California Probate - Law Offices of Janet Brewer Blog

What Happens If Trust Not Funded

“Revocable trusts are a very popular and effective estate-planning tool. However, the trust will be ineffective, if you do not actually place your assets in the trust.”

Revocable trusts can be an effective way to avoid probate and provide for asset management, in case you become incapacitated. These revocable trusts — also known as “living” trusts — are very flexible and can achieve many other goals.

Point Verda Recorder’s recent article entitled “Don’t forget to fund your revocable trust” explains that you cannot take advantage of what the trust has to offer if you do not place assets in it. Failing to fund the trust means that your assets may be required to go through a costly probate proceeding or be distributed to unintended recipients. This mistake can ruin your entire estate plan.

Transferring assets to the trust—which can be anything like real estate, bank accounts, or investment accounts—requires you to retitle the assets in the name of the trust.

If you place bank and investment accounts into your trust, you need to retitle them with words similar to the following: “[your name and co-trustee’s name] as Trustees of [trust name] Revocable Trust created by agreement dated [date].” An experienced estate planning attorney should be consulted.

Depending on the institution, you might be able to change the name on an existing account. If not, you’ll need to create a new account in the name of the trust, and then transfer the funds. The financial institution will probably require a copy of the trust, or at least of the first page and the signature page, as well as the signatures of all the trustees.

Provided you’re serving as your own trustee or co-trustee, you can use your Social Security number for the trust. If you’re not a trustee, the trust will have to obtain a separate tax identification number and file a separate 1041 tax return each year. You will still be taxed on all of the income, and the trust will pay no separate tax.

If you’re placing real estate in a trust, ask an experienced estate planning attorney to make certain this is done correctly.

You should also consult with an attorney before placing life insurance or annuities into a revocable trust and talk with an experienced estate planning attorney, before naming the trust as the beneficiary of your IRAs or 401(k). This may impact your taxes.

If you have any questions about your current estate plan, please call or email us today.

Reference: Point Verda Recorder (Nov. 19, 2020) “Don’t forget to fund your revocable trust”

What are Options for Powers of Attorney?

“Powers of attorney come in different forms, each suited for a specific purpose. They serve as useful tools in any estate-planning effort.”

Power of attorney (POA) documents are an important component of an estate plan. There are four types. You should review each carefully to see which one will work best for you in your situation. What is required for a power of attorney, depends upon what power you want to authorize, says Carmel’s Hamlet Hub in a recent article titled “4 Types of Power of Attorney.”

Limited Power of Attorney. If you need someone to act on your behalf for a limited purpose, use a limited power of attorney. This will specify the date/time after which the power no longer is in effect.

General Power of Attorney. This is an all-encompassing power of attorney, in which you assign every power and right you possess as an individual to a certain party. It’s typically used where the principal is incapacitated. It is also used with those who don’t have the time, skills, knowledge, or energy to handle all of their financial matters. The power you assign is in effect for your lifetime, or until you are incapacitated (unless it is also “durable”). However, you can elect to rescind it before then.

Durable Power of Attorney. The key distinction with a durable power of attorney is that it stays in effect, even after you’ve become incapacitated. Therefore, you want to sign a durable power of attorney if: (i) you want to give the designated agent authority ONLY if you’re unable to act for yourself; or (ii) you want to give the agent immediate authority that continues after you’re unable to act for yourself.

Note that a limited or general power of attorney ends when you become incapacitated. At that point, a court will appoint a guardian or conservator to handle your matters. You can rescind a durable power of attorney at any time prior to becoming incapacitated.

Springing Power of Attorney. This document serves the same purpose as a durable power of attorney, but it’s effective only upon your becoming incapacitated. When drafting this, your experienced estate planning attorney will help you make clear your definition of “incapacitated.”

Remember that you’ll need to state in your power of attorney document which powers and duties you are assigning to the attorney-in-fact.

