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Estate Planning

When a person dies without a valid Will, he is said to have died “intestate.”  His estate will then be distributed according to the state’s laws of intestate succession.

Generally, if the person were married at the time of his or her death, all of his or her community property will go to the surviving spouse.  All of his or her separate property will be distributed among the surviving spouse, children, parents, and other heirs according to a specific formula found in the Probate Code.

If there are any minor children (under 18 years of age), the court will decide if a guardian is necessary and, if so, will appoint one.

If there are no known heirs, the property will go (or escheat) to the state.

Because court supervision is necessary to watch over the distribution of the decedent’s assets, the estate will have to be probated.

Since the state will be distributing the decedent’s estate according to its laws, the decedent’s wishes may be frustrated because he did not write a Will.  For example, a needy relative or friend may receive nothing while an undeserving person is awarded the entire estate.  One family member may need money more than another family member.  However, under an intestate distribution, each family member will receive an equal share.  In the case of a person who is separated from his or her spouse and who intends to obtain a divorce, but dies before making a Will, his or her estate will pass to the estranged spouse under the laws of intestate succession.

A Will is a legal document telling how you want your property distributed when you die and naming a guardian to care for any of your children who may still be minors.  Having a Will allows you some control over the distribution of your assets.  You can direct where and to whom your estate will go after your death.  Otherwise, if you were to die intestate (without a Will), your estate would be distributed according to state law, which may not reflect your wishes.

A Will makes the administration of your estate run smoothly, that is, it may avoid costly, time-consuming disputes over who gets what.

A Will allows you to choose the individual who will administer your estate and distribute it according to your instruction.  Without a Will, the court will appoint an administrator.

A Will can be changed as many times as a person wants, provided that each Will or revision is done in accordance with the requirements of the law for writing a new Will or revising an old Will.  A Codicil is the name given to a revision or addition to an existing Will.
You do not have to be a citizen of the United States to make a Will.

Probate is a Court-supervised process which provides for the change of ownership of your property upon your death.  The fact that you do or do not have a Will has little bearing on whether your estate must go through probate.  Estates having a value of $100,000 or less do not have to be probated.

Certain types of property do not go through probate and are generally not controlled by your Will.  These include property held in joint tenancy, life insurance (where the beneficiary is a named person and not your estate), annuities (where the beneficiary is a named person and not your estate), P.O.D. (pay on death) accounts or Totten Trust accounts, and trust assets.

You should review your Will every few years.  You may need to revise your Will when a change occurs in your family (such as:  a birth, marriage, divorce, or death), when a change occurs in your financial situation, when you move from one state to another, and/or when any other major change in your life occurs.

You should keep your Will in a place where there is minimal risk of its loss or destruction.  The Will should be put in a place that will be available to you, the testator, and to the executor of your Will when you die.  It would not be wise to have the Will where it will be available to persons who are being disinherited or otherwise adversely affected by the Will.


Probate is the process by which legal possession of a person’s property passes on to his or her heirs after death.  Probate includes the filing of the Will of the decedent along with a petition for probate of the Will, or if the decedent dies without a Will, filing a petition to administer the decedent’s estate.

Probate is designed to prevent fraud in the transfer of the decedent’s assets, thereby protecting creditors, insuring that the assets go to the persons the decedent directed in his or her Will or as set out by California intestacy laws, and seeing that federal, state, and local government taxes are paid.

The usual duration of probate is from nine months to two years, depending on the complexities in the estate.  Probate ends after all taxes are paid, creditors are paid, and the assets are accounted for and distributed as provided in the Will.

Probate costs include court costs, professional fees, and executor’s fees.

The advantages of having an estate probated include:

  1. the heirs and beneficiaries are protected by the court;
  2. probate cuts off the claims of creditors after the four-month period following the issuance of letters testamentary or letters of administration;
  3. the transfer of title is a public record that prevents problems with title companies;
  4. questions and disputes are settled under the protection of the court;
  5. the estate is a separate taxpayer and some tax savings may result; and
  6. the costs are deductible for income tax or death tax purposes if properly planned.

The disadvantages of having an estate probated include:

  1. probate is expensive;
  2. probate is time-consuming and delays are excessive;
  3. court proceedings are inherently inflexible; and
  4. court proceedings are open to the public and therefore there is no ability to keep the details of the estate or the recipients of your assets a confidential matter.

