Death, taxes and student loans….

I saw this article on and thought it must be about student loans. The article is entitledThere’s No Escape: Death, Taxes and Student Loans. My thought was the article was about how student loan payback can’t be avoided. I know, for example, generally speaking student loan debts are not discharged in bankruptcy. However, I know Los Angeles bankruptcy attorney, Christine Wilton, was able to discharge student loan debt in a bankruptcy… but I digress.

However, this article runs deeper than just student loans. It mentions a case where a student died, actually committed suicide and so his loans were wiped away at death. However, loans that are forgiven are treated as INCOME.  You say that’s not fair!  I know, right!?

As this Forbes article explains the IRS isn’t warm and cuddly and they don’t care that it is not fair!

Anyway I encourage you to read this article as it deals with these issues which are very relevant for YOU when you are doing your estate planning.  Read about death, taxes and student loans here!


Listing all assets in estate planning

Below I have posted a sample of the information we like to have when we do estate planning. Though we do not require the information it’s helpful to us. It’s helpful in different ways. Let’s discuss.

First, the dollar amounts are certainly not required but knowing the approximate estate size helps determine what plan is right for YOU.  Often clients do not think about the true size of their estate until they put it on paper. Often it adds up to more than they thought. That is, by the time you add your IRA, 401k, life insurance, and other things to your home equity and savings accounts the value can jump up!

Second, we can’t fully fund a trust if we don’t know about all your accounts.  Having the name, account number and address helps us to help you fund the trust!

Third, it’s a great help to your family, friends, loved ones and trustees later. That is, at your incapacity or death how do they know what assets exist? The only way they know is if they have a list. Where do they get a list? From YOU.

Here’s a sample of the questions we go over with you during the estate planning process.


1)      CASH AND SAVINGS (Please supply bank name, address and account number)

Checking Account                   $ ___________

Certificates of Deposit (CDs)  $ ___________

Credit Union                            $ ___________

Savings Account                      $ ___________

Money Market                         $ ___________

TOTAL CASH AND SAVINGS                                $ ______________


2)     MARKETABLE SECURITIES (Please include bank name, address and account number)

Stocks                                      $ ___________

Bonds                                      $ ___________

Mutual Funds                          $ ___________

Annuities                                 $ ___________

Gold and Silver                       $ ___________

TOTAL OF MARKET SECURITIES                       $ ______________


3)     REAL ESTATE  (Please list address, city and state)



i.   _______________________________           ______________________________________

ii.  _______________________________           ______________________________________

iii. _______________________________           ______________________________________

TOTAL EQUITY IN REAL ESTATE                      $ _______________



4)     FIXED AND OTHER ASSETS (Please supply additional information if available)


Business Interests                    $ ___________

Limited Partnerships               $ ___________

Notes Due                               $ ___________

TOTAL OF FIXED AND OTHER                           $ ________________


5)     RETIREMENT PLANS (Please bring bank name, address and account number)


IRA (Standard Deductible)      $ ___________

IRA (Roth IRA)                       $ ___________

Keogh                                      $ ___________

SEP                                         $ ___________

401k                                        $ ___________

403B                                        $ ___________

Profit Sharing Plan                  $ ___________

TSA                                         $ ___________

ESOP                                      $ ___________

PASOP                                    $ ___________

Deferred Compensation          $ ___________

Pension Plan                            $ ___________

TOTAL OF RETIREMENT PLANS                        $ ________________


6)     LIFE INSURANCE (Please list life insurance company and agent, if you know)


Face Value of Policy #1          $ ___________  (Term  or   Whole Life?)

Face Value of Policy #2          $ ___________  (Term  or   Whole Life?)

Face Value of Policy #3          $ ___________  (Term  or   Whole Life?)




7)      OTHER ASSETS (Cars, boats, collectibles, etc.)

$ ___________

$ ___________

TOTAL OF OTHER ASSETS                      $ ________________




GRAND TOTAL OF ALL ASSETS                        $ ________________

Segregate your assets in estate planning

I met recently with a single mom who has a few bucks in the bank in savings and CDs, a growing 401k and also a couple of life insurance policies.  With a minor child her focus is on protecting the assets for her child of course.  In her case a living trust is not mandatory but it certainly would make things easier for her chosen executor and trustee, and also much cheaper for her daughter. That is, much cheaper and more efficient, than a simple will or will with testamentary trust.

However, it does cost more now to get a living trust. There is no question about it. Legal fees are more and thus it costs more.  It costs more NOW but saves a lot of money LATER and makes for simple and efficient distribution. Thus a lot of people prefer the living trust to the standard will.

Now let’s talk about the segregation issue….

