Estate Planning Practice Blog

Kind Words About This Blog.

We receive email from readers with legal inquiries, kind words and other suggestions for this blog often.

Emails are always welcome from blog readers. Our email addresses are on the left column near our photographs.

Here is a recent email from a reader named Lynn, who has given me permission to post:

"I am a probate paralegal and I cannot say thank you enough for such a wonderful blog!  I found it very informative and helpful and I have had to share it with not just the attorneys I work with but my other probate paralegal friends.

Thank you for doing such a wonderful job and, in turn, helping me do mine!"

Confidential to Lynn: you are welcome and thank you too!

Not Fond of Your Kids-in-Law?

I received an email today from a blog reader asking about a hypothetical situation:

Say you and your spouse die together. Your married child inherits your estate. A year later your child dies. The child's surviving spouse gets everything and enjoys the rest of their life with your money, spending it on God-only-knows-what... with a new lover, to boot. 

What can you do to avoid this? What if you do not want your children's spouse to inherit your estate in a situation described above?

One way would be to set up a Living Trust that says that your child can inherit your estate, but it must remain in trust for your child's lifetime or until your child reaches a certain age.

You can give the trustee discretion on how to allocate the funds for your child. It could be distributed to your child with complete discretion by the trustee. Or you could state that the trustee must distribute income and any principal is discretionary. Or you can say that the trustee must distribute both income and principal at certain intervals.

It's a bit complicated to understand, but try this:

Say you don't care for your daughter-in-law "Floozy." Floozy is married to your only child, your "Son." You can set up a Living Trust to give your entire estate to Son to be held in trust for Son's lifetime. The trustee can be a corporate trustee to ensure continuity and consistent management.
If Son dies then you state who the contingent beneficiaries are -- your Son's children, your nieces and nephews or maybe a charitable organization. This will prevent Floozy from getting the rest of your money if Son dies too soon.

This situation only works if you have a larger versus a smaller estate.

Another way would be if your estate consists of just a home, you could put your home into your Living Trust and allow your Son to have a life estate in the home for the remainder of his life and then upon his death the home would go to your alternate beneficiary.

Or you could state in your Living Trust that Son is to get 5% of the trust assets every year until he reaches age 50 (or whatever age you choose) and then he gets the remainder of your estate outright at that age. At which point there's not much left.

But if your Son inherits property in California, it is considered separate property and not an asset of the marriage so long as your Son keeps the property separate from Floozy and does not otherwise commingle the funds with community property funds.

And, lastly, if your Son were wise, he could set up his own Living Trust to catch his inheritance and devise it straight to his children or keep it in his family bypassing Floozy so long as it were not community property. In this instance, Son's estate may lose the benefit of the marital deduction for his entire estate if the separate property inheritance and the community property portion exceed the federal estate tax exemption amount.

Lots of issues. It depends on your situation, your assets and your wishes. And there are other options -- these are just a few.

Talk to an estate planning attorney to help you devise the best approach for your estate plan based on your wishes.

Thanks to the blog reader for emailing me this terrific hypothetical!

Every Trust Needs a Trustee.

One of the components of a valid Trust is having trustees. The trustee is the person who is managing the assets in the Trust.

If you are alive and well, the trustee of your Living Trust is often the person who has created the trust. So normally a person creates a Living Trust and acts as trustee for their own trust until they are unable to act either by reason of death or incapacity.

Then the successor trustees named in the Trust will step up and manage the assets in the Trust according to the Trust document.

Most people tend to nominate their loved ones to act as trustee.  Here are 7 things to consider when naming a loved one to act as trustee:

    1.     Does your loved one have time to commit to fulfilling the many duties of being a trustee?

    2.     Does your loved one have the knowledge and information necessary to manage the assets in your Trust?

    3.    Are there any terms of your Trust that could present a conflict of interest to your potential trustee?

    4.    Do you have conflicts in your family that could present problems for the trustee?

    5.    Does your Trust hold assets that may force the trustee to make difficult decisions like dealing with a family-owned business?

    6.    Is the cost of a professional trustee a consideration?

    7.    Is the loved one also a beneficiary of the Trust?

These are the kinds of questions you should ask yourself when deciding on who should be trustee. You can also discuss these questions and issues with your estate planning attorney.

Closing a Probate Estate.

