Why should I do any Estate Planning?
State laws determine who will receive your estate if you die without a Will or Trust (Intestate Succession). If you don’t want the state determining who gets what and when, plan now so that your wishes are followed upon your death.
How do I know if a Revocable Living Trust is what I need rather than a Will?
If your Estate (probate assets only) is worth less than $150,000 and you have no children, a Will may suffice. But if your estate is worth more than $150,000, you can avoid probate and federal estate taxes if you have a Revocable Living Trust. An asset is not counted as a probate asset if it is owned in joint tenancy or if there is another means of determining who receives the asset after the owner’s death (ie, beneficiary designations).
Why should I have an attorney draw up my Estate Plan when I can have a paralegal or an online service do it for less money?
Due to the complexity of a Will or Trust, questions will most likely arise about the meaning of various parts of the document. Non-lawyers who attempt to answer these questions are breaking the law and could be providing inaccurate information. In order to avoid costly mistakes, it is advisable to work with an attorney when forming your Estate Plan.
How often does an Estate Plan need to be reviewed after it is signed?
Clients should look at their estate plans once a year to determine if the distribution plan still fits their needs. But if any major life changes take place during the year, the Estate Plan should be reviewed. Examples of major life changes are: Marriage, divorce, birth of children, inheritance received and illness rendering guardian named for minor children unable to serve.
If I have a Revocable Living Trust, why do I also need a Will?
The purpose of the Pourover Will is to pour (transfer) assets into the trust if the assets had not yet been transferred to the trust. A Pourover Will names the Revocable Living Trust as the only beneficiary.
Does a Pourover Will have to be probated?
Probate (a legal proceeding that is used to wind up a person’s legal and financial affairs after death) is not required unless the assets that are subject to probate are valued at more than $150,000.
What are Probate Assets?
Probate assets include any asset in the decedent’s name that isn’t in joint tenancy or in a trust. Assets that are not subject to probate include IRAs, 401Ks and life insurance, assuming that a beneficiary has been named (a person and not the Estate) to receive the assets involved.
What is Joint Tenancy?
Joint Tenancy is a way of holding title to property so that when a joint tenant dies, his or her interest in the asset vests in the surviving joint tenant or joint tenants without probate. Joint tenancy is not recommended for assets that can increase in value, such as a residence, because the surviving joint tenant will not receive a “stepped up cost basis” to fair market value at the date of death of the other joint tenant. Cost basis is used to determine capital gains. For many homeowners, the cost basis is the price they paid for their home, plus any capital improvements that have been made. The cost basis is subtracted from the selling price to determine the capital gains. A Revocable Living Trust is the best way to hold title to your home in California.
Do trust documents become public information when someone dies?
The fact that a Trust does not automatically become public information is one of its inherent benefits.
Who should be chosen as the successor trustee?
Having to pick a successor trustee is often why clients procrastinate in setting up their Estate Plan. Remember, you can always change it later. Don’t let this difficult choice stop you from moving forward. Whomever you choose will be better than not having an Estate Plan at all. Pick someone – your adult children, other relatives, friends, trust companies or banks. This person must be responsible and willing to seek professional help to carry out the administration of the trust.
Who receives the estate?
You can give your estate to your children or grandchildren (outright or in trust if they are too young to receive an inheritance), make charitable gifts, or provide for the care of your pets. The decision is yours. You should also include a contingent beneficiary in case the designated beneficiary predeceases you.
What is a Special Needs Trust?
The beneficiary of a Special Needs Trust is usually receiving benefits from a government program. Those benefits will stop if the beneficiary receives an inheritance because of income limits that determine eligibility. A Special Needs Trust provides that the trustee only distribute income that will not trigger disqualification from benefits. The trust can own certain assets that are available to the beneficiary, such as a car or a house.
What is an Irrevocable Life Insurance Trust (ILIT)?
The purpose of a Life Insurance Trust is to avoid federal estate taxes on life insurance proceeds owned or controlled by the decedent. By having the ILIT own the insurance, the decedents have given up control so there are no estate taxes on the proceeds when paid out to the beneficiaries.
What is a Qualified Domestic Trust (QDT or QDOT)?
It is a Revocable Living Trust for Non-Citizens. It is used to preserve the marital deduction when the surviving spouse is not a United States citizen and the trust assets are likely to be subject to the federal estate tax if the marital deduction is not available.
What is the Marital Deduction?
The Marital Deduction allows transfers of unlimited amounts of assets between spouses at death, but only if they are United States citizens. The surviving spouse does not have to pay any tax on the estate of the first spouse to die, provided the surviving spouse is a citizen of the United States. The marital deduction postpones the federal estate tax on the estate. The marital deduction is useful in deferring taxation possibly for many years after the death of the first spouse.
Why use a Restatement of Trust?