When a Will is probated or when a person dies without a Will, the decedent’s estate will be charged with probate fees, according to a schedule established by California law.  It should be noted that these are minimum probate fees.  Not included are probate referee fees, appraisal fees, court costs, bonds, and “extraordinary expenses.”  The probate costs are based on the gross estate, before any debts owed by the estate to other parties are deducted.
VALUE             FEES        COMMISSION
$100,000           $4,000             $4,000
150,000             5,500               5,500
200,000             7,000               7,000
250,000             8,000               8,000
300,000             9,000               9,000
350,000             10,000             10,000
400,000             11,000             11,000
450,000             12,000             12,000
500,000             13,000             13,000
550,000             14,000             14,000
600,000             15,000             15,000
650,000             16,000             16,000
700,000             17,000             17,000
750,000             18,000             18,000
800,000             19,000             19,000
850,000             20,000             20,000
900,000             21,000             21,000
950,000             22,000             22,000
1,000,000          23,000             23,000
2,000,000          33,000             33,000
3,000,000          43,000             43,000
5,000,000          63,000             63,000

*Sec. 10810 California Probate Code

After the court appointment of an executor of the decedent’s Will, the following are some of the primary responsibilities that an executor, with the assistance of his or her attorney, may be required to do during the administration of the decedent’s estate:

    1.    Collection of decedent’s assets

—    inventory items in decedent’s safe deposit box
—    supervise opening of safe deposit box held with another person
—    transfer valuables from decedent’s safe deposit box to estate safe deposit box
—    take possession of decedent’s bank accounts
—    search for stocks/bonds in which decedent had an interest
—    initiate collection of debts due estate

2.    Management of decedent’s estate

—    review investments
—    establish financial record-keeping procedures for estate
—    open estate bank accounts
—    identify all expenses
—    prepare estate budget and estimate of cash needs
—    cancel decedent’s credit cards

    3.    Bank accounts

—    deposit estate’s cash in interest-bearing accounts
—    confirm insurance coverage of accounts

4.    Stocks and bonds

—    cancel reinvestment of dividend option
—    advise transfer agents where to send dividends

5.    Real property

—    review documents of title
—    consider renting residential property
—    inform tenants where to send rent payments
—    determine amount and status of property tax payments
—    confirm homeowner’s exemption
—    determine insurance coverage of property
—    determine whether mortgage must be exonerated
—    obtain legal descriptions of real property
—    determine outstanding balances on real property loans
—    ascertain whether decedent owned real property outside California

    6.    Insurance and benefits

—    question decedent’s employer about benefits
—    ascertain and obtain social security benefits
—    request IRS Form 712 from life insurance companies

    7.    Personal property

—    determine anticipated disposition by sale or transfer of decedent’s automobile
—    take custody of personal property
—    review documents of title
—    determine insurance coverage of property

    8.    Tax considerations

—    maintain records for tax purposes
—    ascertain need for filing estate tax returns
—    consider other income tax purposes

The key characteristic of joint tenancy is the right of survivorship, which provides that upon the death of one joint owner, the survivor(s) immediately becomes the owner(s) of the decedent’s interest in the property.  Therefore, a primary advantage of holding title in joint tenancy is the avoidance of administration on the death of the first spouse.  When an estate is small and the first to die wants all of his or her property to pass outright to the surviving spouse, joint tenancy ownership may, in a limited number of situations, offer a convenient and economical way to bypass probate.

Another advantage is the avoidance of ancillary administration of out-of-state real estate.  When a property owner dies owning real estate in more than one state, ancillary administration in the states other than that of the decedent’s domicile may be necessary.  This can be both time-consuming and costly.  When out-of-state property is held in joint tenancy, the surviving joint tenant will own the out-of-state real estate outright and there will be no need for ancillary administration in that other state.

There are, however, numerous problems with holding property in joint tenancy.  These include:
Income tax consequences.
When a husband and wife hold property as joint tenants, the law says that, for estate tax purposes, they each own one-half of the property.  Consequently, the surviving spouse will not receive a stepped-up basis for his or her one-half of the property.  If the property had been held as community property, the entire property would have received a stepped-up basis upon the death of the first spouse.  For highly appreciated assets, the tax savings could be substantial.

Gift tax consequences.

If the joint tenants did not contribute equally or proportionately to the property, putting  title of the property in joint tenancy will result in a taxable gift for federal gift tax purposes.  For example, when one person purchases securities from his or her separate funds and registers them in joint tenancy with a child, this is treated as a taxable transfer for gift tax purposes.

Loss of control of property.
Joint tenancy reduces legal control over the property.  The person who shares his property with another in joint tenancy no longer has sole say as to how the property is to be used, managed, invested, sold, etc.  If a parent were to hold title in joint tenancy with an adult child, that child’s consent may be required in order for the parent to sell or otherwise dispose of the property during the parent’s lifetime.  If the child were to become incapacitated, the parent would not be able to sell or dispose of the property without going through a conservatorship proceeding.  If the child had granted his or her spouse a durable power of attorney over assets or power to manage his or her assets in a trust, the parent would have to deal with that child’s spouse in managing the property held in joint tenancy.  If the child were to have creditor problems, all property held in joint tenancy with that child would be at risk to claims from that child’s creditors.

