Probate, Estate Planning and Trust Law
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San Fernando Valley Probate & Estate Administration Law Blog

Detailing split-interest trusts

Those in Woodland Hills who have assets they would like to be managed for the benefit of others may find a trust to be an effective tool at doing so. The same may be said for people who wish to use their personal assets to benefit a favorite charity. Those who would like their trust’s property to do both may be able to do so through a split-interest trust. The Internal Revenue Service defines a split-interest trust as one for which a portion was allowed a charitable deduction, while the remainder may be subject to the same tax requirements as a private foundation.

In simpler terms, with a split-interest trust, one can pass a portion of his or her wealth to a beneficiary while also contributing to a charitable organization. Such trusts are set up using one of two different payment methods. The first is a charitable lead trust, which pays income to a charity for certain period of time, and then sees the remainder interest pass to its beneficiaries. A charitable remainder trust, on the other hand, follows the exact opposite payment method.

Lawsuit aims to stop McDonald’s from using late artist’s works

For those in Woodland Hills who have been asked to serve as the executor or personal representative of a family member or friend’s estate, their responsibilities may go beyond simply ensuring that the estate is processed and dispersed correctly. If the assets include items of artistic value or intellectual property, they may also need to ensure that the any copyright protections covering those items are respected (as such property may add an estate’s overall value). If those rights appear to be infringed in any way, then it may be left up to the one charged with administering the estate to pursue the proper legal recourse.

The administrator of the estate for a popular late American artist has seemingly been forced into seeking such action against the fast-food giant McDonald’s. The woman (who was also the late artist’s girlfriend) has filed a lawsuit claiming that McDonalds’s had begun to display his artwork in several of its restaurants without first seeking the approval of his estate. She claims to have asked the company to stop this alleged infringement back in June, yet to no avail. Such use is being viewed as particularly unsettling by the woman given that the artist was known during his life for avoiding associating commercialism with his work.

Mistakes to avoid when planning your estate

While the recent media attention has focused on the estates of the most-wealthy CEOs and celebrities, in reality, estate planning is for almost everyone. For people who have a house, a car, or even simply a bank account, an estate plan is essential to the financial future of your family.

Estate plans are important not only for ensuring the maximum value of an estate is passed on to the rest of the family, but also for determining how valuable possessions are handled while the owner is still alive. For people out there looking to plan an estate, there are common mistakes that people make. It is essential to avoid these issues because they can cost the inheritance millions of dollars. 

What are powers of appointment?

Once you begin to get deeply involved in the estate planning process in Woodland Hills, you may begin to hear the term “power of appointment” frequently used. What does this mean? Essentially, the power of appointment is the granting of authority to another to dispense or dispose of property. In the case of a will, for example, you as the testator may choose to grant the power of appointment to a family member, friend or colleague. That person then assumes the role of donee. A donee differs from a trustee in that he or she is not charged with managing property or investing assets, but rather simply dispensing them.

The California Probate Code recognizes two distinct types of powers of appointment. The most common is a general power of appointment. This allows whomever you grant it to exercise it as he or she sees fit, including to the benefit of him or herself, or his or her estate, creditors, or creditors of his or her estate. An example would be if you have an art collection, which you leave to a son or daughter to be utilized in any way he or she chooses.

Knowing the limitations to a trustee's discretionary powers

When you have been named as the beneficiary of a trust in Woodland Hills, it may not be uncommon for you and any other interested parties to feel frustrated about your apparent lack of control over matters. Given that the assets of the trust may have been significantly designated to benefit you, it is difficult to feel as though you are at the mercy of the trustee's discretion. Many have come to us here at The Law Offices of Alice A. Salvo questioning exactly how much discretion a trustee has in exercising his or her duties. The answer depends largely on the details of the trust itself.

Section 16080 of the California Probate Code states that, in general, a trustee is not able to exercise his or her discretionary powers without restraint, but rather within reason. While this may seem straightforward, it may open the door to interpretation, particularly if in the trust instrument itself, the settlor uses terms such as "uncontrolled," "absolute" or "sole" when describing the level of discretion afforded to the trustee.

Understanding the difference between principal and income

When researching the topics of trusts and trust administration, Woodland Hills residents may likely hear the terms “principal” and “income” thrown around quite a bit. Understanding what each of these words mean in relation to a trust as well as the differences between them may be vital to the success of a trust as being a source of revenue for its beneficiaries. Knowing such information may also greatly help a trustee as he or she works to allocate a trust’s assets correctly.

As defined by the American Bar Association, principal is the property placed into a trust to benefit beneficiaries (either by producing income or through other means). This may include:

  •          Money
  •          Real property
  •          Stock options

When is the right time for estate planning?

Estate planning isn't something that most people think about very often. In fact, most people don't even realize they have an estate. They tend to think of an estate as a fortune substantial enough to qualify for a federal inheritance tax.

As of 2016, that amount is $5.45 million dollars, an amount that relatively few people are able to amass within their lifetimes. However, in legal terms, most people actually do have an estate, and it's often worth far more than they realize. For example, estates include pensions and life insurance policies, among other things. 

Filling a vacated trustee’s office

The success a trust achieves in managing the assets therein may depend largely on the capabilities of the trustee. Many often come to us here at the Law Offices of Alice A. Salvo concerned over the office of a trustee having been vacated. If you are an interested party to a trust, then it may prove to be beneficial for you to understand the process followed to replace a trustee if you happen to encounter such as scenario.

There are any number of reasons why a trustee’s role may be vacated. The person designated as such by the trust instrument may die, or he or she may simply refuse to assume those responsibilities. In any event, section 15660 of the California Probate Code lists the proper way to fill a vacated trustee’s office as follows:

  •          First, any instructions in the trust instrument naming the replacement trustee or outlining a process to replace the trustee will be honored.
  •          If no such instructions are given, then the role of trustee may be assumed by a trust company. In order for this to happen, you (if you are a beneficiary) and all of the other adult beneficiaries of the trust must agree on this action.
  •          If you and the other beneficiaries cannot come to an agreement, you or another interested party may petition the court to select a replacement.

Tax dispute over Tom Clancy’s estate settled by court

For those in Woodland Hills who have considerable assets to pass on to beneficiaries, one concern that they may want to address is estate taxes. In many cases, tax considerations are often overlooked in estate planning because one’s estate must reach several millions of dollars in value in order to meet the federal estate tax requirements. If one’s estate does warrant taxes being levied, then the issue of how they are paid could potentially cause tension amongst beneficiaries.

Such has been the case in an ongoing to dispute between the widow of the late author Tom Clancy and his children from a previous marriage. In his will, Clancy left a trust estimated to be worth one-third the total value of his estate, as well as properties valued at close to $7 million to his late wife. The remainder was split into another series of trusts, one which was meant for his widow and her family. The others were left to the children Clancy had with his first wife, all of whom are now adults.

How much does probate cost?

If you have begun to look into estate planning in Woodland Hills, then you have likely heard the recommendation that you do what you can to avoid having your estate go into probate. The primary reason why so many may tell you to avoid probate is the financial cost that it can exact on your estate. This may inevitably prompt you to question exactly how much the probate process can cost.

Probate costs can be found in Section 10810 of the California Probate Code. They are based upon the total value of your estate as determined by your personal representative. This determined by taking the total appraisal value of all your estate’s property, plus any gains added to it through receipts, and then either adding or subtracting from the it the net difference between the appraisal value of the property and it’s actual sale price.