Trump's Proposal to Repeal Estate Tax Will Not Effect More Than 99% of Americans Who Are Extempted From Estate Tax. Estate Tax Elimination Does Not Eliminate Need for Trust and Estate Planning.

If president-elect Donald Trump follows through on his campaign promises, the estate tax will be eliminated.  Currently, the rules are straightforward: A married couple is exempt for the first $10.9 million in their estate, and they pay a 40 percent tax on the amount above that. Mr. Trump’s campaign proposal seems straightforward: Repeal the estate tax — the "death tax" in his words. There is a second part to his plan which involves keeping taxes on capital gains over $10 million when family assets are sold.

Back in 2012, most tax experts considered the estate tax resolved when the Republican-majority Congress and President Obama reached a so-called grand bargain on taxes. As part of that deal, the current estate tax exemption was set, with annual increases indexed to inflation. With that agreement, more than 99 percent of Americans were exempted from the estate tax. Last year, for example, the IRS processed just 4,918 federal estate tax returns.  Few families have more than $10.9 million in their estate.

But Mr. Trump’s proposal is not a simple repeal. His plan also said, “Capital gains held until death and valued over $10 million will be subject to tax to exempt small businesses and family farms.”  In other words, the tax on capital gains above $10 million would have to paid only when, or if, the assets were sold.

Estate Planning Meets Retirement Planning - NYT Article on How to Give an I.R.A. to Beneficiaries Without Giving Up Control

Kate Thornton/New York Times

An interesting New York Times article "How to Give an I.R.A. to Children Without Giving Up Control" (11/18/16). Some may have never heard of a Trusteed I.R.A. which allows the funds to be distributed to beneficiaries and control how someone uses the money so it's not squandered or ill-spent. For clients who have large I.R.A. holdings (over $500,000), this may be a wise option or at least something to consider.

It also allows the assets in the I.R.A. account to be broken up into separate accounts for the beneficiaries. Each account can have different guidelines on when and for what distributions are made and take into account their age.

One advantage is that there is better asset protection for the beneficiaries. In 2014, the U.S. Supreme Court rule that funds held in traditional I.R.A.s that are inherited do not have the same protection as retirement assets. Another benefit is if the I.R.A. owner becomes incapacitated where the trustee can request the minimum distribution since without the owner reqeuest there can be a large penalty.

There is the option of creating a trust and putting the I.R.A. into it but that can cause issues with the I.R.A. especially where there is a spouse and can be more expensive. Trusteed I.R.A.s have management fees so that is one reason why they are usually recommended if the account is large.

Trusteed I.R.A.s have their limits and anyone thinking of a Trusteed I.R.A. should consult an experienced attorney to draft the documents, consider it in the context of retirement and estate planning.

Posted by Henry (Hank) Moravec III
Email: hm@moravecslaw.com
Office: 626-793-3210

L.A. Times / Don Bartletti ~ Reading Cinemas Movie Theatre

The Los Angeles Times is reporting on a family estate dispute and court drama thatis affecting the Los Angeles-based movie theater chain Reading InternationalInc. which has dozens of cinemas around the world, major real estate holdings, and a nearly 200-year history with roots in the railroad and coal business. The adult three children of Reading’s late chief executive, James J. Cotter Sr., are waging a battle for control of the company.

This case is more complicated than the typical estate dispute in that it involves a public company but it has some allegations that are common to many of them such as whether the father had capacity to amend the trust, breach of fiduciary duty and undue influence.

The Los Angeles Times reported that the issues began after James J. Cotter Sr., a Los Angeles businessman, resigned as CEO and chairman in August 2014 because of declining health, leaving son James Cotter Jr. in charge. Cotter Sr. died in September 2014 at age 76. Shortly thereafter, his two daughters went to court, alleging their brother improperly convinced their father to add him to a trust that would control the voting shares of the company.

