California Advance Health Care Directive

July 23, 2007 by Mitchell A. Port

PUT IT IN WRITING

As a probate attorney in Los Angeles, all of my California clients have me prepare a California Health Care Directive. As the Terri Schiavo case illustrated, in any given case, people may have divergent views on what measures should be taken to keep someone alive. The choice of which person speaks for you is your choice alone. My clients avoid or lessen the kind of strife that has torn the Schiavo family by identifying in advance who will speak for them.

TALK ABOUT IT

Each of us in Los Angeles County, Ventura County, Santa Barbara County and Orange County where most of my clients live chooses a person to whom we express our wishes who shouldn't be left guessing. If anything good has come of the Schiavo tragedy, it is that families are now talking about end of life decisions, and are taking steps to make sure that their wishes are known and are carried out.

BE SPECIFIC

I still believe that the designation of a health care agent is far more effective than trying to provide instructions for every conceivable scenario. But your grant of authority to your agent – and your discussions with him or her – should cover a key issue raised in the Schiavo case by specifying whether or not the agent's power extends to the withholding or withdrawal of fluids and nutrition.

YOU CAN'T COVER ALL THE BASES:

Any attempt to make medical decisions far in advance, I began to realize, will almost always be futile. As one widely-read booklet on advance health care directive (Shape Your Health Care Future with Health Care Advance Directives, co-produced by the American Association of Retired Persons, the American Bar Association Commission on Legal Problems of the Elderly, and the American Medical Association, 1995) states:

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Minimizing Tax Problems With Qualified Appraisals

July 20, 2007 by Mitchell A. Port

California property values are through the roof. For those of us who live in Los Angeles County, Ventura County, Santa Barbara County or Orange County and are considering making a gift of property, obtaining an appraiser to help determine the value of an asset to be gifted or that is in an estate is an important decision. This is true whether the California property is held in your own name or in the name of a limited liability company (LLC).

You don't want to pay for an appraisal, and then lose the case, have a large deficiency or penalties imposed, or suffer the embarrassment of the court telling the appraiser that his testimony is "full of holes".

California and other courts continue to ignore, criticize and occasionally use the testimony of appraisers to determine a disputed value.

Reputation and price of appraisal firms necessarily seem to assure success.

Appraisers must state their qualifications and show their understanding that a substantial or gross valuation misstatement may subject the appraiser to a civil penalty under Internal Revenue Code section 6695A in the appraisal.

Here are some suggestions in working with – and selecting – appraisers:

1. Confirm that the appraiser is full time and independent.

2. Check to be sure the appraiser is credentialed - in the subject matter to be appraised!

3. Confirm that key information, dates, and facts are correct.

4. Insist that the appraisal considers the various valuation methods, and if some are rejected or given less weight than others, a reason is given and supported for that action.

5. Involve the appraiser early.

6. Make sure your appraiser has statistical expertise and the numbers add up - and are current!

7. Confirm that the appraiser is not too "creative".

8. Check to be sure the appraiser has the ability and willingness to listen - as well as to engage the client and others in order to obtain important information that others may not have asked.

Structuring your gift or creating an estate tax strategy to minimize or avoid tax requires the input of a qualified California tax attorney. Call Mitchell A. Port at (310) 559-5259 to discuss the tax strategy you have in mind or that may be available to you.

Gift Tax Consequences Of Trusts Employing Distribution Committee

July 18, 2007 by Mitchell A. Port

Want to give your input to the IRS on a matter involving gift taxes? Read on....

The Internal Revenue Service announced the other day that it is reconsidering a series of private letter rulings (PLRs) previously issued. A PLR is an interpretation of statute or administrative rules and their application to a particular set of facts or circumstances. The private letter ruling addresses unusual or complex questions pertaining to a particular taxpayer and his or her tax situation. The purpose of the letter ruling is to advise the taxpayer regarding the tax treatment he or she can expect from the IRS in the circumstances specified by the ruling.

