Thursday, February 1, 2018

Why Your Estate Planner Needs to Know If You’ve Lent Money to Family



Let's talk about money - or the loaning of money. Many children and grandchildren are skipping the traditional bank and obtaining loans from parents or grandparents.  Unfortunately, we have all heard stories of families torn apart because of disagreements over money. So, what can you do to make sure your intra-family loans help — rather than hurt — your family?



As far as estate planning is concerned, money you lend to others is legally an asset. If you have lent money to a family member the presence of these assets in your estate can be problematic for your surviving family members. This is because your executor and successor trustee are under a legal requirement, known as fiduciary care, to collect the outstanding obligation, even if the other party is a family member.



If the amount of money that you have lent out is significant -- and “significant” can be relative -- it is important to let us know as we help you plan your estate. For example, if you wish to forgive the debt there are special terms that must be included in your trust or will for this to happen. On the other hand, you may want the debt to be paid out of the inheritance the borrower is otherwise receiving. In that case, the payment of the debt from the inheritance must be addressed in your estate planning documents.



A Brief Loan Primer

A loan is a legal and financial arrangement where money is borrowed and is expected to be paid back with interest. Generally, a loan involves a promissory note, which is a signed document by the borrower containing a written promise to repay a stated sum of money to the lender in accordance with a schedule, at a specified date, or on demand. In some cases collateral, like real estate or other property, is used to secure the loan. Collateral is something pledged as security for repayment of the loan. If the borrower quits making payments, then the collateral can be taken by the lender.



Lending as an Estate Planning Tool

When properly structured and well documented, loans can be a smart estate planning tool for many families. This is because lenders (usually grandparents or parents) can essentially give access to an inheritance without any immediate gift or estate tax problems, generate a better return on their cash than they could with bank deposits, and borrowers (usually children or grandchildren) can take out loans at interest rates lower than commercial rates and with better terms. In fact, the Internal Revenue Service allows borrowers who are related to one another to pay very low rates on intra-family loans. Furthermore, the total interest paid on these types of transactions over the life of the loan stays within the family. If structured and documented properly, intra-family loans may effectively transfer money within the family, for the purchase of a home, the financing of a business, or any other purpose.



Sometimes loans can be used in sophisticated estate tax planning strategies as a way to shift assets into special estate-tax saving trusts. One variant of this technique is sometimes called an installment sale to a grantor trust. Although this sophisticated strategy and others like it are usually only appropriate for those with a net worth of at least a few million dollars, other types of intra-family loans, perhaps for home improvement, an automobile purchase, or a business, can help families across the wealth spectrum.



There are several points to keep in mind regarding these types of loans: the loan must be well-documented, lenders should usually ask for collateral, the lender should make sure the borrower can repay the loan, and the income and estate tax implications should be examined thoroughly.



Deciding What You Want

While you were kind enough to help a member of your family by lending him or her money, do not let this become a legal dilemma in the event of your incapacity or after your death. Instead, use your estate plan to specifically express what you want to have happen regarding these assets. Before lending money, it is important to carefully consider how the loan should be structured, documented, and repaid. If you or someone you know has lent money and has questions about how this affects your estate plan, contact us today at 619-810-4644 or email mark@ignaciolaw.com to discuss the options.

Monday, January 8, 2018

Organizing for Tax (and Estate Planning) Season



It’s the start of a new year, which means tax season—and this year’s April 17th IRS filing deadline—is just around the corner. Soon you’ll be receiving tax forms such as your W-2 or 1099s, and you’ll start thinking about the life events that could affect your taxes in various ways.

This flurry of tax prep activity is the perfect opportunity to get your estate plan in order, too, and kill two birds with the proverbial stone.

Why? Because as you run down your list of “tax prep” questions, you will find that your answers could also impact your estate plan.

Some things to think about:
      Did you get married or divorced? Did any of your children or grandchildren?
      Did you welcome a child or grandchild into your family by birth or adoption?
      Have any of your children or grandchildren reached the age of majority?
      Have you dealt with illness or hospitalization? Have you incurred medical expenses?
      Did you buy or sell a new property or any other major assets, like a vacation home?
      Did you move to another state?
      Did you buy, sell, open, or close a business?
      Have you made any charitable donations?
      Do you have any new life insurance or pension plans?

