LIVING TRUSTS

Published on: June 13, 2015

Can My Creditors Control My Estate?

Estate planning includes not just how to dispose of your assets, but also how to deal with any creditors you may still owe money to after your death. This includes lawsuits which may be pending or occur as a result of your death. In some cases, even if you leave no assets as part of your probate estate, an estate must still be opened in order to address such litigation.

Estate of DeMotto

Here is a recent example which is discussed only as an illustration and should not be taken as a correct statement of the law. A man died in 2013. The man was living with a woman-not his wife-at the time of his death. Their relationship began in 2001. Although the woman claimed he intended to provide for her in his estate planning, he did not name her as a beneficiary of his will or trust.

Published on: March 22, 2015

The Importance of Managing Trust Assets

by Scott C. Soady

A living trust can help provide for both you and your children. Married couples often establish a joint trust to manage their assets during their lifetimes, and when one spouse dies, the other spouse may continue to benefit from the trust. A trust may also make provisions for children or other descendants, but it is important to structure the trust so your priorities and intentions are clear.

While trusts generally help individuals avoid probate, there are unfortunately times where disagreements over a trust’s provisions may lead to litigation between family members. Here is a recent example from a California Court of Appeal decision regarding a trust. This case is provided simply as an illustration and should not be taken as a comprehensive statement of California law on the subject of trusts.

Cavagnaro v. Sapone

Published on: March 20, 2015

Addressing “Joint” and “Community” Property in Your Estate Plan

by Scott C. Soady

California is a “community property” state. This means any property acquired during a marriage belongs to the spouses equally. In the event of divorce, any community property must be divided between the spouses. Of course, a divorced couple can still own property together, but they would do so as joint tenants or tenants in common; there is no “community property” once the marriage is dissolved.

If you are recently divorced (or contemplating divorce), you should be aware of the estate planning implications. It is important to revise your will or living trust to reflect the end of your marriage. In the event your divorce settlement leaves any unresolved questions over the ownership of former community property, your estate plan should address these issues.

Schmidt v. Turner

Published on: March 13, 2015

What is the Rule Against Perpetuities?

by Scott C. Soady

When you create a trust as part of your estate plan, you can effectively control the disposition of your property for years, even decades, into the future. This can prove useful if you want to limit the distribution of an inheritance until your chosen beneficiaries reach a certain age. But there is a limit to such control, as expressed through what is known in the law as the “rule against perpetuities.”

At common law, the rule against perpetuities dictates that a gift can last only until 21 years after the death of the last potential beneficiary alive at the time of the trust’s creation. A number of states, including California, have amended the rule of perpetuities. Under the California rule, a trust must terminate after 90 years. This does not replace the common law rule entirely, but rather complements it. The common law rule declares a trust gift valid if it vests within 21 years after the last surviving beneficiary’s death. This is still the case under the California rule, but it also declares the gift valid if it is completed within 90 years of the trust’s creation.

What About Your Great-Great-Great Grandchildren?

Published on: February 13, 2015

Using Age Provisions in a Will or Trust

by Scott C. Soady

Prince Harry, the younger son of Prince Charles, the Prince of Wales, and his former wife, the late Diana Spencer, turned 30 last year. This milestone means Prince Harry will receive more than $17 million from his late mother’s estate, according to the modified terms of a trust established as part of her estate plan.

Diana, Princess of Wales, made a last will and testament in 1993 and amended it in 1996. She left the bulk of her estate in trust for her two sons, Prince Harry and Prince William (now the Duke of Cambridge). Originally, the trust assets were to be paid to each prince when they turned 25. But the executors of the estate obtained a “variance” from an English probate court, modifying the terms to delay distribution until the children turned 30.

Age Provisions in Trusts

Published on: December 5, 2014

Failure to Leave a Will Can Lead to More Than Just “Sibling Rivalry”

by Scott C. Soady

It is important to make a last will and testament before your declining health renders you incapable of doing so. In a deteriorating physical or mental state, you may be subject to the undue influence of others who may wish to take control of your property for their own benefit. And while the law in California and other states will not recognize a will signed as the result of undue influence, settling this may require long and often costly litigation which can deplete your estate and deprive your chosen beneficiaries of the fruits of your labors.

Green v. McClintock

Here is a recent example from another state. This involved the estate of Kenneth Green, who died of cancer in 2010. Green and his brother, Albert, had fought for years over the disposition of their mother’s estate. She died in 1995 without leaving a will. She did, however, leave a substantial farm in Allegany County, Maryland, and other cash assets. Neither brother bothered to open an estate for their mother until 2002, when Kenneth Green decided to take action.

Published on: November 5, 2014

Can a Creditor Challenge a Trustee’s Mismanagement?

by Scott C. Soady

When you create a living trust, you transfer personal assets to a trustee, who then manages those assets on your behalf. In most cases, this won’t be a problem, since you can name yourself as trustee during your lifetime. But when someone else serves as trustee, he or she owes a duty, not only to you as the person creating the trust, but to any persons you name as beneficiaries of your trust. Under California law, a trustee may not misuse (or co-mingle) trust assets for his or her personal benefit to the detriment of any beneficiaries.

Recently, a California appeals court addressed a question that apparently had not been considered before: Does a trustee owe a creditor a duty to avoid self-dealing? The appeals court answered no, reversing a lower court’s decision to the contrary.

Vance v. Bizek

Published on: November 1, 2014

What Happens When an Equal Distribution of Property Is Not So Equal?

by Scott C. Soady

If you have multiple children, you may wish to structure your estate plan so that each child receives an equal share of your property. Sometimes this is easier said than done-or written. If your will or trust contains conflicting or ambiguous language regarding the division of property, a probate court may have to attempt to determine what your actual intent was. This adds time and money to the cost of administering your estate, which ultimately reduces the amount of any gift left to your children.

Estate of Ellis

Here is a recent example from Iowa. In 2012, a longtime married couple passed away within a couple weeks of one another. They left three surviving adult children. According to each of their wills, upon both of their deaths, the couple left several parcels of real estate to their children. The will contained specific descriptions and estimated acreage for each gift.

Published on: October 31, 2014

When Does a “Revocable” Living Trust Become Irrevocable?

by Scott C. Soady

A revocable living trust is a flexible estate planning device that allows you to transfer your property to a trustee–usually yourself–thereby reducing those assets subject to a court-supervised probate after your death. Your trust document names a successor trustee to assume responsibility for the trust assets after your death. And as the name implies, a revocable living trust may be modified or revoked at any point during your lifetime.

But what about after your lifetime? Does a successor trustee have the right to modify the terms of your trust? That was the question before a California appeals court recently, which had to decide whether the spouse of a deceased trust grantor could alter the distribution of assets he specified.

Wright v. Tufft

Published on: September 18, 2014

Naming Backup Beneficiaries In Your Will or Trust

by Scott C. Soady

In creating a will or trust, a person may make specific bequests of property to a chosen beneficiary. But what happens if that beneficiary does not survive the person making the bequest? A well-drafted will or trust must anticipate such contingencies. Either the document should name an alternate beneficiary, or it should be made clear that the gift lapses and passes as part of the person’s residuary (leftover) estate.

A recent California Court of Appeals decision illustrates the confusion that may arise when the intended beneficiary of a gift dies before the giver. This case is only provided as an example and should not be viewed as a comprehensive statement of California law on this issue.

Dilworth v. Tiernan