Estate and Trust Planning

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HilaryLRetirement plans and life insurance and annuities often constitute a large portion of a client’s estate.   At death, these plans are distributed by beneficiary designation, not by the client’s Will or trust.

Many clients are aware that under California law (unless a Will specifically provides otherwise) bequests made to the former spouse in a Will that was made prior to the divorce are revoked at the time the dissolution becomes final.  In addition, some beneficiary designations naming the former spouse are automatically revoked upon divorce; but that is not always the case.  For example, there is no such automatic revocation of beneficiary designations for retirement plans that are covered by ERISA.  For an extended discussion of the effect of California law on the inheritance rights of a former spouse see the following Death and Divorce Blog.

Continue Reading NEW U.S. SUPREME COURT CASE HIGHLIGHTS IMPORTANCE OF UPDATING BENEFICIARY DESIGNATIONS UPON DIVORCE

Last week, I blogged that a common refrain that we hear from people when we encourage them to consider estate planning is “But I don’t need an estate plan.”  This post addresses the second of three of the most common refrains that we hear.

I don’t need an estate plan because I want everything to go to my spouse.

Many married (or registered domestic partner) couples believe that they don’t need an estate plan because each spouse or partner wants everything to go to the other.  This is true for community property.  However, if either spouse owns any separate property, the separate property will be divided between the surviving spouse and other relatives.  Separate property generally includes anything owned prior to marriage and anything acquired during marriage by gift or inheritance, and titling a separate property asset jointly or commingling it with community property will not convert it to community property.  Many married couples will have at least some separate property, and if the surviving spouse and his or her in-laws do not get along, it could lead to disputes.  Additionally, if you have children, half to two-thirds of the separate property will go to your children, depending on the number of children.  If the children are minors, a court proceeding may be needed to distribute the assets to a guardian of the estate for the child or into a blocked account until the child turns 18 (even if the child has a surviving parent).   Even if a large sum of money is involved, there is no way to prevent the child from accessing the entire account at age 18.Continue Reading You Need an Estate Plan (Even in Your 20s and 30s) (Part Two)

A common refrain that we hear from people when we encourage them to consider estate planning, especially people in their twenties and thirties, is “But I don’t need an estate plan.”  The reasons vary, and this post will address the first of three of the most common ones.

Reason # One:  I Don’t Need an Estate Plan Because I Don’t Have Very Much.

For young people just starting out, this is a common belief.  But, estate planning isn’t just a way to distribute your property after your death – it’s also planning for your incapacity and making arrangements for your minor children.  A “foundational” estate plan generally consists of three or four documents:  (1)   a durable power of attorney for finances (DPAF), (2) a durable power of attorney for health care/advance health care directive (DPAHC), (3) a will, and occasionally, (4) a trust.  Of those four, the first two of those documents are exclusively for use during your lifetime.  The DPAF names someone to handle your financial and personal affairs if you are ever unable to do so, and the DPAHC names someone to make medical decisions for you and sets forth your wishes for medical treatment.  Additionally, if you have a trust, the trust names a person to manage the assets in the trust both during your life (if you are ever unable to do so) and upon your death.Continue Reading You Need an Estate Plan (Even in Your 20s and 30s) (Part One)

Getting started with estate planning can seem like a daunting task. The various documents and the vocabulary can be confusing if you’ve never seen them before. Here’s a guide to the basics of a foundational estate plan:

Trust: A trust is an agreement that makes it easier to manage assets during your lifetime and after your death.  The person creating the trust is called the settlor or the trustor, and the person who manages the trust is the trustee. A trust can have more than one settlor and more than one trustee – in a community property state like California, married couples often create a joint trust, where they are each a settlor and each a trustee.  People can also have more than one trust – sometimes couples will create a joint trust for their community property, and each will also have an individual trust for his or her separate property.

A trust can be either revocable or irrevocable.  For basic estate planning, people generally create revocable trusts (also called living trusts or inter vivos trusts) during their lifetime, which means that they can change or completely revoke the trust at any time.  After their death, the trust becomes irrevocable, which means it cannot be changed.  Irrevocable trusts can also be used during a settlor’s lifetime for complex tax planning.Continue Reading Estate Planning 101: Getting Started

I recently had the privilege of serving as one of the Sacramento Bee’s experts for the “Ask the Expert” column by Claudia Buck, Personal Finance columnist. The following Q & A, based on an answer I wrote that was posted online at www.sacbee.com/personalfinanceblog, deals with a topic that comes up regularly in my practice and may be a situation you have faced: how long, after the death of the settlor, can the assets remain in the trust before distribution to the trust beneficiaries must be made?

Q:  “Is there any harm in leaving a house titled in a trust name after a person is deceased? All other assets have been disbursed, the house is a rental and the rent is split evenly (after expenses) among the siblings, each claim the income and expenses on our individual tax returns, is that okay?”  Continue Reading How Long Can Assets Remain in a Trust after the Death of the Settlor?