After you’ve answered these questions, get to work on gathering the corresponding paperwork. That might include deeds, policies, and contracts as well as bills and receipts. Having all of this information on hand can help you prepare your tax forms and whip your estate plan into shape.

Here’s how your tax-related changes can affect your estate planning.

If you already have an estate plan, your number one goal is to make sure everything still represents your wishes, taking into account the past year’s events. Maybe because of a change in circumstances, you need new or updated estate planning documents. Perhaps it’s time for an LLC and an update to your living trust now that you have a small business, or maybe you need to update beneficiaries because of births or deaths. Or, if you’ve had a change of heart about who should inherit from you, you also need to update your plan.

If you don’t have an estate plan, having this information at your fingertips sets you up for a productive conversation with your estate planning attorney. After reviewing your legacy goals, your lawyer can draw up key documents, such as:

·      A will. Among other things, this document can ensure that your wishes—and not the laws of the state—determine how to distribute your estate. 

·      A revocable living trust. In addition to, or as an alternative to a will, you can establish a living trust, which allows your estate to bypass the potentially long and costly probate process upon your death, gives you extra privacy, and helps to avoid the potentially costly guardianship or conservatorship court process (sometimes called “living probate”) if you become incapacitated.

·      A living will. This document expresses your desires regarding life-sustaining medical treatment, if you become incapable of communicating your wishes.

·      A durable power of attorney. This appoints someone to step in and take over your financial affairs if you are unable to do so, reducing the possibility of hard feelings among loved ones or the need for court intervention.

It’s a new year, and new possibilities are in the air. As long as you’re getting started on your taxes, take a few extra moments to get the ball rolling on your estate planning as well. By getting organized in this way, you’ll be well on your way to making 2018 an amazing year.

As Anne Burrell once observed, “Organizing ahead of time makes the work more enjoyable. Chefs cut up the onions and have the ingredients lined up ahead of time and have them ready to go. When everything is organized you can clean as you go and it makes everything so much easier and fun.”

Are you ready to develop a comprehensive estate plan designed to achieve your goals and protect your family? Do you want to update your already-existing estate plan so it will correspond to your current goals and wishes? Call our offices at 619-810-4644 today to get started.


Tuesday, January 2, 2018

What to Expect from Estate Planning in 2018



Hello everyone and a happy 2018 to you! I hope you enjoyed the holiday season and this new year is off to a terrific start for you and your loved ones, thus far. I would like to consider a few items to watch regarding estate planning for 2018, so you and your family can be completely protected.


     The death tax. The death tax has been in a state of flux ever since the early 2000s when the Bush administration’s first tax cuts changed the exemption and tax rates. The recently-passed Tax Cuts and Jobs Act is the latest significant change. Starting January 1, 2018, the estate tax exemption amount will double to $11.2 million per person (married couples have $22.4 million of combined exemption). Like the current exemption, this amount will adjust annually for inflation. However, this enhanced exemption expires on December 31, 2025, at which time it will return to an amount similar to the $5.49 million per person exemption we’ve had in 2017. Similar to what happened when the Bush tax cuts phased in (and were scheduled to expire) during the 2000s, we’ll face the same situation over the coming years – the law provides a deadline and timetable, but political activity may result in something entirely different. Regardless of your stance on this new tax law, if you have a plan based around the now-old rules, it’s time to visit with us, so we can make sure the plan still meets your needs and goals while maximizing the benefit to your family, charities, or other beneficiaries.


     Incapacity planning. What happens if you don’t die? Historically, much of estate planning focused on what happened to your assets after your death. With cognitive impairment at near epidemic proportions, you must plan for the contingency that you don’t die and instead require assistance managing your affairs. Depending on your circumstances, this could range from a relatively simple matter of ensuring you have a trusted person authorized to make decisions to extensive planning to become eligible for help paying for nursing home care. Either way, now is the time to work with us to ensure that your plan protects you, even if you don’t die.


