California Estate Planning Attorney Blog

Under California law, in order for a formal will to be valid, the will: (1) must be in writing signed by the testator, or by someone at his direction and in his presence; (2) must be signed in the presence of two disinterested witnesses who understand that they are witnessing the execution of a will.

For example, a typewritten will meets the writing requirement. If Testator suffered from severe tremors, he could ask his attendant, to help him execute his will in Testator's presence and at his direction.

A valid will may revoke a valid prior will if the testator indicates the intent to do so. To revoke a prior will, a new will needs to conform with the same requirements as the prior will to be valid and effectively revoke the prior will. When a testator fails to validly execute a new will, the prior will not be revoked.

Under California law, witnesses do not need to be at each other's presence, but the witnesses each need to see a testator sign the document purported to be the will. There is no requirement for the witness of a will to know the contents of the will, but the witness must understand the document to be the testator's will.

To make sure a witness understands a document to be a testator's will, the testator should explain the purpose of the document to the witness prior to signing. If a witness signs a document too quickly, there might be question on whether the person understood what the document was.

A trust is a fiduciary relationship with respect to a settlor's property. The person creating the trust, the settlor, may create a testamentary trust through the provisions of his will. The trustee holds the property, the trust res, for the benefit of the beneficiaries. A trust requires: (1) an intent by the settlor to create the trust for a valid, legal purpose; (2) trust res; (3) beneficiaries; (4) a trustee; and (5) valid delivery of the trust property to the trustee.

A charitable trust is a trust that is created in order to benefit society, such as public health and welfare. When a trust benefits society, it does not have any specific individuals who are beneficiaries. All persons who fall within the class described in the trust receive the trust benefits.

Under the cy pres doctrine, a court has the equitable power to give effect to a charitable trust where the trust purpose would otherwise fail as long as the court only changes the mechanism of carrying out the goals of the trust as opposed to the trust beneficiaries. A court has cy pres powers to effect a charitable trust where the settlor manifested a general charitable intent as opposed to a specific charitable intent.

Continue reading "Wills and Trusts in California" »

What is a pourover will? A pourover will is like any other will, except that it has only one beneficiary, which is the testator's living trust. Usually a person who makes a trust also makes a pourover will. The pourover will transfers assets to the trust to ensure that these assets will be subject to the distribution plan in the trust and receive the benefit of trust's tax reduction provisions. This is because in a living trust, the person may forget to title his property in the trust. For example, someone opening a bank account may not think of the hassle of bringing trust documents to the bank for verification so he opens the account in his own name. When the person dies, the property not titled in the trust name is distributed by the pourover will.

The pourover trust pours assets into the trust.

The pourover will controls only probate assets. These are assets that are not in a trust, not in joint tenancy like a bank account with people's names, not inherited by a surviving spouse like a house titled with the right of survivorship, not insurance proceeds, and not in an IRA or 401K. Probate assets are generally titled in the name of the decedent only.

The assets in a pourover will may need to go through probate if it is real estate or add to up to more than $100,000. If the amount does not exceed $100,000, the assets can be transferred to the trust by using declarations as authorized by California Probate Code section 13100.

The pourover will distributes tangible personal property, such as furniture, jewelry, clothing, to the deceased person's beneficiaries. The will nominates executors and guardians for minor children. The pourover will revokes prior wills.

Continue reading "Pourover Will - Walnut Creek" »

Rinne Legal offers a free initial consultation on estate planning to individuals in and around Walnut Creek, San Francisco, Fairfield, Oakland, and Sacramento. To prepare for a consultation, it helps to gather information on the three Ps: People, Property, Plan.

Who are the people in your life? First there is yourself, then your spouse if you are married. If your parents are alive, you might count them in on your estate plans. If you have brothers and sisters, you might want to take care of them. Besides individuals, you might want to leave some of your assets to charities, colleges, or churches. There are your children and grandchildren if you have any.

In California, non-marital children may inherit from the mother when there's parent-child relationship by the mother giving birth and from the father only if father acknowledged the child, subsequent marriage to the mother, or court decree of paternity. Laws allowing non-marital children to inherit from mothers and not fathers violate the US Constitution's equal protection clause.

