LIVING TRUSTS

Published on: February 24, 2009

Bequests to “Care Custodians” Scrutinized

Many elderly people in San Diego are cared for at the end of their lives by caregivers and friends rather than family members. Sometimes they want to provide for those caregivers or friends in their will or trust. Such bequests however can be challenged by family members and other beneficiaries after a death.

The California Probate Code lists seven categories of people who are presumptively unable to inherit under a will or a trust. The list includes the person who drafted the will or trust, the law firm, attorneys or employees of the law firm that are asssociated with the drafting and “care custodians.” A care custodian is defined to include a number of agencies and any “individual providing health care services or social services to elders or dependent adults.”

Those persons mentioned in Probate Code section 21350 who are left an inheritance are subject to higher scrutiny before they can inherit. They can inherit only if they can prove by “clear and convincing evidence” that the bequest to them “was not the product of fraud, menace, duress, or undue influence.” This can be difficult to prove after the death of the individual making the will or trust.

Published on: February 17, 2009

No Inheritance Tax in California

by Scott C. Soady

Those of us who live here in San Diego know what a great place San Diego is to live and work. Besides the wonderful weather and the proximity to the beautiful beaches of La Jolla, Del Mar, and other coastal areas, there is another benefit you might not realize. California is one state that does not have an inheritance tax.

17 states and the District of Columbia assess an inheritance tax on the portion of an estate received by an individual. This is in addition to the federal estate tax levied on the estate before it is distributed. As we reported in earlier blogs, a federal estate tax will have to be paid on estates over $3.5 million in 2009. States which have an inheritance tax assess it separately against each beneficiary and each beneficiary is responsible for paying the tax to the state, although there may be a lower tax rate for spouses and children of the deceased as opposed to a distant cousin.

A revocable living trust can help reduce estate taxes for couples in California as can other advanced estate planning techniques. If you need to set up a trust or want to know your options for reducing estate taxes, contact us. The experienced estate planning attorneys at Law Office of Scott C. Soady, A Professional Corporation would be happy to meet with you at no charge for your first consultation.

Published on: February 12, 2009

San Diegans Following in Famous Footsteps?

by Scott C. Soady

Are you following in the footsteps of past Americans utilizing trusts?

If you have a revocable living trust, you are in good company. Many famous people from the past utilized trusts as part of their estate plan.

When the 13 colonies declared independence in 1776, the richest man was a Senator from Pennsylvania named William Bingham. He created a trust in 1804 for his vast estate in Maine.

Published on: February 9, 2009

Duties of a Trustee in San Diego

by Scott C. Soady

Many people in San Diego are in the position of choosing a successor trustee for their living trust or they may be beneficiaries of a trust and wonder if the trustee is managing or distributing their inheritances properly. Generally the trustee must administer the trust according to the terms of the trust and the California Probate Code. Here are some of the duties of a trustee of an irrevocable trust in California.

Duty of Loyalty. The trustee must administer the trust in the best interest of the beneficiaries, not using the power to the detriment of any beneficiary.

Duty of Impartiality. Similarly, the trustee must treat all beneficiaries the same, not favor one over another or if the trustee is also a beneficiary, giving himself or herself favor.

Published on: January 29, 2009

7 Reasons to Have a Pet Trust

by Scott C. Soady

Last year we posted a blog about cats living it up in a retirement home in Spring Valley thanks to a pet trust. Wherever you are in San Diego County, do you consider your pets part of the family? You are not alone if you do. 87% of Americans consider their pet a family member. Do you need estate planning for this family member? If you have a number of family members or friends that will step in to care for your pet, then maybe not. If any of the following are true, however, you might consider having a pet trust.

1. You have pets with a long life expectancy. Some pets are almost sure to outlive you. Birds and reptiles have exceptionally long lives. Some turtles can live almost 100 years. A macaw for example can live to be 80. Horses have a life expectancy of twenty to thirty years.

2. You live alone. If you live alone with your pet, you need to consider who would step in and care for your pet if something happened unexpectantly to you.

Published on: January 22, 2009

Accidental Disinheritance by “Ademption”

by Scott C. Soady

When people give particular assets to someone upon their death, what happens when that asset is no longer in the estate at the time of death? “Ademption” is the term used in the area of wills and trusts to describe a situation where property left to a beneficiary is no longer in the estate when the decedent dies. In that case, the property is “adeemed”, i.e. the gift “fails” and the beneficiary does not receive it.

