Monday, June 24, 2013

Finding a Better (and less bitter) Way to Divorce by Amy Alvis

Collaborate dispute resolution is a process that couples voluntarily may chose as an alternate way to resolve their issues in a divorce, legal separation, or other relationship termination without having to litigate issues in court. It is similar in ways to mediation however, it takes a more holistic approach by involving attorneys, counselors, financial advisors, tax advisors and any other professional who may be needed to help the parties settle their issues.  Unlike mediation, where no legal advice is provided to the parties by the mediator, the parties are each represented by legal counsel.

In order for this process to work both parties need to agree to participate in the collaborative process, typically in writing as well as the following:

1. They agree to fully disclose all relevant information to each other in the spirit of mutual cooperation and the avoidance of litigation.

2. They agree to act in good faith in the process and the goal of reaching a solution/settlement that is acceptable to each of them.

3. They each have their own attorney (typically one that is a collaborative practitioner or will act in such capacity) and accept that their attorney’s representation will end if the matter becomes contested. This is known as a “limited scope” representation.  This is also different than mediation where the parties may have an attorney advise them during mediation, but then later represent them in court if they are unable to reach an agreement in mediation.

4. The parties agree to engage the services of financial, tax, mental health, and/or other professionals to the extent their situation warrants, to evaluate the facts and then advise and make recommendations to the parties. These professionals will also stop their representation if the matter becomes contested.

The benefits of this process is that the parties feel much more in control of the outcome and solutions.  All persons involved become very familiar with the family, the financial issues, and all other relevant factors that go into the solution that becomes the mutual agreement.  Decisions are not left to the courts that often have very limited familiarity with the particular case and facts, nor really know the parties involved other than what they may see in their courtroom or read in the court pleadings. And finally, there is more trust in the process and confidence in the final agreement because the parties are each providing information to each other freely and openly.

To find out if collaborative practice is right for you, call Amy Alvis at Alvis Frantz and Associates at (925)  516-1617. Amy is a member of the International Academy of Collaborative Professionals.

Tuesday, November 20, 2012

Tips For Holiday Conversations about Estate Planning

This holiday season, as you gather with your family, is a perfect time to have those important conversations about what happens when someone passes away. One of the biggest causes of trust and probate litigation is as a result of lack of communication and in turn, mistrust and misunderstanding. Important questions to consider this holiday season are:

• What will happen when your parent’s pass away
• Have your parents done a will or trust, when was it last reviewed, and where is it?
• Who are their attorney, accountant, and financial advisor?
Here are some easy-to-use tips and conversation starters.
Tip #1 - Tell a story. When dealing with someone who is reluctant to discuss their plans, try telling them a story about someone you know, heard about, or have read about that had to deal with the struggles of someone’s death when there was no planning. (If you don’t have a story to tell, make one up)

Tip #2 - Just ask if your loved ones have done their estate planning. It doesn’t matter what age someone is, no one is guaranteed a long life. How often do you hear about a young mother or father losing their life? They most often have no plan in place. If your loved ones haven’t done their estate planning, encourage them to do so now.

Tip #3 - Confirm that they done what they said they did. If they have an estate plan, has it been updated recently? Have they transferred their assets into their trust? Having a trust or will alone is great but if it is not done the right way and not updated with new laws and life changes, it may not work as they imagine it will.
Tip #4 - Verify that their plan has been prepared or at least reviewed by an estate planning attorney. Not all attorneys handle estate planning but most will draft up a will for their clients. In addition, there are so many online do-it-yourself legal options out there, but cheaper is not better. Beware of trusts that try to be “one size fits all”. Estate plans are not “one size fits all”, they should be customized for your loved one’s needs.

Tip #5 - Know where they keep their estate plan documents. If no one knows where your family keeps their documents, how is anyone going to find them when they need them? Make sure that your loved ones tell you where those documents are located and that the trustee or executor can access them. Be cautious as well about safe deposit boxes. If you store documents there, be certain that person has access to the key and authorization on file with the bank to access the box.

Friday, August 3, 2012

Divorce and the Family Owned Business

Issues of family law and community property often arise in the course of business legal planning.   Although nobody likes to think about it, divorce happens.   As with many risks, the best way to minimize the potential for problems is a thorough understanding of the law and thoughtful planning.

