for 2010, the year in which the federal estate tax is scheduled to completely vanish? Only time will tell.

Still don’t be lulled into thinking you don’t need to create an estate plan or review and update your existing estate plan because the estate tax is a non issue, or the economy is in the tank.

I believe the time is ripe to get back to the basics and understand what estate planning really is supposed to be - a systematic approach to making a plan for what happens to you and your property in case you become mentally incapacitated and making a plan for what happens to your loved ones and your property after you die.

That’s it, and while there’s nothing revolutionary about it, over the next few weeks I’m going to be blogging about some basics about estate planning that apply to most everyone. Keep in touch.

Did you know that even deceased persons can be victims of identity theft? The deceased are easy targets because sometimes it takes weeks or months and in some cases years for financial institutions to find out about a death. The identity of a deceased person can be stolen in a variety of ways. Some identity thieves watch the obituaries, look up death certificates, or obtain private information from health care providers, unknowing relatives, or internet genealogy web sites.

Unfortunately, the thief may also be a family member who may take advantage of the situation or who has already been using that identity. This may be especially true if the deceased suffered from lengthy illness, mental confusion, or if there is disagreement among family members prior to the death.

Financial institutions are not immediately made aware that their customer is deceased. It takes time for the Social Security Administration to transmit the Death Master File to the financial industry. Until the institution receives word that the individual is deceased, the account remains active.

Although the deceased person doesn’t have to be concerned with his or her credit rating, identity theft can cause emotional distress for the family. Identity Theft Resource Center has valuable information about how to protect yourself and your deceased loved one from identity theft. They also have an information sheet with steps to take to decrease the risk of identity theft such as notifying the credit bureaus to put a “deceased” notation in their file, obtaining a copy of the decedent’s credit report, and a list of agencies and companies to notify of the death.

You can also stop the junk mail by contacting the Direct Marketing Association . There you can register to take the deceased’s name off mailing lists with their Deceased Do Not Contact List.

If your loved one had a will which needs to be probated or a trust which needs to be administered after death, contact my office. We can help with trust administration or probate.