1. Joint Tenancy – Avoids Probate:

It is true that an asset titled: “John Smith and Mary Smith, as Joint Tenants, with right of survivorship” will avoid probate at the death of the first joint tenant. However, at the death of the first joint tenant the asset will then be retitled in only the surviving joint tenant’s name. Thereafter, in the event the surviving joint tenant does not create a proper estate plan, typically including a Trust, at his or her subsequent death, assets will be required to got through probate.

2. An Invalid or Outdated Will:

If a Will is not properly executed in accordance with statutory law it is invalid. Therefore, the Decedent will be treated as having died “intestate,” and the estate will be distributed to his or her heirs, as defined by the state legislature. In addition, if the validity of a Will is questioned by family members and other heirs a “Simple Will” may lead to a costly “Will Contest.”

A Will that has not been updated may create serious estate planning problems. That is because it may fail to address the following issues:

a. Recent marriages, divorces, or marital separations.
b. Recent births, deaths, or adoptions of children.
c. Changes in both federal and state tax law.
d. Changing needs of beneficiaries (i.e., age, incapacity etc.)

3. Life Insurance and/or Retirement Plan Beneficiaries:

A life insurance policy owner (i.e. the insured), or IRA participant names a primary beneficiary. However, the insured or IRA participant often fails to name a secondary beneficiary. In the event the primary beneficiary dies and no secondary beneficiary is designated, this will cause the life insurance death benefits or retirement plan proceeds to go through probate. It is the worst of all worlds for IRA or life insurance benefits to go through probate due to the simple fact the insured or IRA participant failed to name a secondary beneficiary.

4. Failure to “Fund” a Revocable Living Trust:

Both married and single clients may establish a Revocable Living Trust with the thought that “I have now avoided probate.” However, for a Trust to avoid probate the Settlor/Trustor/Grantor (i.e., the creator of the Trust), must “fund” the Trust. Another word for “funding” the Trust is, “retitling” assets into the name of the Trust. If a Settlor dies and has not properly funded his or her Trust, there is a strong probability such estate will go through probate.

5. Failure to keep your Trust up-to-date due to Tax Law changes:

Many, married and single clients believe that because the current “Federal Estate Tax Exemption” or “Applicable Exclusion Amount” in 2019, is $11,400,000.00, per individual, they need not worry about their existing Trust. That is because their estate does not exceed $11,400,000.00. However, if clients are married and their Trust was drafted when the Federal Estate Tax Exemption Amount was $675,000.00 in 2000, or before, their current Trust may require the surviving spouse to file unnecessary state and federal Trust tax returns, as well as to establish additional outdated Trusts. It is critical to keep your Trust in compliance with recent tax law changes. Otherwise, you may have created unnecessary complexities for the surviving spouse, as well as for other remainder beneficiaries.

6. Community Property is the same as Joint Tenancy:

Community property and joint tenancy are two (2) entirely different forms of asset titling. If you are married and living in a community property state such as California, you have the opportunity of titling assets as community property. However, as a general rule this does not happen automatically. Community property offers major income tax benefits to married couples which are not available through joint tenancy. If a married couple has all assets titled as community property, establishes a Revocable Living Trust, and then retitles all such community property assets into their Trust, the surviving spouse will receive a major income tax benefit at the death of the first spouse.

The tax benefit is that all community property assets (with the exception of retirement plans) receive a new One Hundred Percent (100%) step-up in income tax cost basis. In other words, the capital gains a married couple would have had to pay if they had sold assets while both spouses were alive disappears. The new appraised value of each community property asset is its new cost basis. The surviving spouse may now liquidate/sell investments at their new appraised “fair market value” and pay zero (0) in income tax.

By comparison, if all assets are titled in joint tenancy at the death of the first spouse while avoiding probate, such assets do will not receive the community property double step-up in coast basis. Only the deceased joint tenant’s One-Half (1/2) interest receives a step-up in income tax cost basis. Finally, assets titled in joint tenancy cannot fund a Trust, and may end up going through probate at the surviving joint tenant’s date of death.