California defines community property as any property acquired during marriage that is not acquired by gift or inheritance.  Although community property rules are a mainstay of the family law courts, they also are an important issue in the context of a family owned business. These rules apply to spouses as well as registered domestic partners in California

One area where this comes up frequently is the manner in which stock in a Corporation or membership in an LLC is held.  If a couple is incorporating a business or starting an LLC, they must decide how they want to hold title and what their respective ownership rights will be.  Just like with title to real property, corporate stock or LLC memberships can be held in a variety of different forms, each with their own implications.  Each situation and circumstance is unique and calls for a thoughtful decision to be made by the couple.  A consultation with an attorney to discuss how to hold ownership interests in a business can help minimize problems later in the event of a divorce and can also be extremely beneficial with respect to the couples’ estate planning.

No matter how the ownership interests are held, divorce of business owner spouses may be a difficult challenge to overcome.  If the couple is not able to continue to work and run the business together, then the couple may need to sell the business to an outsider or have one spouse or partner keep the business and offset the value with other marital assets.  Both of these latter options require a proper valuation of the business which is often difficult once owners are no longer on the same page.   If the business owners define in advance the methods and manner they will use to value their business, it can reduce valuation and litigation expenses in the future.

Although nobody plans for divorce, it is a reality that must be addressed in business planning for spouses and domestic partners.  Couples entering into business together should understand California’s community property rules and should hold title to the business in a way that best suits their needs.  If you and your spouse own a business or are starting a business, call Alvis Frantz and Associates 925-516-1617 or email to schedule a consultation now, to protect for tomorrow. 

Disclaimer: The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.

This information on this site is designed to provide a general overview with regard to the subject matter covered and may not be state specific. The authors, publisher and host are not providing legal, accounting, tax or other specific advice to your situation.

Copyright © 2012 Alvis Frantz and Associates.

Thursday, November 17, 2011

Choosing Trustees for Irrevocable Trust

Irrevocable trusts are created in two ways:

1.  A revocable trust becomes irrevocable after the grantor has died.

2.  An irrevocable trust is established while the grantor is living to save estate taxes (by removing assets from the grantor's estate) and/or for asset protection or Medicaid planning.
While a grantor may technically be allowed to serve as the trustee of an irrevocable trust he/she creates, it is not a good idea at best. That is because if the grantor has any discretion with trust asset distributions, it could lead to inclusion of the trust assets in his estate for tax, Medicaid and other purposes, which could frustrate the trust's objectives.
Often there is someone the grantor knows who the grantor suggests to be the trustee. Typical choices are the grantor's spouse, sibling, child, or friend. Any of these may be an acceptable choice from a legal perspective, but may be a poor choice for other reasons.  Client trustee appointments will frequently be made with little consideration of the qualifications the trustee should have. Likewise, those who agree to be trustees typically have no idea what they are getting into. Non-professional trustees often are overworked, underpaid, unappreciated, find they are dealing with unhappy and unappreciative beneficiaries, and may even wind up being sued by the beneficiaries.

Non-Tax Considerations for Selecting a Trustee

·         Judgment: Clients typically want their trustee to make the same decisions they would. Someone who shares the grantor's values, virtues, spending habits and faith is more likely to do this. Also, consider whether the trustee candidate will be aware of his own capabilities and weaknesses. If the trustee candidate does not have accounting or investment experience, would he/she have the judgment to admit this and engage an appropriate qualified professional?  

·         Availability/Location: Does this trustee candidate have the time required to be a trustee? Will he/she be available when needed or will work and/or family demands leave too little time for trust responsibilities? Where does the candidate live? If the trustee lives in a place different than the trust situs, different laws may apply. Is living near the beneficiary important?

·         Longevity: How long will the trustee be needed? Many grantors are most comfortable with friends who share their values and have gained wisdom from life experiences, but someone near the grantor's age may not live long enough to fulfill the job. A trust established for the grantor's child will likely need a trustee for many years to come. Thus, for trusts that may last a long time, a corporate trustee is often the preferred choice.

·         Impartiality: The trustee must be capable of being impartial among the beneficiaries. This is especially difficult to do if the trustee is one of several beneficiaries. Corporate trustees, because they can be impartial, are often chosen to prevent a sibling or relative from being placed in an uncomfortable (and often unfair) position.

·         Interpersonal Skills: The trustee needs to be able to communicate well and effectively to the beneficiaries and to professionals who may be involved with the trust. Some people may be good record keepers or investors, but lousy at diplomacy or feel intimidated or even be offended if a beneficiary gets an attorney. A good trustee will need to be able to work calmly and well with all involved.