The PLRs under reconsideration address, in part, the gift tax consequences under sections 2511 and 2514 of the Internal Revenue Code of trusts that utilize a distribution committee consisting of trust beneficiaries who direct distributions of trust income and corpus. The Office of Chief Counsel believes that the conclusions in the PLRs regarding the application of section 2514 may not be consistent with Rev. Rul. 76-503, 1976-2 C.B. 275, and Rev. Rul. 77-158, 1977-1 C.B. 285. As a result, the Office of Chief Counsel is requesting comments from us in the general public as to whether the conclusions in these PLRs regarding section 2514 can be reconciled with the revenue rulings.

These PLRs involve a situation where trust distributions are made at the unanimous consent of a distribution committee that consists of trust beneficiaries, or at the discretion of an individual committee member with the consent of the grantor. If a distribution committee member resigns or dies, the committee member is replaced with another person. The PLRs conclude that the distribution committee members have substantial adverse interests to each other for purposes of section 2514. Therefore, they do not possess general powers of appointment over the trust and as a result, distributions from the trust will not be subject to gift tax with respect to the distribution committee members.

The problem is, however, that the holdings in Rev. Rul. 76-503 and Rev. Rul. 77-158 indicate that because the committee members are replaced if they resign or die, they would be treated as possessing general powers of appointment over the trust corpus. Some suggest that the facts presented in the PLRs are distinguishable from the revenue rulings because in the PLRs, the grantor’s gift to the trust is incomplete since the grantor retains a testamentary special power of appointment. See, however, section 25.2514-1(e), Example (1) of the Gift Tax Regulations, and Rev. Rul. 67-370, 1967-2 C.B. 324.

Before the Office of Chief Counsel takes any action with respect to the PLRs, the Office of the Associate Chief Counsel, Passthroughs & Special Industries is requesting comments regarding the question of whether the distribution committee members possess general powers of appointment under section 2514. The comments could also include suggestions for a substantially similar trust structures that would achieve the intended income, gift, and estate tax objectives of the transactions described in the PLRs.

Comments should be provided within ninety (90) days of the date of this news release. Send written comments to: Internal Revenue Service, Attn: CC:PA:LPD:PR (CC:PSI:4), room 5203, POB 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (CC:PSI:4), Courier’s Desk, Internal Revenue Service, 1111 Constitution Ave, N.W., Washington, DC, or sent electronically, via email to: Notice.comments@irscounsel.treas.gov (indicate CC:PSI:4)

To find out how this may impact you, speak to a tax attorney now. Call Mitchell A. Port at 310.559.5259.

Choose The Right Executor

July 16, 2007 by Mitchell A. Port

For California probate matters, picking the right person to serve as personal representative or executor can make a significant difference. The wrong person (including someone outside of California when the estate’s property is primarily in California) can blunder and convert what should be an uncontested estate into a quagmire of never-ending litigation. The right person can take a difficult situation and smoothly work through the issues with minimum fuss and expense to the benefit of all concerned.

In an article entitled Choose The Right Executor, Forbes thoroughly discussed each task the executor must assume when probating an estate. The importance of picking the right personal representative or executor is highlighted in the article. It begins by stating:

Most people know that they should have a will, but few individuals understand how important it is to select the right executor to help manage their affairs and distribute their assets to heirs upon their death. Picking the right executor will mean that loved ones will receive their inheritance on a timely basis. Picking the wrong one could lead to lengthy delays, tax problems and possibly even a “will contest.”

I recommend reading the entire piece.

If you have any questions about California probate, please call Mitchell A. Port at (310) 559-5259.

Divorce: Estates And Trusts And Proposed New Law

July 11, 2007 by Mitchell A. Port

Existing California law (California Probate Code Section 5600) invalidates nonprobate transfers of assets made to a former spouse by a decedent before termination of the marriage, unless

There is clear and convincing evidence that the decedent intended for the benefits to pass even after termination of the marriage,

The nonprobate transfer is not subject to revocation, or

A court orders otherwise.

A bill pending before the California State Legislature (AB 873) would permit a court instead to impose any or all of the following conditions upon a party to a bifurcated, status-only dissolution:

A new condition authorizing the court to make an order, if appropriate and except as specified, requiring that a party maintain a beneficiary designation for a nonprobate transfer asset until judgment has been entered with respect to the community ownership of that asset and until the other party's interest therein has been distributed to him or her.