If you die intestate, foster children and stepchildren are treated likewise if it's established the parent would've adopted but for a legal barrier. Non-marital children as a general rule may inherit from and through the mother but only from and through the father if paternity established by subsequent marriage of the parents, adjudication of paternity during father's lifetime or proof of paternity.

Next, make a list of the assets you own or control. Identify insurance policy numbers and exact dollar values. Write down notes on the cash, stocks, bonds, death benefits, real estate. Knowing the property allows someone to create special asset distribution mechanisms such as a life insurance trust where the trustee holds life insurance policy proceeds for beneficiaries. California allows a settlor to name the trustee of a life insurance policy in a will.

Finally, consider the plans you would make for the important people (including yourself) and the property inventoried in the event of incapacity or death. Who would you name to make decisions for you if you could no longer do so yourself on your medical and finances? Who would care for your children? How would you distribute your assets to heirs? Would you prefer to spare your heirs probate costs and time? Would you like to minimize the impact of estate taxes or gift taxes? Do you want the beneficiaries to know what you are leaving them or keep it a secret?

Continue reading "Initial Estate Planning Consultation - Walnut Creek" »

A charitable trust lets a settlor donate to a charity, and it gives the settlor and his heirs a tax break. Charitable trusts require someone to give up legal control of property because charitable trusts are irrevocable.

When a charitable trust is partly charitable and partly not, it does not qualify as charitable, unless the trust instrument allows for splitting into two trusts by dividing the corpus: 1) beneficiaries must be indefinite; where a specific individual is named, the trust is not charitable, even if the individual needs charitable assistance; 2) a charitable trust may be enforced by the Attorney General or a beneficiary acting with special interest in a trust; 3) legal title to trust res must vest in the trustee within the rules against perpetuities; once title vested, the rules of perpetuities does not apply when there is a shift from one charity to another, but applies if there is a shift from a charity to individual or vice versa.

The rule against perpetuities at common law invalidates future interests (contingent remainders and executory interests) that may vest beyond the time of perpetuities, meaning a person is prevented from putting qualifications in his will that continue to control or affect the distribution of assets long after he dies. The perpetuities period under the common law rule is not a fixed term of years. The rule limits the period to at the latest 21 years after the death of the last identifiable individual living at the time the interest was created (life in being). This measuring life could be the grantor, a life tenant, a tenant for a term of years, or a contingent remainder or executory devise to a class of unascertained individuals, the person capable of producing members of that class.

To set up a charitable remainder trust, set up a trust and transfer to it the property to donate to a charity. The charity must be approved by the IRS. The charity serves as trustee of the trust, and invests the property so it will produce income. The charity pays the settler a portion of the income for a certain number of years, or during life. When the period expires or at death, the property goes to the charity.

The tax breaks come when the settler takes an income tax deduction, spread over five years, for the value of the gift to the charity. The IRS deducts from the value of the property, the value the amount of income the settler estimates to receive from the property. When the trust property goes to the charity, it's no longer in estate so it isn't subject to federal estate tax. When appreciated property is sold for cash, the proceeds stay in the trust because charities, unlike individuals, don't have to pay capital gains tax.

Continue reading "Getting Tax Breaks for Doing Good - Walnut Creek" »

CNNMoney.com Lesson 21: Estate Planning discusses the top things to know about estate planning. Number 3 on the list says to take inventory of assets. Assets include investments, retirement savings, insurance policies, and real estate or business interests. Whom should inherit the assets? Whom should handed financial affairs if incapacitated? Whom should make medical decisions if unable to make them?

When studying estate planning, it helps to have a glossary of often used trust terms:

CONSTRUCTIVE TRUST: created by a court to grant relief when person obtains legal title to property which rightfully belongs to another. Constructive trust granted when: 1) one party receives legal title for real or personal property, and another can prove he supplied consideration before other party took title, unless both parties close relatives (parent, grandparent, spouse), title was taken for illegal purpose, or fraud or wrongdoing; 2) one obtains legal title through theft, conversion, fraud, or duress, breach of fiduciary duty, homicide; 3) title to land or to inheritance obtained by breaching a promise to hold property for another. Trustee must convey legal title to the beneficiary, must account for all profits and damages from/to property and may raise equitable defenses.