     Giving your family lifelong financial security. Although you may not have a “large” amount of wealth now, you probably have an IRA or a life insurance policy. A modest IRA or life insurance policy could be the foundation for lifelong financial security for your family. To make this a reality, you need to set up your affairs with the proper structures to ensure money avoids costs, taxes, and the risk of financial immaturity or ignorance. We are here to help you ensure that the savings you’ve spent a lifetime building will be there for your family.


     Fixing broken or old trusts. Many people have inherited assets from parents, aunts, uncles, and others through a trust. Some of these trusts may use old strategies or be expensive or difficult to administer. The law recognizes that old trusts may need some refreshing. There are many options available to modernize an old trust, and the best way to get started is to meet with us so we can explore which option is best for you and the trust you inherited. Further, we are pleased to offer a Maintenance Plan to our existing clients, so please contact us for additional information about this service.

2018 will likely be an exciting, dynamic year. No matter where you are on the estate planning journey, carve out some time to talk with us to make sure that you and your family are fully protected. Give us a call today at 619-810-4644 or visit our website at www.ignaciolaw.com. 





Saturday, December 9, 2017

How to Share Family History and Heirlooms with Your Estate Plan




The best time to share your family history with loved ones is right now, before the memories are forgotten. The coming holiday season is a great opportunity to reminisce because you’ll probably have your loved ones nearby.



While you can always pull aside children and grandchildren for a chat about family history, did you know you may also be able to use a personal property memorandum in your estate plan to pass along special memories and stories about specific items that are meaningful to you and connect your family with the past?



What Is a Personal Property Memorandum?

Many states allow you to include a “personal property memorandum” in your estate plan. This supplemental document, specifically referenced in your will or your living trust, lets you describe which personal property items you wish to leave to heirs, without having to call your lawyer and arrange for a meeting. You can handwrite or type this document, but it must be signed and dated to be valid. In conjunction with a will or living trust, a personal property memorandum can provide a roadmap for your executor regarding the distribution of specified items to your beneficiaries.



One important feature of a personal property memorandum is that you can change or update it whenever you like without the assistance of an attorney or notary. This freedom can be beneficial to you, because although you can also change your will as often as you like (and you absolutely should update it periodically to make sure it still reflects your wishes!), updating your will or living trust does require a visit to the estate planner’s office.



Another great reason to have a personal property memorandum in addition to your will and living trust is that your personal possessions likely change more frequently than other assets. For example, you probably add items to your closet more often than you add vehicles to your driveway.



What Can Be Included in a Personal Property Memorandum?

Not every asset can be distributed using a personal property memorandum! However, here are a few examples of assets that we commonly see people list in their personal property memorandum:

·      Furniture

·      Jewelry

·      Clothes

·      Books

·      Photographs and portraits

·      Important certificates (birth, marriage, death, citizenship/naturalization)

·      Collections of dolls, figurines, etc.

·      Other family heirlooms



Items that should not be included on your personal property memorandum are:

     items which have a title, such as your car, RV, plane, boat, etc.;

     real property, such as your home, timeshare, farmland, etc.; and

     intangibles, such as stock certificates, royalties, or bank accounts.



Leaving these types of assets to others upon your death requires a will or trust. Of course, if you have questions about those assets, check with us as your estate planning attorney so we can include everything you own in your plan.



Giving It Away Now Versus Waiting Until Later

One option you always have is to give personal items to your loved ones while you’re still alive. You can share with them the accompanying stories as you’re making the gift. Indeed, this in-person exchange is often the surest way to know your wishes will be followed. If you do choose to give away possessions during your lifetime, you must be aware of any potential gift tax consequences that could arise for items of a larger value. But, generally any gift or series of gifts, within the calendar year, that is valued at less than $14,000 (up to $15,000 starting in 2018) can be given this year without concern.



