Though the decision to secure your own representation for estate planning may appear to be a simple financial one, the reality is that the choice touches on a variety of deeply personal issues in your relationship. Don’t let emotions get in the way of your speaking up and doing what you need to do to protect your family’s future.
The 6 key things to consider
A recent article at Forbes.com highlighted some of the issues surround estate planning as a married couple. Getting your affairs in order is crucial to securing your family’s future. (And when blended families are involved, it’s especially important. If a parent remarries, all too often disputes arise following the death of a parent.)
The issue the Forbes article raised is an interesting one: should you work together with one attorney or should each of you get your own representation for estate planning purposes? While it’s certainly true that joint representation is more cost effective in the short term, it can also create issues between the couple, especially if underlying trouble already exists. Joint representation can spell disaster if the couple has problems communicating generally.
The Forbes article mentions the following things to consider when deciding whether you should go it alone or work together when crafting an estate plan:
1. Only one party has children
It’s no surprise that the vast majority of people want to leave their estates to their children. The problem that can occurs is if the other spouse has no children of their own then the parent may fear dying first and leaving their kids empty handed.
2. Disparities in income
A large income gap between spouses can affect joint planning and may be a good reason for each of you to go your own way.
3. One of you typically runs the show
If one party dominates the other in every day interactions, it can spell trouble when the estate planning process begins. A communication breakdown can leave one spouse upset with the final deal, believing his or her opinions were never fully considered. A skilled estate planner should recognize this imbalance and suggest that the parties consider finding separate representation.
4. Length of the marriage
This one’s pretty obvious: the shorter the relationship, the greater reason to get separate attorneys.
5. The number of prior marriages
The author of the Forbes article believes that a solid rule of thumb says that the greater the number of prior relationships a person has, the greater the need for separate representation when it comes time to make plans for the future.
6. Large age gap
The bigger the age difference between you and your spouse, the bigger the reason to contemplate solo representation. The suggestion that you seek separate representation is not meant as a critique of your relationship’s health; it’s meant only to acknowledge the fact that you both are in very different places in your lives and, as such, face unique concerns that can be best addressed with your own estate planning professional.
Though the decision to secure your own representation for estate planning may appear to be a simple financial one, the reality is that the choice touches on a variety of deeply personal issues in your relationship. Don’t let the complicated emotions get in the way of your speaking up and doing what you need to do to protect your family’s future.
Browse our other articles:
Source: “Estate Planning For Couples: Should It Be A Solo Or A Duet?,” contributed by by L. Paul Hood, Jr. and Emily Bouchard in the column by Deborah L. Jacobs, published at Forbes.com.
All the best,
Of all the topics I cover at this blog, probate seems to involve the most legalese. It's an ongoing challenge to translate legal jargon into examples and tips that make sense to non-lawyers. So I am glad to see that a new TV show called "Trial & Heirs" is in the works. Last time I checked, PBS was going to stream an episode in August and start airing it nationally in December.
While I don't litigate, I hope the show highlights how wills, trusts, and other elements of estate planning affect real people... and that it prompts more families to do sound planning.
Avoiding probate is important because probate adds stress, costs (including court filing fees), and other pressures on loved ones during a period that is already painful. In brief, get a comprehensive will and living trust in place and review them about every three years with an eye to whether your situation (or the tax law) has changed.
If you must deal with probate - an example
Suppose your relative, Roger, passes on at his home in Redwood City, and you learn that you are named in his will. Because he did not have a living trust, you will probably be involved in the probate of Roger's estate.
Probate is a legal procedure that identifies the heirs to an estate and determines how much of that estate the heirs are legally entitled to receive. It is used to sort out how much you owe to your creditors, to pay them, and to officially prove your Will is genuine (or to determine who should receive your property if you die without a Will).
Roger's estate must be probated in the county where he died. So Roger's Will should be filed with the Clerk of the San Mateo County Probate Court -- within 30 days after his death -- in Room B on the first floor of the Hall of Justice at 400 County Center in Redwood City.
Since Robert's will named beneficiaries, the representative filing the form fills out a “Petition to Probate Decedent’s Estate”. Filling it out requires:
- Name of the personal representative who will oversee the estate
- Estimated value of the decedent’s estate
- Names and addresses of the beneficiaries designated in the will
- Names and addresses of all legal heirs
Once the representative files the petition, the court sends a Notice of Petition to all parties named in the petition, publishes a notice in the newspaper, and sets a hearing date.
