It’s been a difficult year for many, but I
am grateful for the Covid vaccine and hopeful that life will go back to
normal soon. I
wish you all a very happy holidays!
There have been
some inflation adjustments in estate and gift tax:
The estate tax
exclusion for 2022 is $12.06 million; and
The annual gift tax
exclusion is
$16,000.
Although President
Biden’s original infrastructure proposal would have been paid for
partially with an increase in
the estate tax, that component will not likely be in the final federal
tax bill.
Income tax and capital gains rates may change in the near future, but
the estate tax exclusion
amount is not scheduled to change until January 1, 2026, when the amount
will drop by
half.
Delays
in Court Procedures
Our local courts
have had many issues this year, primarily due to Covid. Although
we have shifted most of
our hearings to Microsoft Teams and most filings are handled through an
e-filing portal,
ultimately many people are needed to review the paperwork and the court
is understaffed.
This Fall in the Santa Clara County probate department, it’s taken more
than a month for
documents submitted for e-filing to be reviewed by a clerk for
scheduling. And, then the
matter is scheduled for six or eight weeks in the future. This
means once a client signs
the court paperwork, it can take up to three months for a judge to
review the
matter! Living trusts, powers of attorney, and advance
health care directives are
great ways to help avoid complications, minimize (or eliminate court
involvement), and ensure
that your wishes are carried-out. I strongly urge you to review
your signed paperwork, and
make sure you are still happy with your listed fiduciaries and
beneficiaries. And, if
you’ve been delaying signing your paperwork, please make it your New
Years’ resolution to
finalize your estate plan in the new year.
Ethical
Issues
As the pandemic
continued throughout 2021, we’ve all gotten a little “on edge”.
I’ve tried my best to show
patience and be as accommodating as possible to clients. If
appointments need to be moved
at the last minute, or there’s some confusion in instructions, I gladly
work to make sure my
clients get the best results with their estate planning. But,
there have been two ethical
issues that came up very frequently this year, which I feel the need to
address: (i) divorcing
clients and (ii) clients with diminished capacity.
Divorcing
Clients
When I first represent a married couple, I
send them an engagement letter that (i) goes over my fees, but also (ii)
states my
responsibility to the couple. I write that there can be no
confidentiality between the
three of us in the matter. I say that if I get an email from one
client, I can reply to
both clients’ email addresses. And I state that I cannot be an
advocate for one spouse
against the other (say in figuring out what is separate property and
what is community
property).
When clients divorce, I am prohibited by
California legal ethics rules from representing either or both spouses
without the written
consent of both of them. I also could be required to turn over my
file to either spouse’s
divorce attorney.
This year, I’ve had multiple clients
complain because I cannot represent them without their former spouse’s
consent.
Unfortunately, under California law there is no amount of time that can
override the conflict
and it doesn’t matter if I knew one client before the couple got
married. This conflict
must be waived by both spouses. I hate to lose clients who would
prefer to work with me,
but if it’s an acrimonious divorce and a spouse won’t agree to the
continued representation, it
really would be better if both former spouses started fresh with
independent
attorneys.
Clients with Diminished
Capacity
The other issue that has come up many times
this year is handling clients with diminished capacity. In all of
these instances, an
adult child (who is not a client in their own right) has called me to
tell me that the client
wants to change their estate plan and wants the child to schedule the
appointment. Then
the child drives the client to the appointment and tells me that the
client wants to either (i)
name that particular child as the trustee or (ii) give that child a
larger share of the
estate.
Please understand that I have been doing
this work for 25 years and I am on high alert for undue influence as
soon as the child makes the
appointment. In my experience, a person who really wants to change
their estate plan is
capable of scheduling the appointment themself. But, I do try to
keep an open mind and
talk with the client privately about what they want to
do.
In most cases, after the client’s child
leaves the room, the client immediately tells me exactly what the child
wants. I’m sure
the client was “primed” before the appointment. So, I try to
continue the conversation for
about ten minutes, asking the client about their living situation,
family circumstances,
financial concerns, and time and place. ( I actually had one client tell
me, “She [my daughter]
didn’t tell me you would ask me this.” I had asked her what day of
the week it was!)
