Tag: Law Offices of Hanlen J. Chang

Don’t Put Your Estate in the Hands of a Machine

Recently there has been a lot of discussion and predications about the impact of automation and artificial intelligence on the legal profession.

While technology has made administrative repetitive tasks more efficient, it is still far off from substituting the counsel of an experienced attorney.

In terms of Estate Planning, the use of document providers such as Legal Zoom has gained in popularity. The most touted benefit is the cheaper cost.

However, you get what you pay for. Translation: What is the value, quality, and assurances provided?

Value Factors

Fiduciary

Tax Advice

Legal Advice

Court Experience

Translations

Trust Funding

Insurance

Trust Administration

 

Attorney

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

 

Document Provider

No

No

No

No (Represent Yourself)

No (Own Comprehension)

No (Do it Yourself)

No

No (Do it Yourself)

 

Issues Not Likely Addressed by Document Provider

  • How to transfer and effectuate ownership of specific assets (e.g. real estate) into the the Trust.
  • How to relate financial assets to the Trust only held in the name of an individual (e.g. Life Insurance and Retirement Accounts.)
  • Tax planning and management of each specific asset. (Assets have differing tax characteristics, application to beneficiaries, and the method and sequencing of distribution.)
  • Cross-border considerations and International Tax implications.
  • Advice regarding scenarios that are more likely to cause disputes, legal actions or delays.
  • Insights regarding the Trust or Estate administration. When you die what is required of those in charge to effectuate your testamentary wishes? Common tasks include tax valuations and tax returns, legal notices, legal filings, and distributions.

In conclusion, technology is a great thing, but it is still a tool that is only as good as the operator and the person providing the input. Savvy customers should ask themselves if they want to hire someone to delegate responsibility for complex and sophisticated matters, or rely on their own education, skill, and capability.

Disclaimer

Trusts – Medi-Cal Planning

As of January 2017 a regular revocable trust can now defer a Medi-Cal estate claim if there is a surviving spouse or surviving child with a disability.

Professional counsel is still strongly recommended in navigating the savings and costs of the various estate planning options, e.g. Special Needs Trust.

The best option is still having “little assets” at the time of death, by planning in advance.

For more information please contact the Law Offices of Hanlen J. Chang.

Disclaimer

About That A/B Trust

It is common to encounter A/B Trusts created for married couples before the year 2010.

Back in the day the A/B Trust was primarily established to avoid the tax impact of exceeding the then much lower Estate Tax limit.

The mechanics of an A/B trust involves setting up so called reciprocal “lockboxes”, first coming into effect when the first spouse passes.

At the time of the first death, the Trust estate (assuming all community property) gets divided 50-50 , with one-half transferred into the deceased spouse’s “Bypasss Trust” and the other half into the surviving Spouse’s “Survivor’s Trust”.

Once the first spouse passes, the surviving Spouse will only be able to modify or dispose of the A/B trust mechanism with a Court Order, as the so called “lockbox” becomes irrevocable.

In the year 2018 each spouse has an Estate Tax credit of eleven million dollars ($11,000,000.00). Thus, the A/B Trust is no longer a required tax planning mechanism for the vast majority of U.S. taxpayers.

Other overlooked implications of the A/B Trust are that illiquid assets, e.g. real estate, at the time of death, have to be divided into two (2) shares, the Survivor’s Trust and the Bypass Trust. This could be impracticable and contrary to long term estate planning goals.

If a married couple has a strong and straight forward relationship, where the goal is to simply leave everything to the Surviving Spouse, then it is strongly advised to have an Estate Planning attorney review the Trust documents, and if indicated, update it to a Non-Formula Trust.

If you are unsure if you have an A/B Trust or want to update to a Non-Formula Trust, please contact the Law Offices of Hanlen J. Chang located in San Francisco and Palo Alto.

Disclaimer

 

For Sale by Owner – Alternate Hourly or Flat Fee Service

For Sale by Owner (FSBO) is suitable for situations where the seller has already found a buyer. This alternative hourly rate or flat fee service can save costs compared to hiring a realtor who will be compensated on commission.

A Lawyer-Broker can assist with preparing the real estate documents and arranging for escrow. This service requires an average of 11-24 hours.

Common situations include:

  • Tenant seeking to buyout Landlord;
  • Buyout of a Joint Tenant;
  • An Owner who wants to sell without a realtor.

A Realtor service is more suitable when there is no a pre-determined buyer and marketing is required.

If you believe your situation may benefit from a For Sale by Owner alternative hourly or flat fee service, please contact the Law Offices of Hanlen J. Chang for more information.

Disclaimer

Someone Just Died – What Now?

There are three scenarios upon the passing of an individual:

  1. With a Trust;
  2. With a Will;
  3. No Trust or Will.

Whatever the scenario, there are additional post death administrative tasks to handle.

Passing With a Trust

The most efficient and secure succession setup and mechanism is to have a Trust.

One major benefit is that it bypasses the need for Probate Court (more specifically explained below).

Of importance is understanding that assets have to be transferred into Trust before death and out of Trust after death.

Equally important is the before and after tax planning and management of the assets.

Common Post Death Trust Administration tasks include:

  • Inventorying, valuing, and managing trust assets;
  • Satisfying or resolving debts (e.g. mortgages, utilities, credit cards, auto loans..etc.);
  • Filing Tax Returns (sometimes outsourced to a CPA);
  • Trust asset distribution (including sub-trust funding if applicable);
  • Collecting and distributing assets outside of Trust where applicable.

Another Trust advantage is when a beneficiary is a Non-Resident Foreigner, bypassing delays, verification, and tax withholding by financial institutions or third parties.

Passing With a Will or No Will

Probate Court is required if you pass with a Will or No Will (“Intestate) and there is an asset worth more than $150,000.00 for which there is otherwise no succession mechanism (e.g. beneficiary designations).

For assets below $150,000.00 those items can be collected by an out of court small estates procedure on behalf of the successors-in-interest.

The Schedule of Probate Fees is as follows:

• 4% of the first 100,000 of the gross value of the probate estate
• 3% of the next $100,000
• 2% of the next $800,000
• 1% of the next $9 million

Both the executor (individual nominated in the Will) or administrator (individual appointed by the court) and the attorney are entitled to this fee. Thus, the Probate Fees when multiplied by two (2) can become costly when compared to a Trust setup where the settlor (person establish the trust) gets to set the Trustee fee according to her or his preference.

The executor or administrator will essentially handle the same functions as the Trustee but under court supervision and approval.

Another consideration and possible drawback includes the time lag for completing the Probate process, which could be anywhere from 1 year to 3 years.

Disclaimer