Articles Posted in ESTATE PLANNING

Many clients want to know how they can benefit their grandchildren while grandma and grandpa are still alive. One way is under the California Uniform Transfers to Minors Act. This law in California allows you to give gifts to minors under the age of a 18. The gift may be stock, mutual funds, cash, or any other asset which is then managed by a custodian on behalf of the minor. The custodian can invest the asset and add additional assets but the owner is considered the minor. The custodian can keep the assets in this custodial account until a designated age; in California the upper limit is until the child is 25 years old. At the designated age, the assets are turned over to the minor.

For example, if you want to open a custodial account for a minor grandchild and have the asset given to him at age 21, the account will be titled in the name of the custodian for the child “until the age of 21, under C.U.T.M.A.” Should the child die before the child reaches the age of 21, the asset will be part of his estate. Should the custodian predecease your grandchild before he reaches the age of 21, a successor custodian can be appointed. Often you will be choosing one of your children to act as the custodian or a trusted family friend.

Another way to benefit a grandchild is to create a trust for that child as part of your estate plan. You can specify the reasons the child would receive distributions and the ages at which the principal would be distributed. One thing you do not want to do is leave assets to your grandchildren without any type of custodial account or trust. If you do that, the minor cannot receive the gift outright and there has to be a guardianship set up for him through the probate court, something that is expensive and unnecessary if you plan ahead.

An ILIT is an irrevocable life insurance trust. The purpose of an ILIT is to cause life insurance death benefits to be excluded from a decedent’s taxable estate. With the usual life insurance policy owned by a decedent, the death benefits are part of the decedent’s estate and subject to estate taxes because the decedent has the power to change the beneficiary. In an ILIT, the life insurance is owned by the ILIT and therefore the death benefits are not subject to estate tax.

ILITs have been an important tool in estate planning either to remove wealth from a decedent’s estate thereby reducing estate taxes and in situations where a decedent wants to provide cash to his beneficiaries to pay estate taxes.

With an ILIT, the individual or married couple creates an irrevocable trust and funds the trust with an insurance policy. If certain requirements are met, the proceeds from the life insurance policy upon death are removed from the decedent’s taxable estate. The decedent during his life can make a yearly tax free gift to cover the cost of the insurance premium. One of the differences between an ILIT and a revocable living trust is that the ILIT is irrevocable and the trustee cannot be the trustor/decedent or the beneficiaries. The trustee must be independent, usually a trusted family friend, private professional fiduciary, or a financial institution.

The recent case of Estate of Stoker, decided in a California Appellate Court, involved an interesting way one person revoked his living trust.

Steven Stoker signed a will in 1997 in which he left the bulk of his estate to the Steven Stoker Revocable Trust, which he created at the same time as his will. His girlfriend Destiny Gularte was named the successor trustee and the beneficiary.

Several years later, Steven and his girlfriend had an argument and separated permanently. Steven did not do anything to formally amend or revoke his trust. He did however have a friend write out a new will which Steven dictated and signed, revoking his 1997 will and leaving everything to his two children, not the girlfriend. Steven signed the will in front of two witnesses but did not have them sign the document. He then urinated on his original will of 1997 and set it on fire.

In today’s high tech world, it’s difficult sometimes to get through to a human to address your concerns when you call the bank, the cable company, public agencies, etc. Sometimes you feel like there is no live person who is working there. Now there is a website, GetHuman.com. which tells you the numbers to press or the words to say to reach an operator.

There are more than 2000 companies listed on the website from AT&T to Zappo’s. With many companies you can reach an operator by just dialing 0, however that is not always the case. To reach an operator at Master Card, for example, you have to press 0 three times. At Greyhound Bus Lines, you have to press 26. There are many companies who actually have humans answering the phone and there are also a couple of companies on the list that say you cannot reach a human to talk to.

The website also has user reviews for customer service lines, including the average wait time. At Facebook, for example, it can take from 1-2 hours to get to talk to a live person. Verizon Wireless gets a good customer service rating with an average 4 minute wait time. To reach a live person at Verizon, press # and then 0.

An appraisal is a professional’s estimate of the value of one’s property. The item to be appraised can be a small item like a piece of jewelry or something larger, like a residence or office building. Appraisals play a role in various aspects of estate plannng.

When someone dies with a will, the person designated as the executor will petition the Probate Court to administer the estate. When someone dies without a will, there is also a Probate opened and a family member or friend of the decedent is appointed the administrator of the estate. In both cases, the personal representative (executor or administrator) must file and Inventory and Appraisal describing all the assets and placing a value on them. Then a probate referee appraises all of the assets as of the date of death. Real property is appraised, personal property is appraised, and other assets are valued. Different types of assets may require appraisers with different expertise. For example, if the estate contains valuable artwork, an appraiser experienced in that type of art will be used to do the appraisal. Antiques also require a special appraiser as do coin collections, stamp collections, and other collectibles.

When a person dies with a trust, their trustee will be administering the trust and distributing the assets to the beneficiaries. Appraisals may also be necessary. The Trustor’s real property has to be appraised as of the date of death and similar to probate administration, jewelry, artwork, collections, and personal property and household furnishings have to be valued and sometimes requires appraisers of various types. Assets such as checking accounts, savings accounts, stocks, mutual funds, and other investments are valued at whatever their value was as of the date of death.