Three Questsions to Ask Before You Sign a Residential Lease

,

real estate 91024My wife and I were both apartment renters in our younger years. Now we are landlords with several 3 and 4-unit residential properties in and around Los Angeles.

Good landlords aren’t looking to take advantage of their tenants. Without even going into the legal and ethical implications, that’s just bad business. And good tenants respect their landlord’s property and time. That’s good business on their end of things as well (again, not to mention the legal and ethical consequences of not doing so).

But even when there are good, moral people on both sides of the landlord-tenant relationship, problems can – and do – still arise. Often, these problems are because of simple misunderstandings. So to help prevent those kinds of problems, here’s what prospective renters should ask before signing a lease:

Number 1: What Will My Total Cost Be and When Is It Due?

You might be surprised at how many people sign leases without understanding all of the associated costs and when they must be paid. Renting an apartment or house is exciting and it can be easy to simply just scan the document and jump straight to the signature line. Most tenants think about obvious costs, such as monthly rent and typical utilities. However, some leases require tenants to pay less obvious costs, such as application fees, credit check fees, parking fees, and optional service fees, such as cable and Internet. Review your lease carefully and compare leases from different landlords–what may seem like a better deal may not actually be better after everything is taken into consideration.

Be sure you know what the deposit is, what will be necessary to get your deposit returned after you move out, when your rent payment is due and what the late fee is if you are late (and whether or not there is a grace period for being late).

Number 2: What Rules and Regulations Will Apply to Me?

Many landlords impose rules on their tenants, particularly those living in close quarters, such as apartment buildings. More common rules include mandatory quiet times, as well as prohibitions on pets or parties. However, other important rules are also found in leases. For example, many landlords prohibit tenants from redecorating their property, from changing locks, from using propane grills or from storing items on balconies or porches. Read the lease carefully to ensure you understand and can abide by each of the rules.

Number 3: When Will My Lease End, and What Happens When It Does?

Many leases define how long they will last (called the “term” of the lease) and under what circumstances they will renew. If the lease does not provide this information, California state law will set the term of the lease and its renewal. Before you sign a residential lease, make sure you know how long you are locked into it and under what circumstances you can move out and owe no more rent. If you are not sure, consult with an attorney.

Dedicated to your family’s wealth, health, and happiness,
Marc Garlett 91024

/0 Comments/by

So What Is a Trust, Exactly?

,

Wills and Trusts 91024Trusts seem to be shrouded in mystery. Often thought of as an estate planning tool only for the ultra-wealthy, many people aren’t sure what trusts are really all about let alone whether or not a trust would be appropriate for their family.

Let me try to clear up the confusion: A trust is nothing more than a legal agreement set up to benefit someone or something. For example, some people set up trusts to benefit their children, their grandchildren, their favorite charities, or even their pets.

It is easiest to understand trusts if you think of them in terms of a relationship between three separate parties, people or entities.

The first party (called the trustor, settlor, or grantor – these terms are all interchangeable and refer to the same party), funds the trust by placing assets into the trust. Any type of asset may be used, such as money, brokerage accounts, cars, and even real estate.

The second party, known as the trustee, agrees to manage the assets held by the trust. Once the trust is created, legally executed, and the assets are moved into the trust, the trustee holds title to those assets on behalf of the trust.

The third party, who is known as the beneficiary, receives the benefits of the assets held in the trust. For example, those benefits might include interest paid on money in the trust, a monthly allowance, or even a place to live.

And the use of trusts as a planning tool isn’t just for the rich. Trusts can provide many advantages for the rest of us, too, including:

  • Avoiding the formal probate process associated with transferring property using a will;
  • Protecting assets from a beneficiary’s creditors;
  • Caring for those who cannot care for themselves, such as minor children or those with special needs; and
  • Reducing tax liability.

Although it may seem confusing, a trust can even be set up to benefit the person who puts the assets into the trust. In other words, while there are three roles to be played, each role does not necessarily have to be played by separate and distinct parties. One person can serve in more than one of those roles.

For instance, a person may place assets into a trust, select someone else to manage those assets, and then receive the benefits himself. To take that example one step further, the person who is both the trustor and the beneficiary could even be the trustee if the circumstances suited such a scenario.

