California Tax Attorney Blog

As part of the California probate process, notice of a person’s death and the probate of that person’s estate must be published 3 times before the court hearing and the first publication must be at least 15 days before the hearing date. California Probate Code Sections 19040 and 19041 have very specific publication requirements.

The notice must be published in a newspaper of general circulation in the city where the decedent resided at the time of death (or where the decedent left property if the decedent did not live in California). If no such newspaper exists or if the property is not in the city or if the decedent didn’t reside in a city, publication may be made in a newspaper of general circulation that is circulated in the area of the county in which the decedent lived.

Three publications must occur in a newspaper published once a week or more often, with 5 days between the first and last publication dates, not counting those dates.

An affidavit from the newspaper as proof of publication must be filed with the court before the petition for probate is scheduled for a hearing date.

The notice shall state substantially as follows:

NOTICE TO CREDITORS OF _____________

LOS ANGELES SUPERIOR COURT OF CALIFORNIA
COUNTY OF LOS ANGELES

Notice is hereby given to the creditors and contingent creditors of the above-named decedent, that all persons having claims against the decedent are required to file them with the Superior Court, at _______, and mail a copy to _____, as trustee of the trust dated ____ wherein the decedent was the settlor, at _____, within the later of four months after ____ (the date of the first publication of notice to creditors) or, if notice is mailed or personally delivered to you, 60 days after the date this notice is mailed or personally delivered to you. A claim form may be obtained from the court clerk. For your protection, you are encouraged to file your claim by certified mail, with return receipt requested.

_____________________________________________
(name and address of trustee or attorney)

Probate your California estate with a qualified probate attorney. Contact attorney Mitchell A. Port at (310) 559-5259 for probate help.

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Many California residents write a will which leaves their entire estate to their surviving spouse – even after they’ve divorced! But what is a “surviving spouse”?

California Probate Code Section 78 defines a “surviving spouse” by what who that person is not. Section 78 says the term “surviving spouse” does not include any of the following:

(a) A person whose marriage to the decedent has been dissolved or
annulled, unless, by virtue of a subsequent marriage, the person is
married to the decedent at the time of death.

(b) A person who obtains or consents to a final decree or judgment
of dissolution of marriage from the decedent or a final decree or
judgment of annulment of their marriage, which decree or judgment is
not recognized as valid in this state, unless they (1) subsequently
participate in a marriage ceremony purporting to marry each to the
other or (2) subsequently live together as husband and wife.

(c) A person who, following a decree or judgment of dissolution or
annulment of marriage obtained by the decedent, participates in a
marriage ceremony with a third person.

(d) A person who was a party to a valid proceeding concluded by an
order purporting to terminate all marital property rights.

If your will leaves your estate to your "surviving spouse" who may no longer hold that title because of the application of Section 78, then your estate may pass through California's laws of intestacy - the laws which apply to situations where no will exists or where no heirs have been designated.

Have your will prepared properly by a qualified estate planning attorney so you can leave your estate to those you really want to have it. Call Mitchell A. Port at (310) 559-5259.

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A probate bond is designed to protect the estate in California in case the personal representative mismanages the estate or steals any of the estate's assets.

A Will that waives the bond requirement is often effective at avoiding having to obtain a bond. Another way to avoid buying a bond is for all the heirs agree to waive the bond. However, the court may still require that the personal representative be bonded if that person resides outside California even when all of the heirs agree to waive it.

This means that to probate an estate without a Will or Trust waiving the bond requirement, the personal representative will have to apply for a probate bond to be sure the value of the estate is protected. For example, if the estate is worth a million dollars - which could include a personal residence in California along with cash assets - bond premiums could run approximately $2,000 for every year the estate is opened. The first year's premium is not refundable if the estate closes within a year.

The executor or personal representative for the estate must qualify for a bond. Qualification depends on the executor’s personal net worth and credit worthiness. Some personal representatives won't qualify and the bond company will require that their attorney maintain control over the estate account in some agreeable fashion with the bond company.

To avoid probate in California and avoid the expense of buying a bond, consult with a qualified probate attorney. Call Mitchell A. Port at (310) 559-5259.

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Deductibility of Theft Losses:

The Internal Revenue Service and Treasury Department are aware of investment arrangements that have been discovered to be fraudulent, resulting in significant losses to taxpayers. These arrangements often take the form of so-called "Ponzi" schemes, in which the party perpetrating the fraud receives cash or property from investors, purports to earn income for the investors, and reports to the investors income amounts that are wholly or partially fictitious.

The Internal Revenue Service and Treasury Department recognize that whether and when investors meet the requirements for claiming a theft loss for an investment in a Ponzi scheme are highly factual determinations that often cannot be made by taxpayers with certainty in the year the loss is discovered.