Verbal wishes alone are insufficient to gift personal property after you’ve passed away. Unfortunately, just because you’ve told people verbally who should get what doesn’t necessarily mean that’s what will happen once you’re gone. A personal property memorandum combined with your will or trust gives you the peace of mind of knowing your wishes are clear for everyone to see.  You can also use this tool as an opportunity to document memories and histories that go along with your cherished possessions. Even if you’ve already communicated this information to your loved ones orally, videos, photos and text about the items can continue the history for future generations and ensure the stories live on.



Whether you decide to hand down your prized possessions now or later through a personal property memorandum, know that one of the best gifts you can give your loved ones is the story behind a personal possession that connects it with you and your family forever. Give us a call today at 619-810-4644 to discuss how we can help not only protect your family, but pass along your cherished possessions and memories.

Tuesday, December 5, 2017

Estate Planning Isn’t Spooky! But not planning can be downright terrifying


The idea of implementing an estate plan might be one of the scariest things you have to confront as an adult. But estate planning does not have to make chills run down your spine. On the contrary, estate planning is empowering for both you and your family and allows you to live confidently knowing that things will be taken care of in the event of your passing or incapacity. Remember, estate planning is not just for the ultra-rich. If you own anything or have young children, you should have an estate plan. Read below to find out reasons why.



Benefits of Estate Planning

Proper estate planning accomplishes many things.  It puts your financial house in order. Parents designate a guardian for their minor or disabled children, so they’re raised by someone who shares your values and parenting style (rather than whoever some judge picks). Homeowners can make sure their property is transferred to a designated beneficiary in the event of untimely death. Business owners can ensure the enterprise they’ve worked so hard to build stays within the family.



Yet, according to WealthCounsel’s 2016 Estate Planning Literacy Survey, only 40 percent of Americans have a will and just 17 percent have a trust in place. This translates to a majority of American families not being adequately protected against the eventual certainty of death or the potential for legal incapacity.



When it comes to estate planning, knowledge is vital. Less than 50 percent of those surveyed by WealthCounsel understood that an estate plan can be used to address several concerns - financial or non-financial matters - including health decisions and guardianship, avoiding court and preempting family conflicts, as well as taking advantage of business and tax benefits.



Estate Planning Horror Stories

Legal disputes over estate plans and wills - or, usually, the lack of having these in place at all - are common. These conflicts can cause harm to family relationships and be financially burdensome. Disputes among the rich-and-famous often made headlines.



Some scary outcomes of inadequate or non-existent estate planning include:



      Prince, who died without a will, leaving lawsuits and hefty lawyer’s fees for his family;

      Whitney Houston, whose failure to update her will negatively affect her daughter Bobbi Kristina’s inheritance;

      James Gandolfini, who didn’t finish planning causing his estate to be hit with unnecessary and easily avoided death taxes;

      Michael Jackson, who set up trusts for his children but never funded them resulting in a multiple probate court battles; and

      Philip Seymour Hoffman, who never set up trusts for his kids causing their inheritances to be unnecessarily taxed.



These horror stories are not limited to wealthy celebrities. WealthCounsel’s survey found that more than one-third of respondents know someone who has experienced or have themselves suffered family disputes due to the failure of an existing estate plan or inadequate will. Additionally, more than half of those who have established an estate plan did so to reduce family conflict. Preserving family harmony is for everyone - not only for the wealthy or celebrities.



Attorneys: Your Guide to Not-So-Spooky Estate Planning

Estate planning can be confusing as each circumstance is unique and requires different tools to achieve the best possible outcome. Nearly 75 percent of those surveyed by WealthCounsel said estate planning was a confusing topic and valued professional guidance in learning more - so you’re not alone if you aren’t sure where to begin.



We’re here to help. An estate planning attorney is essential in determining the best way to structure your will, trust, and estate plan to fit your needs. If you or someone you know has questions about where to begin - contact us at 619-810-4644 today.


Thursday, November 30, 2017

4 Reasons Why Estate Planning Isn't Just for the 1%

There is a common misconception that estate plans are only for the ultra-rich - the top 1 percent, 10%, 20%, or some other arbitrary determination of “enough” money.  In reality, nothing could be further from the truth. People at all income and wealth levels can benefit from a comprehensive estate plan. Sadly, many have not sat down to put their legal house in order.

