California Estate Planning Practice Blog

Local Long Beach Telephone Numbers.

For those of you in the Long Beach area, you may find these numbers useful:

• Non-emergency Police: (562) 435-6711
  
• Non-emergency Fire: (562) 570-2500
  
• Gas Emergency: (562) 570-2140
  
• Long Beach Water Dept.: (562) 570-2390
  
• Graffiti Hotline: (562) 570-2773
  
• Trash Collection: (562) 570-2876

Note about the Non-Emergency Police number: consider programming this into your cell phone as 911 calls from a mobile phone are routed to CHP. The emergency response may be delayed. In the alternative, after calling 911, you can also call the Non-Emergency Police number as a back-up and find yourself getting a quicker response in the event of an emergency. However, always call 911 first.

Four Miles North As The Crow Flies.

From my surprise post announcing my move to Tredway, Lumsdaine & Doyle last week, I wanted to share a bit more about how the firm operates.

It operates pretty much the same way my former practice did. I feel like I just literally moved my office 4 miles (as the crow flies) North. I sit facing the same way. I sit at the same office furniture. 

I have the same freedoms to continue blogging, meeting with potential clients and servicing existing and new clients in the same manner as before.

What's new is the tremendous support staff and infrastructure at TLD. There are two very competent and professional assistants in the Long Beach office. [The downtown Long Beach office is cozy. There are 3 attorneys in this office, 2 legal assistants and 1 paralegal.] They are here to help clients make appointments and deal with smaller matters like giving excellent directions to the office.

Before I had no staff. I was using voice-mail to take messages if I was in court or in a meeting with clients. Now you can be assured that your messages to be are personally taken and delivered to me.

You can also be assured that I will have the resources within TLD to respond to all of my client's needs in other legal areas.

• TLD services clients in three offices: Long Beach, Downey and Irvine. If it is more convenient, I can meet you at the office closest to you.
  
• TLD represents individuals and families in estate planning, probate, trust administration, family law and personal injury practices.
  
• TLD also has extensive experience representing small and medium sized companies in business, real estate, employment and litigation practices.

If you have other legal matters that need attention, please let me know. I would be more than happy to introduce you to TLD.

It’s Fire Season: Are You Adequately Insured?

If there’s one weakness I find in most people’s finances, it’s that they don’t have sufficient homeowner’s and auto insurance coverage. Yet it’s the insurance we’re most likely to use, and so inexpensive for what it offers.

I think one reason people are so underinsured is that we are introduced to this kind of coverage when we start driving, a time when we’re young and don’t own anything. So we want the cheapest insurance we can find, and marketers oblige us by touting their product by price. So by the time we have accumulated assets, such as a home, and have something to lose, we’re still thinking like that broke young driver. 

Ideally, you’d have an insurance agent you trust, and you’d sit down with them once a year or so to review your coverage. But most people don’t. I encourage you to find one – ask friends for referrals – and then book that appointment. Take along a net worth statement and a list of special items you own, and be sure to ask the following: 

• If your home was completely destroyed, would the insurance be sufficient to rebuild it and replace all your possessions? I’ve had builders tell me that Southern California homes cost $200 - $250/square foot to rebuild. Apply that amount to the square footage of your own home and then check your coverage. With home prices appreciating over the past few years, most of my new clients are underinsured. The Wall Street Journal covered this in their August 26th issue, and suggested a replacement-cost calculator at www.accucoverage.com which for a $7.95 fee can help you assess the amount of coverage you need. 

• If you were sued for everything you’re worth, do you have sufficient personal liability coverage? This is where the net worth statement really comes in handy. It tells us how much you have to lose, and is a great starting point to discuss liability coverage. It may be difficult for a judgment creditor to tap your retirement funds in an employer’s plan (see my blog entry on Asset Protection and Retirement Plans), but all your other assets could be up for grabs. Once you max out the coverage offered under the individual auto and homeowner’s policies, your insurer can give you additional coverage through a personal umbrella policy, sold in million dollar increments. Don’t panic – it’s really inexpensive, about $200 per $1 million of coverage – and is one of the basic tools in a financial planner’s kit to protect middle class and wealthy clients. What’s more, it typically offers a wider range of coverage than the personal liability offered under your homeowner’s plan. 