Loss of right to dispose of property at death.
A person who holds title in joint tenancy gives up his or her right to dispose of it in his Will or through a trust.  The surviving co-owner receives the entire property outright.  This could result in an unequal distribution among a decedent’s children.  In the case of a prior marriage, the decedent’s children by a prior marriage could be deprived of a share of their parent’s property.

A husband and wife may hold property as joint tenants, tenants in common, or as community property.  It should be noted, however, that unlike the other forms of ownership, community property ownership is exclusively available to husbands and wives.

The key characteristic of holding property in joint tenancy is that there is a right of survivorship.  That right is that upon the death of one joint owner, the survivor immediately becomes the owner of the entire interest of the property.

In comparison, property held as tenants in common or as community property will be divided according to the percentage of ownership of the parties upon the death of one of the owners.  For community property, it is presumed that husband and wife each owned an undivided one-half interest of the whole of the ownership interest, or 50%.  The spouse who dies may leave his or her share of the interest to his or her beneficiaries.  However, if the first spouse to die leaves his or her interest to the surviving spouse, the property will avoid probate.

The most significant advantage to owning property as community property is that for tax purposes there is a double step-up in basis of the asset upon the death of the first spouse.  In other words, the entire interest (not just the undivided one-half interest belonging to the deceased spouse) is stepped up in value.  This could have a significant effect on capital gains tax for assets with a low basis.

By way of example, suppose a husband and wife purchased property twenty years ago for $10,000.  The property is now worth $100,000.  If the couple owned the property as community property, upon the death of the first spouse the property would have a new tax basis, for capital gains tax purposes, of $100,000.  If the surviving spouse sold the property for $100,000 there would be no capital gain to report.  If, on the other hand, the couple owned the property as joint tenants or as tenants in common, when the first spouse dies, only that person’s share of the basis would be stepped up to current market value.  The surviving spouse’s basis would be one-half of the original basis, or $5,000.  Consequently, if the property were sold for $100,000, the basis of the property would be $55,000 ($50,000 for the decedent’s half and $5,000 for the surviving spouse’s half).  Capital gains tax would have to be paid on the $45,000 “profit”, i.e., the capital gain.

Separate property or property held in joint tenancy may be transmuted to community property by an express written declaration signed by both parties.  (Civil Code §§ 5110.710 and 5110.730)


A conservatorship is a court proceeding for the appointment of a manager in the event a person becomes either physically or mentally unable to handle either his financial affairs or personal needs.

A conservator of the person may be appointed for someone who is unable to properly take care of his or her personal needs.  The conservator of the person sees to it that the conservatee is properly cared for, housed, and clothed and that food, medical care, and personal needs, such as haircuts or beauty treatments, are provided.

A conservator of the estate may be appointed for someone who is substantially unable to handle his or her financial resources.  The conservator of the estate conserves, manages, and uses the conservatee’s property under California law for the benefit of the conservatee and those individuals whom the conservatee is obligated to support.  The conservator must use ordinary care and diligence when dealing with the conservatee’s property.  In most situations, the conservator will need to be bonded.

The court may appoint one or more conservators of the person, of the estate, or of both.

In selecting a conservator, the court is guided by what appears to be “in the best interest” of the proposed conservatee.  If the proposed conservatee has sufficient capacity to nominate a party or can form an intelligent preference, the court will be guided by that choice unless it finds that the appointment would not be “in the best interest” of the proposed conservatee.  A spouse or parent of the proposed conservatee may nominate a conservator in writing either before or after the petition is filed.  However, the court by law retains sole discretion in the appointment of the conservator and preference will be given to proposed conservators in the following order:

1.    Nominee of conservatee.
2.    Spouse of conservatee.
3.    Nominee of spouse of conservatee.
4.    Adult child of conservatee.
5.    Nominee of adult child of conservatee.
6.    Brother or sister of conservatee.
7.    Nominee of brother or sister of conservatee.
8.    Any other person or entity eligible and willing to act.

A finding of incompetency in a family member is a very private matter and due to the court’s involvement, there is a lack of privacy.  A petition for conservatorship is a public proceeding with documents being available for public inspection.

There are specific and often substantial costs occasioned by a conservatorship.  These costs include a filing fee for court papers ($355.00); an appraisal fee for inventory of assets at 1/10th of 1% of value of conservatorship assets (e.g., $150.00 fee for an estate valued at $150,000); conservator’s fees (reasonable hourly rate based on the services rendered); and attorney’s fees for services rendered.