When you get married most people do not ask for a pre-nuptial agreement, or pre-nup, as it’s an uncomfortable topic.  Let me start by saying that segregating assets in a living trust is NOT as good as a living trust but it certainly goes a long way toward showing what are your assets. That is, what’s your separate property as opposed to community property you have with your spouse if you get married at a later date.

I thus encourage single people to get a trust and put all their assets into that trust. Once marriage I encourage them to not put another dime into that trust. To do would co-mingle the assets and that’s of course not good if you get divorced.  Holding assets in trust, and keeping them completely separate, does go a long way toward establishing what is one’s separate property.  I thus encourage you to get a trust and put your assets into that trust before marriage.

Also, once married make sure you amend your trust to reflect that you are married. That can open a whole can of worms if you die unexpectedly.

Contact me to discuss your estate!  -John

Using Bankruptcy in Probate

I spoke to a bankruptcy attorney recently who told me that a bankruptcy could be filed in a probate to stall the foreclosure sale of a home. I should clarify he was a bankruptcy and many other areas of law kind of guy; not a specialist.  I suggested he dig deeper as I had heard multiple times it could not be done in a probate. He emailed back the next day to say I was right. I love being right but am sorry that won’t work as I want my clients to have all options possible to them. Saving mom’s house can be important and if bankruptcy would work then it should be. However, are there other options!?

I recently spoke to a bankruptcy expert from Lakewood, California which is near Long Beach and Los Angeles.  Christine Wilton told me, “I think this whole using bankruptcy to stop other court actions can either be good faith or bad faith.  All debtors that file bankruptcy must do so in good faith.  Simply filing bankruptcy to forestall another court proceeding with no good faith to effectively deal with debt obligations is NOT good faith.  It could rise to the level of malpractice to use bankruptcy solely to frustrate a probate proceeding and/or simply to stop a foreclosure sale.”  Ms. Wilton has a lot of great blog posts on her blog, the Los Angeles Bankruptcy Law Monitor, including this one on using bankruptcy in civil litigation matters.

If you are thinking about filing a bankruptcy within a probate consider what other options might be available.  Possibly filing for an injunction to stop the sale would work!? Possibly merely sending a copy of the probate court documents, letters and order, would work!? The key is to work with an experienced probate attorney AND an experienced bankruptcy attorney.

If we can help please let us know. -John

A wedding gift to your family is to update your estate plan

Many people get married, or often re-married, but are not interested in giving much of their estate to their new spouse. If you find yourself in that position you need to update your estate plan upon marriage. If you fail to update your estate plan upon marriage your new spouse will have an AUTOMATIC INTEREST in your estate; beit a will or a trust.  You do not have to give your new spouse anything but you have to acknowledge you are now married.

If you fail to do this your spouse will be entitled to 100% of your community property and either 1/3 or 1/2 of your separate property depending on how many children you have, or even the entire estate in some situations.  Thus it is imperative that you review your estate plan upon marriage.  Update it before marriage and then confirm it right after your nuptials.

I have personally seen cases involving millions of dollars where the newly wed failed to plan and huge problems ensue.

Contact your estate planning attorney and update now! If you need an attorney we can help!  -John

Where to file a trust petition in California

In many cases it’s easy to determine where to file your trust petition. See California probate code sections 17000-17006 pasted below for ease of reference. In a probate case you file where the decedent lived at death. That is the county, in California, where they were last a resident. This can, in some cases, be unclear. For example, we often have cases where the decedent lived in Roseville (Placer county) for 50 years but 3 months before death moved to a nursing home in Carmichael (Sacramento county). Did they move their residence or were they just staying in Carmichael temporarily? You look at things like intent to move back home, was the home rented out, did they re-register to vote, etc…. In a trust it’s totally different.

In a trust it does not matter where the decedent resided. The correct county is where the principal place of trust business takes place. Well, if the trustee lives in Alaska how can you get into a California Court? That is, what if mom dies in Sacramento and son, the named successor trustee, lives in Alaska. I have looked at this a couple ways. I have used the theory of mom’s former home as being the place where mail is received and thus Sacramento county is still proper. I believe that’s a stretch though but it has worked. The probate code does allow for “…trustee or its representative who is primarily responsible
for the administration of the trust
.” Emphasis added. Who falls into that category? Am I as the attorney “primarily responsible for the administration of the trust?” I believe that argument will work in most counties in California but I would rather have a different theory if possible.

In any event, just remember that the rules for venue in a trust are completely different than for a standard probate case.



17000. (a) The superior court having jurisdiction over the trust
pursuant to this part has exclusive jurisdiction of proceedings
concerning the internal affairs of trusts.
(b) The superior court having jurisdiction over the trust pursuant
to this part has concurrent jurisdiction of the following:
(1) Actions and proceedings to determine the existence of trusts.
(2) Actions and proceedings by or against creditors or debtors of
(3) Other actions and proceedings involving trustees and third

17001. In proceedings commenced pursuant to this division, the
court is a court of general jurisdiction and has all the powers of
the superior court.

