California Business & Estate Planning

What Am I Going To Do About These Kids? They Just Seem To Do Nothing But Fight!

In my almost 40 years of estate planning, I have grown well accustomed to family feuds.  They are the “Mother’s Milk” of lawyers, made famous for centuries and responsible for an enormous body of law starting in the 15^th century.  I cannot begin to count the number of times I have told clients that a particular provision will just cause confusion or acrimony and that the courts, after their death, is no place to resolve a dysfunctional family.  Putting provisions in a trust or will that “get even” is the ultimate form of passive aggression. 

 

But even when there is no intention to exclude heirs, families can fight over the pieces.  It is incumbent on the living to sort this mess out before they are gone.  Dysfunction among siblings is no secret from parents who probably choose to ignore it for their own sanity.  Ignoring it in the estate documents, however, is an invitation to make things worse and a gift to at least two lawyers- the one challenging the estate and the one defending it. 

 

A recent story in the New York Times about John Steinbeck’s “little fishing place” on Noyac Bay in Sag Harbor, NY is a great tale of senseless bickering- this time ofer a small piece of property that in no way is worth the struggle.  Ah, if this was only unique!

 

My  very first trial was a contest over dividing up a parcel of property.  The land wasn’t worth all that much, but one heir just wasn’t going to compromise and for various reasons the land had to be physically partitioned.  The trial lasted 2 weeks with lots of experts.  All settlement proposals by my client were scorned by her brother.  In the end, the court divided the property, nobody was happy and it had to be sold to pay the attorney fees (primarily of the brother).  In the end, nobody got what they wanted.  Had the parents thought this through, the needs of both heirs could have been satisfied. 

 

Check out my February e-newsletter on Family Feuds and Common Blunders at www.tierneywatsonhealy.com

Just Give It To the Humane Society

When I was in law school I was clerking at a then “large” firm in San Francisco- all of 20 lawyers- it now has over 1000- when one of the partners became involved in the largest legal malpractice case of that time.  It was all over the wording of a will and the story is worth telling.  Most law students will find the case in their studies and I have certainly used it when teaching. 

It seems that the decedent was a tremendously wealthy animal lover- he even had his own zoo.  When he met with his lawyer to draft a will, he said he wanted to leave his entire estate, worth many millions, to “The Humane Society, local and national”

See any problem?  His lawyer did and that is why the plaintiff’s lost the lawsuit saying he was negligent in drafting the clause that way.  There was ample evidence that the client simply insisted on the wording and the attorney advised him against it in writing- fortunately for him. 

So did you see what was wrong?  It turns out there are hundreds, if not thousands of “Humane Societies” and the decedent didn’t say which one.  With millions at stake, hundreds of local societies filed appearances in the case and an equal number of lawyers spent a couple of years earning substantial fees attempting to prove that their client was the one the decedent had in mind. 

The lesson?  Be specific when you leave a bequest.  Lawyers should always find out the exact legal name of the charity before putting it in the trust.  It is surprising how many organizations have independent chapters- and only you know where you want the gift to go. 

To learn more go to my website at www.tierneywatsonhealy.com

This Time the Year-End List Makes Sense

    If you are like me you get sick of all the “year end planning” lists that every accountant and planner sends out.  I take a quick look at them, say “Yeah, that is something I should do” and then forget about it.  Things are a little different this year.  The tax laws could well go back to what they were when we were running surpluses- and that makes planning in 2010 all the more important.  Here is a list I found from Reuters that has some great advice.

·         If you’re an investor, take any long-term capital losses from stocks or mutual fund shares.

·         Lock in any capital gains this year, too. The top capital gains tax rate now is 15 percent; it’s scheduled to go up to 20 percent next year. Some are saying it may go even higher. So, it may make sense to sell appreciated assets and pay the tax now.

·         If you have a flexible spending account for health or childcare benefits, look at how much you have left and how long you have to use the money before it evaporates. Check with your employer / benefits counselor, as some accounts expire on December 31^st, while others allow you to use the funds until March.

·         Make the most of your deductions. This year, there is no limit on your itemized deductions, but starting next year, people earning more than $100,000 are likely to see their deductions limited. So, it makes sense to make any charitable contributions, or pay any deductible expenses before the end of the year.

