San Diego Estate Planning Lawyer Blog

Published on: August 31, 2009

What is a QTIP Trust?

We have all heard of a QTIP, but do you know what it means in the context of estate planning?

If you are in a second or third marriage, as many people are in San Diego, you may know that a QTIP is a type of trust. It is a common type of trust which provides for your current spouse but also ensures that ultimately your estate will pass to your own children.

QTIP actually stands for Qualified Terminable Interest Property and is often used in cases of blended families where there are “his”, “hers”, and “their” children. For example, a husband may set up a QTIP trust to provide income for his second wife when he dies.The husband names his children from his first marriage to be the ultimate beneficiaires when his wife dies. There are some strict guidelines for such a trust which an experienced estate planner can explain to you. Some of those are that all of the income from the trust must go to the surviving spouse for her lifetime. The surviving spouse cannot use trust assets to benefit a new spouse or her own children. When the surviving spouse dies, the remainder of the trust must go to whoever the Settlor has designated in the trust document, which in this example would be the husband’s children.

Published on: August 28, 2009

Leaving Money to Grandchildren

by Scott C. Soady

Many people want to leave their grandchildren something when they pass away. It may be small or it may be significant. There are several ways to do this, some better than others. When you draft your estate plan, you have no way of knowing whether some of your beneficiaries are going to be minors at the time you die. You have to plan for the possibility that some may be minors.

1. Outright Gift. You can simply provide in your will that a dollar amount or a percentage of your estate will go to a grandchild but this leads to problems if the recepient is a minor. Substantial amounts of money being inherited by a minor may cause a court-supervised guardianship of the estate of the minor until he or she is 18. Then at 18, the entire inheritance is handed over to the now adult, but still 18 year old, with no limitations attached.

2. Custodial Accounts. One way you can leave money to minors is in an account under the Uniform Transfer to Minors Act ( a UTMA account). This works well for small amounts of money. The account has a custodian who has the power to withdraw funds for the health, education, and maintenance of the minor. Once the child reaches the age you specify (In California it can be as old as 25), the child has full access to the funds.

Published on: August 24, 2009

If your parents die in debt, are you liable?

by Scott C. Soady

It’s often overwhelming when a parent dies, having to deal with all their paperwork, bills, and determining whether there will have to be a probate filed or a trust administered. Children often worry also about their parent’s debts. A long illness and nursing home or hospital expense can quickly eat up a parent’s assets.

What if your parent passes away with not much other than debts? Are you liable? Can you be sued personally for their debt? Sometimes heirs even get phone calls or letters from creditors claiming that as the decedent’s heirs, they are liable for the parents’ debts.

Not so! Children are not responsible for paying their parent’s debts. The estate of the person who died is liable but if there is no money or assets in the estate, the creditors are out of luck.

Published on: August 15, 2009

New Rules in 2010 Concerning “No Contest” Clauses

by Scott C. Soady

Many wills and trusts include language to deter future disputes or contests over the provisions of the will or trust. These “no contest” clauses typically provide that if someone challenges the validity of a will or trust, they take nothing under the instrument.

As an example, suppose a parent has two daughters and creates a trust leaving her estate equally to her two children. Just before her death, she changes her trust to leave the bulk of her estate to the younger dauhter with whom she lives. If the trust contains a “no contest” clause, the daughter who wants to challenge the validity of the trust as amended, faces a court holding that her objection constitutes a “contest” and therefore, the objecting child takes nothing under the trust.

Beginning in 2010, Probate Code Sections 21300-21322 will be repealed. New Probate Code Section 21310(6) will define a “contest” as one that alleges the validity of an instrument based on either (1) forgery, (2) lack of capacity (3) fraud, duress, or undue influence (4) revocation or (5) disqualification of a beneficiary under Probate Code Sections 6112 or 21350 (care custodians, drafters, etc.)

Published on: August 14, 2009

California Budget Crisis Affects San Diego Courts

by Scott C. Soady

San Diego County as you may know has a number of superior courts available to its residents. At Law Office of Scott C. Soady, A Professional Corporation we file our will and trust matters either in the downtown branch of the Probate Court located at 1409 Fourth Avenue or at the North County branch in Vista.

The State has recently announced that it will close all state courts one day per month through the remainder of this fiscal year. The San Diego Superior Courts will be closed to the public on the third Wednesday of each month through June 2010. The closures will begin on Wednesday, September 16, 2009. If you had a matter scheduled for one of these dates, the court will reschedule your matter to another date. It remains to be seen whether court employees will be furloughed one day a montn to further cut expenses. San Diego has the second largest superior court bench with 130 judges and 24 magistrates.