Regardless of the type of power of attorney you implement, the attorney-in-fact has the power to do only what your POA indicates.

Reference: Carmel’s Hamlet Hub (Dec. 16, 2020) “4 Types of Power of Attorney”

Is the Pandemic Motivating People to Do Estate Planning?

“Lack of understanding around estate planning may be leading Americans to avoid getting a will, even as interest is on the rise due to the global pandemic, according to a new survey from financial services leader Policygenius.”

A survey from Policygenius, an online insurance marketplace, found that most people (60.4%) didn’t have a will, but that may be about to change. Nearly 40% of survey respondents (39.7%) said they feel it's more important to get a will because of the pandemic.

PR Newswire’s recent article entitled “Policygenius survey finds Americans with misconceptions about estate planning” reports that many respondents also held misconceptions about the estate planning process, which may a reason they avoid it.

The survey found that more than one in five respondents (22.8%) who think getting a will is too expensive overestimated the cost by hundreds or even thousands of dollars.

A total of 48.2% incorrectly thought that their possessions would automatically pass to their spouse, if they died without a will. That may suggest that people may not be creating wills because they think they don't need them.

There were 24.1% respondents who said that they don't have a will because they haven't had time to put one together, and more than half of those respondents (62%) were parents.

The survey also found that respondents prioritized family, with more than a third of them (35.9%) saying that having a child is the most important life event for someone, if they want to create a will. About two-thirds (65.5%) said that making the process of inheritance as easy as possible is one of their top three important issues, when getting a will.

Just 39.3% knew that if someone passes away without a will, a court will determine who gets their assets.

The Policygenius survey is based on responses from a nationally representative sample of 2,689 Americans ages 25 and over. It was conducted by SurveyMonkey from July 16 through July 17, 2020.

Ask an experienced estate planning attorney about a will and a comprehensive estate plan. Contact our office today to schedule your consultation.

Reference: PR Newswire (Dec. 2, 2020) “Policygenius survey finds Americans with misconceptions about estate planning”

What Do I Need to Know about Creating a Will?

A simple or basic will allows you to specifically say the way in which you want your assets to be distributed among your beneficiaries after your death. This can be a good starting point for creating a comprehensive estate plan because you may need more than just a basic will.

KAKE’s recent article entitled “What Is a Simple Will and How Do You Make One?” explains that a last will and testament is a legal document that states what you want to happen to your property and “worldly goods” when you die. A simple will can be used to designate an executor for the will and a legal guardian for minor children and specify who (or which organizations) should inherit your assets when you die.

A will must be approved in the probate process when you pass away. After the probate court reviews the will to make sure it’s valid, your executor will take care of the collection and distribution of assets listed in the will. Your executor would also be responsible for paying any debts owed by your estate.

Whether you need a basic will or something more complex, usually depends on a few factors, including your age, the size of your estate and if you have children (and their ages).

Having a will in place can be a good starting point for estate planning. However, deciding if it should be simple or complex can depend on a number of factors, such as:

• The size of your estate
• The amount of estate tax you expect to owe
• The type of assets and property you own
• Whether you own a business
• The number of beneficiaries you want to name
• Whether the beneficiaries are individuals or organizations (like charities)
• Any significant life changes you anticipate, like marriages, divorces, or having more children; and
• Whether any of your children or beneficiaries have special needs.

With these situations, you may need a more detailed will to plan how you want your assets to be distributed. In any event, work with an experienced estate planning attorney. With life or financial changes, you may need to create a more complex will or consider a trust. It is smart to speak with an estate planning attorney, who can help you determine which components to include in your plan and help you keep it updated. 

If you have any questions about your current estate plan, please call or email us today.

Reference: KAKE (Nov. 23, 2020) “What Is a Simple Will and How Do You Make One?”

Is a Tax Change a Good Time to Check My Will?

