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

Why California residents may wish to consider trusts

California residents with assets of $100,000 or more may be wise to consider using trusts as part of an estate plan. Trusts allow an individual to stipulate when and how their estate will be distributed, and they can provide peace of mind by ensuring that all heirs will receive their inheritance. Trusts may also mitigate the impact of estate and gift taxes.

Trusts may be a valuable estate planning tool when a significant amount of the estate consists of assets such as real estate, art and antiques or a business. Trusts also allow for payments to be made at specific times such as when a child comes of age or graduates college. Using a trust may also be a consideration for those who worry that their estate would be exhausted before their children come of age. Another benefit of trusts is that they allow disabled relatives to be provided for without impacting their qualification for assistance programs such as Medicaid.

Estates with charitable trusts must satisfy IRS rules

The IRS maintains specific definitions concerning what constitutes a valid trust that can be included in a Californian estate. Although many people want to donate assets to charitable causes, the estate devices they employ to do so don't necessarily benefit from the same tax protections a charitable organization might. For instance, charitable trusts that fail to satisfy the exclusion requirements demanded of public charities are usually deemed tax liable.

The taxes applied to charitable trusts depend on both their investment incomes and the dates of their founding. If someone creates a revocable trust while still living, and it changes to an irrevocable structure after they die, said trust will not be deemed charitable until a settlement period has passed. The IRS applies the same rule to trusts that were created by wills to disburse assets to charitable beneficiaries.

Preventing will contests in California

The vast majority of wills in California are presented to the probate court and their instructions are carried out without any problems. However, on rare occasions the validity of a will may be contested. Most successful challenges to a will are based on either the assertion that the person who made the will was not competent to do so, or that the testator was under the undue influence of someone else so that the will does not reflect the individual's true wishes.

Proving a will is not valid does not always end with the entire will being thrown out. A court has the discretion to invalidate the will in part and leave other parts of it enforceable, or to substitute provisions in a will.

Understanding the notification responsibilities of a trustee

California heirs and trust beneficiaries may be interested in some information about the notification responsibilities that a trustee has in trust administration. These responsibilities can affect a beneficiary's rights to the property contained in the trust, making them important to understand.

Under the California Probate Code, a trustee who is tasked with administering an irrevocable trust must perform certain actions with regard to the trust. First, the trustee is required to provide the beneficiary with information about the terms of the trust. The only exceptions to this rule are when the trust is revocable or the trustee is the beneficiary.

Children born after a parent dies might be an heir

When people pass away in California, a probate court often decides what happens to their belongings. A main component of this process is deciding who are the beneficiaries of the estate. Children are usually considered heirs to an estate, even if the children are born after their parent dies. However, California law states certain conditions that must be met for children conceived and born after a parent's death to receive an inheritance.

Children or their representatives must prove that that a child is entitled assets by providing specific evidence. First, it must be shown that the person who passed away, known as the decedent, agreed in writing to his genetic material being used to conceive a child posthumously. The document must be signed and dated by the decedent, and the person who used the material to conceive must have been also named. Any modifications to the document giving authorization must have been done in writing.

Designating estate beneficiaries in California

Anyone holding a policy with a payout upon the death of the policy holder must designate beneficiaries to inherit the funds. In addition to naming beneficiaries for life insurance policies, retirement plans, annuities and IRAs, California residents should carefully consider how they select their heirs. To preserve a legacy, careful estate planning is essential.

An annual review of beneficiaries helps to ensure that documentation is up-to-date. The recent loss of a loved one may necessitate changing the heirs in a life insurance policy or another asset. Other major events, such as the birth of a child or grandchild, buying or selling of a home, divorce or marriage, should spark a review of beneficiaries. If any of the heirs have special health care needs, the estate holder may wish to create a special needs trust that will be managed by a trustee appointed by the creator of the trust.

What is A-B trust planning?

Some California couples who are planning their estates may have assets above the estate tax threshold. In order to entirely avoid or reduce estate taxes on amounts beyond the level of exclusion, many people choose A-B trust planning, a type of irrevocable trust than can be created either by will or as part of an ongoing living trust that will be implemented upon a person's death.

According to the IRS, the basic exclusion for estates left by people who die will be $5,340,000. For amounts that exceed the exclusion, an A-B trust can provide protection to heirs from estate taxes that would otherwise be imposed.

Keys to estate planning for California residents

After an individual passes away, it may be necessary to go through probate to settle that person's estate. However, it may be possible in some cases to bypass the court process, which is known as probate. The purpose of probate is to determine if a will is valid, to take care of any final financial issues and to transfer property to heirs.

An individual may have appointed an executor to handle the execution of the estate, or the court may appoint one. This person is responsible for inventorying assets, paying debts and distributing what is left to beneficiaries according to the terms of the will. Most probate cases can take anywhere from nine months to as long as a year and a half to complete. Therefore, it may be beneficial to be able to use the simplified process.

How to avoid common estate planning errors

California residents who are making estate planning decisions can learn from the recent mistakes of celebrities. The importance of keeping documents updated is one thing that is illustrated in these high-profile cases.

While a will may be sufficient estate planning for individuals who do not have complex estates, a trust provides privacy and saves money in cases where individuals may have a high public profile or extensive assets. Actor Philip Seymour Hoffman did not want to spoil his children with a trust fund, but as a result, his estate entered an expensive and public probate process. This has been made even more costly by the fact that he was not married to his longtime partner, and as a result, she cannot take advantage of the marital deduction for estate tax purposes.

Named beneficiaries override will

Many California readers are familiar with the main documents used in estate planning. They are the will, the living will, the financial power of attorney and the health care power of attorney. Even if a person has what they believe is a legal, indisputable will, his or her heirs may not get assets intended for them. That is because the beneficiaries named in numerous financial documents have precedence over what is stated in the will.

Some people probably do not remember when they set up a checking, savings or brokerage account that they named beneficiaries of those funds. Even if they remember the process, they probably do not remember whom they named. Those people may no longer be alive or part of the owner's life. Periodic review of named beneficiaries and all estate planning documents could be imperative for ensuring that the wishes of the owner are fulfilled at death.