Your Source for Estate Planning, Asset Protection and Business Transactions for over 35 years!

9 Good Reasons to Conduct a Trust Review

California Trusts, Trust AdministrationNo Comments

trust pic e1378498532909 9 Good Reasons to Conduct a Trust ReviewIf you have a revocable trust, when is the last time you reviewed it to make sure it still meets your goals and complies with current law?  If it has been a few years, then it’s time to conduct a thorough trust review – which is usually best done with the help of your estate planning attorney.

Here are 9 good reasons you should schedule a trust review soon:

1.  Check successor trustees.  For many revocable trusts, the trust owner serves as the trustee with a spouse named as co-trustee.  You should also have designated others to serve as successor trustees, so be sure those designations are still correct.  You should also specify when you want successor trustees to step in – upon the death of the first spouse or after both of you are gone.

2.  Trustee removal by heirs.  Have you provided your heirs with the ability to remove successor trustees?  This should be considered and addressed specifically in your trust.

3.  Distribution of assets by co-trustee.  Many trusts are created that provide the option for co-trustees – generally a surviving spouse – to change the distribution of assets in the trust at his or her discretion after the death of the trust owner.  However, this could lead to family conflict in cases of a second marriage or if a surviving spouse remarries.

4.  Asset protection.  Today, it is probably a wise move to ensure your trust continues during the lives of your children to protect assets from creditors or divorce.

5.  Funding the trust.  You must be sure you have titled all the assets held in the trust in the name of the trust, not the original owner.  This is called “funding the trust”, and if this is neglected, your trust is a bust.

6.  Check beneficiaries.   Make sure the beneficiaries of your trust are coordinated with other beneficiary designations in your estate plan for retirement and investment accounts.

7.  Consider age-based distributions.  Many trusts hold assets for children or grandchildren until they reach a certain age – usually 21.  However, every family is different, so if you believe those distribution ages should change, you will need to update your trust.

8.  Retirement plan benefits.  The best way to pass on retirement plan benefits is via a beneficiary designation form filed with the custodian of your retirement plan.  However, some people choose to name a trust as beneficiary of retirement plan assets.   In this case, your trust should have special provisions that allow annual required minimum distributions to be stretched out for as long as possible.

9.  Estate taxes.  There were major changes to the estate tax laws a year ago, so if you have not reviewed your trust since that time, it should be reviewed by an estate planning lawyer to be sure it is still current and complies with the new laws.

To schedule your trust review or to learn more about creating a trust, contact our Orange County law firm.

4 Special Trusts for Achieving a Specific Purpose

California TrustsNo Comments

trust pic e1378498532909 4 Special Trusts for Achieving a Specific PurposeTrusts are generally used to preserve and manage assets for trust beneficiaries, but there are certain trusts designed to help you achieve a special purpose, like caring for a special needs person, protecting assets from being spent unwisely or simply minimizing estate taxes.  Some special trusts include:

Crummey Trust:  designed to preserve assets for a child’s future use, this trust is generally used when a child is a minor or ill-equipped to deal with a financial windfall.  A Crummey Trust utilizes the annual gift tax exclusion — $14,000 in 2014 – that the grantor places into the trust to preserve for future use by the beneficiary.

Totten Trust:  a simple trust established through a financial institution, where the account is in the grantor’s and the beneficiary’s names.  The grantor adds funds to the account during his or her lifetime, and when the grantor dies, the account automatically goes to the beneficiary.

Spendthrift Trust:  this trust features a special provision that prevents the beneficiary from squandering trust assets.  The trustee controls all distributions from the trust, protecting assets from creditors, divorce or a spendthrift beneficiary.

Special Needs Trust:  this trust is used to provide for the educational and/or discretionary spending needs for a person with special needs without jeopardizing his or her eligibility for governmental benefits.  A trustee manages the assets of the trust for the benefit of the special needs beneficiary.

If you need to create an estate plan to provide for the special people in your life, contact our Costa Mesa law firm.

Use of Trusts for Asset Protection

Asset Protection, California TrustsNo Comments

trust pic e1378498532909 Use of Trusts for Asset ProtectionFamilies who don’t have over $10.5 million in assets that would make their wealth subject to federal estate taxes may think they don’t need trusts, but there is nothing better for protecting wealth for future generations than the strategic use of trusts.

Without the protection of trusts, assets left outright to heirs are exposed to creditors and future divorce actions that could seriously deplete the estate in just one generation.  If trusts have already been established, they should be examined to determine if they provide optimal asset protection.  If they do not, there could be opportunities to decant the old trust and pour it into a new, better trust to protect assets.

