Long-Term Care

Estate planning and probate attorney Carol Kao talks with her clients about the two certainties of life: death and taxes

Photo by: Frank Rogozienski

Published in 2011 San Diego Super Lawyers magazine

By Erik Lundegaard on June 2, 2011


Q: Any thoughts on the Obama tax deal from last December from an estate tax perspective?

A: It was a nice surprise. It’s providing the taxpayers an opportunity in the next couple of years to do some tax planning that was not available in the past.


Q: By “taxpayers,” you mean anyone with an estate worth more than $1 million, correct?

A: That’s right. Without the change, for 2011, we would’ve gone back down to a $1 million-dollar estate-and-gift-tax credit with a maximum rate of 55 percent. [As opposed to, under the deal, a $5 million credit and a maximum rate of 35 percent.] In Southern California, nearly anyone who owns a home would’ve fallen into that [$1 million] category.


Q: So in nuts-and-bolts terms, what does this mean for your practice?

A: I will be able to help and counsel many of my clients about different gifting options that will help allow them to utilize the increase in credit. For example, they can transfer interest in real estate property, which at this point in time may be an ideal time to make that transfer. The value of real estate is probably at a relatively low point. So when you make a transfer of that at low value, that’s the value they’re going to use for gift tax purposes. Any future appreciation will be in the hands of your beneficiary. That’s one manner that’s pretty straightforward.


Q: By raising the estate tax credit from $1 million to $5 million, does this cut into your client base? Because those who have an estate worth, say, $2 million, don’t need to rely on your expertise.

A: It does not have any significant impact. We have developed an expertise in planning for high net worth families and individuals. So for many of our clients, the estate tax component is still there.

It could influence some families with smaller estates to not pursue planning, but I’m not certain that’s really good advice for them. There are always issues that a family would want to address in doing the estate plan. How the assets are transferred to their children, for example. If you have a child with special needs, you want to consider those issues. If you have children from a prior marriage and children from a current marriage. There are always issues apart from the pure tax-planning aspect of it.

So I don’t think families with under $5 million or under $10 million in assets should just determine, “Well, we’re not going to worry about it.” It’s only for two years, and there are other issues they’ll want to address regardless of taxes. I know I would.


Q: Do you get in touch with your clients every time there’s a change in the estate tax?

A: There always seems to be some change going on—whether it’s a California law change or a tax law change—and it’s probably not efficient to update clients on all small changes. When something significant occurs, like it did last year, yes, I do speak to the client and advise the client of the change and then see what the client may want to do in addressing the changes.


Q: And if it goes back to 55 percent in two years? Will you contact them again?

A: We will contact them, but what we do in our planning is try to build in as much flexibility as we can in the document that we’re drafting for them. So they don’t necessarily have to come in each time a change occurs.


Q: What takes up most of your day?

A: I spend nearly all of my time on estate planning, trust administration and estate administration matters, and charitable planning. I do not handle litigation.

Usually what happens is: With the estate plan I help prepare for the client, after the client passes on, I will assist the successor trustee in the administration of the estate; in preparing their estate tax return as needed; and in handling any audit that may occur from the filing of the estate tax return. Basically, I see the plan from beginning to end.


Q: Is that difficult? Dealing with people who have suffered such a loss?

A: From a personal perspective, it’s always hard for me to lose a good client and it never gets easy. But I get to help the family through a difficult time. They’re dealing with so many things: the personal loss of a family member; the estate issues; tax issues and sometimes liquidity issues; and also personal issues within the family. I have the opportunity to help them navigate through that and try to alleviate some of the burden.


Q: Do families ever come to you after a death?

A: Sometimes that happens, too. I get cases where, for instance, a person passes away, and the attorney who handled the planning is either not around anymore or feels the case is too complicated to handle. So I would handle the administration part of it.


Q: What are the percentages?

A: Probably 80 percent of the matters I handle from beginning to end: planning and administration. Many of my clients are longtime clients, and that’s one of the best things about my practice. It’s not a single transaction where you’re done and you move on. I know my clients for a long period of time. I see their family grow, I see their family change, so it’s really a nice long-term relationship, which is not necessarily typical in the practice of law. That’s why when I lose a client, it’s very hard.


Q: What’s the minimum amount of money someone should be worth before they talk to you?

A: There’s really no hard and fast number, per se. I always say to people: If you want to know if I can help, give me a call and I’ll talk to you about it. If it’s a matter that I think someone else can help you, that you don’t need my services, I tell them, and I refer them to other people in town.


Q: You were a CPA for a while, right?

