San Diego Estate Planning Lawyer Blog

We have all heard of a QTIP, but do you know what it means in the context of estate planning?
If you are in a second or third marriage, as many people are in San Diego, you may know that a QTIP is a type of trust. It is a common type of trust which provides for your current spouse but also ensures that ultimately your estate will pass to your own children.

QTIP actually stands for Qualified Terminable Interest Property and is often used in cases of blended families where there are "his", "hers", and "their" children. For example, a husband may set up a QTIP trust to provide income for his second wife when he dies.The husband names his children from his first marriage to be the ultimate beneficiaires when his wife dies. There are some strict guidelines for such a trust which an experienced estate planner can explain to you. Some of those are that all of the income from the trust must go to the surviving spouse for her lifetime. The surviving spouse cannot use trust assets to benefit a new spouse or her own children. When the surviving spouse dies, the remainder of the trust must go to whoever the Settlor has designated in the trust document, which in this example would be the husband's children.

QTIP Trusts are expecially appropriate where estate taxes might be involved. In 2009 this is estates of married couples with assets over $7 million. If taxes are not an issue, there are other options for blended families including customized language in your trust in which your trustee makes payments to the surviving spouse for his or her support and then upon the death of the surviving spouse, to the your children. You can also leave your current spouse a life estate in a home that was yours before marriage and shared together during your marriage. When your spouse dies, the home goes to your children.

Multiple marriages, where both spouses have children from prior marriages, is not an area for do-it-yourself trusts or inexperienced lawyers. At Law Office of Scott C. Soady, A Professional Corporation we have been helping such families for years in determining what type of customized trust is appropriate to accomplish your goals. Call us or email us to set an appointment.

Many people want to leave their grandchildren something when they pass away. It may be small or it may be significant. There are several ways to do this, some better than others. When you draft your estate plan, you have no way of knowing whether some of your beneficiaries are going to be minors at the time you die. You have to plan for the possibility that some may be minors.

1. Outright Gift. You can simply provide in your will that a dollar amount or a percentage of your estate will go to a grandchild but this leads to problems if the recepient is a minor. Substantial amounts of money being inherited by a minor may cause a court-supervised guardianship of the estate of the minor until he or she is 18. Then at 18, the entire inheritance is handed over to the now adult, but still 18 year old, with no limitations attached.

2. Custodial Accounts. One way you can leave money to minors is in an account under the Uniform Transfer to Minors Act ( a UTMA account). This works well for small amounts of money. The account has a custodian who has the power to withdraw funds for the health, education, and maintenance of the minor. Once the child reaches the age you specify (In California it can be as old as 25), the child has full access to the funds.

3. Minor's Trusts. Another option for leaving money to minor beneficiaries is to set up a minor's trust. This is a trust customized to fit your situation and fulfill your wishes. You have infinite possibilities. You can put limitations on what the trustee can use the assets for such as for medical expenses, education, a home, car, etc. You can provide for the intervals at which you want the child or grandchild to receive distributions. As an example, one method would be 1/4 at age 18, 1/4 at age 25, 1/2 at age 30, and the balance at 35. The disadvantage of a trust is that there are costs of administering the trust during the time it is in existence. An experienced estate planner can help you weigh the benefits against the costs and expenses associated with administering the trust.

4. Educational Savings Plans. If your goal is to help your grandchildren with their education, there are many tax-favored college savings accounts, also called 529 Plans, Cloverdale Plans, or educational IRAs. The earning are not usually taxed as long as they are used for education. If the beneficiary does not go to college, however, the funds will have to go to another beneficiary.

Other ways to help your grandchildren out is to pay their education expenses directly while you are alive. You must however write the checks out to the school, not the individual. Savings bonds also work well since they are purchased at half the face value.

Contact us at Law Office of Scott C. Soady, A Professional Corporation if we can help you in deciding how best to include your grandchildren in your estate plan.

It's often overwhelming when a parent dies, having to deal with all their paperwork, bills, and determining whether there will have to be a probate filed or a trust administered. Children often worry also about their parent's debts. A long illness and nursing home or hospital expense can quickly eat up a parent's assets.