How a trust is drafted and who plays each of these three roles depends on the goals of the person setting it up. Call our office today to schedule a Family Estate Planning Session, where we can explain trusts further, answer all your questions, and help you determine if a trust is the best strategy for you and your family.

Dedicated to your family’s wealth, health, and happiness,
Marc Garlett 91024

/0 Comments/by

If You Have a Trust, Don’t Settle for a False Sense of Security – Part III

,

estate planning 91024There are three critical aspects to estate planning. Let’s review: first, a customized set of documents unique to your situation and goals should be the foundation of your plan; second; the plan must be properly and completely funded (your assets must actually be transferred into the plan). So what’s the third?

Once you have your documents in place and your plan fully funded, you can’t simply stick it on your shelf, check it off your bucket list, and assume it will work like you need it to 20 or 30 years from now. If you don’t periodically review (and update, when necessary) your plan you have only managed to buy yourself a false sense of security.

Over time your assets will change. You may buy property; you may sell property. Your stock portfolio may lose value; you may receive an inheritance. There are thousands of things which can – and will – change with your estate (your estate is simply the legal way of saying, “all the stuff you own”). Your plan needs to adapt and transform to your changing financial situation.

Over time your family dynamic will change. There may be births; there may be deaths. There may be marriages; there may be divorces. Your kids will grow up; you may have grandkids on the horizon. Your plan needs to acclimate and adjust to your ever evolving family.

Over time the laws regarding estate planning will change. For example, the estate tax exemption has been as low as $600,000 and as high as unlimited over the last two decades. The estate tax rate has been as high as 55% and as low as 35% over that same period. The laws in this area change all the time. Your plan needs to change and adapt to meet whatever new laws Washington throws at you from year to year.

That’s why my firm reviews our clients’ plans every 1 to 3 years – at no additional charge. And if your plan isn’t being reviewed at least as often, you may be living with a false sense of security… and ultimately, it’s your family’s security that’s on the line. Do NOT let that happen!

You cared enough to put a plan in place. Make sure it is up to date with your present situation, your family goals, and the current laws. That’s the only way to ensure your plan will protect and provide for your family as you intend, when it’s needed.

If you already have a plan in place and haven’t had it reviewed recently, it’s time for a checkup. And if you’re ready to put a plan in place to provide the protection your family deserves, be sure to ask your attorney how often they will review the plan and how much extra that will cost.

I recommend putting an attorney on your team who will take care of all that for you, so you don’t even have to think about it. That’s the only real way to make sure it’s not forgotten about and that your plan stays up to date, providing a “real” sense of security rather than a false one.

Dedicated to your family’s health, wealth, and happiness,
Marc Garlett 91024

/0 Comments/by

If You Have a Trust, Don’t Settle for a False Sense of Security – Part II

,

house of money

Last week I talked about how boilerplate documents often cause trusts to fail. This week I’m going to talk about funding. Funding is the fancy legalese way of saying, “transferring assets into the trust” and it is just as important as having a solid, customized set of documents. You can have the best set of documents in the world, but if the funding isn’t done correctly you’ve just wasted a bunch of paper (not to mention your time, energy, and money).

Improper, incomplete, or nonexistent funding causes trusts to fail more often than you can probably imagine. In fact, it happens all the time. Just last week I got a call from a widow whose husband just passed away a few weeks before. The couple had set up a trust but only after the husband died did the wife realize their house had been pulled out of the trust (defunded) for a mortgage refi, but never put back (funded) into the trust. Now she is left facing probate, capital gains taxes, and a host of other problems that could have – and should have – been avoided.

Unfortunately online legal document services (and even most lawyers) don’t include funding as part of their service to clients. This means lots of people who’ve paid for a set of legal documents think their estate plan is all in order. But without properly funding the plan, it’s not worth the paper it’s written on. That leaves these unfortunate folks (and their families) with a false sense of security which catches up to them when the trustor dies and the plan fails.

