Charity in Estate Planning

If the tragic passing of Microsoft pioneer Ric Weiland in 2006 has a silver lining, it is in the generous charitable bequests he left in his estate plan. Mr. Weiland left a total of about $160 million to charities in his plan, including a total of $65 million to Lesbian, gay, bisexual, transgender (LGBT) and HIV/AIDS organizations, according to a story by CNN. The larges recipient of money was the Pride Foundation of Seattle.

Many people leave sizable portions, or even the entirety, of their estates to charities. These bequests can be structured in trusts that allow the charity to have the benefit during the lifetime of the donor, or after the donor's death.

I have been meaning to post about charitable trusts, and the recent news of Mr. Weiland's bequest has spurred me to action. In my next post, I will discuss charitable lead trusts, and in the following post, I will discuss charitable remainder trusts.

The Estate Tax Myth

No, estate taxes are very real. The myth is in just how many people are affected by them.

Last Friday I attended the State Bar of California's 16th Annual Estate & Gift Tax Conference, put on by the Estate and Gift Tax Committee of the Taxation section. Keith Schiller, of the Schiller Law Group in Orinda, CA, talked about discounts in estate tax planning. He put out some pretty interesting statistics:

In 1976, 7.65% of all deaths generated an estate tax return. In 2002, only 1.17% of all deaths generated one. In 2001, 108,330 estate tax returns were filed. It is projected that by 2009 that number will drop to 26,700.

What is my point? For all the talk about the "death tax" and how it is destroying the financial health of ordinary Americans, the fact is that the estate tax affects very few.

You may have heard about the pending repeal of the estate tax. Currently, the tax applies to net estates of $2 million or more. In 2009, that limit will increase to $3.5 million. The tax goes to $0 in 2010, and then returns in 2011 for estates over $1 million. The consensus is that legislators will act to either repeal the tax completely, or enact permanent estate tax legislation in one form or another. A net estate is the value of all the deceased person's property, real or personal, tangible or intangible, wherever situated. From this, deductions are taken for transfers between spouses, either outright or to qualifying trusts, for charitable contributions, and other amounts including funeral expenses, estate administration expenses, etc.

The upshot of all this is that, for most people, estate taxes are simply not an issue. So, unless you are among the very few affected by estate taxes, you don't need to worry about them when planning your estate.

Britney Spears Conservatorship

Most people, if they think about it at all, don't usually think of 26 year-old pop stars when they think of conservatorships. But that's just what happened to increasingly unstable pop icon Britney Spears on February 3, 2008. Spears, who was admitted to the UCLA Medical Center psychiatric ward on February 1, was originally supposed to be released after a 72 hour evaluation (known in California as a "5150 hold," after Welfare and Institutions code section 5150). Doctors have the discretion to extend the hold for up to two weeks if they think the patient is a danger to themselves or others. That is what happened to Ms. Spears, according the Associated Press.

According the AP story, On Friday, February 1, Los Angeles County Superior Court Commissioner Reva Goetz granted Spears' father James and her attorney Andrew Wallet as her conservators, and set a hearing for today to review the matter.

In California, a court has the power to appoint a conservatorship of an individual who is gravely gravely disabled and a danger to themselves or others. These are known as "LPS" (for Lanterman-Petris-Short Act) Conservatorships. The process requires a referral by the doctor to an investigator in Mental Health Services. In Los Angeles County, a family member can request that the doctor evaluate the conservatee. The investigator interviews the conservatee and others if necessary, and then presents a petition to the court recommending what kind of conservatorship should be established, and who should be appointed conservator. Conservators can also be designated in advance in a durable power of attorney. This may be what happened here, given how quickly this all came together.

The hearing is this afternoon on the appointment of the conservator for Ms. Spears. We'll stay tuned to this compelling, if tragic, unfolding drama...

Probate Update

In my last post, I talked about how going through probate is not necessarily the end of the world, and so should not be avoided at all costs. One of the things I downplayed was the public nature of probate. Probate is a public court proceeding. All the filings are public record and can be accessed by anyone. While most people don't have the time or inclination to want to dig through court files of people they don't know, there are those who do just that for a living. They then turn the information over to others who contact the heirs to try to sell them financial services based on their impending inheritance.

I didn't mention this as a potential downside of probate, but it is real. There are, of course, many other factors to consider when you are planning your estate. Keeping your estate private is only one possible reason to avoid probate. You should, of course, speak with a qualified estate planning attorney to discuss all the aspects of your plan.