What if your parent passes away with not much other than debts? Are you liable? Can you be sued personally for their debt? Sometimes heirs even get phone calls or letters from creditors claiming that as the decedent's heirs, they are liable for the parents' debts.

Not so! Children are not responsible for paying their parent's debts. The estate of the person who died is liable but if there is no money or assets in the estate, the creditors are out of luck.

When a person dies, his or her estate is reponsible for paying off the debts. If there is a probate because your parent passed away with a will or intestate without a will, creditors have 4 months to file a creditor's claim. The administrator or executor will assess the assets and the debts and determine according to legal guidelines, the order in which the bills will be paid. If your parent had a trust, the trustee should make an effort to identify all creditors and pay them if there are trust assets. In either case, if there is no money in the probate estate or the trust estate, then the creditor won't be paid. Creditors will have to write the debt off.

Similarly with credit cards, if your parent dies with credit card debt, you are not liable. The exception would be if you co-signed with your parent on the credit card application. So make sure if you are asked to pay debts of a parent, familiarize yourself with your rights.

For questions about your rights and obligations after a death, contact us for a free consultation.

Many wills and trusts include language to deter future disputes or contests over the provisions of the will or trust. These “no contest” clauses typically provide that if someone challenges the validity of a will or trust, they take nothing under the instrument.

As an example, suppose a parent has two daughters and creates a trust leaving her estate equally to her two children. Just before her death, she changes her trust to leave the bulk of her estate to the younger dauhter with whom she lives. If the trust contains a “no contest” clause, the daughter who wants to challenge the validity of the trust as amended, faces a court holding that her objection constitutes a “contest” and therefore, the objecting child takes nothing under the trust.

Beginning in 2010, Probate Code Sections 21300-21322 will be repealed. New Probate Code Section 21310(6) will define a “contest” as one that alleges the validity of an instrument based on either (1) forgery, (2) lack of capacity (3) fraud, duress, or undue influence (4) revocation or (5) disqualification of a beneficiary under Probate Code Sections 6112 or 21350 (care custodians, drafters, etc.)

Most significantly what will change is the new Probate Code Section 21311 which provides that a no contest clause shall only be enforced if brought without probable cause. The standard for what is probable cause is a low one, i.e. was there a liklihood that the amendment was made because of forgery, undue influence, etc.

The new law will affect any will or trust whenever executed that becomes irrevocable after 1/1/2001. So in the example above, the child whose portion was cut could challenge the trust amendment if she had probable cause to believe that the amendment was executed as a result of one of the 5 grounds listed above, such as information that the daughter with whom the parent was living wrote it and influenced her mother to sign it.

The applicability of “no contest” clauses is an area of trusts and estate law that requires experienced estate planning attorneys. If you would like one of our experienced lawyers at Law Office of Scott C. Soady, A Professional Corporation to review whether your trust contains an effective “no contest” provision, give us a call. We also handle litigation arising out of the applicability of a “no contest” clause as in the context of challenging a will or a trust.

San Diego County as you may know has a number of superior courts available to its residents. At Law Office of Scott C. Soady, A Professional Corporation we file our will and trust matters either in the downtown branch of the Probate Court located at 1409 Fourth Avenue or at the North County branch in Vista.

The State has recently announced that it will close all state courts one day per month through the remainder of this fiscal year. The San Diego Superior Courts will be closed to the public on the third Wednesday of each month through June 2010. The closures will begin on Wednesday, September 16, 2009. If you had a matter scheduled for one of these dates, the court will reschedule your matter to another date. It remains to be seen whether court employees will be furloughed one day a montn to further cut expenses. San Diego has the second largest superior court bench with 130 judges and 24 magistrates.

While many businesses and corporations and state and county employees have been asked to take a furlough, Law Office of Scott C. Soady, A Professional Corporation is still open Monday through Friday from 8 am to 5 pm to address your estate planning needs. Our estate planning attorneys practice in the areas of trust administration, probate, wills, trusts, conservatorships, guardianships, will and trust litigation, special needs trusts, charitable trusts and other areas. Feel free to call us for a complimentary and confidential consultation about your estate planning matter.

