Estate Planning Practice Blog

Whatever Your Wish: Estate Planning is the Answer.

I get questions all the time. Questions where the answer is really let's develop an estate plan.

Think of estate planning as putting down your wishes and wants on paper in a legally enforceable manner so that your loved ones get what you want them to get. And as a bonus, they also know what to do after you pass away.

The question I got today was this:

I have five children. One child currently lives with me. He is an adult now though. I want him to have the house so long as he is alive and when he dies I want the house to be divided among all of my children in equal shares. How do I do this?

First, set up an estate plan. A Living Trust would work well in this situation

Your Living Trust could contain a provision to give the child a life estate in the home so that he can live in the home so long as he lives. Upon his death, the life estate ends and the home then is divided into as many equal shares as are necessary for one share for your all of your children.

Second, realize that having nothing in place will mean that the state will decide what to do.

Done With Taxes? What's Next?

If you have already filed your 2006 tax returns, you might want to tackle estate planning next before putting away your financial records and thoughts for the year.

When you are in the middle of tax season and reviewing your financial records, it is always good idea to review your estate planning documents to see if they need to be changed, revised, restated or handled in some way.

Estate planning is not a static activity though a good lawyer will draft documents that are robust and carry out your wishes. But laws change. Your wishes change. And your family dynamic/structure changes.

To summarize, tax season may be over, but it is a good time to revisit your estate planning goals and see if you need to make some changes. I am pretty certain that your estate planning attorney will be happy to hear from you!

I Don't Know What To File This Under.

I got a call last week from a family in need of my services. The conversation went like this:

I think my family member has limited capacity. I need to do something.

How so? What makes you think that your family member has limited capacity?

He had a partial lobotomy not too long ago.

Oh, that would do it.

Don't you think that if you were going in for a partial lobotomy you'd get your estate planning and related affairs in order since your incapacity after the procedure might become an issue and cause problems for your family?

The lesson learned here: if you are undergoing a serious medical treatment or have been recently diagnosed with a life threatening illness, you should consider getting your affairs in order sooner than later. 

NEW SEMINAR! Estate Administration Procedures

Monica Goel is a featured speaker at the upcoming National Business Institute seminar on June 14, 2007, in Irvine.  For information about Monica's seminar, click here.

She will be speaking throughout the full day on Estate Administration Procedures: Why Each Step is Important.

Anyone can register and attend this seminar through the National Business Institute. If you hold a professional designation or license, you may be able to receive continuing education credits for attending.

Nominating Executors and Successor Trustees.

The person nominated in the Will to handle the final affairs of the decedent for assets not held in trust is named the Executor.

The person nominated in the Living Trust to handle the management of trust assets while the settlors are alive, but not doing well and after they pass away are called Successor Trustees. The term settlor refers to the person(s) who created the Living Trust.

A question that must always be answered when establishing an estate plan:

Who will be your Executor and Successor Trustee for your Will and Living Trust?

1. You can nominate a slew of individuals in order of priority.
2. You can nominate two individuals to serve together as co-executors or co-successor trustees.
3. You can nominate a corporate fiduciary like a bank or a trust company.

A married couple typically nominates each other, husband and wife, to serve as executor for each other's Will and are often already trustee of their Living Trust. Then together they nominate back ups, which are usually their children.

A single individual will have to think about their nominations. Many people tend to nominate their children, if they are age 18 and older, to serve in these capacities in birth order. So, a widow may nominate her oldest son first, her second child next and then her youngest in age order. If a single individual does not have kids, he or she could nominate a sibling, a close friend, or another relative. I have heard many times that the reason a single person hasn't done their estate plan is that they have no idea who should serve in these roles. I understand that it can be a roadblock, but it should not be a permanent roadblock.

Can you nominate the same person to act as Executor of your Will and Successor  Trustee of your Trust? Yes.

Is it the best thing to do? Not necessarily, but it is very common.

If you are unsure who you should nominate for these important roles, discuss your concerns with your estate planning attorney. He or she can very well help you clarify who would be best to serve in these roles.

What is the Difference Between Wills Versus Trusts?

It is a common question: what is the difference between a Will versus a Trust?

To answer the question, we will make some assumptions -- you live in California and you are talking about revocable Living Trust.

A Will and a Living Trust are very similar in that you name executors and successor trustees to manage your estate when you die. You also name your wishes with regards who will get what.

The major difference is a Will must go through a probate proceeding.  A Living Trust avoids probate when it is properly funded with your assets.

In California, a proper estate plan includes both a Will and a Living Trust. You create a backup or pour-over Will to transfer your assets to your Living Trust if you die with assets not already in your Living Trust. You create a Living Trust to hold your real estate and other major assets to avoid probate.