So how can you avoid a false sense of security with the funding of your estate plan? First of all, talk to your preparer about funding before committing to doing your planning with them. Ask questions: How do they support clients to ensure plans are fully and properly funded? Do they charge extra to answer funding questions when they come up (as they surely will)? Do they offer the option of fully funding your plan for you? If not, will they at least prepare and file your deed transfer documents so your house – your most valuable asset – is properly funded into your plan?

Avoid document preparation services altogether as they will offer very limited funding support if any at all. And if the attorney or firm you’re thinking of doing your planning with doesn’t focus on funding just as much as they do on documents, do your family a favor and find someone who does. Also, beware the cheapest alternatives. Cheap estate planners are cutting costs (and corners) someplace, and that’s often in the area of funding. Why? Because most consumers aren’t aware of funding issues let alone educated enough about funding to demand that level of service.

Remember, getting your documents in place is only the beginning (even though that’s where most legal services and law firms stop). Don’t let them short change you. Demand that any plan they create be properly and fully funded. If they don’t offer funding as part of their service package, do not engage them to do your planning. If you do, you will likely be left with a false sense of security and your family will be left holding the bag.

If you’re going to do your estate planning, do it right. Make sure your plan documents are tailor made for your own unique situation and goals. Then make sure all of your assets are funded into the plan. You deserve a real sense of security and so do your loved ones.

To your family’s health, wealth, and happiness,
Marc Garlett 91024

/0 Comments/by

If You Have a Trust, Don’t Settle for a False Sense of Security – Part I

, ,

Estate Planning 91024It is estimated that more than 80 % of trusts fail at the trustor’s death. EIGHTY PERCENT! What a shameful statistic. Think about it. Out of every five people who put the time, effort, and money into creating a trust, only one of them actually protects and provides for their family as they intended. That means the vast majority of people with a trust have nothing more than a false sense of security while they are living and leave their family with a big mess to clean up after they die.

There are three equally important phases to trust-making. Neglect any of these phases and your trust is likely to fail. Phase 1 is the actual creation of your estate plan documents. This includes not only the trust, but many other critical documents as well (your will, powers of attorney, healthcare directives, HIPAA waiver, kids protection plan, etc.). Each of these documents should be customized to your own specific situation, goals, and assets. Remember, your family is unique and your estate plan should be, too.

The courts are filled with cases where simple, fill-in-the-blank, template wills or trusts, downloaded from the internet, led to family disputes, ugly probates, expensive litigation, and hundreds of thousands of dollars (or more) in lost inheritance for intended beneficiaries. The recent family quarrel over an “E-Z Legal Form” estate plan serves as one such cautionary tale. But all one really has to do with such services is read the fine print, such as the Legalzoom disclaimer, to be very clear they’re just selling documents, without any legal guidance, advice, direction, or guarantee about what they mean or whether they’ll even work.

Unfortunately, people who get sold on saving a few thousand dollars now by doing it themselves, often force their families to hand over tens of thousands of dollars to lawyers later, to straighten out the mess they’ve left behind. Of course many times those messes cannot be straightened out at all. But it’s not just online legal services selling a false sense of security. I’ve also heard far too many stories of cut-rate, cheaper-than-anyone-else lawyers whose plans don’t work when they’re needed. And yet again, it’s families who are left holding the bag.

This should all be malpractice, if you ask me. Regrettably, it’s common practice instead. So what can you do to protect yourself – and more importantly, protect your family? Here’s how NOT to get sold a false sense of security:

  1. If the lawyer or service you’re using to prepare your estate plan doesn’t first spend some serious time asking you questions, getting to know you, your background, and your goals, they are much more interested in selling you a set of documents than a plan that will actually work. And if they quote you a fee before getting to know you first, that’s a good indication they are never going to invest their time in you.
  2. Ask the lawyer or service if they are available to provide guidance and answer questions throughout the process. If they answer is no, move on. If the answer is yes, ask them how much they charge for that. If it’s not included as part of a flat fee, they are clearly more concerned about selling documents than they are about providing good legal counsel.
  3. Determine if the plan fee is too good to be true. If the lawyer or service undersells everyone else, that’s a big red flag. It takes a lot of work and time to customize a plan for someone so it is guaranteed to perform as intended. Cut-rate firms and services work on a volume based business model. Their goal is to sell you a set of documents with the smallest time investment possible, then move on.