Most people agree we are in the middle of an economic recession in this country. Unemployment is high and the stock market is like a roller coaster. How does the recession affect your need for a trust or affect your exisiting trust you already have?

If you do not have a trust and have assets of over $100,000, you do need a revocable living trust even in this economy, and some people would say, even more so. If you have real property out of state, a trust will avoid probate in both California and the state where the property is located. Many people have young children and need a trust with guardians set up in case something happens to them. Death is inevitable, recession or not, but a trust will enable your estate to be distributed faster and less costly than with a will or with no estate plan at all.

If you already have a trust, the recession may also affect you. In a recession, some investors try to recession-proof their portfolios by switching their IRAs, 401(ks) or other investments into different funds or CDs. Have you remembered to always title new investments in the name of your trust and made up to date beneficiary designations? Changing accounts, sales of real property, refinancing, etc. all increase in times of rescession, leaving open the possibility that assets are not properly titled in the name of the trust.

A second way your estate may be affected is by the type of trust you have. Your trust, even if old, is still valid, but may not be optimal. Estate plans written in the 90's often require a division of the estate into two separate trusts upon the death of the first spouse. These trusts are called A/B trusts, exemption trusts, or marital trusts. That was a good choice in those days but today with an inctease in the estate tax xemption to $3.5 million ($7 million per couple) you may want to update the type of trust you have. Revising your trust may save on trust administration after the first death and give the surviving spouse more flexibility.

Lastly, the economy may affect not only you but your beneficiaries. Do you have beneficiaries that have become dependent on public assistance? Are some facing bankruptcy? Maybe you need to create a special needs trust or make sure your trustee has the power to postpone distributions if a beneficiary is in bankruptcy.

We can't control the stock market and other effects of the rescession, but we can control our own estate plan by creating the appropriate documents and revising them from time to time as necessary. Contact us if you need to discuss these issues.

We applaud clients that have had the foresight to get an estate plan in place, before they need it. It makes it much easier on your family if you have taken the time to prepare an estate plan ( a will or a trust), specifically setting forth who you want to inherit your estate, who you want to pay your final bills and distribute your estate, how you want your personal effects divided, etc. Sometimes however, doing estate planning can be just the beginning of your planning. Some people discover that on down the road they also need financial planning, long-term health care planning, or Medi-Cal planning.

Especially long term planning and Medi-Cal planning are subjects that most people know little about. You may have questions about how to pay for long-term care? How do I know if I need it? Can I plan now for the possibility I will need it in the future?

AARP (American Association of Retired Peersons has a great article tthat discusses some of these issues. According to AARP, about 60% of people over the age of 65 will require some type of long-term care during their lifetime. There are many choices for long-term care from having your family members care for you to long-term health insurance and Medi-Cal. Sometimes you need a combination of services.

For the legal side of planning for long-term care or qualifying for Medi-Cal, contact us at Law Office of Scott C. Soady, A Professional Corporation. We offer a complimentary consulatation and will be happy to discuss your questions about these and other estate planning issues.

Some clients think that a good way to avoid probate is to put their adult children on the title to their home. While it is true that putting your child on the deed to your home will avoid probate, it can create all kinds of headaches not anticipated or desired. Here are some reasons:

1. Creditors of your child or the IRS (to enforce a tax lien) can go after the property that you hold jointly with your child and try to force a sale against your wishes.

2. If your child files for bankruptcy, the court could determine that the property should be part of the bankruptcy proceeding and creditors may seek to have it sold.

3. The transfer could be considered a gift, triggering a gift tax problem.

4. If your child is sued because of an accident and has no insurance or is underinsured, a judgment against your child could result in a judgment lien again your child's interest in the home.

5. If your child becomes involved in a divorce, the child's spouse could claim that the house is part of marital estate to be divided.

6. If you want to sell the property, your child will have to consent to the sale. Also if you want to refinance, your child will have to consent to the loan.

Joint tenancy can be a useful tool as part of your estate plan in limited situations but it can also lead to many problems. A better way to avoid probate is to create a revocable living trust.

If you need assistance with decisions about joint tenancy or creating a revocable trust which will avoid probate without these problems, feel free to contact us by phone or email.