Foresight Legal Blog

Here’s a copy of the presentation I recently gave at the Long Beach Senior Center:

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Here’s a copy of the estate planning presentation I gave to my home BNI chapter (Extra Mile).

Uploaded on authorSTREAM by foresight

Sometimes clients tell me they’ve either loaned money to their children or their children have loaned money to them. As an attorney, I lean toward having these commitments reduced to writing so everyone is clear and there are no surprises. Of course, the decision to put the agreement in writing is ultimately left up to the clients, but there are several issues to consider with any family loan.

First, regardless of whether its written down, family members should still be charged interest. If you charge below the rate, or make an interest-free loan, the IRS may impute the difference as interest earned and consider it taxable income. In some cases, the IRS could characterize the entire loan as a gift, subject to gift tax.

An acceptable interest rate for the IRS is the “Applicable Federal Rate” or AFR. You can check out those rates by following this link. The imputed interest rules don’t apply to loans of less than $10,000.  You can read much more about related-party transactions and the below-market interest rules in IRS Publication 550 at the IRS website.

Second, the promissory note should include all of the following elements:

• The loan amount.
• A definite payment date or dates.
• A stated rate of interest.
• Collateral or security.

Third, you might consider taking the awkward moments out of a family loan by having a third party administer it. For a $99 fee, Virgin Money formalizes the agreement you and takes care of the paperwork. For $199 plus $9 per payment, they’ll also electronically collect payments from the borrower’s bank account and credit yours. For $14.95, LoanBack will generate a promissory note and pay schedule, but won’t help you collect.

Fourth, from an estate planning standpoint, it is much better to put these agreements in writing to provide a paper trail for the executor or trustee to piece together who owes what and to whom.

Hope this helps.

Foresight has released a series of YouTube ads targeted to generate interest in living trusts and the firm. Check out Foresight’s YouTube Channel. We hope you like it.

Senior Class is a monthly magazine, billed as “celebrating the mature lifestyle.” Foresight attorney, Tom Martin, contributed to the July/August edition.

The article, “When to Look a Gift Horse in the Mouth,” is about the potential downside to using joint tenancy as a way to avoid probate court. Here’s an excerpt:

“Sometimes looks can be deceiving.

Let’s say you own your home free and clear and would like to leave it to your two children. You’ve heard people talk about the need to avoid “probate” and you figure the best and cheapest way to avoid it is to simply add your kids to the title as joint tenants with rights of
survivorship.

That way, when you pass, your home will go directly to your kids without the need for probate. Pretty good solution, and with no need to pay an attorney for expensive advice, right? Wrong.” Click on the link above to read the whole article.

The magazine has a wonderful directory of services for seniors, everything from the local farmer’s market to volunteer programs to meals on wheels. Check it out at a newstand near you!

With unanimous votes in the State Assembly and State Senate last week, the California Legislature sent Gov. Arnold Schwarzenegger a bill designed to protect companion animals after their owners’ death.

“Pets are an important part of the American family,” Sen. Leland Yee said in a statement. “SB 685 will make pet trusts enforceable and assure that the wishes of pet owners are respected.”

“Wills and trusts are the means for people to bestow their possessions and savings as they see fit,” Yee said. “Under SB 685, a pet owner will be assured that their pet will be properly cared for after their passing while also ensuring that kin are not burdened with undue pressure.”

The bill will ensure those pets designated within the trust are protected and cared for as the owner intended and are not sent unnecessarily into the shelter system. Funds left over after the animal’s life may be donated, using the trust’s instructions, to animal related charities.

Tom Martin is an estate planning attorney in downtown Long Beach. Call Tom today to schedule your complimentary consultation on how you can protect your pet’s future: (562) 219-3290.

On Saturday, July 12, 2008, Foresight Legal’s Tom Martin gave a presentation to the Coachella Valley Couples – a gay and lesbian social group – about the pros and cons of gay marriage and domestic partnerships in California. There were over 50 attendees at the Rainbow Senior Center in Cathedral City. Three news agencies, including CBS Channel 2 News, covered the event.

In discussing the issue of the lack of federal recognition of same sex marriage, Mr. Martin referenced the 1997 study conducted by General Counsel to the General Accounting Office. The study noted 1049 federal laws and 13 areas of federal law in which marital status is a factor. A link to that study is available here.

Also, an excellent source of additional information about marriage for same sex couples in California is available from Lambda Legal here.

The California Supreme Court’s decision, overturning the ban on gay marriage, is available here.

Probate filing fees in the State of California are based on a sliding scale depending on the size of your estate.

Under California Government Code Sections 26827 and 68087:

The filing fee for an estate under $250,000 = $320
…at least $250,000 and under $500,000 = $385
…at least $500,000 and under $750,000 = $485
…at least $750,000 and under $1,000,000 = $635
…at least $1,000,000 and under $1,500,000 = $1,135
…at least $1,500,000 and under $2,000,000 = $2,135
…at least $2,000,000 and under $2,500,000 = $2,635
…at least $2,500,000 and under $3,500,000 = $3,635
…of $3,500,000 and over = $3,635 + 0.2% of estate’s value over $3.5M

Recently, Justice Kenneth Yegan, in his opinion for the California Court of Appeal, called this fee filing scheme as he saw it: “This appeal is about an estate or inheritance tax masquerading as a graduated probate court user or filing fee . . . .” The full opinion can be found here. (Estate of Claeyssens, Second District, Div. Six.)

Reports have already come in of the Superior Courts issuing refund orders of filing fees overpaid.