As a example, a father leaves a condominium to his daughter- maybe because she lives in the state where it is located or he wants to keep it in the family and she would be most suited to inherit. He provides in his will or trust that his other two children divide the rest of his estate. Years later he decides to sell the condo but forgets to update his will or trust. When he dies, the condo is not part of his estate and since the daughter isn’t mentioned anywhere else in the estate plan, she is accidentally disinherited.

Another example is where a woman provides in her trust that she wants her 1000 shares of XYZ stock to go to her grandson. The rest of her estate is to be divided between her two children. She decides to sell the stock (or the company dissolves) but she forgets to update her trust to leave her grandson some other asset or cash bequest. When she later dies, the stock is not in her estate and the grandson gets nothing.

Published on: January 15, 2009

Do I need a trust if I just have a home and not much else?

by Scott C. Soady

People with little assets other than their home many times need a living trust more than individuals with more assets. Why? Picture this scenario: With the high cost of housing in the San Diego area, many couples both work to pay the mortgage on their home. They don’t have a will or a trust but own their home in joint tenancy. Husband is involved in a serious accident and has a brain injury which makes him unable to work and incompetent. They need to sell their home because of the loss of husband’s income. How is the wife going to sell the property?

Since the title is held in both their names, the wife cannot sell the home because the husband is incapacitated. The joint tenancy with right of survivorship only applies if the other joint tenant is dead. The husband is not dead and they both need to sign the escrow documents. Even if they had wills, a will would not be of any assistance because the husband is still alive. The wife’s only alternative is to have her husband declared incompetent and become his conservator. Conservatorship is costly and takes time. With mounting medical bills and loss of husband’s income, there is no money to pay for a conservatorship. Also a prospective sale may be lost during the time it takes the court to appoint the wife as conservator.

A revocable living trust would have avoided this problem. With a revocable living trust, there are incapacity clauses contained in the trust. Both spouses are usually trustees but one can serve as sole trustee in the event of a incapacity. There are also durable powers of attorney which enable you as your spouse’s agent to take over the finances and sell the house. In addition, powers of attorney for health care are included in our revocable living trust package that allow you to make decisions about your spouses’s health care including life support and other measures. Contact us at Law Office of Scott C. Soady, A Professional Corporation,LLP to set up a free consultation about living trusts.

Published on: January 12, 2009

Trust Administration in San Diego

by Scott C. Soady

Living trusts save beneficiaries thousands of dollars in probate fees, however, upon the death of the Trustor, there are still steps that need to be taken by the Successor Trustee. These steps are called trust administration and often require some assistance from an experienced attorney. If these actions are not taken or done incorrectly, the Successor Trustee may be held liable to the beneficiaries.

The California Probate Code requires notification by the Successor Trustee to the beneficiaries and heirs of the person who has died. A copy of the will must be filed with the County Clerk. Notices should be sent to the Dept. of Health Services to determine if the person received Medi-Cal benefits as there may be a lien against the estate for reimbursement of those benefits. A similar notice of death should be sent to the Social Security Admiistration, Veterans Administration (if applicable) and the credit bureaus. Creditors may need to be dealt with. The issue of estate taxes needs to be considered.

Trust assets need to be inventoried and valued as of the date of death and decisions made as to how the assets will be distributed to the beneficiaries. Will assets be liquidated to provide cash to the beneficiaries or will the assets themselves be divided up in a manner which fulfills the trust’s provisions?

Published on: January 8, 2009

Even Famous Lawyers Don’t Provide for their Death

by Scott C. Soady

You would think that people who have practiced law would know the benefits of a well drafted estate plan. I guess it is like the old adage that “the cobbler’s son has no shoes.”

Who knows how many lawyers in this country do not have a will or a trust. Abraham Lincoln, a lawyer before he became President, died intestate (without a will). Maybe like most of us he wasn’t anticipating dying at the age of 56.

Some judges have died without an effective estate plan. In 1910 a Judge of the New Jersey Court of Appeals left no will with an estate of between $100,000 and $500,000.

Published on: January 5, 2009

Strange Bequests in Wills and Trusts

by Scott C. Soady

If you create a will or a trust, you can make any kind of gift you want to whomever you want. You can also make stipulations that a certain event must occur for the beneficiary to receive the inheritance. Some people, for example, provide for distributions to children or grandchildren if they graduate from college or they stay off drugs.

Some more outrageous bequests or conditions have been:

A Finnish business man left 780 shares of a rubber boot company to the residents of a nursing home in Finland. That company later became Nokia, which makes cell phones, making all the nursing home residents millionaires.