A trustee in the state of California has the responsibility of managing property in a trust that has been established for an individual’s beneficiaries. The trustee is required to adhere to the requirements that the creator of the trust, also known as the settlor, mandated.

Trustees are required to preserve and protect the trust’s assets. Trustees have their powers spelled out in the trust document and they are required to comply with those orders as long as they do not violate California law or a court does not issue other orders. They manage the property to assist the beneficiaries in ways the settlor intended.

They can make investments, sell assets, handle trust bills and expenses, make repairs to property in the trust, and make distributions to beneficiaries in accordance with rules of the trust. Trustees need to be equitable in their actions and not favor one beneficiary over another. They also need to avoid any conflict of interest or taking actions that could be construed as being done for their own financial gain instead of assisting the beneficiaries.

Trustees also need to keep property in the trust separate from other individuals’ property. The designated trustees also need to tackle the trust requirements themselves. If they need to designate a responsibility to another party, they need to oversee that individual or entity’s work. Keepers of trusts must also maintain detailed records and make periodic reports to the state regarding activities of the trust.

Each legal situation is different, and the information in this blog should not be taken as legal advice. A person who is looking to establish a trust might consult with a wills and estates lawyer. A lawyer can help establish the rules that look after beneficiaries and inform a trustee of his or her rights and obligations.

Source: The Superior Court of California, “Probate Trusts“, September 28, 2014

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Probate is a process of distributing assets to beneficiaries upon the death a person. The process is started and organized by the executor named in the deceased person’s will or possibly by another family member if there is no will. The probate court will work to resolve disputes between family members, and the final disbursement of assets must have court approval. The probate process in California comes with many statutory fees and can become very expensive if the decedent’s estate is complex.

A will is not sufficient to avoid the probate process. Instead, the will serves as a legal guideline for the executor and the court. In order to avoid or minimize probate, assets must be transferred into some kind of trust. Any assets not in a trust are still subject to the probate process.

One of the best types of trusts for this purpose is the revocable living trust. This type of trust allows the individual to remain in control of all of the assets in the trust and the trust itself until his or her death. They can also modify the trust at any time. This includes such activity as adding or removing assets from the trust or changing the beneficiaries. As long as the person is still legally competent, they remain in control. The trust then becomes irrevocable upon their death and assets in the trust are automatically disbursed to the beneficiaries according to the wording of the trust.

An estate planning attorney can assist a person in establishing a living trust and discussing any advantages to leaving assets out of the trust for probate. If a probate process is needed, then an attorney can assist an executor in resolving the process as efficiently as possible.

Source: The State Bar of California, “Do I need estate planning?“, September 19, 2014

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The estate planning actions individuals take can affect the probate process after their death, potentially impacting those who may be poised to receive remaining assets. Probate is the court process for legally transferring those assets, and during this action, the outstanding financial obligations of the decedent are handled as property distribution is addressed. Additionally, probate is used to determine the validity of a will if one exists.

The probate process may not be required in some cases. Some of the factors determining whether probate is necessary may include the types of assets involved, the individuals claiming a right to assets, and the amount of money at stake in the estate. In some cases, an asset may include joint tenancy with ownership continuing with a surviving individual on an account. In other cases, a beneficiary may be named on an account so that ownership is transferred upon death. Although some legal actions may be required, these properties may be kept out of probate courts.

A simplified process for the transfer of property may be available if a decedent’s estate is valued at less than $150,000. However, the simplified approach is not applicable with a house or other real property. A Petition to Determine Succession to Real Property may be used for such issues and must be filed with the court. The simplified process for transferring assets, meanwhile, involves valuing the property to be transferred and filing an affidavit after at least 40 days have elapsed from the time of an individual’s death.

Because the types of property to be considered for a simplified process can be limited, it may be beneficial to seek guidance from an estate administration lawyer in determining whether probate can be avoided. Additionally, legal counsel may be helpful in approaching the probate process if a sizable estate exists.

Source: California Courts, “Wills, Estates, and Probate“, September 14, 2014

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Married California residents who are looking for a way to preserve their estates after they pass away have sometimes turned to the bypass trust. However, with recent revisions to estate tax law and portability of exemption rules, a bypass trust may not necessarily be the most efficient method of estate protection.

Bypass trusts are a tool that is often used by married couples who have a combined marital estate that is larger than the exemption equivalent for one of the spouses by themselves. The purpose of the trust is to avoid estate taxes because to death of a spouse may result in a decrease in a couple’s exemption. Using this strategy, the wills of the two parties mirror each other and act in a concerted fashion to provide shelter to the estate.

