Recently, a client of mine died and his family could not find a signed copy of the trust he had created. People lose things; it’s a fact of life. But, what do you do if you lose the documents detailing your estate plan?

If you lose your original will, and there is no copy on file with your estate-planning attorney, the state considers the will revoked. There are exceptions to this, and the presumption can be overcome in probate court by a preponderance of evidence showing that the will was not destroyed or intentionally revoked. Probate court is an expensive hassle, though, and if you do not have the evidence to over come that presumption, you will die intestate leaving the probate court to distribute your assets according to state law rather than according to your express wishes.

Unlike a will, though, a trust is not necessarily deemed “revoked” if you lose the papers. If you have transferred assets – like your house – into the trust, the transfer will be reflected in the deed or title.

People, including the elderly, sometimes throw out or shred files and papers that they think are of no more use. Or, they might go overboard with their ideas about “security” making it very difficult to find the papers they need when they need them. Estate planning documents have been found in freezers, lampshades, mattresses, or behind pictures. Conditions and diseases like dementia and Alzheimer’s can exasperate these problems.

It’s important to safeguard your estate plan documents. Leave copies with your estate planning attorney, your trustee, or another person so there is evidence of your wishes readily available.

James D. Perry

You may be willing to trust your teenage grandchildren to house sit for you while you’re away for the weekend, but would you trust them to properly manage your entire bank account after you die?

Paris and Nicky Hilton, heiresses to the Hilton Hotel fortune, are notorious for their party-girl ways. DUI charges and driving violations landed Paris in jail at the age of 25, and Nicky has a reputation for drifting in and out of relationships with potentially opportunistic suitors. Neither has yet shown the maturity necessary to manage the Hilton’s billions should they take over any substantial part of estate today – much less so had they inherited at the age of 18.

Generally, if you decide to leave an inheritance in trust, the account can provide for the minor’s health, education and maintenance through a custodian (living parent or appointed conservator) until he or she becomes an adult. However, once he or she reaches majority, the remainder of the account is discharged to them outright.

You also have the option to hold a minor beneficiary’s inheritance in a trust to be paid out in stages or based on milestones. For example, you could pay a beneficiary 50 percent of his inheritance when he reaches the age of 25 and the remainder at 30; or, 50 percent when he gets his bachelor’s degree and 50 percent when he gets his master’s degree. Again, though, once the beneficiary receives a lump sum free of trust, that property is vulnerable to bad decisions, lawsuits, and divorcing spouses (only if transformed into community property in California).

There is also the option of leaving the minor’s inheritance in a lifetime trust. The assets are managed indefinitely by a trustee or until a designated time when the beneficiary may take full control. The inheritance is protected from divorcing spouses, lawsuits, and if a third-party trustee is used, from the beneficiary’s own bad decisions. If there is anything left in the trust when the beneficiary dies, you can control who will receive the remainder.

There are added costs that come with the administration of a lifetime trust, including accounting and legal fees. And the trustee may be entitled to receive a fee for services rendered while administering the trust. These costs must be weighed against the amount of inheritance and your own long-term estate planning goals when drawing up your will.

Keep in mind, though that some people will never be able to handle money properly, due to disability or character flaw. Some clients struggle with how much control they can or should have from beyond the grave, but only you can determine how much weight, if any, to give such considerations.

You may not be a Hilton, but careful planning in advance can make for a smooth transfer of property.

James D. Perry

Over their lives, people tend to accumulate a lot of “stuff”: furniture, clothing, knick-knacks, books, personal collections, etc. And when they die, that stuff gets passed on to their loved ones, taking up space in their garages, looking oddly out of place in their dining rooms, or sitting in storage simply because the heirs can’t bear to part with it.

It’s not uncommon as an estate planning and probate lawyer to see how people who inherit furniture and other material wealth tend to unnecessarily cling to those physical items. Even I have been dealing with this in the wake of my father’s death: I just do not want to let some things go.

A recent New York Times article highlights the power we give these material objects over our lives, and points to the problem of hoarding, which has become fodder for reality television shows. Hoarding is a serious compulsion, and most people don’t accumulate stuff to that extreme.

But seeing that extreme can force us to look at how we may be hanging on to unnecessary material things when all we really want is the memory that thing evokes.

The trinkets we’ve been given or that we’ve picked up somewhere special become the physical manifestation of the memory of the giver or the context in which it was gained. But “your mother or grandmother didn’t plan for you to become overwhelmed by them,” says Jamie Novak, a professional organizer and author of “Stop Throwing Money Away.”

Organizing experts suggest that you pass on the memories instead of the goods. And, if you already have Aunt Sally’s armoire taking up space in your living room, take a picture of it before donating it to charity.

You don’t have to hold on to the stuff letting it clutter up you life, when you can more easily hold on to the memories.

James D. Perry

See Jim’s review of Jamie Novak’s book “Stop Throwing Money Away” (John Wiley & Sons) in the Summer edition of the Perry Estate Planning Newsletter.

