Misconceptions about Financial Powers of Attorney- Each of the following statements is false

1. Financial powers of attorney allow your agent to act when you want him or her to act, but they prevent your agent from acting when you don’t want him or her to act.
2. If your bank or broker has its own power of attorney form, you don’t have to use that particular form.
3. Your agent can wait until you have become incapacitated before he or she turns in the financial power of attorney form (that you previously signed) to the bank or broker.
4. Your agent does not have the ability to use the financial power of attorney form for the agent’s own benefit.
5. If all your assets are titled in your revocable trust and you become incapacitated, your successor trustee will not be able to act unless you have previously given him a financial power of attorney.

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New IRS Form 8971

On the later of March 31, 2016 or 30 days after the filing of an estate tax return (form 706), for 706s filed after July 31, 2015, the filer is also required to file form 8971 with the IRS and to furnish persons receiving assets from the decedent with Schedule A to that form containing information on the value per the 706 of assets which that beneficiary received or will receive.

The recipient beneficiary will be subject to penalties if he or she fails to adhere to a duty to treat the items received consistently with their 706 values for the beneficiary’s income tax purposes. The filer is subject to penalties for failure to timely and/or completely file the 8971, and for failure to file a supplementary 8971 either based on assets discovered after the filing or based on changes to the 706 values that have been finalized on audit or through a court proceeding.

This filing requirement only applies for 706s which are required to be filed based on the size of the estate. This filing requirement is not required for 706s that are only filed to elect portability.

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End of Life Option Act

On October 5, 2015, Governor Brown signed Assembly Bill No. 15 authorizing the following procedure:

The patient must be at least 18 years old and has established that he or she is a California resident.

He or she has submitted two oral requests, a minimum of 15 days apart, and a written request to his or her attending physician seeking to obtain a prescription for an aid-in-dying drug in the form prescribed by the act.

The request was signed and dated in the presence of two witnesses by the individual seeking the aid-in-dying drug and was witnessed by at least two other adult persons, who, in the presence of the individual,  attest that to the best of their knowledge and belief the individual is all of the following: (A) personally known to them or has provided proof of identity. (B) Voluntarily signed this request in their presence. (C) They believe he or she is of sound mind and not under duress, fraud, or undue influence. (D) Not an individual for whom either of them is the attending physician, consulting physician, or mental health specialist.

Only one of the two witnesses at the time the written request is signed may: (1) be related to the qualified individual by blood, marriage, registered domestic partnership, or adoption or be entitled to a portion of the individual’s estate upon death. (2) own, operate, or be employed at a health care facility where the individual is receiving medical treatment or resides.

The attending physician, consulting physician, or mental health specialist of the individual shall not be one of the witnesses.

His or her attending physican, consulting physician, psychiatrist or psychologist is of the opinion that he or she has the ability to understand the nature and consequences of a health care decision, the ability to understand its significant benefits, risks, and alternatives, and the ability to make and communicate an informed decision to health care providers.

He or she must have made an informed decision.

His or her decision must have been made after being informed by his or her attending physician of (1) His or her medical diagnosis and prognosis. (2) The potential risks associated with taking the drug to be prescribed. (3) The probable result of taking the drug to be prescribed. (4) The possibility that the individual may choose not to obtain the drug or may obtain the drug but may decide not to ingest it. (5) The feasible alternatives or additional treatment opportunities, including, but not limited to, comfort care, hospice care, palliative care, and pain control.

His or her attending physician must have directly and not through a designee offered the individual an opportunity to withdraw or rescind the request.

He or she has been determined by his or her attending physician to be suffering from an incurable and irreversible disease that has been medically confirmed and will, within reasonable medical judgment, result in death within six months and this determination has been confirmed by the consulting physician who has examined the individual and the individual’s relevant medical records and who is independent from the attending physician and who is qualified by specialty or experience to make a professional diagnosis and prognosis regarding an individual’s terminal disease.

He or she has the physical and mental ability to self-administer the aid-in-dying drug.

He or she has made a direct and voluntary request for a drug prescribed pursuant to this act for the purpose of ending his or her life.

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Finding The Correct Title Insurance Policy

I have sent clients of mine who have bought real estate individually and who have later transferred the real estate into a revocable trust a letter asking them to call their title insurance company to request a CLTA 107.9 endorsement to add their trust as an additional insured. In my letter, I am referring to the title insurance policy that was issued to the owner when the real estate was originally purchased. The real estate may have been refinanced one or more times after the purchase and on each refinance the lender was issued a lender’s title insurance policy. But the client/owner is not insured under the lender’s title insurance policy. Therefore, the client needs to find the title insurance policy issued to him or her or them when the property was originally purchased and the client needs to call that particular title insurance company to request an endorsement.

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Making Sure Your Title Insurance Policy Will Be In Force When You Need It

When real estate is purchased, the buyer typically also buys a title insurance policy. When the buyer later sells, if there is a problem with title to the property, the title insurance company is obligated to take care of it. It has come to my attention that some title insurance companies may deny coverage where after the property was purchased it was transferred to a revocable living trust. This problem can be taken care of by obtaining a CLTA 107.9 endorsement adding the trust as an additional insured. The small cost of obtaining this endorsement is worth it and will give the owner of real estate that has been transferred to a trust peace of mind. PLEASE TAKE THIS REMINDER SERIOUSLY AND MOVE FORWARD TO OBTAIN THESE ENDORSEMENTS FROM ALL RELEVANT TITLE INSURANCE COMPANIES AS SOON AS POSSIBLE. TELL YOUR FRIENDS ABOUT THIS TOO!

Posted in Estate Planning, Law, special needs, Super Lawyer, taxes, title, title insurance, Trusts, Uncategorized, wills | Leave a comment

Portability- The Best Kept Secre

Recently the IRS released statistics for federal estate tax returns (form 706s) filed in 2011, which was the first year of portability (the ability of the surviving spouse to add the deceased spouse’s estate tax exemption to the surviving spouse’s estate tax exemption by filing a timely form 706). There were 1,565 non-taxable form 706s filed for California decedents dying in 2011. It is likely that most of these non-taxable returns were filed by the surviving spouse to elect portability. Given California’s large population, this is a very low number. It is likely that many surviving spouses failed to file a timely form 706 for their deceased spouses because they did not understand that portability was available. Further, there is no guarantee that the current $5,430,000 exemption equivalent will not be lowered (President Obama has a proposal which would lower it to $3,500,000). Lets get the word out!

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Homestead

Some people have recorded a document entitled homestead indicating that they want a certain dollar amount of the value of their principal residence to be protected from their creditors. Some companies even solicit people to have the company prepare and record the homestead on the homeowner’s behalf. But California law grants owners of a home a homestead, whether or not a document has been recorded. Stated differently, a certain dollar amount of a person’s personal residence is protected from creditors whether or not a written homestead document has been recorded on the home. This benefit that California law gives to homeowners is sometimes called a statutory homestead.

Recorded homesteads and statutory homesteads do not interfere with the sale of the residence.Recorded homesteads and statutory homesteads do not interfere with the placing of a mortgage (note secured by deed of trust) on the residence. Recorded homesteads and statutory homesteads do not interfere with a later transfer of the residence to a revocable living trust.

Assuming that a creditor obtains a judgment against a homeowner and that the homeowner’s equity in his or her home exceeds the dollar amount that is protected by the homestead, the creditor can force the home to be sold and the creditor can get that excess amount in satisfaction of the judgment.

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