(If Roger died without a will -- or "intestate" -- the court may “administer” his estate. In such cases, rather than filing a Petition to Probate Decedent’s Estate, the petitioner would file a “Petition to Administer Estate”.)
After the hearing, the probate judge will enter an order granting or denying the petition. If the petition is granted, and all the required documents have been filed with the court, the court will issue Letters Testamentary (or Letters of Administration in cases involving an intestate estate).
Legalese, hearing dates, and more
As I said earlier, probate involves a ton of legalese. The Court provides some help navigating the process, including a link regarding Initial Petition documents. But on the subject of being your own lawyer it clearly states,
"...before taking any legal action it is highly advisable to consult with a lawyer who can inform you about important legal rights. An experienced attorney may be able to quickly assess your situation and highlight the best course of action to assert or protect your interests. Failure to consult with an attorney may result in unnecessary delays or costly measures in the future to remedy errors."
Getting legal help
Probate is often more complex, more stressful, and more time consuming in cases involving especially large estates (say $5M or more). If you face such a probate, hire the best San Mateo County probate attorney you can for legal help! He or she can represent you in all aspects of the probate process, from initial filing of the will and petition to closure.
Learn about retaining our services
Access additional free resources
All the best,
This is the first of two articles on reviewing a trust. In this one I address whether a Palo Alto family with a living trust should have the creator of the trust do the review, or find a different attorney to take a fresh look.
Q: We live in Palo Alto, California and in the 90s our family chose a Burlingame estate planning attorney to establish a living trust. Now we are trying to verify if the attorney who drew it up really is trustworthy and experienced with living trusts. We need a trust review. Specifically:
- Is it better to go to the same attorney for this "check up" or someone new?
- Since we are asking for a trust review, would the fees be much lower than if we were starting from scratch?
A: You were smart to use an estate planning attorney instead of using off-the-shelf forms or packages from a self-service legal website. You are smart to check and update your living trust, too. Circumstances can change alot in a short time. In fact, it is a good idea to do a trust review and update your trust every three to five years.
Vetting estate planning attorneys using Avvo
I am glad to hear that you are vetting estate planning attorneys before hiring anyone. One way to check out a lawyer is to look on Avvo. Search for "estate planning" in the Palo Alto area and see which lawyers' names appear with high Avvo ratings. See if they've answered questions and read the answers to see what you think of their approach.
Checking out attorneys using the State Bar website
Also check out the State Bar website. Use the "Advanced Search" feature and the "Additional Search Criteria" to find a specialist in Estate Planning law. Less than 1% of all California lawyers are certified as specialists in Estate Planning. In order to be certified, a lawyer has to pass a specialized bar exam and meet rigorous experience requirements.
Also, check out these individuals' websites to see what their approach is to estate planning to see if you think the "chemistry" will be right.
What you can expect to pay
You get what you pay for! If price is your most important criterion, then skip all of the above and just phone lawyers until you find the one with the lowest price. Just remember, if they don't do it right, it cannot be corrected after you die or become incompetent.
Depending on the complexities of your situation (and whether you're married or single, have children who need to be protected, etc.), an experienced attorney's fees will be anywhere from $2,000 to $10,000. As a very rough rule of thumb, figure out your net worth and multiply by 0.10% to 0.25%. That usually approximates the complexity of your estate and the cost of planning for it properly.
For example, if you have an estate worth $3 million dollars, you should expect to pay between $3,000 and $7,500... a little less if your situation is really "plain vanilla"; a little more if it's complex.
Look for the next article on trust reviews
In the next article on trust reviews, tentatively titled "How is Review of a Living Trust Different from Estate Planning?" I'll show an example of what we examine when we do a trust review, and how a trust review differs from creating an estate plan.
Getting legal help
If you are currently working with a highly qualified estate planning attorney that you are comfortable with, it is probably best to continue working with him or her. On the other hand, if you have doubts about the advice you are getting or the experience you have working with the person, it's time to look elsewhere.
All the best,
A stack of forms can’t “know” the nuances of your situation. Work with an attorney experienced in international estate planning to craft a plan that fits your unique circumstances. Protect your loved ones and assets by examining your options now »
This fictional example is drawn from our guide Buying U.S. Real Estate When Your Child Studies in America.
Hiro Sasaki, 19, will be a freshman at Stanford this fall (Class of 2015). Hiro’s parents, Emiko and Dai Sasaki of Tokyo, are looking to purchase a place for Hiro to live. They want to do everything they can to help him succeed, and that means providing a study environment free of the distractions common in a dormitory.