A recent article by Forbes highlighted what I believe to be a serious problem: half of Americans don’t have even the most basic estate planning documents.

According to a phone survey conducted among 1,022 adults in December 2009, only 35% have a will and only 29% have a living will, which states an individual’s views on end of life medical procedures.

The numbers are only a little more promising for the elderly. Fifty-one percent of adults over the age of 65 have a health care power of attorney in place, and 58% say they have a living will.

The poor economy seems to have taken its toll – 44% report they are more focused on immediate needs, such as groceries and paying bills rather than future protection. And, there seems to be a misconception amongst the survey respondents that they don’t need an estate plan if they are not independently wealthy.

In fact, it can be more costly in the long run for those who fail to prepare estate-planning documents.

If you die intestate (without a will) a lot of your assets may get chewed up in probate court rather than going to your loved ones. And, your family may have to pay heavy court costs out-of-pocket if they have to go through legal proceedings to get a judge to appoint someone to make medical decisions for you should you suffer an incapacitating accident or illness.

If you haven’t put together an estate plan, I encourage you to do so to protect your assets, your personal wishes, and your family in the event they have to make difficult decisions.

James D. Perry

America’s prison population is nearing 2.5 million – roughly 1 person in every 133 – so it’s not unusual that I’ve had clients who have friends or family who are incarcerated.

Leaving assets to a federal, state, or county inmate comes with some bureaucratic hurdles and must be done with careful assessment.

In California, when an individual dies leaving an inheritance to a prisoner, both the Department of Corrections and Rehabilitation and the Victim Compensation and Government Claims Board must be notified. If a prisoner owes any money as restitution as part of his or her criminal sentence, the VCGCB with the help of the Franchise Tax Board is going to take its chunk first.

For example, I had an elderly client with very little family who willed part of his estate to a friend doing a few years’ time in state prison. His friend did not owe any restitution on his sentence, and all lawyers and state agencies involved were properly notified.

However, it was later discovered that he hadn’t paid child support to his wife in over 15 years. The arrearage was near $100,000, which was roughly equal to the value of the inheritance my client left him.

In some states, the department of corrections may even collect the cost of incarceration from an inmate’s inheritance by filing a lien in probate court. The State of Connecticut’s laws allow the probate court to extract the cost of incarceration or 50 percent of the inheritance, whichever is less.

If you’re thinking of leaving assets to a guest of the State, I urge caution. If you intend to provide a nest egg for a prisoner’s reentry into society, be aware of the debts they may have incurred as a result of their crimes, and recognize that they don’t have the autonomy to make decisions regarding that chunk of change until their release.

James D. Perry

California residents started the new year with a bevy of changes to state law governing estate planning. One notable change is to California’s No Contest Clause Statute.

A no contest clause includes language in an estate planning instrument that warns heirs from challenging any provisions in the will at the risk of being disinherited in the process.

No contest clauses were originally seen as a way to avoid costly litigation and the public airing of dirty family laundry, and were fully enforced in California courts.

However, the California Law Revision Commission, while scrutinizing the statute in 2008, determined that the intent and the reality were far divorced from one another. Today, the Commission finds that no-contest clauses are too often being used by greedy and dishonest heirs as a tool to blackmail other family members into settling their disputes out of court. And heirs who had legitimate concerns that the instrument was executed fraudulently, under duress, or while the testator was mentally incapacitated were forced to seek judicial review under safe harbor hearings that would protect them from being disinherited.

As of January 1, 2010, California courts are giving no contest clauses included in wills and revocable trusts greater scrutiny. This means that no contest clauses included in wills or revocable trusts which became irrevocable on or after January 1, 2001 will remain enforceable, but heirs hoping to make a good faith challenge to the instrument will not be immediately disinherited upon challenge. Good faith probable cause challenges may be based on allegations including, but not limited to forgery, incapacity, duress, fraud, undue influence, or revocation.

If you have any questions about your estate planning documents or the effects of your no contest clause, contact your estate planning lawyer.

James D. Perry

The daughter of oilman Alfred C. Glassell Jr., founder of Transcontinental Gas Pipe Line Co., is contesting his will in a Texas probate court saying he was manipulated by his lawyers to leave most of $500 million fortune to charity.

Glassell executed a will in 1998, which left his daughter, Curry, and her two sons more than $100 million. But she is challenging his 2003 will, believed to be the final one Glassell signed before his death last year, which transfers most of his money to Houston’s Museum of Fine Arts and to a family foundation run by Curry’s younger half-brother.

The probate lawyers trying the case told the jury panel that Glassell must be declared mentally incompetent at the time he signed the 2003 will for it to be invalidated.

This is a big risk for Curry as the 2003 will contains a broad no-contest clause. If Curry doesn’t win her fight in probate court, she forfeits her entire inheritance, which is roughly one-tenth the size of the one bequeathed to her in the 1998 will – still a sizable chunk of change.

