California Estate Planning Attorney Blog

Besides the weird effect on capital gains tax which the unintended estate tax repeal for 2010 had (see my referral to a NYT-article) the estate tax repeal has some other unexpected implications on living trusts.

Some living trusts are set up as a so called "bypass-trusts". Those trusts generally have multiple beneficiaries: the spouse, children and sometimes others which are supposed to inherit the trust property. One essential clause usually states in legalese: I want the amount that will not create any federal estate tax to go to my kids. I want everything else to go to my spouse. Such a clause formerly avoided a maximum in estate tax.

Now without a federal estate tax the basis for such a clause falls apart if one spouse dies in 2010. If read literally, the clause now states that every single asset of the trust will go to the kids (because there is no federal estate tax at all). The spouse would not receive anything!

Naturally if the couple was very wealthy the spouses would have intended otherwise. Before 2010 with such a clause in place, the surviving spouse would have got a significant share of the estate that ensured his or hers financial independency. Now the surviving spouse has every reason to challenge the trust on the basis that it did not reflect the true will of the grantors. In the end (after a long battle in court) a judge would have to decide. Havoc!

Continue reading "Estate Tax Repeal Causes Havoc in Bypass-Trusts" »

Any estate plan should be reassessed and if necessary updated at least once a year. Usually the arrival of the new year is a good time to tackle this little task. If you don't plan a full overhaul of your estate plan, there is generally not very much to do.

1. You should look for your estate planning documents and see if they are still in the place where you left them. There is nothing more painful for your heirs if they know that you have an estate plan but they cannot find the according documents if they need to.

2. Think about the year that passed. Have you acquired any substantial assets? If yes, you should make sure that those assets are transferred to your living trust. If not, those assets could trigger probate even though you have a living trust in place which is supposed to avoid this. For assets of daily use (e.g. an expensive TV, Art, Furniture) it might be necessary to draft a new declaration of assignment to move those newly acquired assets to your living trust. Within the firm's learning center we have outlined the basics how you move different kind of assets into your living trust.

3. Check your insurances. Does a live insurance still cover the amount that would be necessary to support your family or did the requirements raise in the past year? If you need more live insurance contact your insurance provider.

4. Think about your asset distribution in your living trust. Does your living trust still reflect your wishes of how you would like to distribute your wealth when you die? If not, your will or your living trust may have to be amended.

5. What about your chosen trustee? Is he or she still willing to take over the duty of a successor trustee? If you have any doubt about it, you should talk to the nominated trustee and if necessary choose a new one.

6. Are there any other concerns regarding your estate plan? You will have more peace of mind during the year if you find a solution for your concerns early on. If you don't know the answer to your special situation, speak to a lawyer. He or she will be able to solve your problems and make sure that your loved ones are save if something bad happens to you.

Continue reading "A New Year - Time to Update Your Estate Plan" »

Estate planning is not a one-time affair. Life changes over time and so should your estate plan. Last week I've already posted a link to a list of events, that should trigger a revision of your estate plan. An article by G.M. Filisko now follows a timeline-based approach to the same issue. He identifies 8 stages in an ordinary life that each requires adjustment of your estate plan.

Beginning at the age of 18 everyone should have a durable power of attorney, a health care proxy, a HIPPA release and eventually a living will. Also as soon as a young adult acquires property, a will or a living trust is also a good thing to have (we have outlined all of those estate planning instruments on our firm's website. In this first stage usually the parents fulfill the role of a beneficiary and caretaker in case that something serious happens to the young adult.

Sooner or later you will usually commit yourself into a serious relationship and finally become married. As a grownup you have to think about a prenuptial agreement and also about a major revision of your estate plan. If you have not done it at this point, you should definitely do it now. If you've an estate plan in place, marriage is the time to let the spouse take over the part, which so far has been fulfilled by your parents. Also one can think about buying life insurance.

Things change again with every child you will be blessed with. You should appoint a legal guardian for the case that something serious happens to you and revise all your estate planning instruments to match the new situation.

In the unhappy event of divorce also estate planning also has to be adjusted. Finally, when you advance in age, hopefully without worries, you will have to think about long-term care insurance and check your estate plan whether it still reflects your wishes.

The timeline-approach shows that estate planning accompanies you during your whole life.

Continue reading "Estate Plan Adjustments" »

As a Walnut Creek Trust Attorney I review estate planning trends throughout the country.

Effective on July 1, 2009, the state of Vermont introduced new statutory law the governs the administration of trusts. The statute adopts the Uniform Trust Code (UTC) that many states have already introduced. This act modernizes and codifies the laws governing testamentary and living trusts (the full text can be found here).

California already has its own statutory law, governing living trusts. The statutory regulations are contained in the California Probate Code (sec. 15000-16504). When setting up a living trust these regulations have to be watched closely.

Continue reading "Vermont has adopted the Uniform Trust Code" »

Greg Herman-Giddens has posted a list with events that should trigger a review of your overall estate plan. Although some items are really broad ("(11) Substantial increase or decrease in wealth") he provides a good checklist, that somebody, who already has an estate plan should keep an eye on.

As an estate plan changes, a living trust you might have, needs review as well. I already mentioned some reasons to change your living trust document withinthe learning center on the firm's website. The list of Mr. Herman-Giddens provides a good complement to this.

Continue reading "Reasons to Review your Estate Plan" »

I've come across an interesting article in the Contra Costa Times, written by Laura Casey. Using the example of a recently widowed mother of two young sons, the author explains the importance of naming a legal guardian for children.

It is of course a very difficult decision to make, but an important one. If you don't name a legal guardian for your kids, the probate court is going to do appoint a guardian of its choice as soon as both parents die. The decision of the court may or may not be what the parents would have opted for themselves. Therefore it is always a good idea to name the legal guardian in advance even though the thinking about such a topic feels awkward. In most cases the court will follow the decision of the parents and presume that the parent's wish is in the interest of the child.

The decision for a specific person as a guardian is complex. Family values, religion, race and culture and a possible relocation can play a major role. Often a lot of thinking is required to find out the right person to be the kids guardian. The guardian should also be informed of the choice and agree to it, because nobody can be forced to be a legal guardian.

Usually a legal guardian can be named in an ordinary letter, within the declaration of a living trust (although this is not always recommended), or within the will (see my website for further reference). Because its importance it is always useful to contact an estate planning lawyer in this issue. The consultant will not only check if the naming of the guardian was done in the right way but also assist you in other estate planning matters.

Continue reading "Naming of a Legal Guardian for Children" »

Inspired by an interesting article of Christopher Yugo on nwi.com, i'd like to discuss the practical ways of how living trusts can be amended.

As I have already outlined in our firm's online learning center, there are basically two ways of amending living trusts.

You can either write down a separate document, that only contains amendment instructions, e.g. "delete section 4" and paste the section that is outlined in the amendment document into the living trust document instead. The legal effect is, assuming the grantor is entitled to change the trust (for further reference see here), that the legal implication of the trust change according to the amendment.

The other option is to restate the whole trust. If you do change the trust a couple of times, using simple amendments as outlined above can be a little confusing. Often restating the whole trust document is the better way to go. What Christopher Yugo does not mention in his article though is that one has to be really careful with the restatement of the trust. With the use of modern day word processors, it is very easy, that a passage of the restated trust document is deleted accidently. Such an oversight has to be avoided by all means. However, if you apply the proper diligence to the restatement, it is a great way of keeping you living trust document clear and understandable.

Continue reading "Different ways to amend a living trust document" »