You can, and should, strive to do better than that. Don’t settle for a lawyer or service who’s just in the business of selling documents. There’s too much at stake and your family has too much to lose. The documents are critically important but they should not be the sole focus of the lawyer or service you work with. The documents alone won’t give you real security – the kind of security both you and your family deserve.

To your family’s health, wealth, and happiness,
Marc Garlett 91024

/0 Comments/by

If You Have Young Kids, Don’t Settle for a False Sense of Security

,

Kids Protection 91024Does your estate plan name permanent guardians for your minor children? It absolutely must, and most plans do. But how about temporary guardians? And does your plan include medical powers of attorney for your kids? What about instructions and guidelines for your guardians (both permanent and temporary)? Do you carry a card in your wallet stating you have minor children and identifying your temporary guardians in case of emergency?

Naming and legally documenting temporary guardians will prevent your kids from ever being put into the arms of strangers, even for a moment. But without temporary guardians in place, there’s a very real possibility your kids could be handed over to foster care until a judge orders the children into the custody of the permanent guardians. Even if that’s only for a day or two, that’s far too long.

Without a medical power of attorney for your children they may not receive the medical care you would want them to have if you are not with them when they need it.

Providing instructions and guidelines to guardians is one of the best way to ensure your children will be raised with your values, learn about your story, benefit from your wisdom, and continue to feel your love even if you are not able to be physically present for them.

When you go to bed at night, do you lock the front door but leave the back door wide open? Your estate plan shouldn’t do that either, especially where your kids are concerned. Yet most estate plans simply slap in a quick paragraph about permanent guardians but fail to address the myriad of other issues those of us with young children need to be concerned about.

You see, traditional estate planning focuses on the elderly. And if you have a traditional estate plan, it is most likely n incomplete and less than comprehensive if you also have minor children at home. But it doesn’t have to stay that way.

Taking care of my kids the way they deserve to be taken care of is what got me into estate planning in the first place. And I love empowering other parents to take care of their kids, too. Let me know if you have any questions.

To your family’s health, wealth, and happiness,
Marc Garlett 91024

/0 Comments/by

How to Pass Real Estate to Your Kids (and how NOT to)

,

Protecting Real Estate 91024Many parents believe that by adding children’s names to a property deed, they can easily pass along that property to their children. Unfortunately, those who act on that belief often find they have invited more problems than they have avoided.

This is because in California, when more than one person owns property together and they are not married, the default form of title ownership is referred to as tenants in common. This means that if one of the owners dies, his or her ownership share does not transfer to the other owner(s). Instead, it goes to the deceased owner’s heirs through probate.

The problems of probate (and there are many) can be avoided if the deed designates property ownership as joint tenants with the right of survivorship. However, there are several big reasons why it may not be advisable for you to deed real estate to your children in this manner, with adverse tax consequences topping the list. This is because deeding property to children is actually considered a gift, and the cost basis for that gift is what you paid for your home.

For example, let’s say you paid $150,000 for your home many years ago. You then add your children to the deed at some point, which the IRS deems a gift. After you die, the children sell the home for the current market value of, let’s say, $550,000. They will be taxed on the difference between the cost basis of $150,000 and the sale price of $550,000 – or $400,000. That’s a huge tax burden you’ve left for your children.

It would be better if your children inherited the property via your will, then selling it under the scenario described above would not create the same tax liability because their cost basis would be what the property was worth when they inherited it (that being the current market value of $550,000).

But there is an even better way; much better in fact. While inheriting property through a will does avoid some of the tax issues discussed above, it does NOT avoid probate. The way to avoid tax issues AND probate is by creating a living trust and titling the property in the name of the trust, and naming your children as the trust’s beneficiaries. You avoid – or more accurately, your kids avoid – the problems and costs of probate and do so in a tax-advantaged way.

So if you own real estate, give us a call today. We will review your current deed and advise you on on the easiest and most cost effective ways to pass it to your children.

To your family’s health, wealth, and happiness,
Marc Garlett 91024

/0 Comments/by

Is Your Living Trust Really Going to Work For the People You Love?