The lack of privacy and monetary costs of a possible conservatorship can be avoided by careful estate planning.  A Living Trust can provide that, in the event the original trustee (the original owner of the trust property) is no longer capable of acting as trustee, a successor trustee is authorized to take over management of the trust assets for the benefit of the incompetent person.  This would replace the need for a conservator of the incompetent’s estate.  Providing for the health care needs of an incompetent person can by accomplished by a durable power of attorney for health care.  In both situations, the individual for whom the documents are prepared is appointing an individual of his or her own choice to take the place of a conservator.


The Patient Self-Determination Act of 1990 is the first federal legislation to address end-of-life decision-making.  Its passage was greatly influenced by the nation-wide publicity and discussion surrounding the Cruzan case, wherein the Missouri Supreme Court refused to permit Nancy Cruzan’s parents to have Nancy’s feeding tube removed, unless they could produce “clear and convincing evidence” of Nancy’s feelings and wishes about the withholding and withdrawal of life-sustaining treatment.  This legislation, which went into effect on December 1, 1991, promises a dramatic increase in nationwide awareness of patients’ rights to control the care they receive from hospitals and other medical providers.

The Patient Self-Determination Act requires certain health care providers receiving Medicare and Medicaid reimbursement to counsel patients on their right to draw up “Living Wills” or other directives for medical treatment.  The Act applies to hospitals, at the time of the individual’s admission as an inpatient; to a skilled nursing facility, at the time of the individual’s admission as a resident; to a home health agency, in advance of the individual coming under the care of the agency; to hospices, at the time of initial receipt of hospice care by the individual from the program; and to “eligible prepaid organizations,” such as HMOs, at the time of enrollment of the individual with the organization.

The Act does not apply to persons receiving emergency room and outpatient treatment.  However, when patients who are treated in an emergency room present an advance directive at the time of admission, the advance directive should be followed.

Specifically, this law requires medical facilities to:

  • Provide to each individual, at the time of admission, written information concerning an individual’s rights under state law to make decisions concerning medical care (including the right to accept or refuse medical or surgical treatment and the right to execute advance directives, such as a “Living Will” or a Durable Power of Attorney for Health Care);
  • Notify individuals at the time of admission of the written policies of the provider or organization respecting the implementation of such rights;
  • Document in the individual’s medical record whether or not the individual has executed an advance directive;
  • Not condition the provision of care or otherwise discriminate against an individual based on whether or not the individual has executed an advance directive;
  • Ensure compliance with requirements of state law respecting advance directives at facilities of the provider or organization; and
  • Provide (individually or with others) for education of staff and community on issues concerning advance directives.

This Act also requires the federal Department of Health and Human Services to mount a national Public Education Campaign and to develop materials explaining patients’ rights, to be distributed by medical facilities.

A Power of Attorney is a written document that enables an individual, “the principal,” to designate another person or persons to act on his behalf as his “attorney-in-fact” or agent.  The power granted in the Power of Attorney can be very limited (“to collect my rents and pay my bills”) or very broad (“all the legal powers I have”).  A Power of Attorney can empower an agent to sell, rent or lease property, pay bills, collect rent, file tax returns, etc.

The Durable Power of Attorney differs from the standard Power of Attorney in that the powers granted to the agent under the Durable Power of Attorney do not terminate in the event of any subsequent disability or incapacity of the principal.

Durable Powers of Attorney are particularly important when the principal is elderly and there is a significant chance that he or she may at some point suffer from some dementia.  Use of a properly drafted Durable Power of Attorney may eliminate the necessity of petitioning the court for appointment of a conservator to handle the principal’s assets.

In California, where community property laws control as to ownership of property, it is usually required that both spouses sign documents in order to transfer property.  Incapacity or incompetency of one spouse could prevent the sale of stocks, bonds, real property or the operation of a business where both signatures are required.  The Durable Power of Attorney for asset decisions would allow the agent to carry on the activities of the principal without the necessity of petitioning the court for a conservatorship, which entails court costs and attorney’s fees.

The Power of Attorney may be a springing Power of Attorney.  Such a Power of Attorney is not effective immediately.  It only “springs” into effect once the principal is certified as being incapacitated.
The selection of an attorney-in-fact, your agent, must be very carefully considered.  An imprudent appointment of an unqualified individual can lead to disaster.

  • You could lose all of your property due to poor management.
  • One family member might use the Power of Attorney in a manner that upsets other family members.
  • Giving a spouse a Power of Attorney in an unstable marriage could cause great damage.

On the other hand, the appropriate appointment of a trusted and qualified individual could be one of the most important steps toward the protection of your financial well-being.

The Durable Power of Attorney for Health Care can be used to give an agent the power to make day-to-day health care decisions for an incompetent individual.  In addition, the principal can give the agent the power to make decisions regarding the right to refuse or to consent to treatment, the right to access medical records, the right to withdraw life-sustaining treatment, and the power to make anatomical gifts.