$675,000 cash for Palo Alto townhouse
The Sasakis identify a townhouse in Palo Alto listed for $675,000. It’s close enough for Hiro to bike to campus. Dai pays the listing price in cash, putting the title in his name.
Dai reads online about the importance of having a revocable living trust in the U.S. Dai has seen those online legal programs where it is possible to purchase do-it-yourself-forms. To Dai it seems like a good option. He uses a do-it-yourself form to establish the trust.
Establishing trust does not lower Sasakis' tax liability
Unfortunately, while a revocable living trust is useful for avoiding probate, it does not lower his tax liability. Dai still has only a $60,000 exemption. So if something happened to Dai, his family will have a massive estate tax bill – in the neighborhood of $142,800.
The online legal program where Dai purchased his form wouldn’t “know” about the unique circumstances he is in. And despite diligently completing the form he downloaded, he is about where he started off with respect to his tax liability.
A minor car accident in Tokyo gets Dai thinking again. He realizes he has not protected his loved ones from a big tax bill, should anything happen. He finds a Bay Area attorney experienced in international estate planning, and gets a sound plan in place.
This example is made up, but it's true that a stack of forms can’t “know” the nuances of your situation. If your situation is anything like the one described here, consider working with an attorney experienced in international estate planning to craft a plan that fits your unique circumstances.
All the best,
This article is part of our series on Buying U.S. Real Estate When Your Child Studies in America
Trend: more NRAs purchasing in college areas
The June 29, 2011 article “U.S. is Top Choice for Real Estate Investors,” in Generation America, has some interesting facts and figures from a survey was conducted by the National Association of Realtors as part of its 2011 Profile of International Home Buying Activity.
Among the survey’s findings (paraphrasing): real estate in the U.S. is the top destination for foreign buyers; the number of foreign exchange students at U.S. colleges and universities has increased the demand for real estate by foreign buyers; and some foreign families are purchasing U.S. properties in college areas so their child has a place to live.
The president of the National Association of Realtors observes that, "the U.S. has always been a desirable place to own property and make profitable investments. In recent years, we have seen more and more foreign buyers coming here to take advantage of low prices and plentiful inventory."
Why putting off estate planning is especially risky for NRAs
No one likes to think about dying someday. Some people even consider it bad luck to discuss death. But family members who have come to the United States from elsewhere may find U.S. tax law quite different than what they were used to.
It’s important to set aside our emotions and consider a key fact: Federal estate and gift tax laws impose onerous restrictions on non-citizens (even if you have a “green card”).
- Outright gifts during your lifetime to a non-U.S. citizen spouse – including making him or her joint owner of certain assets – can trigger gift tax problems immediately.
- A non-resident non-citizen with no green card who bought a $1.5 million house with cash, intending to leave it to one of his children through a will or trust could trigger an estate tax of $495,000. With advice from the right expert, she could avoid that tax bill.
- Likewise, gifts at death to a non-citizen spouse may not qualify for the “unlimited marital deduction.” Your unsuspecting widow or widower may be forced to pay hundreds of thousands of dollars in estate taxes shortly after your death.
- If an investor buys a $1.5 million property in U.S. and dies owning it without ever having put it in a trust, the probate cost alone could be as much as $28,000. If that investor also happens to be a non-resident alien, the estate taxes could be $495,000.
Taking steps to protect your loved ones and your assets
Even if your estate is modest, the tax effects of poor planning on NRAs can be devastating. Choosing the right lawyer takes an investment of time and money, and it is a wise investment. We can set up documentation, write any complex agreements, and take other steps to help protect you. But you need to take the first step: contacting us. Protect your loved ones and your assets by examining your options now. Call +1 650 325 8276 or get started at our website »
All the best,
Presenting our newest guide on international estate planning
We've just posted a new international estate planning guide, Buying U.S. Real Estate When Your Child Studies in America. (Note: If you get value from it, would you please recommend it to others on Facebook, Twitter, or other places you're connected to friends and family? Thank you!)
In my 20+ years as an estate planning attorney, I've found that most families – and perhaps especially nonresident aliens (NRAs) – want straight talk when it comes to legal and financial matters. And in this guide I've tried to dispense with legalese and give you exactly what the title says.
Don't "fly in the dark"
Too many parents “fly in the dark” when it comes to securing the financial future of their loved ones. As someone who works on estate tax and probate issues with NRA families, I hear heart breaking stories of families having to pay dearly during painful times, just because they never found a trusted advisor to ensure they keep all the assets they deserve.