·         Attention to Detail: Does the trustee understand the serious duties that come with the job and is he/she willing to be accountable for his/her actions? Fiduciaries are often thought by the beneficiaries to be guilty until proven innocent. While it may not happen, the trustee should assume he/she will be sued at some point and keep meticulous records as a ready defense. A trustee who expects to be sued will be much better prepared than one who doesn't think it will happen and, as a result, does not take the record keeping requirement seriously.

·         Investment Experience: While it is helpful to have investment experience, the trustee can certainly get by without it, as long as he/she recognizes this is an area for which to secure professional help. Also, if the trustee lives in a place different than the trust situs, different investment laws may apply, making it especially prudent or even essential to seek professional assistance.

·         Fees: The non-professional trustee rarely discusses fees with the beneficiaries. Often, family members and friends will not charge a fee for their services out of a sense of family duty or respect for the grantor. But trustees should be paid and, more often than not, an unpaid trustee will eventually come to that conclusion or fail to diligently carry out his duties. From the outset, a trustee should keep close track of time and expenses so that a reasonable fee can be substantiated. Generally, a reasonable fee is what a corporate trustee would charge, so thinking that a non-corporate trustee will do the same necessary work for less is false economy.

·         Insurance: Anyone serving as a trustee needs to have plenty of insurance (errors and omissions or liability). Some of the laws that govern trustees are absolute standards, so a trustee needs to have adequate insurance for protection in the event of a mistake or an innocent error. The amount of insurance needed can depend on the degree to which a trustee is indemnified. However, legal defense costs in trustee litigation can be very large and are typically borne by the insurer.

·         Indemnification: This often comes up when family members or friends are serving as trustee. Grantors want to indemnify family members and their friends; they do not want them to be sued. It is possible to reduce or eliminate the prudent investor rule for such trustees. However, indemnification is a two-edged sword because it may result in the non-professional trustee not taking the job seriously.
Tax Considerations
·         Estate Tax:  If a purpose of the trust is to remove assets from the grantor's estate, the grantor cannot have any role in determining who gets distributions or when they occur. However, the grantor can have the power to remove and replace the trustee or to control the investments of the trust. Neither of those will cause estate tax inclusion providing the grantor cannot appoint a trustee who is related or subordinate to the grantor (as would be a brother, employee or someone else who will capitulate to the grantor's wishes). Interestingly, there is no problem appointing, at the inception of the trust, an initial or successor trustee who is related or subordinate to the grantor.

·         Income Tax:  A non-adverse trustee having certain powers may trigger grantor trust rules and cause the grantor to be taxed on the trust's income. In some instances the client may not want the tax to come back to the grantor and instead want a trust that is a separate tax-paying entity for which the income that is distributed to the beneficiaries is to be taxed to the beneficiaries.  Because the trustee’s identity may affect state income tax as well, you may be able to shift the trust situs to a state with a lower income tax rate.  Depending on the trust assets, this could be important as some investments (such as oil and gas) may be taxed significantly higher in some states than in others.
Beneficiary Removal and Replacement of Trustee
This is an area that is customizable for each trust and can help maintain some downstream flexibility. Some grantors may not want the beneficiaries to be able to remove the trustee, especially if the grantor is aware of family quarreling. But if the corporate or individual trustee knows it cannot be replaced there is little need for responsiveness or careful attention to investments. Because there does need to be a way to have the trustee removed if things should deteriorate, the document can include that the trustee can only be removed for cause as determined by the court. On the other end, spendthrifts may want to "trustee shop" until they find one that will do whatever they want, so there will need to be some restraints on when a trustee can be replaced.
Team Approach
There are times when a team can do a better job than a single trustee. Having more than one trustee, even with different duties and responsibilities, can work well for many situations. The trust can benefit from assigning the trustees specific duties based on their strengths and experience. Of course, the fewer people who are involved, the less complicated the administration. Also, disagreements will have to be worked out. If there are two trustees or any even number, deadlocks are possible. With an odd number, a simple majority would be needed. If an agreement cannot be reached, the court can be allowed to intervene as a last resort.

Also, family member trustees can work with professionals as paid advisors instead of as trustees. This would allow the advisors to provide valuable input and insight into both the grantor's desires and the personalities of the beneficiaries, without being so exposed to possible lawsuits.
A competent trustee is as important to the success of a trust as its being well-drafted. Naming a favorite family member as trustee may not be the smartest (or kindest) thing the grantor can do. As experienced professionals who have seen the consequences of unwise choices for trustee, we must counsel our clients with their and their beneficiaries' best interests in mind.

Disclaimer: The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.