When one of the individuals passes away, a certain amount of assets is passed to the surviving spouse in life estate form. This share is dependent on the size of their applicable exclusion, which is as much as $5.34 million under current law. The remainder is passed directly to the spouse. However, now that an unused exemption from the first spouse’s demise is portable to a surviving spouse, the combined exemption of $10.68 million is more than enough for a wide variety of Californians, and a bypass trust may not be necessary.

The guidance of an attorney can be of use to those who wish to file complex trusts and wills, especially those which require coordination between two parties. Clarity and understanding of obscure provisions of the law can make the difference between real long-term protection for an estate and unwarranted tax exposure.

Source: Agri-View, “Should a bypass trust be used as estate planning tool?”, September 05, 2014

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When an individual passes on, the person’s family may be the beneficiaries of an estate plan. However, it is important to understand how assets will be valued before and after being placed into an estate when the benefactor is considering liquidating some before his or her death. This is because some assets may expose heirs to higher taxes than necessary.

Collectibles should be kept in a portfolio for as long as possible. This includes things like gold and artwork. Holding on to these assets is beneficial because the gains accumulated over the long term are taxed at a percentage. However, when a person dies and the asset is transferred to an heir, the tax on the appreciation disappears. The same principal applies to highly appreciated stocks, but if necessary, the stocks should be liquidated before the collectibles because the gains tax on collectibles is typically higher than the tax levied against shares.

The opposite strategy should be applied to stocks that have depreciated because the loss of value at the time the sale is made can be claimed as a capital loss deduction. This minor benefit to depreciated stock disappears in the same way that the gains tax is avoided upon the death of the benefactor.

An estate planning attorney may be able to help an individual decide which assets to sell and which ones to hold when necessary. Estate planning attorneys may have the ability to analyze an individual’s estate. This may make it easier to construct an estate plan that may reduce the amount of taxes that heirs may have to pay.

Source: Forbes, “Estate Planning: A Ranking of Good Assets and Bad Assets“, William Baldwin, August 25, 2014

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As many California residents may know, having an estate plan in place may help avoid bitter, lengthy and costly disputes when someone dies. The battle between Anna Nicole Smith’s estate and her husband’s family is testament to what may happen when an estate is challenged. While both Smith and the eldest son of the man she married are dead, the battle continues between the estate’s heirs.

Her estate’s 19-plus year battle, set in multiple courts, illustrates how a dispute over inheritance may proceed. Although a will designates what a benefactor wishes to leave to their heirs, probate is a public forum where family members and other individuals may review the legacy and dispute it.

The battle over her husband’s estate began after the billionaire died leaving everything to his eldest son and nothing to Smith, whom he married about a year before his death. She filed a lawsuit in Texas to overturn the will. The probate court denied it. Smith declared bankruptcy in California, which led to a judgment of $475 million. It was reduced in federal court and ultimately dismissed by the U.S. Court of Appeals for the 9th Circuit. Smith appealed to the U.S. Supreme Court asking it to decide if a federal court had the right to rule on a state court’s decision. The Supreme Court ruled that Smith had a right to argue her case. In 2011, the Supreme Court ruled against the decision by the California bankruptcy court. The case is back in Texas with an appeal aimed at the original probate court’s decision.

An attorney, in a case similar to this one, may assist an individual structure an estate plan that is solid. Beyond that, an attorney may counsel the benefactor on the use of trusts that are not subject to probate and hence public scrutiny.

Source: Forbes, “Not So Fast: The Anna Nicole Smith Estate Battle Isn’t Over Yet“, Danielle and Andy Mayoras, August 21, 2014

Source: Forbes, “Not So Fast: The Anna Nicole Smith Estate Battle Isn’t Over Yet“, Danielle and Andy Mayoras, August 21, 2014

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Many California residents were shocked and saddened by the death of Robin Williams. While entertainers may be so involved with their career they fail to ignore estate planning, it appears Williams did not neglect taking steps to protect and direct his wealth after his death.

While many individuals tend to think of wills as the quintessential estate planning document, reports suggest that Williams chose to facilitate the execution of his estate through at least one trust. Many individuals use trusts during the estate planning process for several reasons. They allow the trust holder to not only provide for their family but also help some assets avoid the probate process. Probate is a court-based process and open to review by the public. Concerns about privacy are some of the reasons for using a trust.

In addition, probate proceedings may also be lengthy and rife with disputes. A trust fund alleviates this problem and provides the person forming the device with the ability to closely control how assets are distributed after they pass away. For example, the trust might withhold payouts to children until they reach a certain age. Furthermore, with a revocable trust, the planner may make changes as life situations, such as divorce or marriages, arise. This greatly increases flexibility over a will, which necessitates formal proceedings to make certain changes and revisions.