Payments, if any, of purported income or principal to investors are made from cash or property that other investors invested in the fraudulent arrangement. The party perpetrating the fraud criminally appropriates some or all of the investors' cash or property.

Revenue Ruling 2009-9, 2009 I.R.B (March 2, 2009), describes the proper income tax treatment for losses resulting from these Ponzi schemes.

In view of the number of investment arrangements recently discovered to be fraudulent and the extent of the potential losses, this revenue procedure provides an optional safe harbor under which qualified investors (as defined in the revenue procedure) may treat a loss as a theft loss deduction when certain conditions are met.

This treatment provides qualified investors with a uniform manner for determining their theft losses. In addition, this treatment avoids potentially difficult problems of proof in determining how much income reported in prior years was fictitious or a return of capital, and alleviates compliance and administrative burdens on both taxpayers and the Service.

Under Revenue Procedure 2009-20, the IRS issued guidance on the examination of returns and claims for refund, credit or abatement. This revenue procedure provides an optional safe harbor treatment for taxpayers that experienced losses in certain investment arrangements discovered to be criminally fraudulent. This revenue procedure also describes how the Internal Revenue Service will treat a return that claims a deduction for such a loss and does not use the safe harbor treatment described in this revenue procedure.

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If you owe over $100,000 in unpaid income tax to the Internal Revenue Service or a large amount to the California Franchise Tax Board, you can quickly resolve your tax problem by having the following information available when contacting the Internal Revenue Service:

• Valid Power of Attorney (Form 2848) covering all tax periods
• Completed Form 433- A, B or F
• Explain in detail why the taxpayer is not able to full pay or borrow to full pay
• Copies of delinquent tax returns
• Rental income
• Three months of current bank statements (all accounts)
• Three months of current pay stubs for both yourself and your spouse
• Investment income
• Pension income and/or Social Security income
• Value of 401K or Retirement account
• Value of all property and/or available equity
• Employer’s information including work number
• Number of individual’s living in the household
• Secured loan(s) - amount of loan and remaining balance(s)
• Life insurance policies, (whole or term), any borrowing ability? And/or value of policy
• Profit and Loss statements for self-employed taxpayers
• Commission statement
• Year make of vehicles, value, equity, balance owed, and monthly payments
• Out-of-pocket medical expenses
• Substantiation of payments being made
• Substantiation of Court ordered payments
• Spouse’s income and source with name/address/phone number

Additional information and /or documentation may be needed to determine disposition of the account.

Call a qualified Los Angeles tax attorney for the right tax help. Call Mitchell A. Port at (310) 559-5259.

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Major changes in California regarding your domestic partnership, such as its termination, do impact your Will. California enacted a law which addresses this very issue.

Probate Code Section 6122.1 provides the following:

(a) Unless the will expressly provides otherwise, if after executing a will the testator's domestic partnership is terminated, the termination revokes all of the following:

(1) Any disposition or appointment of property made by the will to the former domestic partner.

(2) Any provision of the will conferring a general or special power of appointment on the former domestic partner.

(3) Any provision of the will nominating the former domestic partner as executor, trustee, conservator, or guardian.

(b) If any disposition or other provision of a will is revoked solely by this section, it is revived by the testator establishing another domestic partnership with the former domestic partner.

(c) In case of revocation by termination of a domestic partnership:

(1) Property prevented from passing to a former domestic partner because of the revocation passes as if the former domestic partner failed to survive the testator.

(2) Other provisions of the will conferring some power or office on the former domestic partner shall be interpreted as if the former domestic partner failed to survive the testator.

(d) This section shall apply only to wills executed on or after January 1, 2002.

Your California will and living trust should be remade after the domestic partnership ends. Call Mitchell A. Port at (310) 559-5259 for help writing the new estate planning documents.

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A divorce or annulment of your marriage in California directly effects your will. Only devises to the former spouse are revoked by divorce. The rest of the will remains valid. The property that does not go to your ex-spouse passes as if the spouse had predeceased you. Remarriage to your former spouse revives that part of your will that was for the spouse's benefit; cohabitation following dissolution is not enough to revive the will for your ex's benefit.

Probate Code Section 6122 provides that:

(a) Unless the will expressly provides otherwise, if after executing a will the testator's marriage is dissolved or annulled, the dissolution or annulment revokes all of the following:

(1) Any disposition or appointment of property made by the will to the former spouse.

(2) Any provision of the will conferring a general or special power of appointment on the former spouse.

(3) Any provision of the will nominating the former spouse as executor, trustee, conservator, or guardian.

(b) If any disposition or other provision of a will is revoked solely by this section, it is revived by the testator's remarriage to the former spouse.

(c) In case of revocation by dissolution or annulment:

(1) Property prevented from passing to a former spouse because of the revocation passes as if the former spouse failed to survive the testator.