Even after you have executed this power of attorney, you continue to have a right to make your own health care decisions.  The Durable Power of Attorney is effective only when you become incompetent to make your own health care decisions.

The Durable Power of Attorney for Health Care is often used in conjunction with the Living Will or Directive to Physicians to establish the incompetent person’s wishes concerning the use or non-use of life-sustaining measures.

The California Natural Death Act established the language to be used in the Directive to Physicians, which is California’s equivalent to a Living Will.  This document states your wishes regarding the use of life-sustaining medical procedures if you have an incurable or irreversible condition that has been diagnosed by two physicians and that will result in death within a relatively short time, without the administration of life-sustaining treatment, or if you are in an irreversible coma or persistent vegetative state and can no longer make decisions regarding medical treatment.

Copies of the Durable Power of Attorney for Health Care and the Directive to Physicians should be given to your family doctor, discussed with him, and placed in your medical chart for future reference.  The person or persons designated to act as your agent in your Durable Power of Attorney for Health Care should also have copies and, further, should be made aware of your feelings regarding the importance and use of these documents.

A Trust is a legal means of transferring your assets to another individual who is called the trustee for the purpose of managing those assets for your beneficiaries and distributing them to your beneficiaries.  If you wish, you can name yourself as the beneficiary.

As the person who sets up the Trust, you are the settlor of the Trust (sometimes referred to as the trustor of the Trust).

The Trust sets out specifically what your intentions are with respect to the disposition of your assets and gives the trustee specific powers to carry out your wishes.

A TESTAMENTARY Trust is established after your death through your will and is only established after probating the estate.  Assets of a Testamentary Trust will first pass through probate and are considered part of your probate estate.  This means that your beneficiaries might not receive income from the Trust until probate is completed.

A LIVING (INTER VIVOS) Trust is established during your lifetime and can be designed to terminate at a specific time or continue in effect after your death.  A Living Trust allows you to avoid probate because the transfer of assets into the Trust occurs while you are alive.

Living Trusts may be REVOCABLE or IRREVOCABLE.  The terms of a Revocable Trust may be changed at any time or canceled altogether.

There are numerous advantages to having a Living Trust.  A properly funded Revocable Living Trust eliminates the necessity for a probate administration of the assets held by the Trust, thus avoiding the cost of filing fees, publication costs, appraisal fees, executor’s commissions and attorney fees, time delays from nine months to two years, and the publicity of a probate.

A Living Trust is much more than a probate avoidance tool.  One of the most significant benefits of a Living Trust is preventing the necessity of a conservatorship proceeding in the event of incapacity of the trustor(s).  A conservatorship is the legal proceeding brought for the purpose of acquiring authority to manage assets and/or make personal health care decisions on behalf of an incompetent person.  With a Living Trust, a provision can be made which states that in the event the original trustee (normally the trustor) is no longer capable of acting as trustee, a successor trustee is authorized to take over management of the Trust assets for the benefit of the incompetent person.  This provision, although not  applicable to health care decision making, may entirely eliminate the necessity of a conservatorship for the estate of an incompetent person.

A trust can also be used to minimize estate taxes at death.  For example, under current IRS regulations, a married couple before death can implement a Marital Tax Trust which may eliminate estate taxes entirely on a combined net estate valued at $7,000,000.  With no tax planning, the executor of the surviving spouse’s estate in this example (assuming no increase or decrease in the value of the original combined estate) would have been obligated to pay over approximately $3,080,800 in estate taxes to the IRS!  A Living Trust incorporating proper tax planning could eliminate this tax entirely.

An additional benefit to the Living Trust arrangement is the ability to control the distribution and management of assets even after death.  For example, a Living Trust can be set up so as to provide for a beneficiary who has money management and/or debt-related problems by creating a “Spendthrift Trust.”  Assets held in such a trust may not become subject to garnishment or seizure by the beneficiary’s creditors until actually placed in the hands of the beneficiary.  Of special interest is a variation of this same type of trust which can be used to provide for a disabled child or other beneficiary who may be receiving public assistance benefits.  This “special needs” type trust could, when properly drafted, prevent the termination of a disabled person’s benefits due to the receipt of an outright bequest of cash exceeding the resource limitations under SSI and/or Medi-Cal regulations.


  1. Avoids time delay and costs of probate.
  2. Provides uninterrupted management of estate assets.
  3. Prevents possible conservatorship problems.
  4. Eliminates out-of-state probates.
  5. Keeps estates somewhat private.