, , , ,

Legacy Planning 91024Traditionally, one of the primary reasons for establishing a living trust has been to avoid probate. But your living trust that can help you accomplish much more than that, if it’s set up correctly:

Asset protection for heirs. One of the most significant benefits of a living trust can be to protect inherited assets for heirs. For example, because minor children are not allowed by law to inherit property, a guardian is appointed by the state to hold the property for them until they reach the age of 18. Most parents would agree, however, that 18 is still too young to manage even a modest inheritance. Executing a living trust on the other hand, allows you to control how and when an inheritance is distributed and to name a trusted person to act as trustee. In addition, a living trust can be especially useful in protecting assets from spendthrift heirs, their creditors or a potential divorce, if it’s set up right.

Most living trusts I review have been set up to distribute assets outright to kids at age 21, 25, or 30 instead of keeping assets in trust for the life of the kids – and eventually giving the kids control of those assets. This type of planning is still fairly unknown to most attorneys, but can ensure that what you leave to your kids will not be at risk from any future divorces, lawsuits, bankruptcies or other creditor matters.

Ensure none of your assets are lost. The vast majority of the time a living trust is created, one of the most important and valuable aspects of creating the trust is lost — making sure that when you become incapacitated or die your loved ones stay out of Court and the assets you’ve worked so hard for make it to the people you want to have them.

If your assets are not titled in the name of your trust correctly, that won’t happen. Your loved ones will have to go to Court to take ownership and control of your assets. And, oftentimes, they may not even be able to find your assets. There are currently billions of dollars in assets sitting in the State Departments of Unclaimed Property because people die and their loved ones didn’t know what they had.

One of the things we do in our office is prepare a Family Wealth Inventory to ensure your assets are easily located by your family. As long as it is kept up to date (and we help with that, too) you’ll never have to worry that what you are working so hard to create will be lost when you are gone.

Plus, when you have a relationship with our office, we’ll make sure your loved ones know just what to do if anything ever happens to you.

Incentivize your children to grow your wealth, not squander it. As I mentioned, most trust plans are crafted to distribute assets outright to kids when they turn certain ages, whether they are ready for it or not. And chances are that if you die when your kids are still young, they will not be ready to fully inherit your wealth at an early age.

We recommend you use your living trust to properly prepare your children to receive their inheritance. That means allowing them to be a co-trustee for some period of time before receiving full control of their trust assets. It means introducing them to us, if we are your lawyer, so we can begin to help guide them during your lifetime and not wait until after you are gone.

You may also want to consider making small lifetime gifts into an irrevocable trust for their benefit so you can start to teach them how to grow the assets while you are living and enter into a partnership for creating more family wealth that can last for generations.

One of the main goals of my law firm is to help families like yours plan for the safe, successful transfer of wealth to the next generation. Call our office today if you have a trust that hasn’t been reviewed recently or if you’re ready to get a comprehensive plan in place to protect your loved ones.

To your family’s health, wealth, and happiness,
Marc Garlett 91024

 

/0 Comments/by

Parents Fear Inheritance Will Do More Harm Than Good

,

bigstock-Parents-Holding-Hands-With-Kid-21739670A survey recently released by Merrill Lynch’s Private Banking and Investment Group — How Much Should I Give to My Family? — shows that the #1 concern of wealthy parents is that the inheritances they plan to leave their children will do more harm than good.

Of the 206 high net worth parents surveyed, 91% said they plan to leave the lion’s share of their estate to their children. However, they expressed fear that giving too much would thwart their children from reaching their full potential.

Almost two-thirds of the parents surveyed said they were somewhat concerned that an inheritance would have a negative impact on their children, especially when large sums were distributed without guidance or accountability. Yet only 29% said they have had a conversation with their children about their future inheritances.

You don’t have to be wealthy to share these concerns. I have them for my own children regarding what my wife and I are planning to leave them. If you share some of these concerns too, I’d be happy to speak to you about when and how to leave your whole family wealth (not just your money) as part of a comprehensive legacy plan for your family so it doesn’t create trouble for your children.

