Winter 2008 Newsletter

Welcome to the Winter 2008 edition of our newsletter.

In this issue we want to showcase our new paralegal, Yana Rozovskaya. Yana received her education from the State University of Ukraine, in the City of Uzhgorod, from the Philology Department during 1985-1990. Her BA Degree in Philology was accompanied by a minor in Political Sciences. After she moved to the United States, she attended Merit Paralegal College, in Van Nuys, CA from1994-1995. As a paralegal, she manages all activities of the office She is responsible for handling all office events, scheduling client appointments, record keeping and filing, preparing outgoing and incoming correspondence, preparing pleadings, motions, discovery, subpoenas and the like, coordinating meetings and providing administrative support to the partners of the office. She also is skilled in evaluating potential cases over the phone, interviewing and obtaining information from clients and preparing various documents for Family Law, Probate and Estates cases.

Please return to our web site periodically

to check out in the E-Newsletter the activity in our courts and legislature in the areas of probate, trusts, conservatorships and family law. We also have received very positive feedback from our readers regarding our new and ever-improving web site. Please let us know if you have any suggestions for further improvement.

Avery and Frieda's Mediation Practice is thriving,

although after being presented with the protocols of Collaborative Law, clients often find the Collaborative Law process to be more rewarding, and at less cost emotionally and financially to the parties, than mediation. Clients wrongly assume that by employing a single mediator, they will be saving money. Sometimes that may prove itself to be true, but usually only when the Parties are coming from a position of equal strength in the financial aspects of their dissolution action and where the Parties have no major conflict with regard to the child custody aspects of the case. Often the Parties' emotional needs and feelings of lack of control prevent mediation from flowing as quickly and positively as it should. Clients also often are not aware of the fact that even if they are mediating their case, usually, they still must each retain counsel to assist them in reviewing the final agreement and the paperwork and pleadings which are needed to finalize the case.

Mediation is often more appropriate

in probate and civil litigation matters, which areas of law that Cooper-Gordon LLP is also capable of handling as mediators. Sometimes, rather than full mediation of all issues in a case, the Parties can agree to submit to mediation of selected issues, not just in family law, where we might mediate such issues as custody and visitation or support or property division, but also issues in probate such as competency, reimbursement claims and the like. The attorney customarily will meet with both parties, flush out the issues and determine if the parties would be best suited for a mediation team or a single mediator. During the Collaborative process, a team of experts called coaches may be employed. For example, with children's issues, teaming up with a psychologist or marriage and family therapist is quite useful. Sometimes a financial planner or forensic accountant is valuable towards reaching a fair and expeditious settlement. In mediation, we recommend that each party have a consulting attorney, a job for which Avery and Frieda are also available.

Frieda and Avery both continue to be appointed

by the Court to represent children in family law matters as well as proposed conservatees in probate matters. Both areas of law are highly specialized and although often very difficult cases, they usually provide for a highly rewarding practice.

Since it is of interest to our clients and potential clients,

this month we want to provide information concerning retirement resources. Planning for retirement must include consideration of from where your retirement income will come. One resource is your Social Security. In divorce cases, we must take into consideration the social security interests of a Party, which may be community property. Social security is provided to workers and their spouses. Benefits can be received starting as young as the age of 62 for "early retirement" or commencing the age of 65 or 67 (depending on the year of your birth) for "full retirement." Your benefits are based upon what income you may have received over the course of your lifetime, up to a maximum amount. You can contact the Social Security Administration directly or by visiting their website (www.ssa.gov). People can rarely survive on what they receive from social security. The maximum benefit for a person retiring in 2008 at full retirement age is $2,185 per month and the non-working spouse's benefit is much less since he or she may not have earned as much during the marriage. However, if the marriage is of a greater duration than 9 years, upon divorce the non-working spouse can apply for and receive 50% of the amount that the working spouse is eligible to receive.

Many employers also offer retirement benefits packages

such as 401k()'s, 403(b)'s (for nonprofits) and Savings Incentive Match Plans for Employees (SIMPLEs). Many of us already are aware of 401(k)'s and 403(b)'s, which allow a maximum contribution in 2008 of $15,500 and those 50 years old or more may also contribute an additional $5,000, but which prevent the ability to withdraw any amounts prior to the age of 59½ without a 10% penalty. Of course since these are pre-tax contributions, any withdrawals are subject to income tax as well as (if applicable) the 10% penalty.

However, you may like to know more about SIMPLEs, which are used by small businesses with 100 or fewer employees. They allow participants to contribute up to $10,500 to a SIMPLE IRA or SIMPLE 401K IN 2008. Those of us age 50 and older may contribute an additional $2,500. Employer contributions may be either a 2% contribution to all eligible participants or a matching contribution which is usually 100% of the first 3% of compensation. Your contributions are all pre-tax and you defer any payment of taxes until you start to take withdrawals. Personal Retirement Savings, such as traditional IRA's and Roth IRA's also allow a certain amount of tax deferment. In 2008, the maximum is $5,000, plus those age 50 and older may contribute an extra $1,000. For a Roth IRA, which is similar, although not initially tax deductible, only taxpayers with an adjusted gross income (AGI) of $116,000 or less for single filers and $169,000 for joint filers are eligible to contribute after-tax dollars to a Roth IRA.

If your estate is greater than $2 million in 2008,

you should take advantage of the following ways in which to have your assets passed on to your heirs tax free. The best and easiest method of eliminating so-called death taxes is to make tax free gifts. By making gifts of $11,000 one can minimize the size of an estate rapidly. Imagine, for example, a gift to a child, his or her spouse and their two children suddenly reduces an estate by $44,000. This is particularly advantageous if done at the end of a given calendar year so that $44,000 can be gifted in December of a given year and then, another $44,000 in January.