To properly protect your estate, new trusts should have long-term durations; some states allow perpetual trusts and your estate planning attorney can advise you on whether setting up a domestic asset protection trust in another state would be a good move for you.

Trusts should also have some flexibility built-in to overcome any objections by heirs, including the ability to change trustees and providing beneficiaries with some decision-making powers.

If you would like to learn more about how a trust can help you protect your assets, contact our Costa Mesa law firm.

7 Reasons a Trust Might Be Right for You

California TrustsNo Comments

trust pic e1378498532909 7 Reasons a Trust Might Be Right for You“Trust fund baby” conjures up images of spoiled children who live off wealth they did not create, but a trust can serve many purposes and is most decidedly not just for the rich.

As a recent Fox Business article notes, trusts are merely legal entities that exist to hold assets for the benefit of the person who sets it up (settlor) and the beneficiary.  And there are a number of reasons anyone would want to set up a trust, including these 7:

  1. You do not want your children to inherit when they turn 18
  2. You want to protect your assets from creditors or divorce
  3. You want someone else to manage your assets
  4. You have a complicated family situation (i.e., spouses with children from previous marriages)
  5. You want to avoid probate
  6. You want to take care of a special needs person
  7. You want to protect your privacy

To determine if a trust or other estate planning strategy would be beneficial to you and your family, contact our Newport Beach law firm.

How Trustees Can Avoid Problems

California Trusts, Trust AdministrationNo Comments

trust pic 150x150 How Trustees Can Avoid ProblemsIf you have been appointed as trustee of a California trust, then you have responsibilities both to the beneficiaries of the trust and to the law to perform your duties correctly.  If you don’t, you could be held personally liable, which is why many trustees without experience in this area of the law get professional help to guide them in their decisions and duties.

As a trustee, you must locate and protect trust assets, invest those assets prudently, distribute assets to beneficiaries, maintain careful financial records and file taxes.  Under California law, you have a fiduciary duty to the beneficiaries of the trust, which means you must act in their best interests at all times.

While a trust can be administered without the involvement of a court, this doesn’t mean that trust administration is easy.  There are circumstances when problems could arise – for example, if proper records are not kept, if tax filings are not done on time or if assets are not invested wisely.  If a trust is not administered properly, the trustee can be removed and help personally liable for any losses suffered or costs incurred.

Unless specifically prohibited by the trust document, a trustee can generally hire an attorney or financial adviser to help with the administration of a trust.  The fees for these professionals are paid by the trust, not the trustee.  Most trustees find it well worth the cost to obtain expert guidance to ensure they comply with the provisions of the trust and California law.

If you are a trustee and need assistance with trust administration, contact our Orange County law firm.

Tips for Giving Money to Grandchildren

California Trusts, Estate Planning, Tax PlanningNo Comments

grandchildren e1379622938556 Tips for Giving Money to GrandchildrenGrandparents and grandchildren have a special relationship.  As grandparents, you get to have the joy of being around children you are related to but not directly responsible for.  And grandchildren have someone to turn to who aren’t their parents.

So it’s natural that grandparents like to find ways to reward this special relationship, including financially.  Here are some great ways that grandparents can give money to grandchildren and help their own bottom lines through estate and tax reduction:

Direct contributions.  Each grandparent can gift up to $14,000 in 2013 without having it count against their lifetime gift tax exemption – and married grandparents can double that, for a total of $28,000 per grandchild.

Custodial account.  A parent can set up a custodial account for a minor child, which a grandparent can contribute to for the benefit of that child.

Indirect contribution.  Grandparents can pay for educational or medical expenses with no limits, so long as they make the payments directly to the educational institution or medical provider.

529 account.  Grandparents who want to contribute to a child’s college education can use a 529 account, which will also help reduce your taxable estate.

Trusts.  Grandparents can establish a trust and name a grandchild or grandchildren as beneficiary.

IRAs.  Grandparents can use other gifting strategies like contributing to an IRA or savings bonds for grandchildren.

If you’d like to learn more about estate planning strategies for providing a secure financial future for your family, contact our Orange County law firm.

How to Ensure Life Insurance Proceeds Are Not Taxed

California Trusts, Estate Planning, Tax PlanningNo Comments

life insurance How to Ensure Life Insurance Proceeds Are Not TaxedHaving the proceeds of your life insurance policy taxed upon your death is not just bad luck for your family…it’s bad planning!  If you own a life a life insurance policy and don’t have a plan, it will become part of your estate and subject to estate taxes.

If you are married  — and for same-sex couples this means legally married in a state that recognizes same-sex marriage – and you list your spouse as beneficiary, there will be no estate tax since assets can be transferred between married couples tax-free.  However, if the beneficiary is your son or daughter, the policy proceeds become part of your taxable estate and subject to the estate tax.