Five fictional examples illustrate key issues NRAs face
In this guide (as well as a previous guide, U.S. Gift Tax and Estate Tax Planning for Non-Residents and Non-Citizens), you'll find examples of nonresident aliens from several countries facing key questions, issues and choices. The examples are made up, but if your situation is anything like ones presented, you could probably use help from an experienced international estate planning attorney.
Comparing your options
Unfortunately, with the way that most international estate planning lawyers present themselves to the world, it seems like we’re all the same. In reality, each lawyer does have certain qualifications.
Some might be experts at tax law, or in working with corporations or with debt collection, or a whole variety of different things…but are they really providing what you, the family person, wants and needs?
Protect your loved ones and your assets by examining your options now
I hope this free guide and checklist opens your eyes to the importance of setting up your plan. My team and I can set up documentation, write any complex agreements, and take other steps to help protect you. But you need to take the first step: contacting us! Please call +1 650 325 8276 or get started using a simple form here at our website.
All the best,
Say you inherit the 5-bedroom family home in Woodside and it's worth roughly eight million dollars. You wonder if IRS and state of California are going to expect a piece of it. You need help to take care of filing the right forms and/or meeting tax obligations. Should you consult with a tax attorney or a CPA?
My answer: Yes! Consult with both. The reason is that we overlap, but have different primary jobs.
The lawyer can advise you on whether the inheritance is a "taxable event" from an income tax standpoint -- and, if so, whether there are ways to mitigate estate taxes.
The accountant can advise you on your finances, including how best to keep track of your money. And although some CPAs and financial planners call themselves “estate planners”, they cannot prepare wills & trusts & other legal documents. Legally, only a lawyer can prepare estate planning documents.
What an estate tax attorney is
- Every attorney must have a J.D. (Juris Doctor) degree and be admitted to the state bar in any state in which they practice law.
- An estate tax attorney specializes in representing clients who have complex, advanced, or technical estate planning, probate, and/or estate tax issues. Estate tax attorneys handle a variety of legal and estate tax matters including estate plan formulation; gift and estate tax return filings; business entity formation, structuring, and tax treatment; and asset protection.
- Many estate tax attorneys (NOT including me) also represent clients facing criminal investigation or prosecution for tax fraud or evasion tax or those who have a civil claim against the Internal Revenue Service.
Specializations within estate planning
A few estate planning attorneys also hold an advanced legal degree in tax law, known as an LL.M.
Some also have expertise in international estate planning. If you are a foreign national with substantial U.S. assets or an overseas U.S. citizen – especially one who is married to a foreign national - it’s even more important to have a network of experts to call upon when you have an issue. Not all countries recognize trusts and other tools that work within the United States. And the U.S. estate and gift tax laws may be more onerous for you.
Achieving peace of mind while minimizing tax liability
By retaining an experienced attorney, you can get all your questions answered and gain peace of mind that your loved ones will not face a snarl of tax issues down the road. Smart estate planning doesn’t take as much time as you might think, and typically pays for itself by lowering your exposure to tax liability.
I hold a J.D., LLM-Tax, and have experience in international estate planning - a rare combination that can help you achieve peace of mind while minimizing tax liability.
p.s. If you are a Bay Area CPA, financial planner, enrolled agent, or insurance professional and your client has inheritance tax questions or needs to get his or her estate planning in order, we would be delighted to work with you. Please get our Tax Law Update for San Francisco Bay Area CPAs for information that may help you and your clients.
All the best,
Here is another example (adding to the one in my last post and pulled from several in my newest guide) of a person with relatively complex financial circumstances, who would benefit from hiring an experienced estate planning attorney.
Meet Edna, mother of four with a $7M family home in Portola Valley
Edna wants all four of her children to share equally in her estate. But she wants her son to have the $7 million family home.
An experienced estate planning attorney will recognize some of the pitfalls in that scenario, such as the financial burden of taking over a mortgage and property taxes on an expensive home.
Unless Edna has a $28MM estate, after estate taxes she’s not going to be able to give one son the home and treat the other 3 children equally ($7MM x 4 = $28MM) – unless:
- The son can qualify for a $5,250,000 mortgage (and then, by the way, only the 1st million would be income tax deductible interest), or
- She has a boatload of other assets
The planner also will talk to Edna to find out how each of the children handle money, making sure that the plan specifies ways to distribute the estate that help each child do his or her best.
Few estate planning lawyers have the knowledge and expertise to avoid the pitfalls in these situations
There is a great deal that must be considered in situations like this. Fortunately, Edna carefully chose the right estate planning attorney. That meant making an investment, since top shelf legal guidance is not cheap. But she gained the peace of mind that comes with knowing that distributions from her estate will help her children.