The article notes that Ellen and Margaret Cotter’s court papers claimed that James Cotter Jr. unduly influenced their father while he was in the hospital after suffering a fall in his home. The daughters said their father lacked “the knowledge and understanding necessary” to make such financial decisions. The daughters contend that after their dad was admitted to the hospital, their brother convinced an estate attorney to draft an amendment to the trust that made him a co-trustee. They allege he lied to Margaret by saying the changes were made based on videos he took of their father expressing his wishes. 

Prince May Have Died Intestate and Estate Estimated Worth Is $300 Million

Los Angeles City Hall Turns Purple In Honor of Prince

The untimely passing of music superstar Prince even gets to estate and probate attorneys who grew up on his music. One of the first questions estate and probate geeks ask is about his estate planning since he owned copyrights to his music, has a valuable public brand and name, and had an estate large enough to be subject to estate tax. 

The Los Angeles Times reported that Prince's estate is rumored to be worth over $300 million and that he may have died intestate (without a will or trust). While hard to imagine, it is not unusual. This would mean his sister would inherit everything as his closest heir regardless of whether he had a live-in companion or other people he wanted to provide for. 

If you have not done your estate planning, you're not alone. It is natural to put it off. Being in Los Angeles, we have had celebrity clients and Us Magazine is right in that celebrities are "like you and me." This is easy to put off since it involves planning and preparing for a time when we will not be with our loved ones. One meeting I had with a celebrity for estate planning, required me to not mention the word "death" in the meeting. Of course, I complied. Why? The important thing is helping clients have peace of mind and having the satisfied feeling that one's affairs are in order. 

Posted by Henry (Hank) Moravec III
Email: hm@moravecslaw.com
Office: 626-793-3210
Moravec, Varga and Mooney

What Happens When Trust Real Property Is Only Listed on a Schedule to a Trust but No Deed is Signed? Trust Litigaton, Appeal And Court of Appeal Decision Reversing Probate Court's Ruling.

A recent California Court of Appeal decision, Carne v. Worthington (4/13/16), shows how disputes over trusts happen if one is not careful in executing and recording all the deeds to property that are to be part of a trust. It also shows how a relative can try to take advantage of a failure to record a deed and how trust litigation happens and can take years to resolve.

This case involves a dispute over the ownership of real property located on Via Regla formerly owned by decedent Kenneth Liebler. Kenneth, who passed away in October 2012, had executed a revocable trust in 1985 and the Via Regla property was transferred to the 1985 Trust.

Kenneth then executed an irrevocable trust in 2009 (the “2009 Trust”) which stated, “I transfer to my Trustee the property listed in Schedule A, attached to this agreement.” The sole asset listed on Schedule A was the Via Regla property.

However, Kenneth did not transfer title to the Via Regla property by a deed from the 1985 Trust to the 2009 Trust. This was an apparent oversight. 

After Kenneth passed away, his daughter Melanie Carne filed a petition to confirm the validity of the 2009 Trust.  A grandson, Dillon Hasting, opposed the petition and argued that the 2009 Trust was not valid because Kenneth had not properly transferred title to the Via Regla property and that property was the only asset in the trust. Nancy Worthington (Kenneth's former live-in companion) also opposed the petition on similar grounds. 

The trial probate court ruled in favor of Worthington and Hasting which meant the Via Regla property would not be left to the daughter. Daughter Melanie filed an appeal. The Court of Appeal reversed the trial court and ruled in favor of Melanie. The appellate court held that the language in the 2009 Trust was sufficient to convey the property to the 2009 Trust, and Kenneth was not required to execute a deed.

The appellate court reasons that while Kenneth did not own the property individually at the time of the transfer, his signature on the 2009 Trust was sufficient to convey title from the 1985 Trust to the 2009 Trust because the 1985 Trust was a revocable inter vivos trust, he owned the property as sole trustee of the 1985 Trust, and he had the power to transfer real property owned by the 1985 Trust. 