When clients come in with an existing trust and ask that it be amended, we would need to review it at length before deciding how to amend it. The trust may have provisions that are outdated or contrary to the clients’ wishes today. It is easier to start over with a Restatement, using language that we know will be effective and reflects the current laws. It is also cheaper for the client because we do not need to charge them for a lengthy review of their current trust.
Do assets have to be retitled if a Restatement is used?
No, the name of the trust, the trustees, and the date that the trust was established remain the same. Deeds, bank accounts, brokerage accounts, etc… do not need to be changed if the title of the assets is already in the trust’s name.
What is Trust Administration?
After the death of the trustor (the person who created the trust), certain steps must be taken to comply with state law, to preserve the federal estate tax exclusion amount, and to change title to assets. Major assets must be appraised and an inventory must be prepared to determine the net worth of the decedent for federal estate tax purposes. increasing the federal estate taxes for the estate.
What is a Disclaimer Trust?
After the death of the first spouse, the surviving spouse has the option of disclaiming all or part of the estate of the first spouse to die. The assets that are disclaimed are transferred to the Disclaimer Trust, and are not included in the estate of the surviving spouse when he or she dies. The decision to disclaim must be made within nine months of the date of death, and the person making the disclaimer cannot have received any benefits from the asset being disclaimed.
What is Probate?
Probate is a legal proceeding that is used to wind up a person’s legal and financial affairs after death.
How much does Probate cost?
California Probate Code sets the maximum statutory fees that attorneys can charge for a probate although higher fees can be ordered by a court for more complicated cases. The fees are four percent of the first $100,000 of the estate, three percent of the next $100,000, two percent of the next $800,000, one percent of the next $9,000,000 and one-half percent of the next $15,000,000. For estates larger than $25,000,000, the court will determine the fee for the amount that is greater than $25,000,000. If both the attorney and the executor receive a fee, the amount paid will be double. Debts are not included in determining attorney’s fees. That means that probate fees are calculated on the full value of the house you own without taking into account any mortgage on the property.
What is an Executor?
The Executor (a/k/a administrator or personal representative), is the person responsible for managing the probate – preparing an inventory, paying bills, filing taxes and distributing the estate after a court order is obtained.
What is a Small Estates Law?
Beginning in 2012, estates that do not exceed $150,000 do not need to be probated in California. An affidavit or declaration signed under penalty of perjury at least 40 days after the death can be used to collect the assets for the beneficiaries or heirs of the estate. No documents are required to be filed with the Court if California Probate Code Section 13100 to 13116 is used.
What assets are included in the $150,000 limit to fall under the Small Estates Law?
Bank accounts, brokerage accounts, stock, bonds, mutual funds, other investments, real property valued at up to $50,000 and similar assets that the decedent owned in his or her name only are included in the $150,000 limit. The following assets are not counted: Joint tenancy assets, trust assets, IRAs, 401K accounts and similar pension accounts, life insurance, death benefits, registered vehicles, pay from service in the armed forced, salary earned but not paid before death up to $15,000, pay on death (POD) accounts and accounts with a named beneficiary. If there is indebtedness in the estate or disagreement among heirs and beneficiaries as to the division of property, it is best to go through a full probate. Probate could also be required on the real property if the title company refuses to issue title insurance based on the affidavit even if the value is within the $50,000.
What is Community Property?
Married couples and domestic partners are subject to community property laws. Community property includes all assets acquired by spouses during marriage while domiciled in California, except for inheritances and gifts made to only one spouse. (Family Code section 760.)
What is Separate Property?
Assets acquired before marriage or through inheritances or gifts to only one spouse are separate property. (Family Code section 770.)
What is commingling?
When a separate property asset or income is used to benefit the community property, it changes the character of the separate property. For example, using part of a separate property inheritance to pay the mortgage on or make renovations to a community property home is commingling of assets.
What is an Advance Health Care Directive (AHCD)?
This legal document can be used to appoint a family member or friend to make health care decisions for you if you are physically or mentally unable to make those decisions yourself. It appoints an agent (and successor agents) who will carry out your wishes for health care only. The directive describes how much and what sort of medical care you want. Under California law, mercy killings, assisted suicides and euthanasia are prohibited so cannot be included in an AHCD. The agent’s authority to take action is triggered only by a determination that the patient lacks mental capacity. Lack of capacity is determined by the patient’s primary physician and by the agent.
What is a Power of Attorney over Assets (POA)?
The Power of Attorney over Assets is for financial purposes and deals only with financial matters (ie, writing checks, filing income tax returns, managing investments or selling property). A Power of Attorney can take effect immediately upon signing or be a “springing” Power of Attorney that will not take effect until a person becomes incompetent, as certified by physicians. It allows the agent to control someone’s financial affairs, but gives the agent no control over the conservatee’s person (ie, deciding where the conservatee should live or making health care decisions).
What is HIPAA?
It is the federal Health Insurance Portability and Accountability Act of 1996. This law has provisions concerning privacy rights for individuals. Among these provisions are regulations requiring written authorization from a patient before a health care provider can release certain health information. All health care documents should include this authorization.