PRUDENT INVESTOR RULE: imposes standard of good faith, reasonable prudence, sound discretion and care in making trust investments: investments must be constantly reviewed and changed if necessary; overall portfolio performance disregarded; each investment must be prudent; take into account diversification of trust inventory and marketability of inventory; prudent investment measured at time of investment. Proper investments: government securities, first mortgages on land with adequate security, high grade corporate bonds, productive land. Improper investments: unsecured loans, second mortgages.

SPENDTHRIFT TRUST: trust that prevents a beneficiary from either voluntarily or involuntarily transferring interest in a trust. This trust protects a beneficiary from his own improvidence. The provisions are valid if the settlor's intent is clear: 1) prevent creditors from reaching beneficiary's interest, 2) settlor can't be beneficiary of spendthrift trust, 3) majority view of courts: restraints on equitable remainders valid; minority view of courts: allows restraints only on income interest.

SUPPORT TRUST: trustee can pay only so much of income or principal as is necessary for beneficiary's support. Beneficiary's interest can't be assigned or reached by creditors. Split in court authority whether other income available to beneficiary should be considered in deciding amount of support. Look to settlor's intent.

Continue reading "Glossary of Trust Terminology - Sacramento" »

An express trust requires (1) present intent by the settlor to create a trust, (2) trust property, (3) beneficiary to enforce the trust, (4) trust purpose that is not contrary to public policy, (5) appointed trustee.

For example, a settlor can show intention to create the trust by providing in a will that one-half of his estate was to be held in a trust for ten years. The trust property is one-half of the person's estate

A testamentary trust will not fail for lack of a trustee, but failure to name a trustee may evidence lack of intent and prevent delivery of the trust property.

A trust is usually created for the care of one's family. If the trust has a charitable purpose, and a charitable purpose selected by the settlor is impractical, the court selects an alternative under the cy pres doctrine, meaning "as near as possible". The court must find a general charitable intent on the part of the settlor and ascertain the purpose. The courts consider the community at large the beneficiary of a charitable trust, and any particular individual eligible for its benefits has no standing to enforce the terms. The enforcement duty goes to the state attorney general.

The trust beneficiaries are the persons who receive property left to them when the settlor dies. Sometimes whether a beneficiary gets trust property when a settlor dies depends on whether the devise is characterized as general or specific. A general devise is one which refers only to the economic value of the property, while a specific devise describes a particular piece of property. A specific devise or bequest is adeemed if the specific property given is not part of the estate at the time of death. In California, ademption is dependent on the settlor's intent to adeem at the time he disposes of the specific property.

If you have any questions with regard to estate planning, please contact our office at 1-800-303-2964. Rinne Legal is located at 1990 North California Blvd., Walnut Creek, California 94596, with additional offices in Fairfield, Oakland, and Sacramento. Rinne Legal offers free initial consultations.

People cannot circumvent creditors by putting property in a revocable living trust. The creditors can still get a settlor's property in a trust while the person is alive. There is the misconception by some that because the trust is a separate legal entity from the individual, the creditors cannot get at the trust assets. However, this is not supported by law. This is because the person has complete control over the property, and the trust can be revoked at any time.

Further, during the settlor's life, the living trust does not have a separate existence for income tax purposes. The IRS treats the trust property the same as if owned by the settlor. The trust cannot be used to lower taxes. Besides income taxes, living trusts do not save on estate taxes.

This is compared to property placed in an irrevocable living trust. In an irrevocable living trust, the settlor is not able to change the trust. Creditors cannot reach the property owned by a bona fide irrevocable trust. The trust cannot be set up for purposes of defrauding creditors.

If you have any questions with regard to estate planning, please contact our office at 1-800-303-2964. Rinne Legal is located at 1990 North California Blvd., Walnut Creek, California 94596, with additional offices in Fairfield, Oakland, and Sacramento. Rinne Legal offers free initial consultations.

A living trust allows someone to leave property to beneficiaries and to care for the person while he is alive. Living trusts are rarely made public, compared to wills that are filed with courts in the probate process. The trustee has authority to manage the trust property. The person making the trust can name himself as trustee while he's alive. The successor trustee can then be the person who will deliver the property when the person dies.