I also ask the client multiple times about what they want to
change. If the client can’t
tell me what the documents currently state, or give me a clear answer or
explain why they want
to change the paperwork, I refuse to modify the estate
plan.
Believe me, I am not trying to trick the
client, and it pains me to see a client lose their capacity and memory,
but I also have to serve
as my client’s advocate at all costs and I cannot stand idly by and
draft documents for a person
who clearly doesn’t understand them. This year marked the first
time that the children of
clients actually yelled at me for a refusal to create new documents!
In one instance I
was actually fearful of my personal safety.
I’ve been told I’m not a doctor and I don’t
have the right to assess capacity. But, I do know the base level
of understanding that a
person must have to create a will or a trust. And if a client
can’t answer basic questions
and doesn’t know why they’re in my office, they are not in a position to
execute new
paperwork. The sad truth is the child will likely be able to find
another attorney to
assist them in changing the client’s documents, and if not the child
will probably draft the
paperwork themselves and find a notary who will acknowledge the client’s
signature. Under
California law, I’m not allowed to call Adult Protective Services or
alert my client’s other
children of my concerns, and I can’t send an email out to the attorneys
of the Silicon Valley
Bar Association telling them to avoid client’s child like the plague (or
like Covid). I
just have to stand back and watch it play out, and know that if it goes
to litigation, I’ll be a
witness and have to explain to a judge my
concerns.
Funding
Your Trust
I am thrilled that so many of my clients
have “funded” their trust by retitling their financial accounts and
updating the beneficiaries
of their retirement plans. But, for every ten clients who have
completed the paperwork, I
come across one or two who have done no funding, other than the transfer
of their home into
their trust as a part of their initial estate
planning.
If you transfer your assets into your trust
at your death, you make a huge gift to your trustee and family
members. A successor
trustee can step in as soon as they obtain a death certificate, and can
start handling accounts,
fix up and list your home for sale, and tackle numerous minute
transactions to clean up your
affairs. But, if your assets do not have a listed beneficiary and
are not in your trust,
and if they total more than $166,250 in value, it will be necessary to
file a petition in
probate court to move those assets in your trust. In Santa Clara
County, given the current
scheduling issues with the court, this could mean at least a six month
delay. And, if the
asset is a vacation home or other real estate out of California, this
will likely require a
probate in the other state, and therefore at least a year of court
paperwork.
If you have any questions about funding your
trust, I highly suggest looking through your blue estate planning
binder. And, if you need
any specific assistance about forms or requirements, please do not
hesitate to contact me
directly.
Client
Workflow/Vacation
I am incredibly grateful to many of you who
have referred your relatives, neighbors, and friends to me over the past
year. However, to
manage a decedent work-life balance there some cases I simply cannot
take, even though they fit
within the practice area of “estate planning”. I am typically in
the office from 8:30-5:30
M-F, and schedule my workflow to fit within that timeframe. I am
happy to discuss with you
before you make the referral. Thankfully, there are many attorneys
in the Silicon Valley
Bar Association who should be capable of taking the
case.
I will be working
limited hours until January 3. During my break, I will be
returning emergency messages and
scheduling appointments for January. Have a wonderful Holiday, and
I’ll look forward to
speaking with many of you in the New Year.
.png)
.png)
.png)
The information contained on this site is
not intended as legal
advice. You should consult qualified legal counsel before acting
on any information on this
site. Carol Elias Zolla is only licensed to practice law in the
State of California, and
will not advise anyone on the laws of any other state. If you
choose to send an email to
Carol, please do not include any confidential or sensitive
information. The law firm has no
duty to keep confidential the information you may transmit, and
your email will not form an
attorney-client relationship. If you choose to subscribe to our
newsletter, that will not
form an attorney-client relationship, and we will have no
affirmative duty to advise you of
changes in California or federal law.