Aside from making tax free gifts, another method of dealing with this problem is to have the Party seeking to provide liquidity take out a life insurance policy. Upon death, the policy proceeds provide cash to pay taxes and avoids forcing your heirs to either sell assets upon your demise or borrow money to pay the estate taxes. In some cases the liquid assets which you may have accumulated, such as bank accounts or certain investment accounts may be inadequate to pay your estate's taxes. Thus your heirs will have to turn to your home or other real estate, as well as certain collectibles and other non-liquid assets to be able to pay the tax debt. Usually, when sold under such a time pressure, those assets will sell well below their fair market value. Another option may be for the executor to borrow money from a lending institution in order to avoid forced liquidation of assets. The loan payments might have to be made from the estate's assets, which will reduce your heirs' inheritance considerably. A life insurance policy provides funds to help pay those estate taxes. It should be noted that each annualized premium payment will constitute only a small fraction of the potential amount of the death benefit. It is expected that the life insurance policy proceeds will be greater than the total premiums paid out over the life of the policy. In addition, policy ownership can arranged (sometimes through a "stand alone" life insurance trust) so that the proceeds will not be included in the insured's estate. If you need a referral to a financial professional, to utilize this plan, we can provide that to you during your initial consultation or during our representation of you.

As promised in the last newsletter,

read on to learn when it is necessary to have a conservatorship and, how to avoid needing one.

In essence, for most people of wealth, a Conservatorship should really be a proceeding of last resort. Conservatorships are created when there is no other practical method of managing a person's financial affairs and/or taking care of a person's health and living conditions when they are objectively capable of doing so. The costs attendant to conservatorships and the requirement of intense court supervision are reasons why clients should do whatever they reasonably can to avoid being placed in such circumstances.

The two most common methods of making certain that a conservatorship should never be needed would be to make certain that an Advance Health Care Directive and a Trust are in place. By having those two legal documents in place, a conservatorship should not be needed.

Let's look at some common examples.

Take the elderly person who suddenly stops paying his/her bills due to the onset of dementia. He or she starts to lose their ability to remember to pay their bills or balance/manage their checking account. Or, consider the person who starts to become susceptible to being influenced by strangers to write checks for "phantom" charities or other such fraudulent recipients. That person is a person who needs protection in order to safeguard their financial security. If a Trust is in place, under those circumstances the Successor Trustee can assume office and take control of the finances thus eliminating the problem. If there is no trust in place, then a conservator "of the estate" needs to be appointed in order to make certain that the incapacitated person's bills are paid, his/her estate is properly managed, and his estate is protected from would be con artists.

How do you deal with a situation

where a person suddenly stops going to their medical appointments, whose home becomes disheveled, or who suffers from a sudden catastrophic injury? If there is an Advance Health Care Directive in place, a mechanism has been set up to provide a person to make medical decisions in place of the incapacitated person and to in essence "run" their life until they are either get better or on an ongoing basis. This person is usually called the incapacitated person's "attorney in fact." If there is no attorney in fact appointed, a Conservator "of the person" must be appointed to make these decisions in place of the incapacitated person.

Speaking of Advance Heath Care Directives,

what exactly are they? Think of them as being several documents bundled together. First, think of them as containing what are commonly referred to as a power of attorney specifically designed to address health care issues. The person designated as the attorney in fact is "appointed" to make medical (health care) decisions on behalf of a person upon their becoming incapacitated, either as a result of a catastrophic event or the advancement of dementia. A second "document" contained in the Advance Health Care Directive is what is known as a "living will." In a sense, this name is a misnomer since it really has nothing in common with a true will. Living Wills are statements made by a person as to their wishes to be kept alive or not, in the event they are only being kept alive via artificial mean as a result of suffering from an irreversible medical condition. These directives also usually contain other provisions such as burial instructions (cremation? burial?), a nomination of a conservator if one is needed, anatomical gifts upon death, and other related issues.

Now imagine if no such document is in place.

Who has authority to authorize medical treatment? To take control of the incapacitated person's estate? That is where the conservatorship process comes in to play. A petition is filed in Court to request that a party (usually a spouse or adult child) be appointed to manage either a person's estate or person (usually both). Due to abuses of the system as pointed out in a series of articles in the Los Angeles Times, the process of getting a person appointed as a conservator (even a spouse or a child) requires even more safeguards, which include having a court investigator make a report to the Court, and, having an attorney appointed to represent the incapacitated person.

Once the Conservator is appointed, he or she must file an inventory listing the assets that he or she has taken control of and then, mange them as long as needed. Accountings must be regularly filed.

There are, however, certain situations where a conservatorship may be needed even if a trust and Advance Health Care Directive are in place. One such example occurs when there are significant assets which are not in the trust. Another example occurs when there are family disputes regarding determining where the incapacitated person should live.

Sometimes, when there is no Trust in place, a conservatorship can be created and utilized to create a trust. Conservators have authority under the Probate Code to petition the court to allow them to create and fund a trust. Once that has been accomplished, the conservatorship can then be terminated.

What is the lesson in all of this?

Get your estate plan in place! As shown by this and prior articles where the financial impact of not having a plan in place have been pointed out, having a trust and an Advance Health Care Directive in place avoid (in most cases) the need to have to be involved in this expensive and time consuming process.

Our firm has handled and continues to handle many conservatorships. We are also often appointed by the Court to represent proposed Conservatees and to report to the Court on the need for the conservatorship and/or the appropriateness of the petitioning Conservator. As part of our "estate planning" package, Cooper-Gordon routinely provides Advance Health Care Directives.