My blog has moved!

You should be automatically redirected in 6 seconds. If not, visit the page Planner's Thoughts at
and update your bookmarks.

Sunday, August 10, 2008

A New Pet Trust Statute for Californians

The California Legislature recently enacted a new Pet Trust Statute. Delaware recently enacted a similar law. Here are some highlights of California's new law, which will be placed in the California Probate Code as section 15212 :

• Lawful for a non charitable purpose. The new law would make the creation of a pet trust lawful for purpose of caring for a domestic animal so long as the animal is alive.

• Principal and Income of the Trust. The principal and income of the trust may not be used for any purpose other than for the care of the animal, unless specified otherwise in the trust instrument.

• Enforcement of Principal and Income Provisions. The person authorized in the trust instrument to enforce the principal and income provisions has the authority to file an appropriate petition in the Superior Court, as may any person having an interest in the animal’s welfare. A charitable organization having as its principal activity the care of animals may enforce the trust provisions. Otherwise, the court may appoint a trust enforcer. Any such person (including the charitable organization) may inspect the animal, or see the books of the trust.

• Appointment of a Trustee. The Court may appoint a trustee if none is named in the trust instrument.

• Upon the Death of the Animal. The new law specifies a manner of distribution to remainder beneficiaries upon the death of the animal, unless otherwise provided in the trust instrument.

• Accountings. Usually, accountings are required for a trust. However, the animal obviously cannot evaluate an account. Thus, accounts are to be given to the remainder beneficiaries. However, accounts are not required of any pet trust having a value of less than $40,000.

(A hat tip to Professor Beyer for bringing this to my attention).

Sunday, August 3, 2008

Confessions of a Southern California Estate Planning attorney, Part II (We are all business owners)

Last time I addressed the natural reaction most have when considering our estate plans. What I mean, of course, is the natural procrastination. Estate planning reminds us of our mortality -- something many of us simply do not wish to face.

However, there is another way of thinking about this subject. In point of fact, each one of us is a business owner. You might ask, "what do you mean that I am a business owner? I've never paid any one's salary, and I have always had a 'W-2.' I have never owned a business in my life."

Au contraire!

Each of us are business owners, believe it or not. All of us are. Some of our businesses are well run, while others are not. But our financial affairs constitute a business. Now, our household "business" plans might differ -- for example, a childless couple might have what is in effect a business plan to maintain a high standard of living, while also reserving funds to contribute to a religious group or church. On the other hand a couple with 4 children might have as their plan the goal of an average or "adequate" standard of living while helping their children as much as possible to go to college.

Now all of us want our businesses to profit (i.e., have savings and retirement funds). We of course want to maintain a high cash flow, and we sometimes even do marketing, by changing jobs. As in the case of a business-for-profit, some household "businesses" flourish, while others go bankrupt.

There is however another aspect of running our businesses. Whether we admit it or not, we all have a financial plan through our household budgeting. Like all businesses, we also have a succession plan. Our business plans necessarily affect those who follow us -- often it is children. Sometimes, it is our "significant other," or a bother or sister. Here are some common succession goals achieved on behalf of our household "business," through what is often called "estate planning":

Care of our "successors." Many with children do not realize that they forfeit control over appointing guardians for their children if they fail to make the designation in a will. A guardian will be chosen either way -- usually by a judge. Without a designation in a will, the care giver may be someone we would never want to have a hand in raising our children.

Saving the company's taxes. Taxes eat up a significant share of many estates. Proper estate planning can minimize these costs.

Distribution of the company's assets. Without a will or trust, estate assets will be distributed to those individuals designated by statute, under the so-called "law of intestacy." This may or may not be the desired result.

Save your company's assets. Probate is expensive. In California, probate attorney's fees are set forth in a schedule and are based upon the assets of an estate. Given fairly high property values (yes, even now, values are still at historical highs) the cost of administration can easily exceed $10,000 or $15,000 in major metropolitan areas. Choosing a trust can significantly reduce the cost to your estate. Of course, the lower the payment to an attorney for his or her fees means more money to distribute to heirs.

Next time, I will provide some "tips" for choosing an attorney -- and how to plan for the visit.