While many businesses and corporations and state and county employees have been asked to take a furlough, Law Office of Scott C. Soady, A Professional Corporation is still open Monday through Friday from 8 am to 5 pm to address your estate planning needs. Our estate planning attorneys practice in the areas of trust administration, probate, wills, trusts, conservatorships, guardianships, will and trust litigation, special needs trusts, charitable trusts and other areas. Feel free to call us for a complimentary and confidential consultation about your estate planning matter.

Published on: August 10, 2009

Revocable Living Trusts in This Economy

by Scott C. Soady

Most people agree we are in the middle of an economic recession in this country. Unemployment is high and the stock market is like a roller coaster. How does the recession affect your need for a trust or affect your exisiting trust you already have?

If you do not have a trust and have assets of over $100,000, you do need a revocable living trust even in this economy, and some people would say, even more so. If you have real property out of state, a trust will avoid probate in both California and the state where the property is located. Many people have young children and need a trust with guardians set up in case something happens to them. Death is inevitable, recession or not, but a trust will enable your estate to be distributed faster and less costly than with a will or with no estate plan at all.

If you already have a trust, the recession may also affect you. In a recession, some investors try to recession-proof their portfolios by switching their IRAs, 401(ks) or other investments into different funds or CDs. Have you remembered to always title new investments in the name of your trust and made up to date beneficiary designations? Changing accounts, sales of real property, refinancing, etc. all increase in times of rescession, leaving open the possibility that assets are not properly titled in the name of the trust.

Published on: August 7, 2009

Planning for Long-Term Health Care

by Scott C. Soady

We applaud clients that have had the foresight to get an estate plan in place, before they need it. It makes it much easier on your family if you have taken the time to prepare an estate plan ( a will or a trust), specifically setting forth who you want to inherit your estate, who you want to pay your final bills and distribute your estate, how you want your personal effects divided, etc. Sometimes however, doing estate planning can be just the beginning of your planning. Some people discover that on down the road they also need financial planning, long-term health care planning, or Medi-Cal planning.

Especially long term planning and Medi-Cal planning are subjects that most people know little about. You may have questions about how to pay for long-term care? How do I know if I need it? Can I plan now for the possibility I will need it in the future?

AARP (American Association of Retired Peersons has a great article tthat discusses some of these issues. According to AARP, about 60% of people over the age of 65 will require some type of long-term care during their lifetime. There are many choices for long-term care from having your family members care for you to long-term health insurance and Medi-Cal. Sometimes you need a combination of services.

Published on: August 3, 2009

Adding Your Children on Title Can Create More Problems Than It Solves

by Scott C. Soady

Some clients think that a good way to avoid probate is to put their adult children on the title to their home. While it is true that putting your child on the deed to your home will avoid probate, it can create all kinds of headaches not anticipated or desired. Here are some reasons:

1. Creditors of your child or the IRS (to enforce a tax lien) can go after the property that you hold jointly with your child and try to force a sale against your wishes.

2. If your child files for bankruptcy, the court could determine that the property should be part of the bankruptcy proceeding and creditors may seek to have it sold.

Published on: July 31, 2009

Avoiding Probate

by Scott C. Soady

Aa you have learned from the recent series of blogs on probate, if you can avoid a probate after your death, your heirs will have an easier time settling your estate.

The best way to avoid probate is to have a revocable living trust into which you transfer all of your assets to yourself as the trustee during your lifetime. Upon your death, the successor trustee you have chosen will have immediate authority to administer your trust without a probate. It is critical however that you in fact transfer your assets into your trust by deed, changing title to accounts, etc. Other advantages of a trust are privacy and that if properly drafted, the trust will also have provisions for someone to manage your assets if you become unable to do that for yourself.

Other ways to hold title to avoid probate are:

Published on: July 28, 2009

Probate FAQs

by Scott C. Soady

Frequently Asked Questions about San Diego Probate

1. How long will my probate matter take? As a general rule, most probates in San Diego are finished in a year to 18 months. However there can be many issues that may cause the probate to last longer. Common examples are litigation issues that develop such as an objection to the will, unusual property that has to be appraised or liquidated, difficulty finding heirs or beneficiaries, and larger estates with tax issues.

2. If I am an administrator or an executor, will I have to post a bond? A bond is for the purpose of protecting the decedent’s estate in case the personal representative mismanages the estate. Depending on the size of the estate, bond premiums can be $2000 or more per year.If the will waives bond or you can get all the beneficiaries to waive bond, you probably won’t have to post a bond, however the Court can always order the personal representative to be bonded if the Court believes it is warranted. Bonds are usually required if the administrator or executor live out of state. To obtain a bond, you have to provide information to the bond company about your employment, criminal convictions, bankruptcies, and civil judgments against you. Some people are not bondable if they have issues in these areas.