FAMILY TRUSTS AVOID PROBATE

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Dwight Edward Tompkins
Attorney at Law

http://www.tompkins-law.com/

This blog is intended for informational purposes only and is not a substitute for legal advice from a qualified estate planning attorney in your jurisdiction.

PET TRUSTS IN CALIFORNIA

In 2008, California adopted a revised pet trust statute, which is found in California Probate Code Section 15212.

This law allows for you to include in your estate plan a provision that upon your death, a certain sum of money will be held by a trustee (that you appoint) in trust for benefit of your pet.  A caregiver is also nominated to take care of the pet.  The trustee and the caregiver may be the same person, or 2 different persons.

The nominated caregiver takes physical possession of the pet when you die, and the trustee provides funds to the caregiver as needed for the costs of the pet's food, veterinary care, and supplies.

A pet trust is a lawful trust, but is considered noncharitable; and "animal" is broadly defined in the law to include any domestic or pet animal.

The pet trust ends when the animal dies, and any funds left over are distributed to "remainder beneficiaries".

There are some requirements for accounting for large trusts, or if the trust document requires accountings, or if a court so orders an accounting.

If you interested in learning more about this topic or any other estate planning topics, please contact me:

TOMPKINS-LAW.COM

DWIGHT EDWARD TOMPKINS
Attorney at Law

This blog is intended for information purposes only and is not intended as a substitute for legal advice from a qualified attorney in your jurisdiction.

Reprinted from original blog post on August 19, 2009; Dwight Edward Tompkins, Attorney at Law

CLIENT CONFIDENTIALITY: HOW DOES THAT WORK?

As an attorney, I owe my clients a duty of confidentiality concerning infor-mation that they communicate to me.

In a court setting this duty is enforced under the Evidence Code through the Attorney-Client privilege.

One of the most common challenges for an estate planning attorney like myself is when I receive a call or email from one of the adult children of my client who is asking for information about their parent's estate plan or finances.

Unless the client has waived the privilege, that is, the client has specificly OKed me to speak with a particular family member or party, I have to refuse to speak to the adult child.

A client can waive the confidentiality a number of ways.  One of the most common ways is when the client brings a family member with them to meet with me and they express to me their desire that the family member sit in and hear all of the discussion, and that it is OK for me to speak with that family member in the future.

A more formal method is to sign a "Release of Information" statement which goes into their file in my office.   This allows me the ability to review the file to determine that the person calling me on the phone or emailing me is entitled to receive information about the client's estate plan, finances, and decisions.

It can often be very helpful for clients to allow the adult children to communicate with me and vica-versa, however, I need to be directed to so, otherwise the duty of confidentiality prevents me from speaking with the child.

When I am unsure, I will call the client and ask if I can return the call or send an email response.

It is a simple matter of letting your estate planning attorney know of your desires.

If you are interested in this subject, or other information concerning estate planning, please visit my website at:

TOMPKINS-LAW.COM

DWIGHT EDWARD TOMPKINS

Attorney at Law

This blog is intended for informational purposes only and is not substitute for legal advice from a qualified attorney in your jurisdiction.

WHY IS AN LLC THE BEST WAY TO HOLD TITLE TO RENTAL PROPERTY?

An LLC is the best way to hold title to investment (rental) property for two reasons:

First, a California Limited Liability Company (LLC) offers its owner-members the same limited liability protection as a corporation.  Cal. Corp. Code Sec. 17101(a). 

Even if you have insurance, a judgment may exceed the insurance coverage, and if the property is your individual name, the judgment creditor/claimaint will be able to attach your personal assets (including other properties, your home, bank accounts, stocks, etc.) to satisfy the judgment.  If the owner of the property is the LLC, the judgment creditor may only attach the assets of the LLC, not the other assets of the member-owner of the LLC not owned by the LLC.

If you own multiple investment properties, it may be adviseable to have a separate LLC own each of the separate properties.  In the event of a judgment against one LLC, the judgment creditor can only go after the assets of the defendant LLC, and not the other LLC's.

Second, there are several tax advantages for holding title to the rental property as an LLC.   Like a sole proprietorship or partnership, a California LLC enjoys pass-through taxation.  This means that owners (known as "members") report their share of the income or losses on their individual returns.

A single-owner LLC offers the benefit of being automatically classified as a sole proprietorship, meaning that the owner reports the LLC's income or losses on his or her own personal return.

While it is true that an S-Corporation can do both of the above, S-Corps have a negative tax treatment when the the shareholders (owners) of the S-Corp want to transfer the asset to other entity, or sell the property in exchange for a another property to be held by the S-Corp because the sale or transfer would immediately trigger the capital gains tax on the fair market value of the asset minus its basis.  Also, any losses that may have been realized by the sale are limited to the shareholder's basis in the S-Corp. 

Moreover, the S-Corporation cannot take advantage of the 1031 Exchange tax treatment.    The same transfer or trade by an LLC can result in a tax-free transaction if done properly. 

While both corporations and LLCs must pay the $800 annual franchise tax, most California real estate LLCs holding a single property can avoid the gross receipts tax if the LLC's gross receipts are below the statutory minimum.

The above discussion involves only rental/investment properties.  Never put your personal residence in an LLC because of the loss of the federal capital gains tax exclusion on the sale of personal residence.

DWIGHT EDWARD TOMPKINS
Attorney at Law

http://www.tompkins-law.com/

This blog is intended for informational purposes only and is not a substitute for legal advice from a qualified attorney in your jurisdiction.  Nothing in this blog should be considered tax advice.