San Diego Estate Planning Lawyer Blog

Many trusts created by married couples provide for the splitting of the trust into 2 subtrusts after the death of the first spouse. These types of trusts go by a variety of names: A/B trust, marital exemption trust, by pass trust, or disclaimer trusts. In these types of trusts, the joint assets must be allocated between the trust for the decedent and a trust for the surviving spouse or in the case of a disclaimer trust, a disclaimer must take place within nine months of the date of death.

Often the surviving spouse does not administer the trust after the death of his or her spouse for a variety of reasons. The surviving spouse may not want to go to the expense of paying attorney’s fees or it may be that the surviving spouse is not aware of the duty to do something after the first death. Whatever the reason, the delay in administering the trust can cause problems especially if the delay has been substantial.

Such a trust is called a "stale" trust. One of the problems that can occur with a "stale" trust is tax consequences. Often trusts that split into two trusts upon the death of the first spouse are created in order to take advantage of the federal tax exemption for estate taxes. Assets that are appreciating are usually allocated to the trust for the deceased spouse. If the trust is not split, there may be an important tax saving lost. Another problem with a "stale" trust may be the remainder beneficiaries instituting litigation because of the lack of funding of the decedent's Trust at the time of the first death.

Sometimes these problems come to light when the surviving spouse amends his or her trust after the death of the other spouse. If you are in the position of being the surviving spouse with a trust that needed administration after the death of your husband or wife, you should consult with an experienced estate planning lawyer to see what can be done to put the trust back on track. Delaying getting advice only complicates and confuses the issues since with the passage of time, assets get sold and new ones acquired.

The experienced estate planning lawyers at Scott C. Soady, A Professional Corporation can assist you in determining if you have a trust that should have been split into subtrusts after the death of your spouse and what should be done about it. Initial consultations are always complimentary.

In many past blogs, we have emphasized the importance of transferring all assets that are trust assets into the name of your revocable living trust. This is important because if you pass away and there are assets in your estate that were not transferred into your trust, those assets will be subject to probate. Probate can be long and costly and avoiding probate was probably one of the reasons you created a trust.

When you create a trust with Scott C. Soady, A Professional Corporation, LLP, the assets that are being transferred into your trust will be listed on your Schedule of Assets. This would include any real property, bank accounts, mutual funds, stocks, bonds, business interests, and personal property. After your trust is in place, you may acquire additional assets, open a new bank account, buy a second home or a different home, or purchase other assets that should be transferred into the trust. All of these "new" assets should be titled in the name of your trust and your Schedule of Assets updated.

If an asset is not properly transferred into the name of your trust, there potentially may be a way to avoid probate proceedings. There is an action called a Heggstad petition, named after a 1993 case entitled Estate of Heggstad. With this petition, it may be possible for the Court to determine that an asset not actually titled in the trust at the time of death is in fact a trust asset. The court looks to the Schedule of Assets to see if the asset was listed and if so, infers there was an intent to transfer it. If the court grants the petition, the court orders that the asset is a trust asset. The Heggstad petition thus avoids the full probate of the estate.

For assistance with your Schedule of Assets or to create a trust or amend a trust, contact us for a complimentary consultation. We also handle probate, trust administration, guardianships, conservatorships, and estate and trust litigation.

Attorney's fees for probate in California are set forth in the Probate Code Section 10810. The maximum fees that can be charged by the probate attorney are:
4% of the first $100,000
3% of the next $100,000
2% of the next $800,000
1% of the next $9 million.
The value of the estate for purposes of attorney's fees is the gross value of the estate, so that if the decedent owned a home valued at the time of death at $500,000 with a $300,000 mortgage, the $500,000 figure is used.

An attorney may also request extraordinary fees based on Probate Code sections 10801-10811 which allows additional compensation for "extraordinary services" in an amount that the Court finds is just and reasonable. Some services that set forth in those sections are:
1. Sales of real or personal property.
2. Contested or litigated calims against the estate.
3. Defense of a will contest after a will is admitted to probate, even if the defense was not successful.
4. Defense of a will contest before the will is admitted to probate, however, in this case, the defense has to be successful in the sense that it benefitted the estate.
5. Preparation of income tax returns, estate tax returns, or other tax returns or the adjustment, litigation, or payment of any of such taxes.
6. Litigation involving estate property.
7. Continuing on the decedent's business if ordered by the Court.
8. Other litigation or special services that are necessary to prosecute, defend, or assist the executor or administrator in the performance of his duties.
9. Filing an accounting for the administration of the estate when such an accounting is required.

Most people would rather see their heirs receive their inheritances in the most cost-effective way possible. Although a living trust costs a bit more to create initially, in most cases, after death, the administration of the trust and distribution to the beneficiaries is much less expensive than what probate fees would be. Call us if you are interested in a revocable living trust package which includes a trust, will, power of attorney, advance health care directive, certificate of trust, assignments, and deeding your real property into your trust. Internet clients receive a 25% discount.