There are some disadvantages to having a Living Trust.  First, a Living Trust normally costs much more than a will.  A typical Living Trust may cost upwards of $1000 to $3000, depending upon its complexity.  Secondly, there is a certain amount of initial “hassle” in changing title of all of one’s assets to the name of the Trust.  This process is commonly known as “funding” the trust and is crucial to the proper administration of the trust.  Thirdly, because a Living Trust provides for avoidance of probate, there is no court supervision to insure the performance of the Trust terms.  A Living Trust involves a substantial amount of trust and faith in the person one appoints to administer his estate in the event of his incompetency or death.  Fourthly, while the probate process cuts off the right of a decedent’s creditors to claim payment from the estate 120 days after the hearing at which the personal representative is appointed, the creditors of a decedent whose assets are held in trust may have creditors’ rights that last substantially longer.  This could pose problems for certain individuals.

A qualified estate planning attorney should be consulted before deciding whether a Living Trust is the proper estate planning vehicle for you.

Personal representatives have various titles, but they share similar duties and responsibilities, all on a principal’s behalf.  So whether you are selecting an executor of a Will, a trustee of a Trust, a conservator of the person and/or estate, or guardian of the person and/or estate of a child, the position is an important one.  Therefore, you should think twice when you name someone to act as your personal representative.
Married couples may wish to name each other to act as executor and/or trustee and then name their children as alternates in the event the survivor of them is unable to act when it becomes necessary to do so.  Widowed, divorced and other unmarried persons may wish to name children, if any, to act, with other relatives or friends named as alternates.  It is recommended that two alternates be named.  This provides for an easier transition should the named individual(s) be unable to act.  The next named alternate would be ready to step in and act immediately.

When naming executors and/or trustees, another consideration is the possibility of naming a corporate fiduciary as a representative.  Many commercial banks have trust departments act in this capacity.  An advantage is that they are experienced professionals whose business is to provide these services.  However, in recent years trust departments have become very selective about the value of the estates they will agree to undertake and the nature of the assets contained in the estate.  For estates under $500,000, a corporate executor or trustee is most likely out of the question.

Some clients express an interest in the possibility of naming two persons to act jointly.  While this is allowed, serious consideration should be given to the realities of the named persons actually acting together.  As a practical matter, do they live near each other? Do they communicate well?  Since naming two personal representatives in most situations would require two signatures on every document and every check signed, the logistics and ease of communication between the two jointly named individuals are very important.  It is usually preferable to appoint one representative at a time.  My experience has been that in the majority of estate administrations where more than one individual is appointed to act together there are significant and costly repercussions.

When considering appropriate guardians for minor children, it is possible to name two; i.e. one with whom your child/children would reside (to care for their person), and the other in whom you have absolute trust and confidence to manage their financial affairs (estate).

Personal representatives are compensated in various ways.  For example, executors’ fees for administering a probate estate are set by statute and approved by the Court.  While conservators’ and guardians’ fees are also subject to Court approval, they are based on the amount of time spent and charged at an hourly rate.  Trustees (other than a husband and wife) are frequently compensated for their services, however, trustees’ fees are not subject to Court approval.

Because of the record keeping that is necessitated by management of assets, the chosen personal representative should have experience in managing assets and in maintaining records.  Personal representatives are responsible for taking possession of assets and investing and managing the assets so as to produce as much growth as possible.  They must also file all requisite tax returns and obtain a tax identification number from the Internal Revenue Service, when necessary.  Personal representatives must maintain proper and adequate insurance on all tangible assets.  In addition, they must maintain complete, accurate and detailed records of all income, expenses, purchases, sales and other transactions, and appropriately distribute income and principal, when required.

Even though personal representatives have a fiduciary duty to keep personal and financial affairs confidential, maintain loyalty and impartiality to family members and beneficiaries (in the case of an estate or trust), and avoid any act of self-dealing or conflict of interest in his or her dealings with your affairs, it is essential that you have absolute confidence and trust in the person(s) or corporate entity you name to act on your behalf.

In matters where the estate planning is dealing with a couple, where either or both couples have had a previous marriage, which produced at least one child, there are a number of significant issues to be addressed.  The problem for the estate planner is how to effectively, yet diplomatically, bring these issues into the planning process so that they can be dealt with.  One issue that may need to be faced in a second or subsequent marriage is the couple’s denial of the true status and nature of the relationship between the individuals which make up the first and second families.  The reality of many such relationships is that some conflicts between the second husband and/or wife and the children of the respective first marriages are inherent in the relationship.

Some conflicts are emotionally based.  In many cases, the step-children fully understand and accept the step-parent’s favorable qualities.  They may even have deep feelings and a strong understanding that their parent is now happy.  Nevertheless, the children may feel varying degrees of resentment about another individual taking their deceased previously divorced parent’s place.  The children may have some new or renewed sense of insecurity about their parent’s affection for them with this new person on the scene.  Additionally, depending upon the circumstances surrounding the parent’s relationship with the children, the children now may be in a position where they are in competition for their parent’s time, attention, affection, and money.

