My Dad was a guy who loved is family and took care of little things behind the scenes to make his kids lives a bit easier. One of those things was to prepay a cremation of his body and interment of his ashes at plots that he and my mother purchased years ago at Rose Hills.

When he died, his preplanning saved me many hours of decision-making and legwork. The only downside, if there was one, is that I get periodic calls from my Rose Hills representative urging me to prepay my own plan.

Paying in advance combines pre-planning with pre-funding, which makes it an attractive estate planning mechanism. Often, prepaid burial plans are a tool used to “spend down” excess funds to qualify a client for MediCal Long Term Care benefits.

There are primarily three ways to pre-pay for a funeral: insurance, trusts, and individual funding.

An individual may buy a whole-life insurance policy to cover the costs when needed, or money may be put into a trust run by a financial institution or statewide funeral directors association.

Individual funding may be done through so-called guaranteed and non-guaranteed plans. Under a guaranteed plan, a funeral home promises that if you pay today, it will provide services to you when needed no matter how much prices rise. Many of them exempt other costs, such as flowers and music, though, and changes to the plan potentially void the price guarantee. A non-guaranteed plan offers no such price protections.

Whatever route you might choose to take in pre-paying your funeral, though, be aware of the risks.

Revoking a prepaid plan is not easy. California imposes up to a 10% fee on prepayments in trust. And, canceling an insurance policy entitles you to receive only the cash value of the policy – not necessarily the value of premiums paid – minus commissions and costs.

Also, there are widespread allegations of fraud and mismanagement within the industry. State and federal legislators are working to curb abuses through regulation and disclosure requirements, but consumer protections for those caught in a scam are still not strong.

Some consider it sound financial planning – a hedge against inflation locking in today’s prices in an industry where prices continue increasing. Others simply wish to spare their loved ones the trouble of picking out caskets, buying burial plots, and making other arrangements during their grieving.

As with any investment, diligent scrutiny and seeking legal and financial advice where needed are key to ensuring your money and your loved ones are protected.

James D. Perry

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

A living will – called an advance directive for health care here in California – is an important part of your estate-planning arsenal. In the event of an accident or life-threatening incapacitation, an advance directive dictates your medical care and treatment preferences. This is especially helpful to family members and care providers because where there is uncertainty and disagreement, the court may have to step in.

An advance directive for heath care can fail its essential purpose, though, if it is ambiguous about treatment options and does not provide enough detailed guidance.

A recent MSNBC article highlighted this problem in the story of Bunny Olenick, an 87-year-old from Boston who became incapacitated by a severe stroke. She had a living will and a medical power of attorney, but her sons were left with questions about assisted breathing devices and feeding tubes and the quality of life she would sustain because of them.

She had stated that she didn’t want to be intubated or hooked up to a respirator, but did that preclude temporary nasogastric tubes for nutrition or a short-term oxygen mask?

Bunny’s sons were able to take advantage of palliative care counseling, which helped them navigate her legal documents and the preferences she had shared with them prior to her stroke.

However, had the sons gotten into a disagreement about Bunny’s wishes, they might have ended up petitioning a judge to appoint a medical proxy. The legal process is costly and ultimately may prolong an incapacitated individual’s life or suffering where he or she would not want it.

No one really likes to ponder their own death, but appropriate advanced planning can save you and your family pain and confusion in a time better spent saying goodbye.

James D. Perry

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

My family said goodbye last month to my dad who celebrated his 94^th birthday last June and had lived a full life. He spent his final weeks at home with hospice care surrounded by the people he loved.

He manifested signs of dementia during his final years, but we were able make the decisions necessary for his medical care because he had an advance health care directive which set for his wishes for end of life care.

People hoping to avoid a prolonged dying process or to prevent family confusion and turmoil should execute an advance directive. Because a stroke or auto accident can lead to severe impairment, it’s never too early to have a plan in place.

The first step is to draw up an Advanced Directive for Health Care. This is known in some states as a living will. You can specify your preferences on a wide range of options – resuscitation, hydration, drugs, intubation, etc. – requesting that you want everything to be done or limiting medical interventions.

The second step is to appoint a health care agent, someone you know well and trust, to whom you designate to make medical decisions for you by way of your health care directive. That person will use your advance directive as guidance to make decisions that you yourself cannot make due to incapacity.

Your health care proxy should be someone who knows you well and someone who will be willing to carry out your wishes, even in the face of family conflict. Your agent in California will also be the person responsible for implementing your wishes for disposition of your body after your death.

Once your advance directive is in order, be sure to give a copy to your doctors, the proxy, your attorney, and your family. Be sure to communicate with your relatives and health care providers about your concerns and wishes.

All who knew my dad miss him and grieve his loss. Still as a family, we are comforted that he lived and died just as he wanted without unnecessary trips to the emergency hospital, or unwanted medical intervention, at a time when he just wanted peace.

James D. Perry

There are a lot of things to look forward to in 2010, but those of us in estate planning and probate law were hoping for one last act of 2009 – Congressional action on the Death Tax.

The Death Tax officially died at midnight, December 31, 2009 meaning that any taxpayer dying in 2010 will not have to pay taxes on his or her estate. It will resurrect itself on January 1, 2011 at Clinton-era levels exempting only the first $1 million with a 55 percent tax rate.

Despite the appealing zero percent tax rate against estates, the hidden danger lies in recent changes to the capital gains tax laws. Heirs face heavy capital gains taxes on the sales of any inherited assets, which may potentially be more costly overall than the death tax.

President Barack Obama and members of Congress have indicated that they want to freeze the levy at 2009 levels ($3.5 million exemption, 45 percent tax) instead of letting it expire.

The House voted in December to put this plan into law. The Senate, though, declined to act until a more permanent solution was found.

It’s expected now that the Senate will take action (when, we’re not sure) and apply any new tax law retroactively. That move may face legal challenges and it still doesn’t help those looking to put into place a responsible estate plan.

Without government action, it is difficult for estate planning lawyers to properly advise clients.

Until this is resolved, all eyes are on The Hill.

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