A: That’s what I did after graduating from college. I took a break from school and pursued accounting and worked at Arthur Andersen for about three years before going to law school.


Q: What drew you to the law?

A: Oh gosh. I’m going to have a corny answer for you.


Q: We love corny answers.

A: I wanted to be a lawyer ever since I was young—probably because of my sixth grade teacher. They had this Constitutional Congress thing as one of the courses; and after that I was so interested in it and she just encouraged me. Her name was Mrs. Stahl. The school was Marguerita. It was up in Los Angeles.


Q: Were you thinking about this particular practice area in law school?

A: Not at all. I wanted to be a real estate lawyer. But I graduated in ’91, which was the last real estate recession, so there was no real estate legal work to be had. Fortunately, I made a call one day to one of the partners here at the firm, Rob Durham, who’s now retired, and asked if I could help with anything. And from that day I’ve worked in this area.

And unless you work in this area you don’t appreciate the benefits of it, because it’s very challenging and very rewarding. When I talk to my clients, we’re talking about things that people don’t typically talk about—death and taxes—but really we’re planning for their peace of mind. I find it’s rewarding. I find it’s constructive. So I’ve been happy as to how I, fortuitously, fell into this area.


Q: When you started practicing, did it differ from what you expected?

A: When you start out as a young associate, the work you do may not be the most exciting? And you may not get to see the whole picture. So for the first couple of years, I found it wasn’t as challenging as I had anticipated. And because of it, I actually did question whether I wanted to do it for a long-term career.


Q: What changed your mind?

A: Rob Durham said to me, “Give it time. It changes.” And he was absolutely right. It gets more interesting, you get to take on more responsibility and more control. Now I relay that message to young associates who are coming up the ranks.


Q: You were born in Taiwan. When did you come to the States?

A: My family moved to the States when I was about 8. We moved to Los Angeles and that’s where I grew up.


Q: What was it like coming to the U.S. at that age?

A: It was a tough transition. The schools back then didn’t have the formal “English [as a] Second Language” program. So basically me and my five siblings were placed in a classroom speaking not a word of English. [Laughs] We did real well in math, though.

I do have this memory. Every morning you had to recite the Pledge of Allegiance. You never want to be left out of anything as a child, so I remember memorizing the entire Pledge of Allegiance by sound without realizing what I was saying.

But sometimes the “sink or swim” approach works. We learned so quickly because we were forced to learn quickly. Within, I would say, a year and a half we were fully fluent and able to keep pace in all aspects of it. In fact, after a couple of years, in our school system, you get to read to schoolchildren and tutor and so forth? I was doing that for the younger grades in English.


Q: I also assume it was difficult because you grew up in Taiwan where almost everyone is Chinese, and you come here and … it’s all races.

A: It’s everybody. Plus you’re no longer the majority, you’re a minority, and you’re treated differently because you’re a minority. That was a shock to us. Some children can be cruel. They openly made fun of us. It was the first time we’d experienced anything like that.


Q: What brought your parents here?

A: My father [first] moved from China to Taiwan. After World War II, there was the civil war in China between the Communists and the Nationalists, and my father’s family was very prominent in China politically. So when it appeared that the Communists were going to take control, my father’s family moved to Taiwan. He was a teenager when that happened. That really marked his life. Those of us who haven’t gone through a real war, when your life is at stake, I don’t think we can understand that experience completely. But my father went through it.

When he started his own family, during the ’70s, there was the tension between Taiwan and China—which is ongoing. There was always this threat that China was going to invade Taiwan and take it over. So my father decided that he didn’t want his children to go through what he had gone through, and he decided to move to the United States.

We had a very good life [in Taiwan]. He was a lawyer there. He had to give up his practice when he moved here. And having six children, he couldn’t really go back to law school and start all over. So my parents made a lot of sacrifices.


Q: What did he end up doing?

A: We started out with a local grocery store. Then they sold that business and started a Chinese bakery business. That’s what he did until he retired.


Q: Did any of your siblings become lawyers?

A: Yes. I have a younger brother who is also a lawyer. Three of my siblings are doctors and the other is a CFO.


Q: Impressive family.

A: We were all inspired to do well.


Q: What did your father think of you becoming a lawyer—his profession?

A: When I first told him, after college, that I wanted to go back to school and become a lawyer, he discouraged me. He said that the law profession is a very tough profession, it’s a very challenging profession—especially for women—and he didn’t think I necessarily wanted to go through that. He didn’t think that was necessarily the best thing for me. I didn’t take that advice, obviously, and he’s glad I didn’t take that advice. He’s very proud I am a lawyer.

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Photo by: Frank Rogozienski

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