Yesterday, I posted a quick tidbit about probate. 

One of things about opening probate is closing the probate estate. Thus, the ultimate goal of the probate process is the smooth transfer of title to the assets belonging to a decedent to the beneficiaries or next of kin.

Closing the probate is the final step and requires the following:

1. a Final Accounting, unless waived by the beneficiaries or next of kin;

2. a Final Report describing the actions taken during the probate and the status of the estate;

3. a Petition for Final Distribution itemizing who is going to get what asset.

Typically the Final Accounting, Final Report and Petition for Final Distribution are included on one petition for the court's review, consideration and approval.

It takes alot of work to get to this process. So, again, to sound like a broken record, a Living Trust is often a better way to go for those who live in California and own property.

A Quick Tidbit About Probate.

In California, probate is the formal legal proceeding for the administration of a decedent's estate. It is what happens when someone dies with or without a Will and their assets are worth more than $100,000.

Estate administration has 3 main functions:

1.     Provide systematic collection of the decedent's assets (also called marshaling decedent's assets)

2.     Determine the liabilities of the decedent's estate and giving creditors a prescribed period of time to present their claims against the estate

3.     Distribute decedent's assets to those persons entitled to receive them either through a Will or the laws of intestacy.

Because of the statutory requirements for creditor claims, probate must remain open at least 4 months. Typically because of all of the other requirements a probate proceeding typically takes a year, if not longer, from start to finish.

Probate is often avoided when the assets are left in a Living Trust.  A Living Trust is often the best approach in California to avoiding probate.

For more information about probate or to set up a Living Trust, please email me or consult with an attorney in your area.

OC Register Features Delia Fernandez.

Delia Fernandez is a guest poster on this blog. Her posts are always very thorough and informational on financial matters. Click here to see her other posts.

Delia was featured in Saturday's Orange County Register as the featured planner of the week for a financial makeover entitled "After Illness, They Look Ahead."

You go girl!

Do-It-Yourself Wills and Trusts.

DIY or Do-It-Yourself is a big thing among Americans. Many of us handle DIY home remodeling with much success. We also handle many other areas with DIY success. [Though my attempt to darken my hair color with a $8 DIY box of hair dye sent me to the salon within the week to pay for ten times that amount to correct the harsh color process I inflicted on myself. ]

The DIY culture is pervasive and the Internet age certainly makes it easier now than ever before to prepare your own Wills and Trusts.

But the general consensus among estate planning attorneys is that DIY Wills and Trusts are almost never done right and can easily cause problems later on when the person has died generating attorneys fees, which only benefits the attorneys and not your estate. One of the biggest errors with DIY Living Trusts is that while the trust is properly created, it is never funded and, thus, rendered useless.

I find it very hard to discourage someone who is hellbent on DIY for their own estate planning. But one way to ensure that your DIY Wills and Trusts are done properly is to hire an estate planning attorney by the hour to review your documents and identify your mistakes, if you have any. The attorney can also assist with property transfers to your Living Trusts.

Gifts of Tangible Personal Property.

What about personal items like Grandmother's china or your Dad's favorite fountain pen? How do you give gifts of personal items after you pass away to your loved ones?

One way to do this is to create a separate writing alongside your Will. California Probate Code Section 6132 allows for a separate writing incorporated by a testator to their Will to make specific gifts of tangible personal property. This Code Section allows you to give gifts of personal items up to a $5,000 value of a single item and include as many personal items so long as the aggregate value is no more than $25,000 for these single items.

This separate writing can be done either before or after you execute your Will.

It is a nice way to keep a small list who is to get what without having to involve your attorney every time you acquire another valuable item of personal property or change your mind about who gets what.

Teamwork at TLD.

One of the nice things about working at a law firm is teamwork. Teamwork is a core value at Tredway, Lumsdaine & Doyle, LLP.

Teamwork came into action when I wasn't feeling well on a day that I had many estate planning appointments.

I had clients driving up from San Diego and Thousand Oaks to sign various estate planning documents. I was hesitant to have to cancel the signings because I wasn't feeling well. (Can I say that a cold is one thing, but the stomach flu is another monster entirely?)

Another attorney, a name partner no less, graciously offered to take my appointments for me and instantly I knew that our clients would be well taken care of.

Teamwork should be one of the attributes clients consider when hiring a law firm to handle estate planning needs.