A new condition authorizing the court to require that the community interest in an Individual Retirement Account (IRA) by or for the benefit of the party be assigned or transferred, as specified, to the other party to preserve the ability of the party to defer the distribution of the IRA upon the death of the other party. In addition, the bill would include a new condition authorizing the court to order a specific security interest under specified circumstances that may arise upon the death of one party.

Except as specified, the bill would require a party to maintain a beneficiary designation for a spouse for up to half, or upon a showing of good cause all, of a nonprobate transfer asset until a final judgment on the community interest has been entered.

Consult with an estate planning attorney about your alternatives. Call Mitchell A. Port at (310) 559-5259.

Navigating Your Local California County Court

July 5, 2007 by Mitchell A. Port

Each county in California is permitted to supplement the California Rules of Court to govern the handling of its probate cases without being bound by the rules which govern another California county courthouse. Listed below are links to some of the counties where I handle most of my California probate matters:

Los Angeles Superior Court

Ventura County Superiour Court

Santa Barbara County Court

Orange County Superior Court

Riverside County Court

San Bernardino County Court

Fresno County Court

Santa Clara County Court

San Francisco County Court

San Diego County Court

Monterey County Court

For a complete listing of local rules for the entire California court system, including criminal rules, civil rules and all other rules, click on Local Court Rules.

For personalized help from a California probate lawyer, call Mitchell A. Port at (310) 559-5259.

California Probate - Using Referees

July 2, 2007 by Mitchell A. Port

The California Probate Referees' Association published its latest edition of the Probate Referees' Procedures Guide. The Guide is designed to assist those with California probate experience as well as those without experience.

The Guide covers all basic procedures with a focus on the preparation of the Inventory and Appraisal. The Guide provides practical suggestions for preparing attachments, describing assets, obtaining appraisals and presenting necessary supporting data.

The Los Angeles Daily Journal published the California Probate Guide under the title: Using Probate Referees in Trusts, Probate, Conservatorships and Guardianships, Small Estates, and Non-probate Matters

The Guide's Table of Contents are here:

WHY USE A PROBATE REFEREE?

THE ROLE OF THE PROBATE REFEREE

BENEFITS OF USING REFEREIS IN TRUST AND NON-PROBATE MATTERS

TRANSFER OF SMALL ESTATES AND SPOUSAL PROPERTY PETITIONS

NEW REQUIREMENT OF VALUATIONS WHENEVER ACCOUNTS ARE REQUIRED TO BE FILED

WHAT IS THE INVENTORY AND APPRAISAL
-Checklist for preparing the Inventory and Appraisal
-What does not go in the Inventory and Appraisal
-What goes on Attachment 1
-What goes on Attachment 2

LISTING PARTICULAR ASSETS
-The importance of complete information

REAL PROPERTY
-Vacant, agricultural, condominium, and single family residential
-Stock cooperatives
-Residential income producing
-Commercial/industrial property
-Life estates
-Remainder and reversionary interests

BUSINESS INTERESTS
-Closely held corporations
-Limited partnerships
-General partnerships
-Sole proprietorships

TANGIBLE PERSONAL PROPERTY
-Miscellaneous/furniture and furnishings
-Jewelry/coins/art
-Motor vehicles/mobile homes/boats
-Livestock and breeding animals

PROMISSORY NOTES

SECURITIES
-Portfolio accounts at brokerage firms
-Common and preferred stocks
-Mutual funds
-Stock options
-Corporate, state and municipal bonds
-US treasury notes and bonds
-GNMA, FNMA, and FHLMC securities
-United States savings bonds

OTHER INTERESTS
-Inheritances and distributions from trusts
-Insurance policies
-Patents, copyrights, and royalty interests
-Judgments and ongoing litigation
-Personal injury actions
-Gas and mineral rights

ADMINISTRATIVE ISSUES AND QUESTIONS COMMONLY ASKED
-How long does the appraisal take?
-How do I correct a mistake?
-When do I need a reappraisal for sale?
-What about inheritance taxes?
-Minority discounts

Speak with an experienced California probate lawyer who can represent you in any court in California, most readily in Los Angeles County, Santa Barbara County, Ventura County and Orange County. Call Mitchell A. Port at (310) 559-5259 to discuss your probate matter.