To avoid having life insurance proceeds taxed upon your death, you can either transfer ownership of the policy to someone else or create a trust and fund that trust with the policy.  However, if you transfer the policy and die within three years of the transfer date, the proceeds will revert to your estate.  Plus, if the value of the policy is more than $14,000 at time of transfer, it will be subject to a gift tax.  And, if you transfer the policy to another person and that person wants to cash it out at any time, you have no control anymore.

A better option is to transfer your policy to a life insurance trust, which becomes the owner of the policy.  Since a trust is not a person, it will not incur an estate tax when the policy pays off.  The proceeds will then go to the person or persons named as beneficiary of the trust.  A caveat here: when you create a life insurance trust, you cannot be the trustee and the trust must be irrevocable (meaning it cannot be changed) or it will not be excluded from your estate upon your death.

For more information on how to save taxes through trusts, contact our Orange County law firm.

Tax Law Changes Make CRUTs and CRATs More Attractive Than Ever

California TrustsNo Comments

trust pic e1378498532909 Tax Law Changes Make CRUTs and CRATs More Attractive Than EverThis week’s Forbes magazine has an interesting article about how the latest tax law changes have made two charitable remainder trusts – the charitable remainder unitrust (CRUT) and the charitable remainder annuity trust (CRAT) — more attractive than ever for higher income households.

These types of trusts allow you to put a highly appreciated asset – real estate, a block of stock, a valuable collection – into the trust and produce retirement income by having the trust sell the asset (the trust, as a tax-exempt entity, will not pay capital gains tax).

Once the trust sells the asset, it pays you either a fixed percentage of the principal (which is revalued every year) if you have a CRUT, or an annual annuity whose amount is set at the creation of the trust if you choose a CRAT.

Payments can continue for the life of the grantor and his or her spouse; after that, what remains goes to charity.  One proviso:  the IRS requires that the charity you choose receive at least 10% of the initial value.  You also receive a current charitable tax deduction for that remainder amount.

There are other variations on charitable remainder trusts that may make sense for you.  Contact our Orange County law firm for more information.

Asset Protection: When a Will Won’t Do

California Trusts, WillsNo Comments

no 150x150 Asset Protection:  When a Will Won’t DoEstate planning can be a complicated process for most people, and one of the most common misconceptions is that if you have a will, that takes care of everything.  However, you need to consider some of the things a will cannot do before you think your estate plan is rock-solid:

Provide a speedy resolution – wills must go through the probate process, which can take anywhere from 9 months to two years – even longer if you own property in another state.  During that time, your assets will be frozen in place and inaccessible to your heirs.

Protect your privacy – a will is a public document and guess who loves that?  Identity thieves!  Anyone can access a will, which usually contains a lot of personal and financial information about a decedent.

Useful in times of incapacity – a will goes into effect only at death, so it cannot protect you in case you become incapacitated.  If the Will is the only estate planning tool and incapacity is an issue, a Guardianship and Conservatorship will generally happen. This is yet another court proceeding that can be avoided if proper Power of Attorney documents are set in place.

No asset protection – a will does not provide your heirs with protection against creditors, divorce or Medicare spend-down.

In comparison, a trust is not subject to probate, is completely private, becomes effective at incapacity and at death, and provides important asset protection for heirs.

To ensure you and your family are fully protected, contact our Newport Beach law firm to discuss which estate planning tools are best suited for you and your loved ones.

When Your Child Has Special Needs, Estate Planning is a Must

California Trusts, Estate PlanningNo Comments

holding hands 150x150 When Your Child Has Special Needs, Estate Planning is a MustIf you are the parents of a special needs child – and with autism spectrum disorder (ASD) now affecting 1 in 88 American children, that number is growing – then the need to plan for how your child’s needs will be met after you are no longer available to care for them is critical.

A special needs trust – also known as a supplemental needs trust – can be set up to allow a disabled beneficiary to receive assets without losing their eligibility for government programs or benefits.

Currently, federal law prohibits disabled individuals from receiving needs-based assistance if they receive an inheritance of more than $2,000.  However, by establishing a special needs trust, assets can be passed on to care for a disabled individual without that person being considered an “owner” of the assets, which would disqualify them for important programs like Medicaid.

In fact, special needs trusts are not for the basic support of the disabled individual, but are for important supplemental support like education, counseling, extra medical care beyond the basics and even recreation.  These trusts supplement the basic necessities, much as you do as a parent, to improve the quality of life and ensure the continued comfort of a loved one with special needs.

If you are the parent or guardian of someone with special needs and want to know more about special needs trusts, contact our Costa Mesa law firm.


« Previous Entries