Family Estate Planning

Estate planning isn’t for death; it’s actually for life!

Estate Planning enables you to enrich the lives of those you love.  It’s so important, in fact, that EVERYONE already has an estate plan. That’s right. Even if you fail to make a plan for yourself and your family, the state of California has a plan for you – it’s called probate. And probate is NOT something you want your family to have to endure. The only way to avoid probate, however, is through proper estate planning.

Do you know what your family would have to deal with if something unexpected happen to you? If you don’t, the first step is to get informed about exactly “what would happen,” legally and financially, so you can decide if that’s okay.

To help you become informed, we conduct a Family Wealth Planning Session. Before your Session we ask you to complete a Family Wealth Inventory and Assessment, which enables you to get clear about what you own and what you have to think about when it comes to planning for the well-being and care of your loved ones and your most prized possessions.

If you decide “what would happen” is unacceptable, and if we both decide that it’s a good fit to work together, then we will design an estate plan together that will best suit the needs and goals of your family.

The foundation of many estate plans often includes a revocable living trust. One of the benefits of a revocable living trust is that when prepared correctly and properly maintained, your estate plan will help your family to avoid the cost and delay of probate and minimize or eliminate estate taxes.

A revocable living trust can and should be tailored to your specific family situation and may include additional estate planning elements such as a Kids Safety Plan, Irrevocable Trust, Stand Alone Retirement Trust, Gun Trust, LLC, Family Limited Partnership, or the like.

Unfortunately, many plans don’t work because much of what passes for estate planning is really little more than very expensive word processing. You are asked a few questions and then told which “plan” is right for you. A drafter puts your name into a template, has you sign it, and send you on your way. This is not estate planning!

With the protection of your children, well-being of your family, and preservation of your legacy at stake, the foundation of your estate planning should be much more than form documents.  You deserve more and so do your loved ones.

That’s why “we take the time” to get to know you, understand your family needs and goals, address your concerns, answer your questions, and educate you about your options. Our focus is two-fold: to help you determine the estate plan that is exactly right for you and your family; and to ensure that it works precisely as you intend it to when that time comes.

We are interested in forming a relationship with you and your family, for life.  We are NOT in the business of merely creating documents for you to sign and sending you on your way. The only “sure” thing in life is change, which means your assets, family size, and even your goals will grow in different ways throughout the course of your life.  This means you must have a plan that grows with you.

The fact is, if your plan is not consistently updated over time, your family may not be taken care of in the proper manner. This is why each of our Estate Plans includes a complimentary review every three years.

So if you’re ready to plan for life and ensure your loved ones will avoid being dragged through the probate courts, call us today to schedule your Family Wealth Planning Session.

Estate Planning for Doctors

Talai Law Offices focuses on estate planning for doctors, and because we focus our practice to such individuals it does not take us days or weeks to figure out and understand what our clients needs are.  We already know their concerns, and are able to provide them with a comprehensive estate plan by incorporating many different planning tools that can provide asset protection, reduction or elimination of estate taxes, and avoidance of the long and costly process of probate.

Most doctors are concerned about exposing assets to litigious patients.  However, by maintaining the focus on effective estate planning these concerns can be mitigated, because asset protection is an incidental benefit of the proper estate planning.

Various Asset Protection Planning Options

Estate planning offers a level of asset protection through outright gifts, irrevocable spendthrift trust, charitable trusts, and marital trust.  However, asset protection includes much more than just trusts. The followings are various techniques for asset protection:

 Adequate Insurance

Adequate personal and business insurance should be considered the first line of defense. Your personal insurance must be sufficient, and it shall include umbrella insurance.  For your practice, ensure that commercial general liability insurance is sufficient, and that you hold umbrella insurance. Additionally, consider as much professional liability insurance as you can reasonably afford, as well as employment practice insurance.  And, most importantly, make sure you read the fine print of all these policies.

 Marital Property

Transmuting jointly held property to separate property interests often yields significant protection. Beware, however, that transfers between spouses may be considered fraudulent if not carefully planned.  A professional spouse may transmute separate property or jointly held interests into separate property of the non-working spouse as long as it is not fraudulent.  Nevertheless, although marital planning provides greater asset protection, it is important to note to that it could be detrimental in the event of divorce.

Setting Up A Business Entity

Creating a business entity lends protection against debts and claims.  If you own everything in one company a single lawsuit can result in catastrophic loss.  If assets are held in separate companies, then only the entity involved in the suit is at risk.  As a result, it is important to segregate your most valuable assets, such as real estate or equipment, in separate LLCs.  Additionally, it is important that you implement proper corporate governance practices, such as maintenance of LLC and corporation corporate formalities.  This ensures that creditors remain unable to “pierce the corporate veil.”