The state of California gives full force to no-contest clauses with a few exceptions, and they can be especially beneficial where family dynamics are tumultuous.

A no-contest clause is a provision in a will, trust, or other estate-planning instrument to the effect that a beneficiary who contests the instrument forfeits any gift made by the instrument. It is intended to reduce litigation by disappointed beneficiaries.

California law includes probable cause exceptions for menace, duress, fraud, or undue influence where a beneficiary who challenges the document with probable cause would not be subject to forfeiture under the clause.

Curry doesn’t have that protection. If she prevails in her challenge, she may nullify his 2003 will and have the 1998 will declared valid.

Or she could lose everything.

James D. Perry.

A few weeks ago, I wrote about the expected death of the “death tax” due in 2010.

The $1.35 trillion tax cut package passed in 2001 included provisions for the estate tax rate decrease and the estate value exemption increase over time with the estate tax disappearing entirely in 2010. However, it would return in 2011 to a 55% tax rate and an exemption only on the first $1 million of an estate.

The question still remains, though, as to what Congress plans to do about it.

Congress could allow the law to stand meaning anyone who dies in 2010 doesn’t have to pay taxes on their estate. But, this doesn’t seem likely because of the tremendous impact it would have on the Treasury’s coffers.

Congress could pass legislation in the next two months to prevent the repeal from taking place, either extending current tax rates and exemptions, or putting forth a new plan. President Obama proposes a permanent estate tax of 45% exempting the first $3.5 million of an estate ($7 million for married couples).

Or, they could let 2010 come and pass a law that will be applied retroactively. Estate taxes aren’t due until nine months after the date of death making September 2010 the latest Congress has to make a decision. However, that could mean that the government may show up at your door, hat in hand looking to collect on the dearly departed’s estate long after you’ve filed the final tax returns.

There is a great deal of criticism against this tactic – most noting the difficulty of such retroactive tax collection on a deceased individual’s divvied up estate. It may even be unconstitutional.

Whatever Congress decides, it’s a decision best made sooner than later.

James D. Perry

Former NFL quarterback Steve McNair was shot and killed in what police have deemed a murder-suicide on July 4, 2009, apparently at the hand of his mistress.

He left a wife, Mechelle, and four young children (two from a previous relationship), and no will or estate plan.

McNair’s estate is sizeable. He earned more than $90 million in his playing career, not including marketing and endorsement deals. At last inventory, his widow listed his estate assets at around $19.6 million.

Mechelle McNair hired a probate attorney and was granted the legal authority to administer his estate. However, in the probate petition, she listed only herself and her natural children as heirs saying she didn’t have proof that the other two were McNair’s natural children.

McNair was ordered by Mississippi courts to provide child support for the two children, which seems to indicate that Mechelle really had no reason to doubt their parentage. And while it doesn’t appear that Mechelle plans to challenge their claims to the estate, the two children – both of whom have attorneys representing their interests – have not yet filed as beneficiaries.

And most recently, another Mississippi woman has come forward claiming that McNair fathered her 17 year-old daughter.

And these are just the claims from McNair’s heirs and potential heirs. This says nothing of his outstanding debts, one of which may be unpaid rent for an apartment that may have housed a second mistress.

This sad story of his death is further agitated by the fact that this family’s grief and indiscretions must be played out in public.

Even if you are not a celebrity, or weren’t murdered by your mistress, there is no privacy when your assets go through the probate court – not from the media nor from the nosy neighbors next door. Everything is out there for the world to see, your debts, an itemization of each of your assets, and the names and addresses of your heirs.

A good estate plan can avoid this. Just do it.

James D. Perry

Richard Pryor’s widow, Jennifer Lee, and one of his daughters, Elizabeth, have been warring in the courts over his estate since 2005.

Pryor was a well-known comedian and actor. He was married seven times to five different women. He and Jennifer married for the first time in 1981 and divorced in 1982. They married again in secret in 2001.

In the mid-1980s, he was diagnosed with multiple sclerosis. Towards the end of his life, Jennifer became his primary caretaker. Pryor died in 2005.

His daughter Elizabeth did not learn of Pryor’s remarriage until sometime after her father’s death. Elizabeth first tried to petition for annulment of Pryor’s marriage, alleging fraud and undue influence.

If she had been successful in getting the court to void the marriage, she may have succeeded in barring Jennifer’s claim to Pryor’s estate under the California law that prohibits caretakers from becoming beneficiaries.

The law exists to prevent caretakers from exercising undue influence over their elderly and infirm clients to gain access to their fortunes.

This case breaks new ground because of the issue of the fact Pryor was married, but that the marriage was not public, thereby making it impossible for anyone to know of or challenge the marriage as a product of undue influence or incapacity on the part of Pryor.

The court has now said that it’s too late to challenge a marriage after death. This looks like a road map to ripping off the elderly or infirm – just marry them in secret and keep it quiet until after they are dead.

James D. Perry