Getting a plan tailored to your needs
Edna is a made up person. But if your circumstances are anything like hers, I do recommend that you retain an attorney familiar with helping families protect their assets and do advanced estate planning.
Here are guides I've published that might help you:
All the best,
Everyone with a high net worth should put together an estate plan. Some may be straightforward, while others will be complex. Here is one example (there are others in my newest guide) of a person with relatively complex financial circumstances, who would benefit from hiring an experienced estate planning attorney.
Meet Barry, the Silicon Valley entrepreneur
Barry is an entrepreneur in his 50s. He is not a U.S. citizen, but he has a green card. He owns real estate here, plus stock in U.S. companies, and lots of expensive stuff in his home -- cars, antiques, etc. He also has assets in South America and Europe.
Barry wants a little bit of his estate to go to his children (who are already doing well on their own), most to go to his grandchildren, and nothing to go to his ex-wife.
A good estate planning attorney will know the applicable laws, both domestic and foreign, that apply to Barry’s situation. His estate plan can be structured so that his grandchildren don’t get control the money until they are old enough to handle it.
The planner will go through several years of tax returns to see how Barry is handling his finances now, what he paid for the properties and what they are worth today. In addition to minimizing estate taxes, the plan will minimize capital gains taxes and property taxes.
Few estate planning lawyers have the knowledge and expertise to avoid the pitfalls in these situations
There is a great deal that must be considered in international estate planning and there are no easy answers or simple solutions. That is why Barry avoided the cookie cutter approach to estate planning -- the one offered by using pre-printed forms. He did make an investment -- top shelf legal guidance is not cheap -- and got a handsome return.
Getting a plan tailored to your needs
Barry is a made up person. But if your circumstances are anything like his, I do recommend that you retain an attorney familiar with helping non citizens and non residents.
Guides I've published that might help you:
All the best,
I have many clients in the Palo Alto area who would like to pass their homes on to their children as part of their estate plans. One client (“Mildred”) who lives in Atherton purchased her house in the early 1970’s for about $180,000. It’s now worth over $3.5 million and is mortgage-free. Mildred is a widow and has 3 adult children.
Mildred wants her estate to pass to her children in equal shares, but she wants her youngest “Suzie” to have the house. Suzie has lived with Mildred for several years and has taken care of her, so she thinks it would be “fair” if Suzie were to be able to stay in the house and buy out her siblings.
Mildred’s property taxes are about $2,700 per year. She knows that if her residence passes to her children, they get to keep her property tax rate under “proposition 13” (transfers of a personal residence from a parent to a child are exempt from increases in property taxes).
Sounds simple, right? Not quite.
Is the house the primary asset?
First of all, the house is Mildred’s primary asset. If Suzie inherits it, Mildred doesn’t have other assets that can be used to “equalize” the estate. That either means that Suzie ends up with an asset worth $3.5 million and her 2 brothers end up with nothing, or Suzie needs to figure out how to buy out her brothers – in order to do that, Suzie would have to come up with approximately $2,333,333 (2/3 of $3.5 million).
"Own it together" rarely works
Mildred’s first idea was that “all 3 of them can own it together”. In my experience, that seldom works. Few people are willing to wait years and years for their inheritance.
Buy outs rarely work
Mildred’s second idea was that “well, Suzie can just get a mortgage and buy her brothers out”. Frankly, that doesn’t work either – first of all, she’d need to qualify for a $2.3 million dollar loan … that works out to a loan payment of over $11,000 per month. If you assume that most lenders want at least a 2:1 or 3:1 ratio of salary to loan payment, that means Suzie would need to be earning at least $22,000 to $33,000 per month ($264,000 to $396,000 per year).
Let’s just make it clear that Suzie’s not earning anything close to that. And then there’s the income tax issue … only the first $1 million of a home mortgage is deductible on your income tax return.
Avoiding an estate plan that's bound to fail
A good estate planning lawyer won’t just blindly set up a plan that’s bound to fail. The solution depends on a number of factors, and each situation is unique. For example, in Mildred’s case she talked to the children. They all agreed that Suzie should be able to stay in the house, but that they did not want to wait “years” after their mother’s death for their inheritance. Because Mildred is relatively young and in good health, she qualified for a sizable life insurance policy. Since the “kids” are the ones who would benefit from the policy, they agreed to make the annual premium payments. They are also the owners of the policy, so Mildred is not using up any of her lifetime gifting exclusion.
This might not be the correct solution for everyone, but it worked well in this situation.
All the best,