 LLCs for Real Property

Real property requires special protection. Tremendous liability potential exists for jointly owned real estate.  Thus, placing real property in an LLC or FLP is more advantageous in terms of asset protection.

Charging Order

A charging order is an order by the court in favor of the creditor requiring that distributions from the LLC be made to the creditor who obtained the charging order. However, if there are no distributions from the LLC and the charging order is the exclusive remedy for the creditor, the creditor will not receive anything.  Thus, this is advantageous for clients seeking greater asset protection.

Forum Shopping

There are many favorable jurisdictions for LLCs, including the following: DE, AK, SD, AZ, NV, and WY.

Domestic Asset Protection Trusts (DAPT)

Domestic asset protection trusts are favored as an asset protection tool because probate is avoided, confidentiality is maintained, and transfer of assets can be more efficient.  However, in most states settlor’s creditors can reach the trust assets while the settlors are alive.  Regardless, DAPTs form a significant barrier against creditors and afford significant leverage to the debtor with respect to negotiations with the creditor.

Spendthrift Clauses

A spendthrift clause protects a beneficiary’s interest from creditors’ claims.  However, these clauses are generally unenforceable for a settlor who is a beneficiary, i.e. while settlor is alive. Nevertheless, 14 states now have legislation providing spendthrift protection to a settlor-beneficiary. The recommendation remains to have significant connections with one of the 14 states to establish a DAPT in that jurisdiction.

Effective estate planning can minimize not only tax exposure but also the risk of recovery by litigating third parties.  Further, focusing on estate planning can also alleviate the moral and legal dilemma of “asset protection.” Undertaking planning sooner rather than later is important because death and taxes are a certainty and, for doctors, litigation claims are nearing that threshold.  Although no strategy can prevent a lawsuit, they will certainly help your chances of settlement or dismissal of a lawsuit.

Call Us Today to Schedule Your Family Wealth Planning Session

Probate Process in California

Probate is the court process of administering the estate of a deceased person who did not have a trust.

The “estate” is the legal term for all the deceased person’s assets while “administering” the estate relates to making a final distribution of those assets. The assets may be distributed according to the deceased person’s will or if they did not have a will, according to state law through the probate process.

The Process formally begins with the filing of a petition in Superior Court in the county where the decedent lived. The executor, also called an administrator or personal representative, is the person responsible for administering the probate of the deceased person, and as with any legal proceeding, there are many technical aspects to the process which include:

• Notifying creditors and publishing legal notices.
• Conducting and filing an inventory of the deceased’s assets.
• Petitions may need to be filed and letters of administration (often referred to as “letters testamentary”) issued.
• Paying bills, settling with creditors, and filing taxes.
• Adhering to deadlines for all filings, notices, objections, and payments.
• There may be separate procedures – or even lawsuits – required in contentious probate cases.
• Real estate or other property may need to be sold to effect correct distribution of assets or to pay debts.
• Other assets may need to be transferred from the decedent to the beneficiaries.
• The rights of beneficiaries and of creditors must be balanced and respected.

The Executor can easily get overwhelmed with the many technical responsibilities and legal duties he or she must accomplish to successfully probate the estate. That’s where we come in; guiding the executor, doing the heavy lifting, and making things as easy as possible for the executor throughout this process. The bottom line is that we save our clients significant time, money, and stress.

Both the executor and the probate attorney are entitled to equal compensation under California Probate Code Section 10810. The formula for determining ordinary probate compensation is very straightforward.

The Compensation in a probate administration case is calculated as follows:

4% of the first $100,000 of the gross estate value, 

3% of the next $100,000 of the gross estate value,

2% of the next $800,000 of the gross estate value,

1% of the next $9,000,000 of the gross estate value,

½% percent of the next $15,000,000 of the gross estate value.

The court determines reasonable compensation for an estate valued at more than $25,000,000. Also, probate courts can – and typically do in more complicated cases – award additional compensation for extraordinary services performed during the course of probate administration.

EXAMPLE: The statutory compensation for probating a California estate with a gross value of $500,000 is calculated as follows: 4% of the estate’s first $100,000 (which equals $4,000), plus, 3% of the estate’s next $100,000 (which equals $3,000), plus 2% of the estate’s remaining value of $300,000 (which equals $6,000). The sum total is $13,000 which means both the attorney and either the executor or administrator are both entitled to $13,000 in compensation at the end of the probate administration. And if there were any extraordinary services performed.

Please call us today for a free consultation if you need assistance with or have any questions about a California probate matter.