Articles Posted in LIVING TRUSTS

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Estate planning is a process that affects your entire family. The decisions you make today regarding your will and trust can affect your spouse, children, and other relatives years down the line. This is why it is important to make sure your family is aware of your estate planning intentions.

52% of Americans Have No Will

BMO Wealth Management, an international bank based in Montreal, recently released the results of a survey it conducted of 1,008 American adults about their attitudes towards estate planning issues. The report, called “Estate Planning for Complex Family Dynamics,” offers some interesting insights into how the average American views the estate planning process, in particular how they responded to their own experience with inheritances.

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If you are married or in a long-term relationship, your estate plan will likely name your partner as the principal beneficiary under your will or trust. But what if you both die in a common accident? The law in this area can get a little complicated.

California’s 120-Hour Rule

When a California resident dies without a will, the state’s intestacy law dictates the distribution of property. If you have a surviving spouse but no children, the spouse automatically inherits everything. If you have children, your spouse inherits all of your community property and splits any separate property with the children.

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One of the main benefits of a living trust is that it can make it easier to administer property you own in multiple states. Probate is handled at the state level, so if you own a house in California and a rental property in Arizona, your probate estate would need to open a separate proceeding in each state after your death. However, if you have a properly funded trust, your successor trustee can administer both properties without having to go through probate at all.

New Hampshire Defers to California in Trust Dispute

Even if you have a trust, you still need a will. Typically you sign what is known as a “pour-over will,” a document that basically transfers any remaining probate property at death to the successor trustee of your trust. This is important because it confirms your intent to distribute all of your property through the trust.

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As any estate planning lawyer can tell you, a living trust can help you avoid probate, as assets in a trust do not pass under your will, which can save your heirs time and money. However, an improperly executed trust can lead to unnecessary confusion and even litigation.

Courts Sort Out Conflicting Trusts

Trusts do not fund themselves. Once you create a trust you must legally transfer title of your assets to the trustee (which is usually yourself). If you later decide to revoke the trust, you must similarly transfer title from the trustee back to yourself as an individual.

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California is a community-property state. This means that assets acquired during the course of a marriage are considered the equal property of both spouses. For estate planning purposes, one spouse may only dispose of his or her 50% share of community property by will or trust; the other 50% remains with the surviving spouse. Of course, one spouse may always leave his or her share of community property to the other.

Drafting Mistake Leads to Dispute Over Status of Marital Home

It is important when making your estate plan to clearly delineate between community and separate property. This is not always a simple matter, especially if one or both spouses have remarried and retain separate property from prior relationships. While California law allows couples to freely decide whether to convert property’s status from separate to community and vice-versa, a process known as “transmutation,”it is important that a will or trust is consistent on this point.

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Parents often create a trust as part of their estate planning to ensure their children have ongoing access to financial resources. When you create a trust, the trustee has certain legal and fiduciary obligations to the beneficiary. But how far does that duty actually extend?

“Opportunities Lost” Not Grounds for Breach of Duty Lawsuit

A California appeals court recently looked at this issue. The question was whether or not an adult child could sue the former trustees of a trust created by her father because of “opportunities lost” due to the trustees’ alleged neglect. Specifically, the child said she lost her house because she was never informed that she had access to the financial assets in the trust.

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Carrie Fisher, the writer and actress remembered by millions of fans as Princess Leia in the “Star Wars” films, passed away in late 2016. A number of stories published after Fisher’s death mentioned her French bulldog, Gary, a service animal who helped her cope with bipolar disorder. To the relief of many fans, Fisher’s daughter took custody of Gary.

Creating a Pet Trust

Unfortunately, many pets are simply abandoned or forgotten after their owners die. Some people just assume a family member will assume responsibility for a pet, but that is often not the case. This is why it is important to include your pet in your estate planning.

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Dealing with real estate is often the most complicated part of estate planning, particularly if you want to provide for multiple family members. Unlike cash or stocks, it can be logistically difficult to divide a house or a rental property among multiple children. In many cases it makes sense to direct the executor of your estate (or the trustee of your trust) to sell the property upon your death and divide the cash proceeds among your designated beneficiaries.

Leaving it Up to Your Trustee

Then again, there are cases in which you might want to afford one member of your family the chance to keep the property. For example, your will might give one person the right to purchase your house upon your death. Such provisions must be carefully drafted by a qualified attorney to avoid any misunderstanding or confusion.

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In a revocable living trust, the person making the trust (the grantor) usually decides how the trust’s assets should be distributed after he or she dies. However, there may be circumstances where the grantor wants to give that power to someone else, usually one of the trust’s beneficiaries. This is known as a “power of appointment.”

Court Rules Son Improperly Used Father’s Power of Appointment

If the grantor places no restrictions on a power of appointment, it is considered a “general” power. This means the beneficiary can name anyone–including themselves or their creditors–as recipients of the trust property. A special power of appointment, in contrast, restricts the beneficiary’s discretion.

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One reason to hire an experienced San Diego estate planning attorney is to help protect your will or trust from a challenge after your death. It is not uncommon for relatives who may feel entitled to a greater share of a decedent’s estate to claim there was fraud or undue influence behind an estate planning document. In some cases, an estate planning attorney’s testimony can to see that your will or trust truly reflects your wishes.

Court Rejects Nephew’s Challenge to Uncle’s Trust

Here is a recent example from a decision by the California Fourth District Court of Appeal, which has jurisdiction over San Diego and surrounding counties. This is an unpublished decision, so this case should only be viewed as an illustration of how courts examine probate cases and not a definitive statement of California law on the subject.

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