Now, on to the laundry list of general differences:

1. A Will must be probated when the estate is worth $100,000 or more.
2. If you don't have a Will or a Living Trust, your estate must be probated if worth more than $100,000.
3. If the bulk of your estate is in your Living Trust, it will avoid probate.
4. A Will is the only document where you can nominate guardians for your minor children. And this is a good reason to have a Will along with your Living Trust when there are minor children.
5. If you own real property in California and most other states, the only way to avoid probate on those properties without a joint tenancy ownership is to place that property into a Living Trust or other type of Trust.
6. A Living Trust can also avoid conservatorship (or guardian of the adult) if you become unable to manage your affairs.
7. You can specify how assets in your Trust will be distributed upon your death.
8. You can create some estate tax saving vehicles in a Living Trust if your estate is worth more than the applicable federal estate tax exemption amount.
9. When there's probate, attorney fees are set by statute and very expensive.
10. The cost of a Living Trust in a proper estate plan is usually a fraction of the probate attorneys fees.

Of course these are generalities and please note that many estate planning attorneys offer a no charge or low cost consultation. During this consultation your attorney will explain the differences between a Will and Living Trust as it affects your estate and answer all of your questions.

Original Estate Planning Documents and Non-Citizen Spouses.

Funny thing about situations ... every few weeks or so I run into very similar situations in a short period of time.  It's like playing poker; here's s a three of a kind or a two pair!

Two and half situations worth posting about:

1. Keep Your Original Estate Planning Documents. Be sure that if you hire an attorney to prepare your estate plan that you have your original estate planning documents for safekeeping. A reputable attorney will not keep your original estate planning documents without asking for your permission. In fact, most attorneys these days do not keep any original documents and instead provide instructions to clients on where and how to store their documents. That said, however, a reputable attorney may keep copies of your estate planning documents.

1.1. Don't Lose Your Original Estate Planning Documents. Please be sure you know where your documents are located in the event your loved ones need them or you wish to update them. There's nothing more frustrating than hunting down missing estate planning documents where it is obvious that they existed at some point. The most tattle-tale way of knowing that a trust exists is to have real estate titled into a trust.

2. Planning for a Non-citizen Spouse. If you are married to someone who is not a U.S. citizen, there are major tax issues involving a non-citizen spouse receiving an inheritance. Citizen spouses are allowed unlimited tax-free transfers of property between spouses where the spouse receiving the property is a U.S. citizen. If the receiving spouse is not a U.S. citizen, the property may be subject to U.S. gift and estate taxes. The way to avoid this is proper estate planning and establishing a special trust for the non-citizen spouse's benefit. This trust is called a qualified domestic trust or QDOT. Ask your estate planning attorney for more details.

Do What You Want To Do.

Estate planning is one of those types of legal matters where clients should find the attorney you are most comfortable working with. You want your estate planning attorney to spend time with you, assist you with determining your wishes and be willing to draft documents in accordance to your wishes.

Sometimes you might hear an attorney say it is too time consuming or to complicated to draft a trust that has specific provisions for each of your 16 nieces and nephews. But if that's what you want, you should be able to have it drafted your way.

For the most part, if it is not illegal, unconscionable or violating any of the maxims of trust drafting, it can be done. You might have to pay more than the person who wants to give everything to only one person. That's to be expected as fees for estate planning documents should be calculated based on your needs and assets. Estate planning is not a one price fits all situation for anyone. 

Newsweek's Jane Bryant Quinn on "Wills and Other Ways"

This week's issue of Newsweek (February 12, 2007) features a timely piece by columnist and financial guru, Jane Bryant Quinn, on estate planning. It's an excellent piece... click here to read the column at newsweek.com.

Quinn says, "...get advice, not from a buddy but from a lawyer who specializes in estates."

Are You a Special Needs Trustee?

A Special Needs Trust is a very important estate planning tool for caring for loved ones, whether minors or adults, with special needs. Generally these trusts are set up to allow you to provide funds for your disabled child without disrupting the child’s eligibility for government aid. 

Click here to read the recent post that explains Special Needs Trust at length.

The other side of the coin with respects to Special Needs Trusts acting as trustee. There are many issues to consider in your capacity as trustee.

One of these issues is knowing the government aid programs involved with and how they work with regard to the special needs beneficiary.

As trustee, you will have to determine the type and nature of the government aid your special needs beneficiary receives  (e.g., Supplemental Security Income (SSI) and Medi-Cal).  You will also have to understand the reporting rules for government programs as not to prevent a reduction in benefits. And, most importantly, you will need to keep current with new developments regarding these government programs.

This is just one of many important items to take under consideration with Special Needs Trust administration.

If you have questions, please consult with your attorney for more information.