People often ask these questions about Trusts:
What are Trusts?
Trusts are the basic Estate Planning tool for families that plan ahead. Trusts are legal entities into which certain tangible possessions and assets, such as homes, real estate, bank accounts, and securities, are transferred.
Do I need a lot of money to have a trust?
No. Trusts are a means of protecting what you have, in a manner that enables you to decide when and how assets are distributed. The cost of setting up a trust is not great compared to what would be lost upon your death without a trust. The assets in a trust do not need to be of any minimum value.
How do I know if I need one?
Most individuals with families and dependents would benenfit from establishing a trust. Depending on your situation, I will explain what type of trust would best suit your situation, and draft the trust and related documentation for you.
More about Trusts:
Trusts are the basic estate planning tool for most families who take the time and care to plan ahead. A trust is a private document, not subject to the expense or public scrutiny of probate proceedings, in which you can distribute your assets in the manner you choose. You can decide when your beneficiaries should receive income and/or capital, and you can specify the person or institution to manage any assets remaining in the trust, for the benefit of your children or other beneficiaries.
The necessary parties to any type of trust are:
Grantor: The person setting up the trust and putting his or her property into it. There can be joint Grantors in the case of people who own property together, such as spouses, who agree to put their joint property into a trust. Sometimes this person is referred to as the “Settlor”.
Trustee: The person managing the property in the trust. There can be co-trustees in the case of spouses or people who wish to manage the trust property together.
Beneficiary: The people and/or entities entitled to receive the property in the trust upon a date or event specified in the trust by the Grantors, such as death of the last Grantor to die, or some other specified event.
A trust is a legal entity, created by statutory law. California trusts are under the jurisdiction of the California Probate Code. The Grantor’s property (including home and other real property, financial assets such as bank accounts, brokerage accounts, etc., and certain types of tangible personal property) is transferred into the trust. Generally, the Grantors name themselves as the initial Trustees, with the power to manage the trust property during their lifetimes, as long as they have the mental capacity to manage it. In most cases, this management power will be exactly the same power as the Grantors had to manage their property before putting it into a Trust. In the case of joint Grantor/Trustees, the surviving Grantor/Trustee will continue to manage the trust property after the incapacity or death of the first Grantor/Trustee. Then, upon the incapacity or death of the survivor, the Successor Trustee named in the Trust will take over the management and distribution of the trust property, following the instructions written in the trust for management and distribution.
Common Types of Trusts:
Revocable Living Trust: This is the simplest and most common type of “Probate Avoidance” Trust. A Revocable Living Trust can be changed or revoked by the grantor at any time before the grantor’s death. A Revocable Living Trust is a good choice for most people whose estates are not likely to be large enough to be concerned about estate taxes, and who have no potential conflicts about the ultimate distribution of their joint assets. This type of trust will avoid the probate court’s involvement in the distribution of assets, thereby saving time and money. (See Appendix “A” for estimated California probate costs.)
Marital Deduction Trust:This trust is useful for married couples whose total combined estate is likely to be larger than the federal estate tax credit. It can save substantial estate tax liability. This trust is also known as an “A-B” Trust. There are variations on Marital Deduction Trusts, based on the size of the total estate. A type of Marital Deduction Trust, called a “Qualified Domestic Trust”, or “QDOT”, can also be used for spouses where one of them is not a U.S. citizen. (See Appendix “B” for Federal Estate Tax Schedule.)
Charitable Remainder Trust: There are several types of charitable remainder trusts, each designed to accomplish the Grantor’s goals of charitable giving combined with providing security for the Grantors and their personal beneficiaries (i.e., children). Charitable Remainder Trusts can be used in combination with other types of Trusts to accomplish the Grantor’s diverse goals, which can include minimizing estate taxes through charitable giving.
Special Needs Trust: With this type of trust, you can provide for loved ones who are ill or incapacitated, or unable to manage their own finances. A Special Needs Trust provides income for life to the incapacitated beneficiary, according to the terms of the trust, and can even be set up for the purpose of not interfering with eligibility for public benefits, in cases where those benefits are paying for needed care which would not otherwise be available. On the death of the incapacitated beneficiary, the remainder is distributed to an ultimate beneficiary of your choosing.
People often ask these questions about wills:
Is a will the same as an Estate Plan?
A will is an essential part of an overall Estate Plan. However, for many people, a complete estate plan should also contain a Living Trust, an Advance Health Care Directive, and, in some circumstances, a Durable Power of Attorney. Your Estate Planning attorney can help you determine which documents will provide you the best protection in your unique situation.
Why do I need more than a will?
Wills only become effective upon your death. If you become incapacitated, you still need another plan and documents ensuring your affairs, and those of your dependents, can be managed by someone else.
If I get a Living Trust, why do I also need a Will?
Even with the valuable tool of a Living Trust, a Will is still an important part of a complete estate plan. A Will is used to identify your family members, nominate guardians for minor children, distribute tangible possessions, including pets, and to state your wishes regarding burial or cremation. Your Will also acts as a “pour-over” into your Living Trust, ensuring that whatever was not transferred into your Living Trust during your lifetime is transferred into it upon your death, so that your trustee can manage and distribute your assets in the way you have directed in your Living Trust.
What are Advance Healthcare Directives?
The Advance Health Care Directive is a California document that allows you to choose someone you trust to make decisions about your health care, in the event you become unable to make those decisions for yourself.
An Advance Health Care Directive also allows you to state in advance what your decisions would be in certain situations, such as the use or removal of life support in the event of a terminal illness or injury.
The provisions of this document can give you security that your medical decisions will be honored, even if you are unable to speak up for yourself at the time.
Knowing your wishes ahead of time also gives your loved ones the confidence they need that the end-of-life decisions they may be making for you are the right decisions, based on what you have chosen to do.
People often ask these questions about Powers of Attorney:
What is a Power of Attorney?
A Power of Attorney is a legal document that authorizes a designated person to handle your financial matters under certain circumstances that you determine. An Advance Health Care Directive is a special type of Power of Attorney that states how you wish health care matters to be handled if you are incapacitated.
What’s the difference between a Durable Power of Attorney and a regular Power of Attorney?
A Durable Power of Attorney is effective even if you become incapacitated. Non-durable Powers of Attorney terminate if you become incapacitated. If your intention is to give someone the authority to handle your financial affairs in the event of your incapacity, then a Durable Power of Attorney might be the best choice. It’s important to discuss your individual situation with a qualified attorney who can specifically advise you.
More about Powers of Attorney:
Used in conjunction with other estate planning tools, Powers of Attorney and Advance Health Care Directives can provide an extra level of security for the management of your affairs.
When We Meet
When we meet, I’ll ask you to complete this form, which catalogs some of the basic information I need to know about your assets. Once it is completed, we’ll meet again, to discuss what’s on the form, and go into further detail to make certain I understand your situation clearly. I’ll then begin to draft the documents comprising your Estate Plan, asking questions of you if I need any further information.
Once the draft is completed, we’ll meet to go over the documents, ensuring your wishes are correctly communicated in what I have prepared. The documents will be signed, witnessed and/or notarized as needed. I’ll then file what must be filed legally, and prepare an archival set of your documents, which I will securely mail to you after we meet.
As your situation changes — when family members are born or pass away, you get married or divorced, you sell or buy a home, your wishes change — I’ll work with you to update your Estate Planning documents.
Fees
I have set up my practice so you will never have to let fear of a bill in the mail prevent you from calling me. Years ago, I banned the billable hour from my law practice! I only work on a flat fee basis, agreed to ahead of time, so you will never be surprised by an unexpected invoice from my office.