This case is interesting because the law has been moving towards confirming property listed on a Schedule A as trust property ever since the famous Heggstad case. It has now become settled that if title to a piece of real property was in the name of a person, a Schedule A to a trust or a general assignment to the trust was sufficient to transfer title to the trust, even if the person never got around to actually executing a deed.  This is because the Trust, Schedule A, and/or general assignment is evidence of the intent of the person.  This was not always the case, for years the Courts simply held:  no actual transfer = no transfer.  Heggstad was a watershed ruling because many people intend to have all of their property in their revocable trust but can either forget to transfer the property or forget to transfer it after a refinancing. 

Worthington moves the law moves a bit farther towards effectuating the intent of a person, rather than following the technical rules of how the property is held. 

Of course, the delay involved in probate litigation is the same as ever.  This decision, issued over three and one-half years after Kenneth passed away, also shows us how long these type of matters can take to resolve. 

Finally, remember to follow up on trust recording and use professionals so nothing falls through the cracks. Our office records the deeds so these type of oversights do not happen. A simple failure to record can have a significant impact on an estate. 

Posted by Henry ("Hank") Moravec III
Email: hm@moravecslaw.com
Office: 626-793-3210
Moravec Varga & Mooney 

Technology and Online Tools Can Help Executors of Estates While Executor Works With Probate Attorney

Technology is making it easier to save and share information and the probate and estate administration world is no different. Clients can use Excel spreadsheets, Dropbox and other file sharing tools with us and beneficiaries.

The New York Times recently had an article "Online Tools Can Ease the Burden of Being an Executor of an Estate" and it recommended an interesting online database tool called EstateExec that has gotten good reviews. It is an interactive tool that allows an executor to list and track financial assets, personal property, debts and then share it online with a lawyer or other beneficiaries and family members. It also has timelines and checklists (so court hearings for approval can be entered) which provides a transparency to the process which helps others understand why it can take months in the probate court system.

While this does not eliminate the need for a probate attorney in an estate with assets, the will is complex or where there is a likelihood of litigation, it has good checklists and is a useful tracking device. It can also be helpful for very small estates that do not need probate court. 

Part of our practice is focused on using technology where possible to make it easier for our clients. Older clients are not as technology based but things are changing and we can take advantage of all the tools available to us to make probate administration easier and faster. 

Posted by Henry (Hank) Moravec III
Office: 626-793-3210
Email: hm@moravecslaw.com

Foreign Property Considerations In Estate Planning and Probate

In our practice, we have a significant number of clients who own real property or have bank account in a foreign country whether China, Mexico, England, Costa Rica, England, Canada or France or other countries. Our clients are becoming more global and mobile, especially when buying properties abroad for retirement, vacation or for their families.

One issue that arises with foreign property is the risk of double taxation. It is possible that when foreign property is transferred, U.S. estate tax will apply, but so will the tax of the foreign country. When a citizen of the United States dies and owns property in a foreign country, the property in the foreign country will be subject to U.S. estate tax if the estate is subject to taxation at all. There are treaties with certain countries which prevent the double taxation and give credit.

Another issue that comes up is multiple wills in different jurisdictions. Somestimes one last will and testament may ultimately revoke another. When ttwo wills are needed, it is important that attorneys from each country work and coordinate the estate planing and wills.

If there is no will or trust, in civil law countries, such as France, the property vests in the decedent’s heirs immediately upon the death of the decedent. This is unlike the United States and other common law countries, where there generally must be a personal representative or executor to transfer title or, at a minimum, some sort of court recognition of the death and transfer of property. 

For example, if a client owning property in France desired that property vest in a long time companion and there was no will or trust, the property would immediately vest as set forth under French succession laws. On the other hand, if the client wanted the property to vest in their heirs, then drafting a will in France to deal with the French property would be not be needed.  

We work with attorneys in other countries while advising clients with foreign property during the estate planning or probate phase. It is always best to address these issues during estate planning rather than going through the difficult and expensive process of dealing with them after death through the probate process. As we live in a more global society and smaller world, these issues are becoming more common. Don't forget to prepare for all your estate planning and probate issues, particularly when foreign real property is involved. 

Posted by Henry (Hank) Moravec III
Email: hm@moravecslaw.com
Office: 626-793-3210