I have met with many individuals who desire to provide in their estate plans for the lifetime care of a disabled child or another incapacitated family member. Such disabilities may encompass cognitive impairment as well as physical incapacity or a combination thereof. The impairment is frequently so severe that it limits the disabled beneficiary’s ability to manage any inherited assets. Likewise, you may have read that an outright inheritance may also disqualify a disabled beneficiary from receiving certain federal or state economic benefits. In the event you are confronting such a situation, then the inclusion of a “Special Needs” Trust in your estate plan may be appropriate.

What is a “Special Needs” Trust? It is a unique Trust established in most cases by a parent or grandparent, under a separate Article contained in their Revocable Living Trust, to manage the investments (i.e., an inheritance) provided for a disabled beneficiary’s lifetime benefit. A disable child or grandchild who is receiving, or who is eligible to receive certain governmental benefits, such as Supplemental Security Income (SSI) or Medi-Cal, may become disqualified if his or her inheritance is not retained in a “Special Needs” Trust. The Trustee who manages the investments in a “Special Needs” Trust should always be a third party. The “Special Needs” Trust must also contain specific language restricting the use of assets allocated to such Trust for the beneficiary’s “special needs”. The goal of creating a “Special Needs” Trust is to allow the disabled beneficiary to inherit assets for his or her “special needs,” without being disqualified from receiving the various governmental benefits mentioned above.

In the event a client establishes a lifetime Trust for a disabled beneficiary and the Trust contains standard language directing the Trustee to make distributions for a beneficiary’s “health, education, support and maintenance” it will disqualify that beneficiary from receiving SSI, Medi-Cal and other governmental benefits.

In addition, it is important that the disabled beneficiary be unable to revoke The “Special Needs” Trust. Finally, the Trustee should be granted the authority to distribute income and principal of such Trust for the “special needs” uses of the beneficiary, instead of only making distributions directly to such beneficiary.

Pet Trusts: Estate Planning For Pets

The late New York hotel heiress, Leona Helmsley, left an estate in excess of Twelve-Million Dollars ($12,000,000.00) to her Maltese Terrier named “Trouble”. Unfortunately, no Trust was properly established for his lifetime care. Instead, Mrs. Helmsley simply designated her Brother to care for “Trouble”. However, he refused to do so. Thereafter, “Trouble” was given to a caretaker who used a significant amount of the fortune to hire permanent security guards due to the fact that “Trouble” became the target of a series of kidnapping threats. Finally, when “Trouble” died the remaining balance of Leona Helmsley’s estate was distributed to a series of charities.

My Beagle, “Prince”, or your favorite pet may not be the beneficiary of a multi-million dollar estate. However, California statutory law now allows you to establish in your estate plan a “Pet Trust” for the remainder of your fury companion’s lifetime. Such a Trust is typically contained in a separate Article in a client’s Revocable Living Trust, and come into existence upon the client’s date of death.

1. What is a “Pet Trust”?

A “Pet Trust” is a legally sanctioned Trust, established under a separate Article generally contained in your Revocable Living Trust which will direct the Successor Trustee following your death to hold property (i.e., cash, investments etc.) “in trust” for the lifetime benefit of your pet. Payments of both income and principal may be made for your pet’s well-being. The “Pet Trust” may continue for the lifetime of your pet and upon his or her death the remaining Trust assets will be distributed to your designated beneficiaries (i.e., SPCA, Guiding Dogs For The Blind etc.)

2. Why have a “Pet Trust” in California?

Because in California such a Trust is legally enforceable by statutory law. With the creation of a “Pet Trust” you can provide specific directions regarding your pet’s care including the brand of food he or she prefers, as well as directives for his or her maintenance and care. You can also list the persons whom you desire to provide such care, including their compensation.

Additional “Pet Trust” provisions should include the following:

1. Identifying your pet or pets by name to avoid fraud,
2. Describe in detail the pet’s standard of living and care,
3. Require regular veterinarian visits for your pet,
4. Determine the amount funds you desire to allocate to the Trust for your pet’s lifetime care,
5. Designate a remainder beneficiary in the event there are funds remaining in the Trust following your pet’s demise, and
6. Provide final instructions for cremation or other disposition of your pet’s remains.Finally, a “Pet Trust” is a valid estate planning technique for anyone who owns a companion dog or other domesticated animal. Your pet becomes a member of your family, and adequate provisions should be made for him or her in the event your fury companion survives you.