• What about uninsured driver coverage? This is the coverage that protects you should you be involved in an accident with someone who does not have insurance. In the past few months I’ve seen a lot of clients with very low amounts of this coverage – say, $30,000 – when we know that auto accidents can cause much higher amounts of damages. Interestingly enough, these same clients have attachments to their policies from their agents, showing that they had to sign a form to acknowledge that they refused higher levels of coverage. Clearly, the industry is concerned about these lower coverage levels. And why would you want to be covered for less if hit by an uninsured motorist? 

Remember, now that you have something to lose, it’s wise to consider whether those things are adequately insured. Only buy the amount of insurance you need…but most people need more insurance than they have.

Delia Fernandez, MBA, PFP

Tough Competition Out There.

As an estate planning attorney, I keenly notice other estate planning attorney's attempts to advertise and market their services. Some attempts make me cringe and others make me say why didn't I think of that?

I rarely get mail at home about estate planning or from lawyers in general. Direct mail is expensive and hungry lawyers can't necessarily afford it.

Anyway, I received a rather nice piece in the mail today. It was addressed to me and my husband. They were offering free seminars at a local prestigious University. The letter explained the rationale for estate planning in a clear, concise and not too inflammatory manner.

My overall impression was that it is nice to know that other estate planning attorneys can solicit for business in a generally pleasing way.

3 Easy Grounds for Attacking a Trust.

Revocable Living Trusts and other estate planning documents can be attacked on three basic grounds:

1. Undue influence
2. Lack of formality
3. Lack of capacity

Undue influence refers to whether someone unduly influenced the person who created the trust in some fashion.

Lack of formality deals with the structure of the document itself. Was it properly prepared, notarized, etc.?

Lack of capacity is whether the person had a basic knowledge and understanding of the trust, knew what they were signing and knew the objects of their bounty among other factors.

Sure, I am explaining this at the simplest level, but you get the idea. So, don't accompany your mother to her lawyer's office, ask the lawyer to draft a trust giving you everything omitting your sisters and taking the document home and making handwritten changes on it. You'd be well on your way to a nice contest.

No Contest Clauses.

Trust litigation appears to be the new era. 

I was at a meeting today where the featured speaker spoke solely about no contest clauses. He started his presentation by stating that trust litigation was the last bastion to be kept safe from the reaches of litigation attorneys. He felt that the flood gates has opened with respects to trust litigation.

And so it began his discussion of no contest clauses. He said the following in a nice nutshell that I jotted down to pass along:

1. Don't cut anyone out completely. Even if you hate them, you'd hate them even more if they successfully contested your trust or other estate plan. I agree. Give them a gift.

2. All trust amendments must contain another no contest clause so that the existing no contest clause in the trust also applies to the amendment.

3. Protect collateral documents that are a part of your estate plan by including those in your no contest clause.

4. Mention the troublesome beneficiaries in your trust so the court can ascertain your intent and why you are cutting them off.

5. Make your intent clear as a settlor or the person who created the trust. Videos, letters, etc. can help your successor trustee fight your trust in court after you pass away.

6. Be creative with your no contest clause. Creativity can make it easier to enforce as the court will likely have never seen the language before and may rule in your favor especially if you are foreseeing a trust contest.

Don't be too alarmed though. Most families are pretty happy. Most parents want to leave everything to each of their children equally. If this is your case, there is no reason to have anything other than a straightforward no contest clause. But if you are concerned, talk to your attorney and make sure your attorney understands the issues.

Transitions, Transitions, Transitions.

Funny thing about being a blogger. Things happen. Good things. Bad things sometimes. But good things mostly. As many of you may notice, I typically blog 5 to 6 times week.

The frequency of my posts has slowed down over the past two weeks for a good reason.

I was approached by Tredway, Lumsdaine & Doyle, LLP to bring my estate planning and probate practice to their Long Beach office not too long ago. TLD is an excellent community based law firm with offices in Long Beach, Downey and Irvine, California, offering representation in wide range of legal matters involving business and consumer law.

How being approached by TLD relates to blogging is as follows: I was one of three invited speakers by Lorman Seminars to present at two estate planning seminars. Lorman approached me because of my blogging presence. I met Mark Doyle from these seminars as he was one of the three invited speakers. After the first seminar, I was approached by Mark about a possible opportunity. And so it goes.

This transition required me to examine my own goals as a solo law practitioner. It also required me to make heavy decisions about my existing practice and where I saw its future.

