CALIFORNIA INTESTACY LAW

No one likes to deal with the fact that someday they will pass on. Creating a will or a living trust and a pour-over will acknowledges that fact and most people prefer to avoid this as long as they possibly can. Sometimes, people wait too long. When this happens, California law, as interpreted by the courts, decides who will get the property of the person who passed on (“the decedent”) Here are some of the laws of intestacy (passing on without a valid will). In order to make this article readable and short, I am not going into specifics but just stating the law generally. For specific information, you should contact an attorney. Section 6400 of the California Probate Code states: Any part of the estate of a decedent not effectively disposed of by will passes to the decedent's heirs as prescribed in this part. If the decedent was married or had a domestic partner (pursuant to a Declaration of Domestic Partnership filed with the Secretary of State). For community property: The surviving spouse receives all of the decedent’s share of community property. For separate property: The surviving spouse or surviving domestic partner will receive all of decedent’s separate property if the decedent is not survived by issue (all his or her lineal descendants of all generations), parent, brother, sister, or issue of a deceased brother or sister. The surviving spouse or surviving domestic partner will receive one-half of decedent’s separate property: if the decedent leaves only one child or the issue of one deceased child; or if the decedent leaves no issue but leaves a parent or parents or their issue or the issue of either of them. The surviving spouse or surviving domestic partner will receive one-third of the decedent’s separate property: if the decedent leaves more than one child; if the decedent leaves one child and issue of one or more deceased children; or where the decedent leaves the issue of two or more deceased children. If the decedent was not married and did not have a domestic partner the property will go to: the decedent’s issue (their shares to be determined by their generation, example: children, grandchildren, etc.); if there is no surviving issue, to the decedent's parent or parents equally; if there is no surviving issue or parent, to the issue of the parents or either of them (their shares to be determined by their generation); if there is no surviving issue, parent or issue of a parent, but the decedent is survived by one or more grandparents or issue of grandparents, to the grandparent or grandparents equally, or to the issue of those grandparents if there is no surviving grandparent (their shares to be determined by their generation). You can see how complicated this can get. The property of a decedent without a surviving spouse or surviving domestic partner or issue or parents or brothers and/or sisters or grandparents or aunts and/or uncles can go to the decedent’s cousins. And if none of these relatives survive the decedent, the decedent’s property can go to the issue of a precedeased spouse of the decedent. Under certain circumstances, the property of the decedent can go the parents of a precedeased spouse and if they don’t survive the decedent, to their issue. One more interesting note: Under California Probate Code Section 6407, relatives of the decedent conceived before the decedent's death but born thereafter inherit as if they had been born in the lifetime of the decedent. It’s clear that the only way to be sure that your property will go to the people you want it to go to is to create an estate plan which will include at least a will and better yet, a living trust with a pour-over will (it pours any property you didn’t put into the living trust before death into the living trust). Considering the amount of control the government has over you while you’re alive, do you really want them to exert even more control after you passed on. You owe it to yourself and your family to take care of your estate planning as soon as possible. The information is this article is for informational purposes only and does not constitute nor is it intended to constitute legal advice.