Probably the most common area of conflict is of a financial nature.  The financial interests of the parent and step-parent goes through a change of focus.  The parent’s financial resources are likely to be allocated in an entirely different manner.  During the parent’s lifetime, they will spend money on the step-parent and, to some extent, on the step-parent children.  And, at best, when the parent provides or fails to provide for all of the “new” family, this reallocation of the financial resources always has the potential to, and inevitably does, produce tension to one degree or another between the step-parent and the children.

These are all topics that, in the best of circumstances can be difficult to discuss.  It has been my experience that it is only in the rare blended family that some of these issues do not exist.  Even situations where everyone gives it their best effort, there can be problems.  Family unity can be a very difficult thing to maintain in families where all of the members are related by blood.  In situations where the relationship is by marriage only, many divergent factors exist.  Sibling rivalries can become even more volatile.  When one or more of the family members forms new alliances with other members of the step-family there can be the complicating factor of an ex-spouse’s varying visitation and support obligations, as well as other family law and related matters that can suck the new spouse or step-family members in.

Even with all of these issues and all of these situations in existence, the married couple on the other side of the desk in an estate planning session are hard-pressed to come to terms with the possibility of these problems, let alone the reality of them.  It is, however, important to broach these issues.  There are some estate planning advantages in addressing these situations with full awareness.  If there are going to be conflicts, it is preferable for those potential conflicts to be discussed and planned for, if at all possible.  Obviously, the true nature of the conflict may not actually arise until after the death of one of the parents.

There are a number of estate planning options available to solve, or at least minimize, some of these blended family issues.

Elsewhere in these materials, there is a more detailed discussion on QTIP trusts as an estate planning tool.  In the blended family situation, where one of the spouses has been widowed and a portion of the joint estate plan of the first marriage has been implemented, the rest of the plan used in the first marriage leaves the exemption equivalent (currently $3,500,000) in a two-way bypass trust.  The rest of the estate remains in trust for the surviving spouse’s lifetime, with the remainder to the children.  That type of plan may or may not be good in the case of the second marriage.  It works well for tax purposes, but problems unrelated to tax arise which are unusual to a first marriage, but common in a second.

Typical Disagreements
Disputes about investments and appropriate allocations of income and expenses are very likely in such cases.  If the trust instrument, for example, restricts the new spouse to being entitled only to income from the trust assets, there is a great deal of room to disagree.  One area of disagreement can be with regard to which receipts are considered income and which are considered principal under State law and the trust instrument.  Another area of common disagreement is which expenses are chargeable to income and which to principal.  Further, there is always room for disagreement on how much of the trust assets should be allocated to income-producing investments and what portion should be placed in investments that will produce growth.  In such situations, a trustee, whether an independent third party or an interested beneficiary is placed in a situation of inherent conflict.  The more income produced for the step-parent, the greater the likelihood of less principal for distribution to the children.  These conflicts can be minimized by proper drafting.  State law often provides a clear and unequivocal procedures for properly allocating the trust assets and the income and principal portions of the trust estate.  However, it is most important for the trust instrument to give the trustee clear direction, as there is always a fair degree of discretion utilized by the trustee.  As a result of this, one of the key factors for minimizing potential conflicts is the consideration of who the trustee will be.

In a QTIP or general power appointment trust, the Internal Revenue Code provides that the spouse must have the power to require the trustee to invest the assets of the trust in a

manner that will be “productive of income.”  The trust document itself should be specific about what “productive of income” means.  The more specific the language of the trust, the less chance that there will be issues in dispute.  If one is looking for circumstances that are destined to cause problems, the situation where the step-parent is close in age to the parent’s children is a natural.  In such cases, the estate plan more than likely makes the children wait until the step-mother dies before they benefit from the estate.  This actually sets up a situation where they, in fact, may never receive any of their parent’s assets, or they may only receive their inheritance when they, themselves, are quite elderly.  These, of course, are the parent/ trustor’s decisions.  If this result is what they plan and want, then no one should be able to question it or alter it.  These considerations, however, do not generally apply to first marriages and, as such, the astute estate planner needs to fully explore the options and results and be sure to flesh these points out with their clients when second or subsequent marriages are involved.

One good option is that the parent/ trustor can leave the children their inherited share of the assets outright or can require that the assets remain in a trust from which the step-parent does not benefit.

These other options, of course, do not come without potential estate tax consequences at the death of the first to die.