Also consider that in some cases, the best time to leave an inheritance to the next generation may be while you are living – instead of waiting until death – because you can guide your children through the pitfalls of the inheritance.

For an example let’s look at the case of Norman and Stephen Brooks, father and son. Twenty years ago Stephen came to Norman and asked him to support him to build a business that would bring youth to Costa Rica, and together they created a tour business and multi-property development that is now thriving.

Stephen couldn’t have done it on his own. And while Norman could have waited to pass Stephen’s inheritance to him until his death, Norman would have lost the opportunity to see that inheritance grow, not just financially, but on so many other levels as well.

Today, Norman’s inheritance to Stephen is far bigger than anything he would have left at his death and both Stephen and Norman are benefiting from it greatly.

The only thing I would have recommended that Norman do differently would be to have given Stephen his living inheritance through a trust, rather than outright.

As things stand now, everything Stephen has created is in his own name remains at risk from creditors, predators, lawsuits, and divorce. If they could go back and change anything, I would recommend Norman set all that up for Stephen in a trust, providing airtight asset protection that Stephen cannot provide for himself.

With inheritance, there is a fine line between enabling our children and providing them with opportunities. But with proper planning, you can absolutely make a safe, successful transfer of wealth to the next generation which will do them much more good than harm.

To your family’s health, wealth, and happiness,
Marc Garlett 91024

/0 Comments/by

What to Do When a Spouse Suddenly Dies

,

GolbergThe 47-year-old SurveyMonkey CEO Dave Goldberg, husband of Facebook COO Sheryl Sandberg and the father of two small children, died suddenly – and far too young – on May 1, 2015.

Money, youth and success are no deterrents to tragedy. Reportedly, Goldberg died while doing an activity we all hope extends life — exercising. According to the New York Times, while Goldberg was on vacation in Mexico with family and friends, he fell off a treadmill and died of head trauma.

Sheryl Sandberg is reported to be worth $1 billion herself, so her family will not face the same financial challenges as others who experience similar tragedies, yet there are still important estate planning considerations Sheryl must face now regardless of her wealth.

And these estate planning considerations are lessons for all of us who have children and/or families we care about, whether we have $1 hundred or $1 billion.

First and foremost: the children.

Sheryl is now a single mom. She has spoken often about how much she relies on her husband and now that he is no longer there, she’ll need to identify others to support her in raising the kids.

On top of that, Sheryl will absolutely need to make sure she has named legal guardians for her kids, in case anything happens to her. And just naming guardians in a Will is not enough.

Sheryl needs to have a comprehensive Kids Protection Plan – naming both short and long-term guardians and giving clear instructions to the people named along with all of her caregivers – to ensure that if anything happens to her, her kids are never in the custody of strangers, but always under the care and guidance of those she chooses.

Once Sheryl’s got a Kids Protection Plan in place, she will need to think about probate and estate tax issues and how she can ensure that her family stays out of Court. She’ll want to keep as much of her financial assets as possible with her family and as little as possible going to the government upon her death.

Let’s examine the court issue in more detail. Any Californian who dies with $150,000 or more worth of assets in their name leave a big mess behind for their loved ones to clean up. And Sheryl would be leaving behind a VERY big mess.

She can ensure her family stays out of Court by putting everything she owns into Trusts. And, ideally, those trusts would have lifetime asset protection provisions built in for her children so they can receive their inheritance fully protected from lawsuits, divorce, creditors and predators. This will also enable Sheryl to determine how, when, and on what her children can spend their inherited money.

That’s something you likely need to consider for your family as well, as everyone who dies with more than $150,000 in assets goes through probate — not just billionaires and millionaires, but everyday regular people too.

Regardless of how much you have in the bank, you don’t want to leave your family with a big mess behind. There is no need to compound a tragedy by not planning well for the people you love. Make sure you protect and provide financial security for your loved ones. We can help.

To your family’s health, wealth, and happiness,
Marc Garlett 91024

/0 Comments/by

Our Office

Phone

(626) 355-4000

Address

100 West Lemon Avenue, Suite 202
Monrovia, California 91016

Cali Law Office California

Schedule a Complimentary Consultation

Simply Fill Out This Form

4 + 0 = ?