This information on this site is designed to provide a general overview with regard to the subject matter covered and may not be state specific. The authors, publisher and host are not providing legal, accounting, tax or other specific advice to your situation.

Copyright © 2011 Alvis Frantz and Associates.

Monday, November 14, 2011

The Holidays are Approaching: What are your Estate Planning Resolutions?

Maybe you’ve been thinking about getting your affairs in order for a while or maybe you’re just starting to look into it. Perhaps you recently experienced a milestone event such as a new marriage, home purchase, or child birth, and are realizing you want to protect what is dearest to you. Or perhaps you recently lost a loved one and are feeling some perspective. In any case, procrastination should not get in the way of securing your family’s future by creating an estate plan.

Make this holiday season the time you resolve to do something!

1. If you have young children it is imperative that you have a will in place that provides them with suitable  guardians should a worst case scenario come to pass. You might also want to set up a trust for them to handle any assets you would want to support them and so that you can control how their inheritance is managed even after they turn 18. Parents: don’t let another day go by without having a solid backup plan for your children’s future!

2. If you have an older estate plan but have since gotten married, divorced, or had a child, you should revisit your plan with an estate planning attorney. A new marriage or birth of a child may make your old plan invalid and subject to contest. Additionally, the old any previously existing wills and a new addition to your family is not necessarily covered under an old plan.

3. If you have a loved one who is getting on in years and may one day be a candidate for assisted living, don’t wait to act until your options are limited. Medicaid has a five-year look back period on asset transfers. The  best time to plan for the high cost of elder services is well before they are actually needed. This year, make the elders in your life a priority!

4. If you have lost a spouse during this past year, having an attorney review your estate plan and ensure that the trust administration procedures have been properly followed is very important. 

The upcoming Holidays and New Year is a great time to think about the people who are important in your life. Contact Amy Alvis at Alvis Frantz and Associates today to discuss how you can best provide for them
though many new years.

The information provided is for informational purposes only and not for the purpose of providing
legal advice. You should contact an attorney to obtain advice with respect to your particular issue
or problem. 

(925) 516-1617

Tuesday, August 2, 2011


Question: My husband and I hold title to our home as husband and wife as community property. Does that mean if he dies, I will automatically own that property?

Answer: The answer is not always an absolute “yes” to this question.

There are various ways people can hold title to assets. Often, how people hold title on their property, such as real estate and bank accounts, may be the only estate planning they have done. Unfortunately, it may NOT always be what their estate planning wishes are. Additionally, if people have done a trust and/or a will, how they hold title to some of their assets may completely conflict and sometime even override what their trust or will provides.

For example, let’s say you and your husband bought your home last year and took title as “husband and wife, as community property”. It was your mutual intent that when one of you dies, the other will own the home 100% and without any court involvement. Now, if you and your husband have no will or trust or if your will or trust provides that all your community property shall pass to the surviving spouse, then the answer to the question would be “yes”.

But now let’s say your husband has a will which provides that upon his death, all of his estate (this includes his separate property and his 50% interest in the community property) is to be shared equally between you and his two children from his first marriage. In this scenario, when your husband dies, you would NOT inherit his entire share of the home, but would have to split it (along with the rest of his estate) with his two children. The reason is that in 2001, California adopted a new form of title “community property with right of survivorship”. This is different than the form of title “community property”. When someone holds title as “community property” it provides a person the ability to bequeath their ownership interest in their community property assets to someone other than a surviving spouse through wills or trust. When you hold title as “community property with right of survivorship”, you cannot. The surviving spouse becomes the sole surviving owner of all community property under this form of title, regardless of what wills or trusts may provide. This is similar to joint tenancy where the surviving joint tenant becomes sole owner upon death.

So what does the form of title say about you and your estate plan? To find out more and call 925-516-1617 to schedule a consultation at ALVIS FRANTZ AND ASSOCIATES, where your legal challenges just got easier!

Disclaimer: The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.

This information on this site is designed to provide a general overview with regard to the subject matter covered and may not be state specific. The authors, publisher and host are not providing legal, accounting, tax or other specific advice to your situation.

Copyright © 2011 Alvis Frantz and Associates.

Tuesday, July 19, 2011

When a spouse dies

So today I have to go to court for a hearing to appoint my client as administrator of his wife's estate. Why? Because they had no plannin other than joint tenancy and the wife had received a large inheritance before death that was never deposited into thei joint account. This was therefore her separate property and therefore does not just pass outright to her husband. Now we need to open a probate and the money will be shared by husband and their two kids.