Consulting with an attorney over the benefits of establishing a trust fund may help individuals during the estate planning process. The attorney may help in structuring a trust that might provide the best protection for a client’s wealth and family.

Source: Daily Finance, “Robin Williams’ Estate Plan Spares His Heirs a Lot of Drama“, Dan Caplinger, August 14, 2014

Source: Daily Finance, “Robin Williams’ Estate Plan Spares His Heirs a Lot of Drama“, Dan Caplinger, August 14, 2014

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When it comes to estate planning, some California parents ignore the benefits of the choices available to them. One example is using a trust to make sure that assets pass to intended parties. Using a trust can give parents more control over their estate versus leaving it up to a court or in the hands of an executor. Some parents might be concerned about privacy and do not want their will publicly available in probate court. A living trust could be the answer due to the fact that such a trust is not subject to probate.

When using an irrevocable trust, it is important to make sure the right trustee is selected as the trustee is the one who actually controls access to the assets in trust. To avoid any potential unpleasant situations, some experts recommend that the trustee be bonded. Grown children of aging parents often want to be named trustee of an irrevocable trust so that they can shield their future inheritance from medical bills the parents are likely to incur.

Parents who have accumulated significant assets may want to use an irrevocable trust because of its tax advantages. In certain situations, it is even possible for California parents with modest assets to benefit from an irrevocable trust. However, the disadvantage of an irrevocable trust is that the parent loses control of the asset.

When planning their estate, parents need to educate themselves on various topics that include trusts, living wills, beneficiary designations and powers of attorney. A person dealing with complicated inheritance documents may want to consult an estate planning attorney. An attorney may be able to help draft certain documents and might be able to assist in filing documents with the court.

Source: NBR, “A matter of trusts: Benefactors, heirs and their advisors“, Maureen Niven, August 04, 2014

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People in California may recall the story of a soldier who was killed by a bomb in Iraq, and his father, who went to court to get Yahoo to release his son’s emails. Who gets digital assets after someone passes away is a new area of law and an issue people should address in their estate planning. Who gets access to emails, social media accounts and even things like paid downloads of music and videos should all be spelled out in an estate plan to avoid confusion and unintended results.

Although most email providers have terms of service that protect users’ privacy even in the event of death, some probate courts and family members are going around these rules to get access to information that people might never have wanted shared. People can state in their will that they do not wish anyone to have access to their personal accounts, or they could grant access or ownership to a loved one as long as terms of service are not violated. Facebook, Twitter and similar sites typically address matters such as how to close down an account when a person has passed away.

In order to include these matters in an estate plan, the first thing people should do is write out an inventory of digital assets. Choosing an executor to handle digital assets and creating instructions for what that person should do is also important. In some cases, executors for digital assets may be the same as chosen to handle the other property in the will, but they do not have to be.

Thorough estate planning relieves a major burden for loved ones and gives people peace of mind that their final wishes will be respected. An attorney could assist with the necessary forms and procedures for naming executors and granting them rights to access digital assets. This could help to avoid unnecessary conflict between family members of the decedent.

Source: Flip The Media , “I’ll Tweet When I’m Dead: Estate Planning in the Digital Age”, Connie Rock , July 28, 2014

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There are many potential estate planning mistakes that could make it harder for an estate to distribute assets to beneficiaries. One of the biggest errors occurs when an executor of an estate is not up to the challenge of following the terms of a will, or the trustee of a trust doesn’t pay attention to detail. By not following the terms of a trust or will or by using poor judgement, legal challenges could be made.

It is critical that beneficiary forms are updated regularly when an individual’s circumstances change. If a person were to get divorced, a former spouse could still be listed as a beneficiary on an IRA or 401k and get that money even if a will or trust gives instructions to the contrary. While it may be possible to get a court to abide by the terms of a will or trust, it may be costly and take a lot of time to do so.

As it relates to beneficiaries, it may be a good idea to designate a contingent beneficiary in case anything happens to the primary beneficiary or it is agreed that someone else may better suited to receive an asset. If no secondary beneficiary is named for an asset, family members or others could make a challenge as to who should receive it.

Proper estate planning can alleviate many problems and possibly reduce the potential of a legal challenge related to who gets a particular asset when an individual passes away. An estate planning attorney may be able to help a person create and update wills, trusts or other documents to ensure that the property is ultimately distributed in accordance with the client’s wishes.

Source: Investing Daily, “Key Estate Planning Mistakes You Need to Avoid“, Bob Carlson, July 24, 2014

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