Another alternative would be to have the step-parent trustor create an irrevocable life insurance trust, which would distribute the proceeds of the death benefit to the children outside of the settlor’s taxable estate.  This would distribute some money in a manner independent of the step-mother or step-father, minimize the impact of the age discrepancy and avoid transfer tax problems.

Much of the time, one of the most valuable assets in an estate is real property in the form of the principal residence of the parent.  One goal that is almost universal between spouses is the wish to provide shelter for their spouse in the event one dies.  One sure way to provide for the shelter of your spouse is to ensure that the principal residence you share continues to be available for the surviving spouse.  One option, of course, would be for the parent to leave the house to the step-parent outright.  This disposition is, of course, simple and would qualify for the marital deduction.  Many clients will readily understand this procedure and be all for it.  However, they must also be made aware that anything that goes outright to the step-parent is very likely to end up in the hands of the children of the step-parent at their death.  The parent/trustor may be perfectly happy to be generous with their spouse, even at their children’s expense.  However, that generosity may not extend to their step-children when their interest is juxtaposed to the interest of the parent’s own children.  There are, of course, some alternatives.  The parent can grant the surviving spouse a life estate that would allow the spouse to utilize the home for life, with the ultimate ownership of the property after the death of the surviving spouse passing to the children of the pre-deceased parent through a trust or other process.  This solution is one that most beneficiaries would consider to be natural.  The life estate in the principal residence, unlike the situation discussed above, does not contain the potential points of disagree like the proper allocation of income and principal or what the corpus of the trust should contain.  However, there certainly are other issues that are raised by this circumstance that can be fraught with disagreement.  One such issue, of course, is who will be responsible for the payment of expenses that can be related to the house.  In a true life estate, the life tenant is responsible for insurance, maintenance and avoidance of waste and is entitled to the use and enjoyment of or the rents, issues and profits from the real property.  It is incumbent upon the estate planning attorney to make sure the terms of the use of the house for life are clearly set forth in the trust instrument.  The parent/trustor should specify what expenses are to be borne by whom.  Additionally, it should remain clear who has the power to sell the house and who gets the proceeds of any sale.  Under the ordinary rule applicable to life estates, neither the surviving spouse nor the children could sell the entire house without the other’s consent.  These are all important issues and need to be addressed with specificity by the estate planning attorney and the clients.

In most states, a surviving spouse has certain enforceable rights in the estate of their deceased spouse.  As a result, it is usually not possible to leave the surviving spouse less than a certain amount without a marital property agreement of some other enforceable waiver of these rights by the surviving spouse.


The attorney, in the context of estate planning for a person whose prior marriage ended in dissolution, must check to see what, if any, obligations are imposed by the property settlement agreement or order of dissolution on that client’s estate.  One issue is what effect the client’s death has on alimony/spousal support obligations.  If this remains an obligation of the estate, there may be certain tax deductions available.  This will depend on whether there was adequate consideration for such support or if the obligation was the result of a decree of court, with the authority to impose the obligation, without regard to the agreement of the parities to the dissolution.

Child Support
Child support is not generally an obligation which is imposed on an estate.  Normally, an individual’s obligation for child support ends with death.  Nevertheless, it is not uncommon for couples who are dissolving their marriage to agree that child support payments will continue as a continuing obligation of a decedent’s estate.  As such, in estate planning, this is another important issue to address.

Agreed-Upon Bequests
It is common to include provisions in the agreement created at the dissolution of the marriage that one or both of the parties leave a certain amount of money or specified assets to the children of that marriage and/or the spouse of that marriage.  As such, this is an issue that should be discussed in subsequent estate planning.

Marital Property Agreement
Marital Property Agreements are likely to exist in a second or subsequent marriage.  In the process of estate planning, this document should be carefully examined and discussed with the parties.  There may be issues that arise or unintended modifications to such agreement that result from the preparation of an estate plan.

As you can see, there are many difficult issues to be addressed in situations where an estate plan is being prepared for a married couple where one or more of the clients had a prior marriage where there were children.  The most difficult issue of all is developing a realistic and a frank discussion of the issues with the clients.  I have found that one way to approach the subject is to discuss the issue of conflicts when one attorney is representing two or more clients.  In my basic estate planning, I always prepare, and require the clients to execute, what I call my “conflicts” letter.  I explain this letter to the clients by informing them there is always a theoretical conflict between clients when they are represented by one attorney and that, in the event a real conflict ever arises between the parties, I will not represent either.  This letter sets forth the discussion of the theoretical conflict.  In the case of a blended family, this discussion can then be expanded to more fully point out the “theoretical” conflicts that can exist with all of the members of the family.  This discussion can then be converted into the balance of the planning discussion and, ultimately, be  incorporated in the estate planning documents.
~ Contributed by Wm. Peter Terhune, Esq.

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