In THIS ISSUE California Legislation   No-Contest Clauses New Probate Avoidance Method Conservatorship & Guardianship Changes Elder Law Federal Tax Law Changes Elder Fraud Alert Corner

Is there anything more beautiful than Spring in Los Gatos? If so, we at Carney Law Firm would love to see it! Flowers are blooming, birds are singing, and the weather is second to none. The climate of our office is pretty terrific too, with a little extra bounce in everyone's step at this time of year. And why not? The community in which we do business is charming, and our clients are even more so. Thanks for counting yourselves among them.

Exciting things are happening at The Firm. Baby Lauryn has a brand new nanny, and while the whole office misses our little mascot, Leslie is glad to get back to business as usual. Beverly Luther, our former receptionist, moved to the central valley recently, but we have already welcomed a delightful new receptionist, Charlene Caron. Good employees help us serve you better, and we hope you agree that ours are among the best.

Our bi-annual client seminar, "Avoiding Family Conflict in Estate Distribution," is scheduled for May 17, 2001. Forewarned is forearmed, and heightening your awareness of the sensitive issues involved in making an estate plan can protect you and your loved ones from the discord that sometimes develops. Specific examples of disputes and misunderstandings we have seen in our practice will be shared, along with strategies to avoid such friction. We hope you will take advantage of this unique opportunity to benefit from our observations and experience.


The law with regard to no-contest clauses in wills and trusts has been clarified. In a will or trust with a no-contest clause, a beneficiary who questions provisions in the document can be found in violation of the no-contest clause and disinherited. Recent changes to the California no-contest law specify which actions will not be found to violate a no-contest provision that is included in a document executed after January 1, 2001. Previously, certain actions by beneficiaries, including requests for repayment of funeral expenses, requests for clarification as to the character of property either as separate or community, and challenges to an ancillary estate planning document (for example a stock redemption agreement) have been considered contests, resulting in a named beneficiary being disinherited. New California Probate Code section 21305 provides that these three actions, as well as a petition for settlement or compromise which affects the terms of the will or trust, will not constitute a contest. In addition, this new probate code section provides a list of actions which will not violate a no-contest clause for public policy reasons. These actions include: a petition to modify or terminate a trust, a petition to appoint a conservator, a petition brought under power of attorney laws, a petition to annul a testator's marriage, a petition for instructions in a conservatorship proceeding, a petition to challenge the exercise of a fiduciary's power, and petitions to object to or remove a fiduciary and to object or respond to an account by a fiduciary.

Existing wills and trusts can be amended to specifically include these new rules. An amendment can help clarify instances you would not want considered as a contest under your estate planning document. In addition, no-contest clauses can be expressly tailored to apply to a certain party, avoiding the risk of adverse results from family members you are not concerned about. All of you with no-contest clauses who would like your clauses strengthened, please contact us at your convenience.

California has finally enacted a new form of ownership of real property: "community property with right of survivorship." This new form of ownership becomes available on July 1, 2001. It will provide to married couples the ease of administration benefits of holding real property as joint tenants, while giving the tax benefits of community property. At the death of the first spouse, real property held as community property with right of survivorship will receive a complete tax basis step-up to the date of death value. In addition, clear title to the property can be transferred to the surviving spouse by merely recording a simple affidavit of death.

Of course, holding title to real property in a living trust is still preferable in almost all cases. If you have questions, please give us a call.

In response to the abuses of a conservator in Riverside County who was charged with embezzlement, theft, conspiracy and perjury in the administration of over 300 conservatorship estates, the Legislature enacted some tough new laws. These include stricter reporting requirements by financial institutions; constraints on the buying, leasing or renting of conservatorship or guardianship property by court personnel; new self dealing restrictions by the conservator or guardian (not applicable to a family member serving as a conservator or guardian); and additional accounting requirements. Those interested in more details regarding the rules can contact our office.

In the elder law area there have been a number of changes. The definition of "financial abuse against the elderly" has been revised and broadened to include retaining property for wrongful use or with intent to defraud as a form of abuse. Police officers can now report to the public guardian any circumstance where they have probable cause to believe a mentally impaired elder will become a victim of fraud or misrepresentation unless action is taken.