A last will and testament can make certain that your goals for legacy and asset disposition are satisfied and carried out. However, what most people fail to grasp is that a will needs regular review—especially if the document was written or involved the creation of a trust prior to passage of tax reform, the Tax Cuts and Jobs Act (TCJA), in 2017, says Financial Advisor’s recent article entitled “Tax Changes Make This A Good Time To Revise A Will.”

Wills can pass on assets, but taxes have come to greatly impact how much money is passed on. People usually understand the primary components, including the tax implications, of their wills.

These include:

• The unlimited marital deduction
• Applying current rules to make non-taxable gifts of up to $15,000 per person
• The current estate tax exemption of $11.58 million
• Health care directives
• Naming trustees and executors; and
• Creating long-term trusts with non-taxable asset transfers.

Wills and trusts were created prior to the passage of the TCJA may not consider that reform changed the amount which can be exempted from estate taxes.

The law more than doubled the amount that can be exempted from estate taxes. The potential tax changes could cause many more Americans to have a taxable estate, and it’s important to have a full understanding of your assets and carefully decide who you want to receive them. You must also decide if you want them passed outright or through a trust.

Privacy is a good reason why some people often prefer trusts. They also like the quick processing and avoiding probate.

Estate plans should be reviewed every few years, and wills should be reviewed more frequently because life changes are the biggest reason for trouble in revising wills.

Divorce, separation or marriage; the birth or adoption of children, as well as a child reaching adulthood; and changes to finances, location, and health all can play important roles.

Reference: Financial Advisor (Nov. 9, 2020) “Tax Changes Make This A Good Time To Revise A Will”

No Time Like the Present Pandemic to Get the Estate Plan Going

There’s nothing like a once-in-a-lifetime global pandemic to focus one’s thinking. 2020 has been one for the books.

The pandemic has made many people focus on depressing things, like death. Many of us are worth more dead than alive.

Federal News Network’s recent article entitled “It’s your estate, but who gets it?” says that lack of control is one of the frustrating things about this already terrifying pandemic. We can wear masks, keep our distance and avoid crowds, but then what?

There are some very important and valuable things that are still under your control. One of these is estate planning.

Any number of things could have occurred in 2020 that are off your radar because you’re still adjusting to the many changes the pandemic has brought to our everyday lives.

Many people see their estate plan as one of life’s necessary chores. Once it’s signed, they simply file it away and forget about it. However, an estate plan should be reviewed regularly to be certain that it continues to meet your needs. Here are just a few of the life events that make it essential for you to review and possibly revise your estate plan with an experienced estate planning attorney:

• The birth or adoption of a child
• You are contemplating divorce
• You have recently divorced
• Your child gets married
• Your child develops substance abuse problems or has issues with managing finances
• Those you’ve named as executor, trustee, or agents under a power of attorney have died, moved away, or are no longer able to fulfill these obligations
• Your child faces financial challenges
• Your minor children reach the age of majority
• There has been a change in the law that impacts your estate plan
• You get a sizeable inheritance or another windfall.
• You have an estate plan but can’t locate it
• You acquire property; or
• You move to another state.

If any of these events occur, talk to your estate planning attorney to see if it is necessary to revise your estate plan to address these issues.

Reference: Federal News Network (Nov. 4, 2020) “It’s your estate, but who gets it?”

What Kind of Estate Planning Do I Need During the Pandemic?

“The COVID-19 pandemic has made 2020 a nightmare for many people, and inadequate estate planning can exacerbate the pain.”

Having a valid will and a complete estate plan is important for everyone, but it’s crucial as you approach retirement.

Richmond Times-Dispatch’s recent article entitled “Estate planning during the pandemic” says that it’s because you’ll probably have more assets at this stage of your life, and it’s important to consider whom you’d like to inherit.

It is critical that you plan to be sure your spouse and family will be cared for financially, in the event that something happens to you. This can be accomplished with proper estate planning with the help of an experienced estate planning attorney.