According to a 2016 Gallup News Poll more than half of all Americans do not have a will, let alone a comprehensive estate plan. These same results were identified by WealthCounsel in its Estate Planning Awareness Survey. Gallup noted that 44 percent of people surveyed in 2016 had a will place, compared to 51 percent in 2005 and 48 percent in 1990.  Also, over the years, there appears to be a trend of fewer people even thinking about estate planning.

When it comes to estate planning, the sooner you start the better. Below are four reasons why everyone - no matter what income or wealth level - can benefit from a comprehensive estate plan:

  1. Forward Thinking Family Goals: Proper estate planning can accomplish many things. The first step is to ask what your goals are. They may include caring for a minor child, an elderly parent, a disabled relative, or distributing real and personal property to individuals who will appreciate and maintain these assets prudently.  Understanding what your family wants and needs are for the future is a great starting point for any estate plan. If you can sit down and spend time planning your vacation, you can do the same for your estate. Your future self, and your loved ones, will thank you.
  2. Financial Confidence Now and After You Are Gone: One immediate benefit of having a finished estate plan in place is that you will likely feel in control of your finances, possibly for the first time ever. Many people experience a new sense of discipline in maintaining their finances which can help with saving for retirement, a big purchase, or other goal.  In addition to the personal benefit of financial control, an estate plan allows you to dictate exactly how and when your heirs receive an inheritance. This is particularly important for minor heir or those who need additional guidance to manage their inheritance, like a disabled child.
  3. Identify Risks: An important aspect of a good estate plan is to mitigate against future and current risks. One example is becoming disabled and unable to support your family. Another is the possibility of dying early. Through an estate plan you can chose who will be in control of your personal assets, instead of the court appointing a legal guardian who will cost money and be a distraction for your family.  While contemplating these types of risks is never fun, preparing ahead of time ensures your loved ones will be prepared if an unfortunate tragedy occurs.
  4. To Maintain Your Privacy: In the absence of an fully funded, trust-based estate plan, a list one’s assets are available for public view upon death. This occurs when a probate court needs to step in. Probate is the legal process by which a court administers the deceased person’s estate. A solid estate plan should generally avoid the need for involvement by the probate court, so your family’s privacy can be maintained.

The Bottom Line: Seek Professional Advice
There are numerous benefits to working with a professional team when it comes to estate planning. Estate planning attorneys, financial advisor, insurance agents, and others  have a broader and deeper knowledge of money management, financial implications, and the law. When you work with a qualified team to implement an estate plan you can rest easy knowing your family will be taken care of no matter what happens in the future.

If you are seeking assistance in establishing estate planning goals, please reach out to us at 619-810-4644 or visit our website www.ignaciolaw.com for further information.

Wednesday, November 8, 2017

About Me

Hi, I’m Mark. I’m an attorney based in La Mesa, California, a municipality in San Diego. My main areas of practice are Estate Planning, Trust Administration, Probate, and Inheritance Rights. I wanted to create this blog so I could provide practical considerations to a topic many folks dread thinking about: planning for one’s death.

In my blog posts, I hope to eradicate this apprehension by educating readers on the importance of Estate Planning and how, with their newfound knowledge, they can become empowered in proactively taking steps to planning for contingencies in the inevitability of death and the potential for mental incapacity.

I will try my best to draft my blog posts in a manner that is easy to understand for individuals who have not attended law school, but also provide enough breath to survey the legal considerations for each topic.

It is important to note that the contents of this blog is not meant to be legal advice, but a discussion about general legal topics. Reading and otherwise consuming the materials on this blog does not establish an attorney-client relationship. If you require further information, I highly suggest you seek the advice of an attorney.

If you have questions, you may contact me via email at mark@ignaciolaw.com. Any communication between you and me, however, will not constitute an attorney-client relationship unless we mutually agree otherwise.

I hope the contents will prove to be a worthwhile read for you.

Why Your Estate Planner Needs to Know If You’ve Lent Money to Family

Let's talk about money - or the loaning of money. Many children and grandchildren are skipping the traditional bank and obtaining...