If you have a revocable living trust, there may be questions that you have about the funding and operation of your trust. Here are a few frequently asked questions about your trust once it is in place.

1. How do I re-title assets into the name of my trust? If you are single, you are the sole Trustor (also called a Settlor) and the sole Trustee. To transfer your assets into your trust, you need to re-title the assets into your name as Trustee of your trust. As an example, if your trust is called the John M. Smith Trust dated 2/25/10, you would transfer the assets into the name of the John M. Smith Trust dated 2/25/10. If you are married, your trust might be called the John M. and Sally S. Smith Trust or maybe the Smith Family Trust. You will re-title your assets to John M. Smith and Sally S. Smith, Trustees of the Smith Family Trust dated 2/25/10. With bank accounts, the easiest way to take care of transferring your accounts is to go personally to the bank and advise them that you have a trust and want your accounts in the name of your trust. Other assets such as mutual funds, stocks and bonds, etc. can be re-titled by contacting the company or your broker to complete the necessary paperwork. Real property that you owned at the time you created the trust should be transferred into your trust by the attorney creating your trust, but if you acquire additional real property, remember to transfer it into your trust by a deed recorded with the county recorder.

2. Do I have to transfer all of my assets into my trust? It is not necessary to title all of your assets in the name of the trust. Some examples of property that is not usually titled in the name of your trust are automobiles, life insurance policies, and retirement plans. You also might own real property or other assets in joint tenancy with other individuals which you want to keep titled in that manner.

3. Do I have to record my living trust somewhere? It is not necessary to record your trust with the County Recorder. One of the benefits of having a trust is the fact that it is private.

4. Do I have to file an income tax return for the trust? No, there is no obligation to file a return for the trust while you are living. You continue to file your personal income return just as you did before you created a trust. If you are married, however, and have an A/B trust (also called a Bypass Trust, an Exemption Trust, or Marital Trust) and your trust splits into two trusts after the first spouse’s death, it will be necessary to file a separate return for the trust of the deceased spouse.

5. I have a revocable living trust with my spouse. Do we have to do anything when one of us passes away? If your trust includes tax planning provisions or is the type of trust that provides for the division of the trust into two separate trusts after the death of the first spouse, there is some work to do after the first death. Your estate planning lawyer that prepared your trust should explain this to you at the time you create the trust and also include instructions with your trust as to what is necessary when the first spouse passes away. Often the surviving spouse has to allocate assets into each of the subtrusts. Usually this requires the surviving spouse to consult with a CPA or estate planning lawyer.

These are general guidelines about the operation of your trust. If you have specific questions about the operation of your trust, how to re-title assets, or need a review of your current trust, feel free to contact us at Scott C. Soady, A Professional Corporation for a free consultation.

A recent article in the Wall Street Journal reported how retirement planning is short changing women. The article has a number of interesting points:

1. A survey by MassMutual found that women's retirement accounts were, on the average, just 2/3 the size of men's. That is unfortunate because since women live longer than men, they need more money than men do to have a comfortable retirement.

2. About 2/3 of women between the ages of 75 and 84 live alone, making it more important that they have saved enough to see them through.

3. A college educated woman during her career, will earn almost half a million dollars less than a college-educated man.

4. 70 - 80% of financial advisers are men.

5. 7 out of 10 widows or divorced women leave the advisors their husbands used.

6. Many women do not feel like their advisers communicate well with them and try to encourage them into retirement-savings plans that fit well for men, not women. Interestingly, men and women, as a whole often have different ways of approaching investments.

In a blog posted here in February 2009, we reported how important it is for women to manage their estate planning as well as their financial planning. Since women are living longer, do not remarry as frequently as men, and often earn less, it is important to make sure that they have the necessary estate planning documents to be prepared for the future: a living trust, pour over will, and durable powers of attorney for finances and health care. If a woman had an estate plan with her spouse and now is widowed or divorced, it is important to have any existing documents reviewed to see if they need to be revised. It also is important to check on any life insurance policies, annuities, retirement plans, IRAs, etc. to make sure an ex-spouse or deceased spouse is not still listed as the beneficiary.

If you would like some assistance in reviewing or creating your estate plan, call us at Law Office of Scott C. Soady, A Professional Corporation & Associates to schedule your free consulation.

A probate conservatorship often becomes necessary when an individual cannot take care of himself or handle his own finances. A petition has to be filed in the San Diego Probate Court, usually by a family member, seeking to become a conservator of the person or the estate. The conservator of a persons makes decisions about where the conservatee will live, health care, food and recreation. A conservator of the estate is the individual handling the financial affairs of the conservatee. Establishing a conservatorship is costly, sometimes contentious, and often not necessary.

There are several ways that a conservatorship can be avoided. One way a conservatorship can be avoided is to create a living trust. When you create a revocable living trust, you designate someone to act as successor trustee of your trust if you become incapacitated. You also execute a durable power of attorney and health care documents which designate someone you trust to act as your agent in case of incapacity. Even if you don’t have a trust, you should obtain a durable power of attorney and health care directive. Young adults, newly married individuals, and anyone else that can’t afford a trust or doesn’t have the assets to warrant a trust, should at least execute these two documents. These documents prepared in advance of any incapacity, can avoid court intervention.