As a result of the 2017 Tax Act signed into law by the President, it is now advisable for you to review and possibly revise your estate plan. A variety of personal changes may have occurred in your life which affect your estate plan, irrespective of your net worth including the following:

1. Changes within your family unit (i.e., your health, a beneficiary’s health, an adoption, a marriage, a divorce, a relocation, a death or birth of new beneficiaries, etc.),
2. Changes in your asset distribution objectives (i.e., inclusion v. exclusion of certain beneficiaries, retention of assets in trust v. outright asset distribution, etc.),
3. Changing needs and abilities of beneficiaries, including their financial condition, their ability to manage assets, or their qualification for governmental aid,
4. Reassessing individuals or institutions now appointed as your Executors, Trustees, Attorneys in Fact, and Primary Agents, due to advanced age, other demanding commitments, abilities, death, or corporate takeover, and
5. Changes in net worth, as well as changes in your address.

Please understand, the primary purpose of this message is to alert you of the importance of keeping your estate plan up to date. The above issues apply to all US citizens whether you are married, single, gay, or straight. If you now believe a free, follow-up conference with me is desirable, please call my law office to schedule an appointment. Likewise, I encourage you to visit my new website, and review the above personal issues in more detail at: test.parrishestatelaw.com.

The following changes in the new Tax Law signed by the President in December of 2017, make it advisable for you to now review your personal estate plan and to make sure it is up to date:

1. The Federal Estate Tax “Applicable Exclusion Amount” has increased to $10,980,000.00 (i.e., approximately $11,000,000.00) per individual in 2018. A married couple may shelter up to $22,000,000.00 from federal estate taxation. If your estate plan was drafted before 2010, it needs to be reviewed. You may have Trusts which become irrevocable at the first spouse’s death, and this may no longer be necessary for proper tax planning.
2. In addition, if you are married the new tax law allows a surviving spouse to utilize the unused portion of a deceased spouse’s “Applicable Exclusion Amount” (i.e., any part of his or her $10,980,000.00) to offset taxes at the survivor’s death. This depends upon how your Trust is drafted and what is done at the first spouse’s death.
3. Many provisions in your Durable Power Of Attorney and Advance Health Care Directive should be reviewed. Please understand, a Durable Power Of Attorney only governs non-Trust assets and terminates at death. Likewise, it is important for you to review all of your IRA beneficiary designations, and to make sure you have designated both a Primary Beneficiary, as well as a Secondary Beneficiary. Failure to do so will cause such non-probate assets to go through probate.
4. Internal Revenue Code Section 1014 (b)(6) allows a “double step up” in income tax cost basis at the death of the first spouse. However, this “step up” is dependent upon proper re-titling of all assets as community property instead of joint tenancy. Due to refinancing, many clients take homes out of their Trust and fail to retitle them back into the Trust. Therefore, a probate estate is created.
5. You may establish within your Revocable Living Trust new “asset protection” Trusts for various beneficiaries. These Trusts will shelter a child’s inheritance from a divorce or other lawsuits.

Please understand, the primary purpose of this message is to alert you of the importance of keeping your estate plan in order. These issues apply to all US citizens irrespective of your net worth, or whether you are married, single, gay or straight. If you now believe a free, follow-up conference with me is desirable, please call my office to schedule an appointment. Likewise, I encourage you to visit my new website and review the above issues in more detail at: test.parrishestatelaw.com.

After four (4) decades of practicing law in the area of estate planning, I have come to realize that many client initial estate planning objectives tend to create new problems, rather than solving such issues. Why and how is this possible?

Examples of such issues may involve both married couples, as well as single clients. Such problem issues arise when clients desire to appoint Successor Co-Executors of a Will, Successor Co-Trustees of a Revocable Living Trust, or Successor Co-Attorneys in Fact under a Durable Power of Attorney. While it is true that naming Successor Co-Executors, Successor Co­ Trustees, and Successor Co-Attorneys in Fact are legal planning options, it does not mean they are desirable estate planning techniques. Such arrangements frequently give rise to a series of questions and problems including the following:

1. Does the Will, the Trust or the Durable Power of Attorney contain a dispute resolution clause in the event the two (2) appointed individuals cannot agree on a specific decision? Without such a clause in each of the above documents the two (2) individuals named in a fiduciary capacity may be required to go into Court to resolve such disputes. This is the complete antithesis of a client’s desires.
2. Does the Will, the Trust, or the Durable Power of Attorney contain language permitting one (1) Successor Co-Executor, one (1) Successor Co-Trustee, or one (1) Successor Co-Attorney in Fact to act independently from the other Co­ Fiduciary? Failure to include such a clause will frequently cause long delays in achieving a client’s estate planning objectives

Whenever the issue of appointing Successor Co-Executors, Successor Co-Trustees, or Successor Co-Attorneys in Fact arise in an estate planning conference, I always inquire of the clients: “Are the two (2) individuals you desire to appoint to such fiduciary roles capable of working together without major conflicts?” In many cases children appointed in such fiduciary roles may live at a long distance from one another, and may also only agree with each other in the presence of a parent. Once the parent, as the controlling figure is incapacitated or deceased, conflicts often occur between such Successor Co-Executors, Successor Co-Trustees or Successor Co-Attorneys in Fact.

During an initial estate planning conference when clients express the desire to appoint two (2) individuals in a fiduciary capacity as described above, I share with them the potential problems discussed above and also state: “We are here to solve problems not create new ones.”

My role as an estate planning attorney is not to tell clients what to do, but rather explain to clients the potential consequences of their decisions. In most cases clients are totally unaware that such problems may exist. Therefore, many client objectives become excellent examples of: “Good intentions lead to the most undesirable results.”

While such arrangements are entirely legal, they may result in major conflicts between Co-Fiduciaries. Likewise, please understand the appointment of Successor Co-Executors, Successor Co-Trustees, or Successor Co-Attorneys in Fact are totally unrelated to the disposition of a client’s estate. Finally, such potential conflicts reinforce my belief that the most difficult decisions clients face are not tax related, but are personal in nature.

Estate planning for Married Clients We assist married couples in avoiding unnecessary income and estate taxes, as well as probate, through the creation of revocable living trusts as well as irrevocable trusts, asset protection trusts, drafting of additional estate planning documents. California is a community property state. We counsel married couples in understanding how community property titling is different from joint tenancy and how titling affects estate planning.	Estate planning for Single Clients We provide services to single clients, same-sex couples, single parents, and unmarried couples in developing effective estate and trust plans that assure privacy and are appropriate to their unique situations. We aid clients in the creation of revocable living trusts as well as drafting additional necessary documents, including wills, durable powers of attorney, advance health care directives and assignments.	Estate planning for Same Sex Clients For same sex couples there is not a great deal of literature, either in the popular press or in legal publications addressing the issue of, for lack of a better term, “alternative lifestyle estate planning”. The purpose of this article is to briefly address certain major issues applicable to same sex couples, as well as opposite sex couples living outside of what the law recognizes as a traditional marriage.	Post-Mortem Trust Administration After a client has died, we assist family members and fiduciaries (i.e., Executors, Trustees) in the proper administration of trusts and other estate settlement documents to fulfill the goals of the client’s estate plan. We will also provide Medicare and medical planning services in “special needs” cases for elderly clients, disabled clients, and their care givers.
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Welcome to the Law Offices of M. Franklin Parrish At the Law Offices of M. Franklin Parrish, we are dedicated to the practice of traditional estate planning techniques. Each client’s needs are unique and are carefully reviewed and analyzed. We offer personalized, professional services to married couples, domestic partners and single individuals seeking competent and informed legal guidance in matters related to successful estate and trust planning.We also assist clients in taking the appropriate steps to avoid unnecessary income taxation, as well as federal estate taxes. The federal estate tax has undergone significant changes in the past six years. Discuss your estate plan with a knowledgeable attorney Contact us today to discover how proper asset management and estate planning can benefit you and your loved ones.

Weekly Trust News Update Basic Federal Estate Tax Exclusion for 2015 has just been announced by the IRS. The Exclusion has been increased effective January 1, 2015,  from $5,340,000 in 2014, to $5,430,000 in 2015. However, the Annual Exclusion for lifetime gifting remains at $14,000 per year/per recipient. Simply stated: You may give $14,000 to an endless number of individuals in 2015, and never be required to file a Federal Gift Tax Return. In addition, the transfer is income tax free to the recipient.