IRS OFFER IN COMPROMISE

The IRS is waiting for your money. What should you do if you can’t afford to pay your current taxes or your taxes for past years? One way to deal with this is the Offer in Compromise. If you are in this situation, please contact me at (310)917-1021 for a free consultation. As stated by the IRS: “An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service that settles the taxpayer’s tax liabilities for less than the full amount owed. Absent special circumstances, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement.” So you have to convince the IRS that you will not be able to pay the amount due. As the IRS states: “In most cases, the IRS will not accept an OIC unless the amount offered by the taxpayer is equal to or greater than the reasonable collection potential (RCP). The RCP is how the IRS measures the taxpayer’s ability to pay and includes the value that can be realized from the taxpayer’s assets, such as real property, automobiles, bank accounts, and other property. The RCP also includes anticipated future income, less certain amounts allowed for basic living expenses.” For the IRS to accept an offer in compromise, there are three grounds: Per the IRS: “1. Doubt as to Collectibility - Doubt exists that the taxpayer could ever pay the full amount of tax liability owed within the remainder of the statutory period for collection. 2. Doubt as to Liability - A legitimate doubt exists that the assessed tax liability is correct. Possible reasons to submit a doubt as to liability offer include: (1) the examiner made a mistake interpreting the law, (2) the examiner failed to consider the taxpayer’s evidence or (3) the taxpayer has new evidence. 3. Effective Tax Administration - There is no doubt that the tax is correct and there is potential to collect the full amount of the tax owed, but an exceptional circumstance exists that would allow the IRS to consider an OIC. To be eligible for compromise on this basis, a taxpayer must demonstrate that the collection of the tax would create an economic hardship or would be unfair and inequitable. To get the process started, generally, you have send an application fee and your first payment with a Form 656, Offer in Compromise to the IRS. There are three payment options. According to the IRS, they are: “1. Lump Sum Cash Offer - Payable in non-refundable installments, the offer amount must be paid in five or fewer installments upon written notice of acceptance. A non-refundable payment of 20 percent of the offer amount along with the $150 application fee is due upon filing the Form 656. If the offer will be paid in 5 or fewer installments in 5 months or less, the offer amount must include the realizable value of assets plus the amount that could be collected over 48 months of payments or the time remaining on the statute, whichever is less. If the offer will be paid in 5 or fewer installments in more than 5 months and within 24 months, the offer amount must include the realizable value of assets plus the amount that could be collected over 60 months of payments, or the time remaining on the statute, whichever is less. If the offer will be paid in 5 or fewer installments in more than 24 months, the offer amount must include the realizable value of assets plus the amount that could be collected over the time remaining on the statute. 2. Short Term Periodic Payment Offer - Payable in non-refundable installments; the offer amount must be paid within 24 months of the date the IRS received the offer. The first payment and the $150 application fee are due upon filing the Form 656. Regular payments must be made during the offer investigation. The offer amount must include the realizable value of assets plus the total amount the IRS could collect over 60 months of payments or the remainder of the statutory period for collection, whichever is less. 3. Deferred Periodic Payment Offer - Payable in non-refundable installments; the offer amount must be paid over the remaining statutory period for collecting the tax. The first payment and the $150 application fee are due upon filing Form 656. Regular payments must be made during the investigation. The offer amount must include the realizable value of assets plus the total amount the IRS could collect through monthly payments during the remaining life of the statutory period for collection. The IRS is not bound by either the offer amount or the terms proposed by the taxpayer. The OIC investigator may negotiate a different offer amount and terms, when appropriate. The investigator may determine that the proposed offer amount is too low or the payment terms are too protracted to recommend acceptance. In this situation, the OIC investigator may advise the taxpayer as to what larger amount or different terms would likely be recommended for acceptance.” The information is this article is for informational purposes only and does not constitute nor is it intended to constitute legal advice.

