Estate Planning Services
Wills & Living Trusts
Document Your Decisions. Most People know what a Will is, but most are not familiar with a Trust.
A Will generally says who will inherit, and what, after the creator of the Will dies. Usually, it also appoints someone to carry out those wishes (the Executor). The major downside is that a Will still requires a court procedure (called “probate”) in order to carry out the wishes of the deceased. Probate can be a very costly and drawn-out process, often costing tens of thousands of dollars and taking at least 9 months to complete (it is not uncommon for it to take 2-3 years). Because of the costs and delays, most people would prefer it if their death did not require their family to go through the probate process.
A Trust can be administered without having to go to court (i.e., it “avoids probate”) and because of this, Trusts are frequently used as a substitute for a Will.
A Trust is usually created with a document that governs how the Trust will be administered (sometimes called a “trust agreement” or “declaration of trust”). In the context of estate planning, the governing document will say who is in charge of managing the trust property and who will get to use or have the trust property.
Trusts are extremely flexible and can be used to achieve a variety of different goals and outcomes, which is why they are so highly recommended by estate planning professionals. The main reasons people create trusts are to avoid probate, minimize estate taxes, provide a layer of asset protection, and/or place restrictions on inheritance (usually to prevent an inheritance from being distributed to a young beneficiary).
Special Needs Trusts
A Special Needs Trust is a specific type of trust that helps avoid a situation where a beneficiary is forced to choose between receiving their inheritance and staying eligible for public benefits (usually SSI, housing assistance, Medicare, or Medi-Cal). They can also be used to help protect a beneficiary from themselves, usually when there are substance abuse concerns or other situations where a beneficiary might be harmed if they receive a large inheritance all at once.
Special Needs Trusts can also be used for people receiving a personal injury settlement if receiving a large sum of money would disqualify (or reduce) public benefits the injured person is receiving.
A Special Needs Trust preserves a beneficiary’s public benefits by allowing the trustee to make distributions from the trust in a way that doesn’t result in money going directly to the beneficiary. Usually, this is done by buying things for the beneficiary that aren’t included in the eligibility calculations for the government benefits.
Since there are many different public benefits programs and multiple ways to qualify for each program, it is important for the trustee of a Special Needs Trust to understand what types of distributions are allowed and which can jeopardize the public benefits eligibility.
Trust Administration
When the creator of a living trust passes away, this usually triggers certain provisions of the trust that make the trust irrevocable and direct the transfer of property to beneficiaries (or at least making new people the beneficiary of the trust). If the person that created the trust was also acting as the trustee, it will also trigger a change in trustee. Often it will be necessary for the new trustee(s) to obtain a separate taxpayer identification number for the trust (also called a Federal Employers Identification Number, or FEIN).
Whenever a trust becomes irrevocable or there is a change in the trustee this also triggers a requirement for certain notices to be given to the beneficiaries and certain other people. Included with the requirement to provide certain notices, the new trustee(s) must provide an accounting to the beneficiaries.
Then it is necessary for the new trustee(s) to make sure they collect all of the trust property and the ownership reflects that there has been a change in trustee. Sometimes this is relatively easy while other times it is a much more involved process; it really depends on whether the decedent’s property was already transferred into the trust or had the trust listed as a beneficiary.
When it comes to representing a trustee, the attorney’s level of involvement usually is determined by how much or little the trustee wants to do and is capable of doing without an attorney’s assistance.
Probate Administration
When someone dies without a living trust, the property remaining in their name must go through a court process to authorize someone to collect and distribute that property. This process is called “probate” and generally is a rather long and expensive process. Depending on the value of the estate, and whether or not it contains any real estate, there might be options to administer the estate as a “small estate” through a shorter and simplified process.
There is a misconception that having a Will prevents someone’s property from going through probate; however, a Will does not transfer property out of someone’s name (like a living trust does) and thus requires a court to appoint someone to represent the estate (the personal representative of the estate; called the “executor” if named in the decedent’s Will and called the “administrator” if there is no will or the appointed person is not named as executor by the will).
Small Estate Administration
There are a few different procedures for administering a “small estate” but the availability of these options depends on the value of the property. Currently, there are three main “small estate” options:
- To collect personal property if the estate’s total value is less than $166,250.
- To transfer real estate if the “gross value” of all the decedent’s real estate in California is less than $55,425 (regardless of the value of the rest of the estate) – used mostly for fractional interests and timeshares.
- To transfer real estate valued at more than $55,425 if the estate’s total value is less than $166,250.
*“Gross value” means debts and mortgages are not subtracted from the value.
Power of Attorney
A Power of Attorney is a document that allows a designated individual to handle critical financial transactions on your behalf and is especially important if you become incapacitated (and is only effective while you are alive). The powers granted can be very broad or extremely limited and can range from signing checks for household expenses to arranging the sale of property, to managing a business.
Healthcare Directives
An Advance Healthcare Directive (also called a Healthcare Power of Attorney or Living Will) expresses your preferences concerning life-sustaining procedures, healthcare decisions, and the general care you wish to receive in the event of incapacitation. These documents can include very detailed instructions with specific instructions for various treatments, conditions and illnesses, medications, and medical procedures. However, since there are many “unknowns” when it comes to predicting future medical and healthcare needs, the reality is that most of the time the instructions usually cover how the agent is to make end-of-life decisions; specifically regarding maintaining or stopping life-sustaining treatment.