(2) Other provisions of the will conferring some power or office on the former spouse shall be interpreted as if the former spouse failed to survive the testator.

(d) For purposes of this section, dissolution or annulment means any dissolution or annulment which would exclude the spouse as a surviving spouse within the meaning of Section 78. A decree of legal separation which does not terminate the status of husband and wife is not a dissolution for purposes of this section.

(e) Except as provided in Section 6122.1, no change of circumstances other than as described in this section revokes a will.

Revise your California will and trust after your divorce is complete. Call an estate planning attorney for help. Call Mitchell A. Port at 310.559.5259.

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California's Franchise Tax Board, Employment Development Department and the State Board of Equalization now allow taxpayers behind in their tax payments to use one form when applying to more than one tax agency for an Offer in Compromise.

Are you an OIC candidate for taxes owed to California's tax agencies?

The Offer in Compromise (OIC) program is for taxpayers that do not have, and will not have in the foreseeable future, the income, assets, or means to pay the tax liability. It allows you to offer a lesser amount for payment of a nondisputed final tax liability. Although each case is evaluated based on its own unique set of facts and circumstances, California gives the following factors strong consideration in the evaluation:

The offer is in the best interest of California.

Your present and future expenses.

The amount of equity in your assets.

Your present and future income.

Your ability to pay.

The potential for changed circumstances.

California’s tax agencies will not recommend approval of offers if there are assets or income available to pay more than the amount offered.

Can California’s tax agencies process your application?

Your offers will be evaluated independently by each agency. The BOE, FTB, and EDD have different criteria for participation in their OIC programs.

For all agencies, you must agree that you owe the amount of the liability. If you dispute the liability, you should appeal through the appropriate agency’s appeal process.

For FTB, your application will be processed if all of the required FTB income tax returns have been filed. If you have no filing requirement, note it on your application.

For both BOE and EDD, you must be out of business and must not have a controlling interest or an association with the business or a successor to the business that incurred the liability. This includes operating a business of the same nature.

For EDD, you cannot have access to income to pay more than the accumulating interest and 6.7 percent of the outstanding liability on an annual basis.

For EDD, an offer will not be considered for liabilities assessed for fraud or where the employer has been convicted of a violation under the California Unemployment Insurance Code.

For BOE, an offer for a liability with a fraud assessment will not be considered if there is a criminal conviction of fraud. For other fraud assessments, an offer will be considered if a minimum of the tax plus the fraud penalty is offered.

Are collections suspended?

Submitting an offer does not automatically suspend collection activity. Wage garnishments already in place at the time of the offer will continue and will not be considered as partial payment of the offered amount. However, in many cases, collection action will be suspended until the OIC evaluation is completed. If delaying collection activity jeopardizes California’s ability to collect, collection efforts may continue. Interest will continue to accrue as prescribed by law.

Will California’s tax agencies require you to continue payments on an Installment Agreement?

All the agencies require that you continue making periodic payments as called for in any existing installment agreement while your offer is being considered.

Call Mitchell A. Port, a California tax attorney, for help with your tax problems. Call (310) 559-5259.

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When a Californian who owns a business dies and creates a probate estate, the business owner’s affairs must be sorted out and when appropriate, the business must continue to operate. The business is an asset of the probate estate. Payroll must be met, contracts must be fulfilled, bills must be paid and the business property must be addressed in an orderly fashion.

Immediate business needs may be addressed by creating a “special administration” rather than waiting for the appointment by the California probate court of an executor.

Sole Proprietorship. California Probate Code sections 9760-9763 deal with the California representative’s role in handling those business affairs of a sole proprietorship.

Partnerships. Partnership businesses are governed by California Probate Code sections 9761-9763.

Corporations. California corporations in which the decedent was a shareholder are not governed by section 9769-9763 since the remaining members of a board of directors, officer or managing employees can operate the business. When a shareholder dies, the issue is one of what to do with the deceased shareholder’s stock which is governed by whether there is a Will or a buy sell agreement between the shareholders.

The executor usually does not become personally involved in the day-to-day operation of the California-based business unless he or she has experience in the kind of business owned by the decedent. The executor ordinarily obtains court approval to employ independent management who are qualified to run the business.

For probate help, call a California probate attorney. Call Mitchell A. Port at (310) 559-5259.

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The California Franchise Tax Board explains that if you meet certain legal requirements, you may qualify for relief of payment on all or part of your unpaid income tax balance. California's Franchise Tax Board will work with you to determine if you meet the requirements for relief. One approach is to complete and submit a "Request for Innocent Joint Filer Relief".

Speak to a licensed California tax attorney to discuss fixing your tax problems. Call Mitchell A. Port at (310) 559-5259.

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