No-Contest Clauses may not be effective unless properly inserted in most recent trust or will instrument

A no-contest clause or in terrorem clause, should be carefully drafted and implemented in estate planning to avoid potentially catastrophic consequences.  Such a clause can punish a person from filing a pleading in any court and result in disinheritance.  

Some people and some estate planners may insert a no-contest clause in the initial trust or will instrument and then years later draft an amendment to a trust or a codicil to a will or even a new instrument.  However, if the subsequent instrument does not include a no-contest clause or is not drafted properly to reference a prior no-contest clause then it may not be protected.  Also, if the original instrument does not properly refer to subsequent instrument(s) then such instrument(s) may not be protected.  This can be very problematic as a no-contest clause only applies to "protected instruments" under Probate Code section 21310.  Again, many no-contest clauses do not apply to future instruments (as such are not contemplated) and many amendments or subsequent wills may revoke prior instruments in their entirety. 

Even in situations where prior instruments are referenced as being given full effect, no-contest clauses have generally been narrowly construed and found to be ineffective.  The recent Court of Appeals case in Aviles v. Swearingen (2017) 2d Civil No. B281420, provides a prime example.  In that case a restatement and amendment of a trust incorporated terms of a prior trust (which had a no-contest clause) but did not specifically include a new no-contest clause, nor did it cite specifically to incorporating the old no-contest clause.  

If you find yourself in a litigation situation or potential dispute, it is best to consult with experienced counsel in such matters, such as the attorneys at the Demiris Law Firm to help guide you.

Avoiding Probate Without a Trust in California

A simple and often under-utilized tool to avoid probate of a decedent's estate in California when a person does not want to use a trust is to do so by way of establishing transfer on death beneficiary designations for one's accounts and property.  California allows a transfer on death transfer for real property as well as bank accounts and various brokerage accounts.  This is an often under-utilized or ignored tool for many people.  However, as with everything, there are pros and cons.  To best understand those pros and cons a consumer should contact an attorney experienced in probate law.

Trump's Proposal - Repeal of the estate tax


A recent New York Times article cited to president elect Donald J. Trump's campaign proposal to repeal the estate tax - what is referred to by some as the "death tax."  The article can be read in full by clicking below:

Interestingly enough, as the article points out, the existing estate tax only affects about 1% of the population - in other words 99% of the population is exempt under the existing format.  Nonetheless, a repeal of the estate tax could likely lead to promoting "dynastic" wealth by allowing generations to inherit large sums free of tax consequences (at least on the federal level - some states have "inheritance" taxes).  

If you are a person with an existing estate plan or one who is interested in estate planning, then it is a good idea to talk to your estate planning attorney and CPA about the pros and cons of the Trump plan and how implementation of a repeal could affect you and your family.


Forbes reports IRS Announcement of 2017 Estate and Gift Tax Limits

On October 25, 2016, Forbes online reported some helpful information for estate planners.  Forbes reported that the IRS had announced the estate and gift tax maximum exemption limits for 2017.  The article is below:

For 2017, the annual gift tax exclusion applies to the first $14,000 gifted per person.  Beyond that, the lifetime exemption amount for federal estate taxes and federal gift taxes bumped up to $5.49 million per person compared to $5.45 million in 2016.

2016 Federal Estate Tax Exemption and Gift Tax Exclusions Announced

The Internal Revenue Service (“IRS”) has announced that the estate tax exemption amount for 2016 will be $10.9 million per married couple and $5.45 million per individual.  This is an increase of $110,000 per individual – up from $5.34 million per individual in 2015. 

The annual maximum gift tax exclusion amount remains unchanged at $14,000 per individual.  This means that a couple with two children may gift up to $28,000 per child and none of the money gifted would count toward the maximum lifetime gift tax exemption amount.  The lifetime exclusion amount for gifts will be $5.45 million in 2016 as well.

This information is important for estate planners and individuals interested in long-term planning as amounts gifted or transferred after-death that exceed the exemption and exclusion limits may be taxed up to 40%.