The trustee has the following fiduciary duties: (1) duty of care, (2) duty to diversify, (3) duty to act impartially between beneficiaries.

A trustee is in a fiduciary relationship to the trust and its beneficiaries. The trustee must comply with the prudent investor rule to exercise the degree of care, skill and prudence that would be exercised by a reasonably prudent person in managing his own property or business. The trustee has a duty to take reasonable steps to preserve trust property, and make the property productive in furtherance of the trust purpose.

In making and implementing investment decisions, the trustee has a duty to diversify the investments. This requires balancing assets among investments. If the trustee invests "all" trust assets in one investment, the trustee likely breaches his duty to diversify the trust assets.

Where a trust has life and remainder beneficiaries, the trustee has a duty not to choose investments that favor one type of beneficiary over another.

If you have any questions with regard to estate planning, please contact our office at 1-800-303-2964. Rinne Legal is located at 1990 North California Blvd., Walnut Creek, California 94596, with additional offices in Fairfield, Oakland, and Sacramento. Rinne Legal offers free initial consultations.

Essential part of any estate planning effort is a diligent assessment of your legal relations. No matter if you are rich or not so well-off there are plenty of those. Every ordinary person has obvious ones, like employment contracts, family ties (married?) or partnerships in business enterprises. Each single legal relation comes with certain rights and/or obligations. There is also a relationship to assets, called ownership. Owners have also rights and obligations, e.g. the right to sell an asset or the obligation to pay property taxes on real estate.

Normally the owner knows that he or she actually owns something. Usually the owner is also aware of the respective rights and obligations that come with ownership of assets. Imagine now the unhappy event that you die from one day to the other. You would normally expect your heirs to take over, but heirs are not visionaries. The heirs would need to figure out what assets you have owned to know their rights and obligations.

Therefore, it is a good idea to create an inventory of all assets - tangible (like a car or a house) or intangible (like bank accounts, royalties or patents), so you heirs will get an overview of your estate. Often assets come with a document of title that expressly states your ownership (like the deed to a house). Inventory and documents of titles are essential when it comes to the distribution of an estate. Therefore those papers should always be held in an order and accessible in a way that somebody who is not familiar with your financial situation could get on overview if need arises.

The same applies to the usual instruments of estate planning, which are expressed in documents as well. Those essential documents encompass the last will, your living trust document, your health care directive and the durable power of attorney. Your heirs will need those documents to figure out who is entitled to your estate. It will avoid confusion if you keep those documents accessible. You should also let your intended heirs know where you keep your papers. In addition a safe backup - either digitally or hardcopy is advisable for worst-case scenarios (like a disastrous fire). Keeping your documents in order and safe will provide you with ultimate peace of mind.

Continue reading "Before You Die - Get Your Paperwork in Order" »

A recent article in the Wallstreet Journal Blog Section covered the possibilities to plan for the future of a pet that outlives its owner (see here).

If you'd like to ensure that your pet receives the proper care after you die you should follow these important steps:

• Appoint a "Pet Guardian" and leave instructions for the caregiver (This is simply a non-enforceable nomination of a trusted person, that you believe will take loving care of your pet). You can use your will or any other document for this.


• Make sure the financial needs of your pets a covered. A already existing living trust may be used for that purpose but need to be adjusted to set aside the necessary funds for your pet. In average a dog costs $1,400 pa and a cat $1,000 pa. Depending on the age of your pet, the trust might require funding for up to 20 years pet care. You should also implement a clause into your trust that governs the use of the pet funds for the case that not all funded money is used. Such a clause should name an alternative beneficiary.


• Make sure that the appropriate legal instruments are also implemented for the case that you become incapacitated. You should draft your durable power of attorney in a way that enables your agent to financially cover the needs of your pet. The agent does not necessarily have to be the nominated caregiver.

If you'd like to learn more about living trusts, which can be used to cover the financial needs of your pet, you will find further information on Rinne Legal's website (see here).