If you die without a will or estate plan, state probate laws of succession may direct the way in which your assets are distributed. This can be an expensive process, but it can also be a significant burden on your family during a time of grieving and sadness.

Even with a will, going through the court-supervised probate process of passing assets through a will can be time consuming and expensive.

One way to avoid probate is to ask an experienced estate planning attorney to help you set up a trust. A frequently used trust is a revocable living trust, which lets you modify the terms if you like.

Individuals with children or real estate can particularly benefit from setting up a trust. A trust allows you to avoid probate and makes certain that your assets are transferred to the intended people. It also lets you control exactly how the money can be used. You can also name someone to take control when you’re not available, known as a secondary trustee.

The executor of a will is really an administrator who transfers assets from one person to another. In contrast, a trustee is more of a decision-maker who will take your place and make decisions you would want to make, if you were still around to make them.

After you set up your estate plan, you should review it every few years.

You can read more about how our process works, how we can make sure we are a good fit for your needs, and how to get started today right here.

Reference: Richmond Times-Dispatch (Nov. 19, 2020) “Estate planning during the pandemic”

Did Zappos Founder Tony Hsieh Have a Will?

“Advisors were likely powerless to push for an $800 million estate plan, as Zappos founder started to drift into unhealthy habits. The family now has to sort it out.”

Zappos founder Tony Hsieh did not quite make “billionaire” status. However, he was close, selling several companies for a $800 million personal payday.

Wealth Advisor’s recent article entitled “Even Mega-Millionaires Die With No Will: Tony Hsieh Family Steps Up” explains that when leaving that much cash behind, heirs need only invest in Treasury Bonds to be set for life.

However, when you die on a reported girlfriend’s property at age 46, far from home and without a will, the estate becomes much more complicated than it needs to be.

Hsieh sold his first startup company in 1998 and moved into the world of top-tier technology incubators, eventually starting the shoe retailer Zappos, which he sold to Amazon in 2009. He continued to manage Zappos, until he stepped down this summer. While Hsieh had no need to work financially, he liked the structure.

However, he also enjoyed pushing his health to the limit, experimenting with extreme diets, holding his breath, and literally playing with fire. Hsieh was asphyxiated in a Connecticut shed when it caught fire. He was rushed to the hospital, where he died.

Hsieh seemed untethered, but it was his life and his money.

However, now that he’s gone, his fortune is an issue.

He did not have a wife or children, so his scattered assets need to be accounted for and then dispersed.

His father and brother have volunteered to sort everything out.

However, it is going to take time and money to find all the money and there are no guarantees. Things frequently fall through the cracks.

The tax situation is also a question, with an $800 million estate, the IRS will see a significant payday.

Hsieh didn’t have a will or a trust, so probate is a concern. With a Nevada base of operations, a Utah residence, and presumptive California executors - probate can get messy very quickly.

The lesson here is clear: we all need an estate plan.

That’s how we can add multigenerational value and keep family fortunes growing, instead of dwindling to nothing.

Ask an experienced estate planning attorney about a comprehensive estate plan.

Reference: Wealth Advisor (Dec. 7, 2020) “Even Mega-Millionaires Die With No Will: Tony Hsieh Family Steps Up”

What Should I Know about a Living Trust?

“A living trust is an estate planning legal document that contains your instructions and authorization for what you want to happen to your assets, when you become disabled or pass away.”

A will and a living trust both can be very important in your estate plan. However, a living trust doesn’t require probate to transfer your assets.

KYT24’s recent article entitled “Fundamentals Of A Living Trust” explains that everyone who owns a home and/or other assets should have a will or a living trust. Proper estate planning can protect your family from unnecessary court costs and delay, if you become incapacitated, disabled, or die.

With a living trust, you can avoid all probate delays and related costs and make life much simpler for your family in a crisis. If you pass away, your spouse will be able to automatically and immediately continue without any delay or unnecessary expense.