CALIFORNIA ADVANCED HEALTH CARE DIRECTIVE

No one wants to think the unthinkable. No one wants to imagine that someday he or she might be in the intensive care unit of a hospital unable to speak or communicate. And no one wants to be fearful that at the most vulnerable time in their life that someone else will be making life or death decisions for him or her. California has provided a document that takes that fear away. With the Advanced Health Care Directive, you can make you make your own life or death decisions in advance. There are six “Parts” or sections in the Directive Please note that any statements below in quotations are from the Directive. In Part 1, which is a Power of Attorney for Health Care, you choose someone to be your agent, who will have the power to make certain health care decisions for you if you are unable to. It is up to you how much or how little power you want to give your agent (“My agent shall make health care decisions for me in accordance with this power of attorney for health care, any instructions I give in Part 2 of this form, and my other wishes to the extent known to my agent. To the extent my wishes are unknown, my agent shall make health care decisions for me in accordance with what my agent determines to be in my best interest. In determining my best interest, my agent shall consider my personal values to the extent known to my agent.”). You should make a careful and thoughtful decision as to who you want to be your agent and who you want to be the first alternate agent if your original choice is not available and your second alternate agent if your first alternate agent is not available. It should be someone who knows you well and who you feel you can literally trust your life to. You should discuss this with your attorney. Further, in Part 1, you can state when your agent’s power becomes effective, which can be either be when your primary physician determines you are unable to make your own health care decisions or immediately upon your proper execution of the Directive. You can also grant your agent authority concerning organ donation; autopsies; and burial. In Part 2, you give your instructions for health care concerning “end-of-life decisions.” You can choose under what conditions your health care provider should prolong your life (“I do not want my life to be prolonged if (1) I have an incurable and irreversible condition that will result in my death within a relatively short time, (2) I become unconscious and, to a reasonable degree of medical certainty, I will not regain consciousness, or (3) the likely risks and burdens of treatment would outweigh the expected benefit --”) or prolong your life (“I want my life to be prolonged as long as possible within the limits of generally accepted health care standards.”); provide or not provide pain relief (“Except as I state in the following space, I direct that treatment for alleviation of pain or discomfort be provided at all times, even if it hastens my death”}; and any other wishes concerning the above you may have. In Part 3, which is optional, you can give your instructions concerning the possible donation of your organs and for what purposes those organs should be used such as “Transplant,” “Therapy,” “Research,” and “Education.” In Part 4, which is optional, you can designate your primary physician and an alternate primary physician, if the first one is not available. In Part 5, you sign the agreement in front of witnesses, for which there are specific requirements. In Part 6, a “patient advocate or ombudsman as designated by the State Department of Aging” must witness your signature if you are a patient in “a skilled nursing facility, a health care facility that provides the following basic services: skilled nursing care and supportive care for patients whose primary need is for availability of skilled nursing care on an extended basis.” The Advanced Health Care Directive is a truly important document. It provides protection for you when you are unable to protect yourself. As they say, no one knows what tomorrow may bring. The information is this article is for informational purposes only and does not constitute nor is it intended to constitute legal advice.

CALIFORNIA WILLS AND LIVING TRUSTS

In California, when you pass on, your property is distributed according to your will. If you don’t have a will, it is distributed according to California law. There are exceptions to this such as the proceeds of your life insurance policies; the assets in your retirement plan; your bank accounts or other accounts that state “transfer on death” or “pay on death”; which are paid directly to the beneficiaries named by you. But if you don’t name a beneficiary or the beneficiary has passed away or you make the above payable to your estate, California law will decide who will get it. Generally, you can control the distribution of your property by creating a will or living trust. A will is a legal document that must meet certain requirements to be effective. Although you can create a will yourself under certain circumstances, my strong advice is to contact an attorney. In your will, you state to whom and how you want your property distributed and you nominate your executor. Your executor is the person who is basically the CEO of your estate. He or she will get all your assets together; pay your debts; pay any taxes that are due (income and estate); and distribute your property as well as perform other legal functions. The process by which your executor does this is called probate and it is court supervised. The probate process begins with the executor filing a form called the Petition for Probate with the court. If there are no problems, the court confirms your nominated executor as executor. During the probate process, which can generally take six months or longer, your executor must file certain forms and perform certain functions within specified time periods. The process can get complex and many executors hire attorneys to handle it. The attorney is generally paid a statutory fee which currently ranges from $7000 for a $200,000 estate to over $20,000 for a $1,000,000 estate. If you don’t name an executor or your executor does not qualify for some reason or if you don’t have a will, the court will appoint an administrator who will perform the same functions as your executor. Every form that your executor files and your will become part of the public record so that anyone can look at them. There are several exceptions to the probate process such as estates valued below a certain amount and community property belonging to the surviving spouse. This property is distributed by following certain streamlined procedures. You can revoke your will at any time during your lifetime as well as make changes to its provisions through the use of a document known as a codicil. My strong advice is to contact an attorney. The advantages of a will are that the attorney fee for preparing one is generally not high; you don’t have to change the title to any of your assets; and the probate process ensures court supervision. The disadvantages are the time and expense of the probate process and the fact that your will and other probate documents become part of the public record. Another way to distribute your property is by creating a living or revocable trust. A living trust is a separate entity that is created by you in a trust document. The trust document will contain many provisions which will state how the trust is to be operated and how your property is to be eventually distributed. If you desire to establish a trust, my strong advice is to contact an attorney. You can amend or change the provisions of your living trust as long as you follow the instructions in your living trust which state how to do so. The CEO of the living trust is the trustee. Generally, you will be the initial trustee of your living trust and you will name successor trustees who will take over after you. Once you create the trust document, you will transfer your assets to yourself as the initial trustee of the trust. However, your life will not change, you will still control your assets, and you do not need to file a separate tax return for your living trust. Any assets that you transfer to the trust can be taken out at any time during your lifetime by following the provisions of your trust. Since the assets are owned by the trust and not by you, the assets can be transferred to your beneficiaries without the need for the probate process. Since there is no probate, there is no public record. The distribution of your property can be handled by your attorney in his or her office. The advantages of a living trust are that there is no probate and your property can be distributed much sooner; the attorney fees for distributing your assets is generally much lower than the attorney fees for probate; and there is no public record. The disadvantages of a living trust are the greater initial cost of creating and setting up your living trust; and your need to make sure that all your assets are transferred into the living trust. This has been a very basic discussion of wills and living trusts. As you can see, with a will there’s a way to make sure that you make the decision as to how your property is distributed, but, by avoiding probate, a living trust may be the better way. The information is this article is for informational purposes only and does not constitute nor is it intended to constitute legal advice.