If the only reason a conservator is needed is for a family member to have access to social security, disability benefits, etc. a family member can ask the agency to allow them to act as a representative payee and therefore a conservatorship is not needed. Federal agencies which allow this to be done are the Social Security Administration, VA, and Dept. of Defense. You must explain why a payee representative is necessary and provide a doctor’s statement explaining the incapacity.

California Probate Code §3100 also may be used in some cases. This section allows a spouse that does have capacity to petition the probate court to be able to make a decision or transfer a community property asset for the spouse that lacks capacity. Often this arises in the context of qualifying for Medi-Cal.

If you need to plan in advance for incapacity, contact us at Scott C. Soady, A Professional Corporation. We can help you understand if there are alternatives to avoid a conservatorship or if conservatorship does become necessary, we can assist you with filing the necessary paperwork to be appointed conservator of the person or the estate.

Some people think they do not have enough assets to need estate planning. The truth is even with a small to moderate estate, you may need an estate plan (will or trust) just as much as a wealthy person. An estate plan is a program for the distribution of your assets upon your death as well as planning for any periods of incapacity. It is also about having individuals designated to take care of your minor children should something happen to you. Planning for end of life decisions and financial planning are also concerns of estate planning.

Here are some aspects of estate planning that are important regardless of the size of your estate:
1. Protecting minor beneficiaries. This is a critical aspect of estate planning if you have minor children. If your minor child inherits assets from you without a will or a trust, it will be necessary for someone to petition the probate court to be appointed guardian of the child’s estate and a guardian of the child’s person. By having a revocable living trust, you can specify who should manage the child’s inheritance and how distributions should be made. You can stretch out the distributions over a number of years rather than have the child receive their inheritance at age 18.

2. Providing for “significant others” without marriage. If you are in a relationship, whether with an individual of the same sex or in a heterosexual relationship, your partner will not automatically receive a distribution from your estate without an estate plan. Your estate will be distributed to your heirs at law. Creating a will or trust insures that you can leave assets to your partner and that it can be your partner who will make decisions about life support and other end of life decisions.

3. Reducing the costs to your beneficiaries upon your death. If you pass away without an estate plan, your estate will have to be distributed through the probate process. Probate can be complicated for the lay person and in most cases, a probate attorney has to be hired to guide you through the process. Probate fees are statutory and come out of the estate before distribution. With a revocable trust, trust administration after the death of the Trustor is often less expensive than if the estate were probated. Additionally, with most trusts, the time to distribute the decedent’s assets is shorter than the time would be to probate the estate.

4. A properly prepared estate plan will also include documents which are important if you become incapacitated. If you are unable to handle your own finances, your agent under a power of attorney can step in and pay bills, invest assets, file taxes, and many other tasks until you recover. An advance health care directive can designate someone you choose to make decisions about your medical treatment while you are incapacitated.

The estate planning lawyers at Scott C. Soady, A Professional Corporation can help you create an estate plan that is tailored to your needs and your individual situation. We are happy to meet with you for a complimentary consulation.

The Wall Street Journal recently reported that as many as 1/3 of American households have not
taken out life insurance personally and are not covered at work. Life insurance can be an
important tool in estate planning. There are several ways in which life insurance may play a role
in your estate plan.

One of the ways life insurance can be used is to provide immediate cash so that the debts of the decedent can be paid; funeral or burial costs covered; and costs of administration paid. Insurance proceeds keep trust assets from having to be liquidated right away in order to pay these expenses.

If the decedent was in a partnership or small business, often special life insurance policies called “Key Man” or “Key Person”policies can be useful. Such insurance is insurance on the owners,partners, or other key people to cover such expenses as lost revenue, hiring a new person, or buying out the decedent’s interest in the company.

Another way in which life insurance can assist is if the decedent owned a business, farm, or
ranch that is going to keep operating. Funds for the surviving partner of a business to buy out the deceased partner’s share can come from life insurance. Life insurance proceeds can also be used to prevent a farm or a ranch from being split up between the beneficiaries. If one child of the decedent wants to continue to operate the farm or ranch, the life insurance can be used to make an equal division among the other children and prevents the operating child from having to buy out the others.

Payment of estate taxes is another way in which insurance proceeds can help. Proceeds can
provide the necessary cash to pay any federal estate taxes that are due. The estate may not have liquid assets or assets which want to keeo rather than liquidate. With life insurance, the
decedent’s beneficiaries can pay the estate taxes without having to liquidate assets.

There are many aspects to estate planning just as in financial planning. If you have a small to
medium business, a ranch or a farm, or just want to provide cash to your beneficiaries to pay taxes or for any other reason, you should consider contacting the experienced estate planning lawyers at Law Office of Scott C. Soady, A Professional Corporation for a complimentary consultation.