In the end, the opportunity to practice law within TLD was too good of an opportunity for me to turn down. Furthermore, this opportunity will allow me to spend even greater time with clients assisting with their legal matters involving estate planning, probate and trust administration.

This is possible because of the existing infrastructure at TLD, which frees me to spend more time blogging, meeting with clients and producing estate planning documents without having to worry about running a business at the same time.

Sure, I am giving up some freedoms, but the trade off to spend my time with you as clients is what I am gaining by joining TLD.

You'll find me at the blog more than ever before with lots of estate planning, probate and trust administration posts. Stick around for what's to come.

My new contact information:

Jennifer N. Sawday, Esq.
Tredway, Lumsdaine & Doyle, LLP
100 W. Broadway, Suite 6030
Long Beach, California 90802
(562) 901-3050
email: jsawday@tldlaw.com

Asset Protection and Retirement Plans

When you see the phrase “asset protection,” you may immediately think of wealthy people establishing offshore trusts. But most of us already have access to something that allows us to protect an unlimited amount of money: our company’s retirement plan. 

This includes 401ks, 403bs, deferred compensation or 457 plans, profit-sharing and money-purchase plans, defined benefit or pension plans and SEPs and Simple IRAs. Thanks to the 2005 changes to the Bankruptcy Act, all funds inside these accounts now have unlimited protection against creditors. 

And under the same law, regular IRAs (including traditional and Roth IRAs) are now protected up to a balance of $1 million, unless we deposit money into them from a qualified plan (more on that later). SEP and Simple IRAs are not included in this amount. 

But before you relax, consider when this protection would kick in. You would have to be sued, and the person suing you would have to win the case and obtain a judgment against you by the courts that says they have the right to pursue your assets. You would decide to file bankruptcy to protect yourself, and thus protect your assets. 

Yes, we’re saying you’d file bankruptcy to obtain this protection. Not an attractive prospect. 

Clearly, the first line of defense against unwanted lawsuits (aside from living a careful life) is having sufficient personal or professional liability insurance. But if you think you might have to rely on these new asset protection laws, keep the following in mind: 

• Manage rollovers carefully. When you leave a job and roll your funds from your employer plan into an IRA, be sure there’s a paper trail. For example, keep the final statement from your employer plan, the first statement from your new IRA rollover, and a copy of the transfer paperwork. I’d also recommend that you keep these funds in a separate IRA from other IRA funds, just to be safe. Remember, if the courts can’t distinguish these funds from your regular IRA, you won’t have unlimited protection.

• Small businesses should be sure their plans are well designed. If you’re not using a master or prototype plan document for your 401k or other plan (e.g., a turnkey plan from a mutual fund or brokerage firm), get a qualified professional’s help in designing your plan.

• Consider rolling IRAs into employer plans. This is a more aggressive strategy that hasn’t been tested yet in the courts, but could be helpful.

Delia Fernandez, MBA, PFP

Student Loans Are Forgiven ... At Death.

Student loans are an interesting type of debt. It's not necessarily bad debt as it is for a good purpose. Interest rates and repayment plans are usually reasonable. But as debt goes, you cannot discharge your student loans by filing for bankruptcy. If you die, however, they are forgiven. Nice to know that some things can't follow you to the grave or crematorium.

It Is Not What You Earn, But What You Spend.

The phrase that is the title of this post was spoken recently. It was spoken in the context of  budgeting and spending your money on things you think you cannot afford:

"It is not what you earn, but what you spend."

This came in context when a friend of mine was inquiring about hiring a personal trainer for one month to jump start her new fitness regime.  She wanted to start a regular exercise program to avoid normal aches and pains. She felt that her left knee was hurting her because she was not using the equipment at the gym properly.

So, the trainer, after quoting his fee of $100 for 4 sessions and drafting a plan to continue her working out on her own, my friend said what most people say: I can't afford it right now, but I will get back to you.

His reply was that it is not what you earn, but what you spend. Meaning if she truly wanted to afford the 4 personal training sessions because it was important to her health then she ought not to spend so much in other areas. Ix-nay Starbucks?

This is truly an interesting concept as it can apply to estate planning as well. Sure, attorney fees are not easily affordable, but is estate planning one of things that should be accomplished by most individuals and families to prepare for the inevitable in life? I think so.