Continue reading "Estate Planning for Pets" »

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" »

Some may wonder if it is possible to direct their own Interment. The answer is yes, legally binding arrangements regarding the choice in between burial and cremation and the kind of ceremony that is to be conducted can be made either in a last will, in an advance health care directive or within any other document as long as it is in writing.

While many leave some last instructions to their survivors only a few know, that those instructions are only legally binding under the California Health and Safety Code if two conditions are met:

• First the directions must clearly, unambiguously and completely state the final wishes of the decedent in sufficient detail and


• second the decedent must have provided the financial means to cover the selected disposition of his or hers remains and the ceremony. The finances can be provided by either trusts, insurance, commitments by others or by any other effective and binding means. (California Health and Safety Code Sec. 7100.1.)

Especially the second condition requires that the whole estate plan takes the interment instructions into account. It is not enough to simply state that the final ceremony is to be held in a certain way as long as the costs are not covered. There are some options to cover the costs. One could include respective arrangements within his living trust. Alternatively there are special trusts that cover funerals - be warned: the costs for those trusts may be very high (see the respective blog entry from last year).

However the costs are taken care of, it is important that you do take care of it, if you want your final instructions to be binding.

Continue reading "Binding Funeral Instructions in California" »

In a tough economy it may become necessary for some parents to lend money to their children. Liza Horvath has recently published an article on http://www.montereyherald.com that deals with family loans and estate planning. With this article, I would like to add some thoughts from an estate planner's point of view regarding the intertwined issues of estate planning and family loans.

First of all it is highly recommended to keep loan agreements in between family members in writing. That is especially important - even though you trust each other - because if something happens to one of the parties a third party "professional" might have to figure out, what exactly the parties agreed on. Even more important, if you use a promissory note, both parties will know what they've agreed on (memory tends to fade over time). The written document will also allow to formally write off the loan for tax purpose if it is not repaid as initially intended.

The document should outline all the details of the loan, starting with the loan value and the repayment details (repayment schedule). The document should also contain a clause, the deals with the solution of problems between the parties that might arise in the future (arbitration clause). The document should be written clearly and unambiguously in order to avoid later disputes. If you don't feel comfortable with perfectly drafting such a document it is often a good idea to ask a lawyer to draft or at least to revise your document.

From an estate planning perspective it is also important to consider the loan with respect to your general estate plan. If you have for example a living trust that leaves all off the parent's estate to more than one child in equal shares, the prior loan to one child should be mentioned in the trust document to avoid later disputes that might end up court. You could for example regard the loan as irrelevant or alternatively deduct it from the debtor's share as far as it is not repaid upon the death of the grantor. The decision is up to the grantor. Either way, the living trust document should be updated. If you don't feel comfortable to update your living trust document yourself (see our learning center for living trust amendments), you should ask an estate planning attorney to do so.

Continue reading "Estate Planning and Family Loans" »

In the firm's learning center I have already outlined the importance of including all trust assets in an attached schedule to the living trust (here). But what is the legal consequence of not including certain assets in the trust schedule?

First there is no consequence for items that have a document of title, like e.g. a deed for real estate, which states that the property is held in the name of the trust. The trust "owns" the respective property and it will be distributed according to the terms of the trust upon the death of the grantor without probate.

Problems may arise though with property that is not expressly transferred to the living trust. Such an item may be subject to the ordinary probate proceedings which are long and costly.

However if an outside item (an item that is not formally transferred to the living trust) is included in the property schedule there might be another way out of the ordinary probate proceedings. Under some conditions, it may be possible to obtain a court judgment which determines that property held in the decedent's individual name is actually trust property. Under the so called Heggstad Petition (named after a 1993 California case Estate of Heggstad, 16 CA4th 943, 20 CR2d 433), a successor trustee may claim that property was intended to be transferred to the trust. The usual basis for such a petition is that the property was listed in an annex to the trust. If the petition is granted, the court issues an order declaring that the respective property is in fact trust property. The court order then transfers the respective property to the trustee.

The Heggstad Petition avoids a full probate of the assets that were not transferred to the trust by changing their titles and is therefore more cost-efficient. However the best way to avoid probate is to clearly transfer the property to the trust and naming it in the property schedule.

Continue reading "Heggstad Petition and Probate Proceedings" »