When you and your spouse both die, your assets will also transfer directly to your beneficiaries.

Living trusts can save time, expense, and stress for your loved ones. Speak with an experienced estate planning attorney about creating a living trust. Contact our office today to schedule your consultation.

A trust agreement, being a legal document, must be written by an experienced estate planning attorney who has the knowledge and experience to prepare such a legal document to cover all of your needs and desires. If not properly and completely drafted, you run the risk of issues after you’re gone for your family.

After your attorney drafts your living trust, you must fund the trust, by titling or adding assets to it. If assets aren’t titled to or otherwise connected to your trust agreement, they won’t be legally part of the trust.

This totally defeats the purpose of drafting your living trust agreement in the first place.

It’s a common mistake to fail to fund a trust, which can happen as a result of poor follow-through after signing the trust.

Work with an experienced estate planning attorney to complete a living trust and your entire estate plan. This includes a thorough review of your goals and objectives, as well as reviewing all estate assets to complete the funding of your trust, by transferring assets into the name of the living trust.

Reference: KYT24 (Nov. 14, 2020) “Fundamentals Of A Living Trust”

What are the Biggest Estate Planning Mistakes?

“Taking a few simple steps now can potentially help save your beneficiaries thousands in legal fees and taxes.”

One of the largest wealth transfers our nation has ever seen is about to occur, since in the next 25 years, roughly $68 trillion of wealth will be passed to succeeding generations. This event has unique planning opportunities for those who are prepared, and also big challenges due to the ever-changing legal and tax world of estate planning.

Fox Business’ article “5 estate planning disasters you'll want to avoid,” discusses the biggest estate planning errors to avoid.

Failing to properly name beneficiaries. This common estate planning mistake is easily overlooked, when setting up a retirement plan for the first time or when switching investment companies. A big advantage of adding a beneficiary to your account, is that the account will avoid probate and pass directly to your beneficiaries.

Any account with a properly listed beneficiary designation will override what is written in your will or revocable living trust. Therefore, you should review your investment and bank accounts to make certain that your beneficiaries are accurate and match your intentions.

Naming a minor as a beneficiary. This can be a problem, if they are still minors when you die. A minor won’t have the legal authority to take control of inheritance or investment accounts until they reach the age of 18 or 21 (depending on state law). When a minor receives an asset as a beneficiary, a court-appointed guardianship will be created to supervise and manage the assets on behalf of the minor. To avoid this mistake, you can name a guardian for the minor child in your will.

Forgetting to fund a trust. Creating a trust is the first step, but many people don’t properly fund their trust after it’s established.

Making a tax mess for your heirs. A significant advantages of passing on real estate or other highly appreciated investments or property, is that your beneficiaries receive what is known as a “step-up” in basis, so that they aren’t responsible for any income taxes on the appreciated assets when they are received. The exception is when inheriting retirement accounts, such as 401k’s and traditional IRAs. Except for a surviving spouse, inheriting a traditional IRA or 401k means that you are now responsible for the taxes owed. With the recent passage of the SECURE Act, most non-spouse beneficiaries must totally withdraw a 401k or IRA within 10 years. It is deemed to be ordinary income for beneficiaries, which could result in a huge tax bill for your heirs. To avoid this, you can convert some or all of your retirement account assets to a Roth IRA during your lifetime, which lets you to pay the conversion taxes at your current income tax rate—a rate that may be much lower than your children or grandchildren’s tax rate. When you pass away, any money that is passed inside a Roth IRA goes tax-free to your heirs.

Failing to create a comprehensive estate plan. Properly establishing your estate plan now, will care for your loved ones financially, and can also save them a lot of emotional stress after you’re gone.

Talk to an experienced estate planning attorney about planning now. It can really affect your family for generations. It is one of the best gifts that you can leave your family.

Reference: Fox Business (Nov. 12, 2020) “5 estate planning disasters you'll want to avoid”