17002. (a) The principal place of administration of the trust is
the usual place where the day-to-day activity of the trust is carried
on by the trustee or its representative who is primarily responsible
for the administration of the trust.
(b) If the principal place of administration of the trust cannot
be determined under subdivision (a), it shall be determined as
(1) If the trust has a single trustee, the principal place of
administration of the trust is the trustee’s residence or usual place
of business.
(2) If the trust has more than one trustee, the principal place of
administration of the trust is the residence or usual place of
business of any of the cotrustees as agreed upon by them or, if not,
the residence or usual place of business of any of the cotrustees.

17003. Subject to Section 17004:
(a) By accepting the trusteeship of a trust having its principal
place of administration in this state the trustee submits personally
to the jurisdiction of the court under this division.
(b) To the extent of their interests in the trust, all
beneficiaries of a trust having its principal place of administration
in this state are subject to the jurisdiction of the court under
this division.

17004. The court may exercise jurisdiction in proceedings under
this division on any basis permitted by Section 410.10 of the Code of
Civil Procedure.

17005. (a) The proper county for commencement of a proceeding
pursuant to this division is either of the following:
(1) In the case of a living trust, the county where the principal
place of administration of the trust is located.
(2) In the case of a testamentary trust, either the county where
the decedent’s estate is administered or where the principal place of
administration of the trust is located.
(b) If a living trust has no trustee, the proper county for
commencement of a proceeding for appointing a trustee is the county
where the trust property, or some portion of the trust property, is
(c) Except as otherwise provided in subdivisions (a) and (b), the
proper county for commencement of a proceeding pursuant to this
division is determined by the rules applicable to civil actions

17006. There is no right to a jury trial in proceedings under this
division concerning the internal affairs of trusts.

No trustee named on trust… how to fix that….

There are many instances where a California trust ends up without a trustee in charge.  When I do estate planning I try to come up with a number of back-up choices and thus this doesn’t happen for clients when I do the estate plan. However, not everybody comes to me for their planning. Some only come to clean up messes created elsewhere.  The lack of a trustee is one of those messes. There are many reasons a trust can be without a trustee. Among those:

A person has died;

A person is sick or unable to act;

A person doesn’t want to act as trustee;

Any of 100 other reasons….

So, let’s say mom has died and has a trust that names daughter #1 as trustee and no back up. I have met with clients like that.  I advise them to put in a back up and they say they don’t need to because daughter #1 will do it. I go through the list of reasons that daughter #1 might not be able to act and usually I can get them to put a back up; another family member, a friend, a professional fiduciary, a professional (CPA or attorney), or a bank or other financial institution. There are many good options. In fact, I encourage people to put several options.

However, not all attorneys do this. Some accept mom’s idea and just have daughter #1 as successor trustee. Of course, daughter #1 has died or in some other way is unable to act and that’s when I am brought in… to CLEAN UP THE MESS.

Unfortunately, in many cases this involves going to probate Court and getting a Court order appointing a successor trustee. In some cases the beneficiaries are vote on a trustee but often the beneficiaries are minors or they don’t get along. Thus we end up going to probate Court.  The key here is planning ahead to avoid this problem!

Hopefully you are reading this during the planning process when the successor trustee situation can be properly addressed. If not, and death or disability have created a mess, contact me and I will fix it for you!


Just do it!

I had a great example today of why clients need to get their estate planning DONE; or as the Nike ads used to say… JUST DO IT!

A client came to me several months ago to update her estate plan.  She advised me that she basically wanted to disinherit her daughter. I made the changes within one week. I reached out to the client a few times and she always put me off.  I reminded her the documents were not in effect until signed.

No, she has not died…

She came in today to go over the proposed amendment. She asked what would happen if she died before she signs the amendment. I said her daughter would get 1/2 of her estate. She looked at me, stunned, and said, “I can’t have that… how can we change that?”  I politely pointed to the trust amendment, which she has been sitting on for 3 months, and said “you can sign this trust amendment.”  No she did not sign as she had a few very minor tweaks to make. Hopefully it won’t take 3 months to get her back in to sign!

We shall see….

Michael Jackson’s estate in the news

It seems that Katherine Jackson has a team of attorneys working on her behalf as Executor of the estate of her late son, Michael.  The latest has to do with possibly wrongful use of the pop star’s copyrights after death by Howard Mann. I will paste the link to the article on below. As a distant observer this estate continues to show you how NOT to do an estate plan. Here are a few observations of how you can do better than Michael:

1) have a trust;

2) put all your assets into the trust;

3) select a professional trustee.

Link to article here.

Ratings and Reviews

10.0John Bernard Palley
Wealth Counsel Member
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