Taking a current income tax deduction when you make a charitable donation is an integral aspect of tax-savvy charitable planning. To be sure you don’t miss out on opportunities that could impact your estate planning, consider scheduling an estate review now.  For more information check out www.tierneywatsonhealy.com.   

 

Bari Chronicles Episode 21 The Will Contest

Readers of this story may remember that Angela, wife of Augie Bari, died suddenly after having drafted a will that left her half of their community property estate to her daughter Maggie.  Maggie, it turns out, was the result of her long time affair with Bernardo and was therefore not Augie’s legitimate child.  Naturally everybody is upset by these developments and the family is now deciding whether to contest the will.

 

Portofino Van Steel once again found himself in the middle of a conflict of interest.  His client of 40 years, Augie Bari and Augie’s’ two children, Anna and Danny, were beside themselves over the “Angela Will” as they were now calling it and they wanted advice on what to do.  His dilemma was that he had represented both Augie and Angela for all these years- and for that matter had represented Bernie and Maggie (now Bernie’s daughter) on different occasions.  He decided to discuss the whole issue with Augie.

 

The two men met at the Exedra in the center of town and agreed to walk through the park as they discussed what Augie saw as “Porto’s problem”.

 

“I just don’t see where you have any problem, Porto.” Said Augie as he moved to pick up the pace on his corpulent attorney.

 

“But Augie, how could you not see the problem!  I’ve always represented Angela and this will is her last expression of how she wants her property to be distributed.  How can I advise you and the kids on how to fight her wishes?” Porto was struggling to keep up with Augie, who despite his age was “power walking” through the paths of the park.

 

“I’ll tell you why you don’t have a problem.  First, you are my attorney- not my dead wife’s attorney.   The only conflict of interest you have is that you represented both of us.  You were as surprised as all of us by the “Angela will” and what it said about Maggie- hell you had prepared a trust for the two of us just a year ago that left everything to me and then to the kids equally.”

 

“But Augie- you never signed that trust and you never put anything in it!  It’s just a piece of paper!” argued Porto.

 

“Yeah well, it may just be a piece of paper, but it is the way Angela would have written it if she hadn’t been influenced by that traitor Bernardo” 

 

“Is that how you hope to break the will?  By claiming that Bernardo had undue influence over Angela?” questioned Porto.

 

“I don’t know how I’m going to break the will, I just know I’m going to do it.  That’s your job, Porto.  Find me a theory and get the job done”

 

“Before I find any theories, Augie, I need to know how I can represent you.”

 

“I’ll tell you how.  Two weeks ago I sent you back to be sworn in as the consigliore of my family.  You made your choice to be bound by that code of ethics.  What is the rule on conflict of interest under the Consigliore Shotguns of Ethics?  I’ll tell you what it is:  ‘Don’t ever let one family member mess with another member’.  And also: ‘Don’t ever forget where your bread is buttered’”

 

Porto was left in the dust by the time Augie had finished giving him this lecture.  He knew, however, that Augie was right.  Despite his qualms about representing the remaining parts of the Bari family, he was bound to do so after having taken the consigliore oath.  Whatever might happen with his lawyer credential, his hope for the future- and the continued financial support of his 4^th wife Tiffany- rested with his new career.

 

Back in his paneled office overlooking Lake Merritt, Porto resolved his conflict of interest the way most lawyers and accountants do, by looking at the checkbook.  Now he needed to find some theory on how the will was going to be set aside.  It was not going to be easy.  Even though the effect of the will was to cause the estate to pay potentially millions of dollars of estate taxes and to disinherit Augie, Anna and her brother Danny, it seemed hard to imagine that the usual reasons for setting aside wills, undue influence or incompetence, were going to apply.  He needed to come up with another reason.

 

Just then the phone rang on his direct line.

 

“Porto here” he answered.

 

“Porto, this is Anna.  We have some news that might make your will fight a little easier.  Mom left another will, dated the same day as the other one- and it is completely different”

 

So Porto now has something to go to court with.  Whether it will be enough, whether it is legitimate (always a question when dealing with this family) are matters that will be left to future episodes.  Stay turned.