CALIFORNIA SIMPLIFIED PROBATE TRANSFER

After the death of a loved one (“decedent”) it is necessary to take action and follow certain procedures (both through the probate court system and out of it) to transfer the decedent’s property to the decedent’s beneficiaries or heirs (if the decedent didn’t designate beneficiaries for the property). One way is through a complete probate of the decedent’s estate which will take approximately four to six months or longer and depending on the size of the estate could cost many thousands of dollars in statutory attorney fees (if you use an attorney). A second way is the distribution of property that was held in the decedent’s living or revocable trust. This process is much faster as an attorney can generally distribute the property in a reasonable amount of time. It is also less costly than probate. Of course, the decedent would have had to create a living or revocable trust during his or her lifetime. There is also a third way. California Probate law provides for simplified procedures for the transfer of the certain property of a decedent. Please note that any transfer of property might have tax consequences so you should always check with your attorney before doing anything. You may be able to use these simplified procedures for the transfer of the following types of property. It would be best to check with your attorney first. For property in joint tenancy: Real Property: You need to file an “Affidavit Of Death Of Joint Tenant,” which states that the decedent is the other joint tenant on the title to the real property and along with the Affidavit you have to file a certified copy of the decedent’s Death Certificate. Check with the County Recorder’s Office of the County in which the real property is located on how to record the Affidavit and further information or any questions you may have. Bank Accounts: Go to the bank with a certified copy of the decedent’s death certificate and a check (if it’s a checking account) or the savings account passbook. Ask the bank representative to explain the procedure to you along with any questions you may have. Motor Vehicles: Check with the California DMV. Securities: Check with your stock broker or your agent at the applicable financial institution. Ask the broker or agent about the proper procedures along with any questions you may have. For an estate with less than $20,000 in assets: If the decedent’s real and personal property is worth $20,000 or less, you can ask a probate court judge if you can use the “set aside” procedure. Please note that not all of decedent’s property is included in determining the value of the decedent’s estate. You will have to prepare a Petition and Order. Contact the probate court or your attorney for further information along with any questions you may have. For an estate with real property in California worth $20,000 or less: To transfer the real property, you need to prepare and file an Affidavit Re: Real Property of Small Value ($20,000 or less). Contact the probate court or your attorney for further information along with any questions you may have. Community Property or Separate Property of Decedent Spouse: If the decedent was your spouse and you want to transfer or confirm property to yourself, you can file a Spousal Property Petition. The surviving spouse, the representative of the surviving spouse’s estate (if the surviving spouse is also deceased), or the conservator of the surviving spouse’s estate can file the Spousal Property Petition. There will be a hearing and there are specific people who have to be notified prior to the hearing so they can attend it. The judge will decide at the hearing whether to grant or deny the Spousal Property Petition. Life Insurance Proceeds: Locate all of the decedent’s life insurance policies. In addition to a personal life insurance policy, the decedent could have life insurance policies from his or her employer; fraternal organization; a credit card company; the military; or other source. Determine who the beneficiaries are. Contact the decedent’s insurance agent; broker; or the life insurance company or companies or any person or entity who would have information concering the policy. Advise them of the death of the decedent and ask them what documents they need to process the claim and pay the proceeds. Retirement Benefits: Locate the retirement plan documents. Determine who is the beneficiary or who are the beneficiaries; the amount of the benefit; and the payout options. Contact the entity which is administering the plan to determine the process to claim the benefits after the decedent’s death. The information is this article is for informational purposes only and does not constitute nor is it intended to constitute legal advice.