Revisions to the law regarding Medi-Cal eligibility provide some guidance with regard to transfers made for less than full consideration. New regulations concerning the sale of financial products to elders were enacted in an attempt to stem the abuse surrounding the sales of annuities, Medicare supplement insurance, and long-term care insurance to the elderly. More disclosure is now required, and abuses by attorneys who sell these products is being reported to the Legislature by the State Bar. The Bar has been quite active in this area; for more information please see our Elder Law, Fraud Alert Corner.

1. Those with large estates.
2. Those who own property in another state
3. Those with no living spouse who need aid to maintain their estate.
4. Those who suspect their will might be contested.
5. Those who wish to avoid probate

1. DO choose a licensed attorney experienced in estate planning..
2. DO NOT trust salesmen, telemarketers, and even attorneys who approach you about creating a trust.
3. DO consult with your family and friends about what your needs are and what plan would best suit you and your family's future.
4. DO take your time. Never make hasty decisions concerning your estate.
5. DO read all documents carefully to ensure your estate is being handled according to your expectations.
6. DO NOT ever sign or agree to a plan without doing a thorough investigation of the person offering the plan andthe plan itself.
7. DO NOT be afraid to say no. It is your estate, and you and your family are the ones who stand to lose.

We now have a President, but we still await tax code changes to benefit us in inflated California!

As of this printing, President Bush is lobbying support for his tax cut proposal. This proposal contains various tax-reducing provisions including, and particularly important for our purposes, estate tax cuts. The bill has passed the House but is facing opposition in the Senate. President Bush has indicated his willingness to compromise on some of the bill's provisions, a prospect which leaves us uncertain as to what tax changes will actually occur.

President Bush is encountering opposition to estate tax cuts from an unlikely source. Some of the super-wealthy in our country have formed a lobby designed to keep estate taxes in place. Their concerns are twofold: 1) Where would lost funds from estate tax revenues be recaptured? (presumably from the middle-class) and 2) How great a loss of charitable donations would a repeal in estate taxes cause? Charities are understandably apprehensive, for philanthropic contributions are often motivated by the threat of large estate taxes. With that threat removed, people may be less charitably inclined.

It is important to remember that any tax cut proposal, whether it be a complete repeal of estate taxes, an increase in exemption amounts or both, is scheduled to be phased in over a ten-year period, at which time a new administration could conceivably make changes to the estate tax system again. Predictably, most of the tax cuts are back-end loaded, meaning you won't see much benefit for a number of years. Whether estate taxes are repealed completely or whether the exemption amount is increased (possibly up to five million dollars per person), most of you will benefit from the changes. Until the bill is passed and completely phased in, however, estate planning efforts to reduce or eliminate estate taxes will continue to be necessary.


Of great concern to the Legislature are abuses concerning the sales of financial products to the elderly, including annuities, Medicare supplement insurance, and long-term care insurance. Unscrupulous con artists convince people to buy annuities and other insurance products, promising those products will avoid estate taxes and facilitate the Medi-Cal qualification procedure.

Many scams operate as follows: "Free" seminars are sponsored to tell attendees how to avoid estate taxes. The operators begin by selling estate planning services. Under that guise, they also peddle financial products such as annuities and life insurance policies in an attempt to earn commissions, often undisclosed. The danger is that these operators are not estate planning professionals but salesmen, who sell these products to people with little regard for whether they will be helped or harmed.

In an effort to assist and warn the public regarding estate planning scams and sales of unnecessary financial products, the California State Bar has established a phone number (1-888-460-SENIORS) where the public can ask advice or report a scam. In addition, the State Bar has made a video entitled "Taking Charge." This video includes stories from three California families who suffered at the hands of these con artists. The stories and tips given will help you recognize the warning signs of an estate planning scam before it is too late.

This 20-minute video is available in our office for anyone who would like to borrow it. We urge clients with existing estate plans to be aware that even you can be victimized, though hopefully you would recognize some of the warning signs and call us for advice before signing anything! It is also prudent to alert family members and friends to these scams so they do not fall victim, and we encourage you to borrow the video and share it with them at your convenience. Additionally, we are making the video available to various senior organizations in our area so they can educate their members regarding the hazards lurking out there. Please contact Charlene in our office and make arrangements to view the video or show it to an interested group.