CALIFORNIA REVOCABLE (LIVING) TRUSTS

A revocable or living trust in California is a separate entity that is created by you in a trust document. The trust document will contain many provisions which will state how the trust is to be operated and how your property is to be eventually distributed. If you desire to establish a trust, my strong advice is to contact an attorney. You can amend or change the provisions of your living trust as long as you follow the instructions in your living trust which state how to do so. The CEO of the living trust is the trustee. Generally, you will be the initial trustee of your living trust and you will name successor trustees who will take over after you. Once you create the trust document, you will transfer your assets to yourself as the initial trustee of the trust. However, your life will not change, you will still control your assets, and you do not need to file a separate tax return for your living trust. Any assets that you transfer to the trust can be taken out at any time during your lifetime by following the provisions of your trust. Since the assets are owned by the trust and not by you, the assets can be transferred to your beneficiaries without the need for the probate process. Since there is no probate, there is no public record. The distribution of your property can be handled by your attorney in his or her office. The advantages of a living trust are that there is no probate and your property can be distributed much sooner; the attorney fees for distributing your assets is generally much lower than the attorney fees for probate; and there is no public record. The disadvantages of a living trust are the greater initial cost of creating and setting up your living trust; and your need to make sure that all your assets are transferred into the living trust. The information in this article does not constitute nor is it intended to constitute legal advice.

CALIFORNIA WILLS AND PROBATE

In 1789, Benjamin Franklin wrote: “In this world nothing can be said to be certain, except death and taxes.” Two hundred and twenty-nine years later nothing has changed, except that taxes have gotten higher. In California, when you pass on, your property is distributed according to your will. If you don’t have a will (or trust), it is distributed according to California law. There are exceptions to this such as the proceeds of your life insurance policies; the assets in your retirement plan; your bank accounts or other accounts that state “transfer on death” or “pay on death”; which are paid directly to the beneficiaries named by you. But if you don’t name a beneficiary or the beneficiary has passed away or you make the above payable to your estate, California law will decide who will get it. Generally, you can control the distribution of your property by creating a will or living trust. A will is a legal document that must meet certain requirements to be effective. Although you can create a will yourself under certain circumstances, my strong advice is to contact an attorney. In your will, you state to whom and how you want your property distributed and you nominate your executor. Your executor is the person who is basically the CEO of your estate. He or she will get all your assets together; pay your debts; pay any taxes that are due (income and estate); and distribute your property as well as perform other legal functions. The process by which your executor does this is called probate and it is court supervised.The probate process begins with the executor filing a form called the Petition for Probate with the court. If there are no problems, the court confirms your nominated executor as executor. During the probate process, which can generally take six months or longer, your executor must file certain forms and perform certain functions within specified time periods. The process can get complex and many executors hire attorneys to handle it. The attorney is generally paid a statutory fee which currently ranges from $7000 for a $200,000 estate to over $20,000 for a $1,000,000 estate. If you don’t name an executor or your executor does not qualify for some reason or if you don’t have a will, the court will appoint an administrator who will perform the same functions as your executor. Every form that your executor files and your will become part of the public record so that anyone can look at them. There are several exceptions to the probate process such as estates valued below a certain amount and community property belonging to the surviving spouse. This property is distributed by following certain streamlined procedures. You can revoke your will at any time during your lifetime as well as make changes to its provisions through the use of a document known as a codicil. The advantages of a will are that the attorney fee for preparing one is generally not high; you don’t have to change the title to any of your assets; and the probate process ensures court supervision. The disadvantages are the time and expense of the probate process and the fact that your will and other probate documents become part of the public record. The information in this article does not constitute nor is it intended to constitute legal advice.