Many people believe that having a will is all that is needed for a proper estate plan. The reason for that belief may be a lack of knowledge about other estate planning tools like the revocable living trust.

Wills take care of asset distribution to beneficiaries upon the death of the will’s creator. Revocable living trusts function before and after death with control of the trust terms in the hands of the document’s originator. A trust that is revocable is one that may be changed or revoked during the document creator’s lifetime. Once the originator of the trust dies, the terms within the trust are solidified and cannot be altered. Provisions within the trust will direct the flow of assets.

Trusts are frequently used in estate plans to preserve assets that might otherwise end up in probate. People who crave privacy also depend upon trusts to keep estate matters among a trusted few individuals including trust beneficiaries, heirs and trust administrators.

Beneficiaries of assets may not be capable of caring for them at the time the assets are given. A trust allows its creator to dictate conditions for the release of trust assets.

Money for children may be placed in a trust until they are old enough to use it responsibly. That provision may hold true for minors as well as young adults who could be tempted to spend and squander the assets they receive.

A trust may also be employed to aid an individual in the event of incapacity. A person who is alive but financially incompetent is protected by a revocable living trust. A designated person can be named to help manage the trust during the creator’s life and beyond.

A supplement to the revocable living trust should include powers of attorney. This names an individual – or more than one – to decide financial and health matters in place of an incapacitated person.

Source: blogs.sacbee.com, “Do I need a revocable trust?” Claudia Buck, Nov. 5, 2012

Posted in Trust Administration | No Comments »

Term and permanent life insurance policies are used to help the very wealthy and the not-so-rich cover estate taxes or balance financial relationships among heirs. Estate planning experts suggest a thorough review of the purpose of the insurance before choosing between term or permanent policies.

Affluent Californians who die before the end of 2012 have fewer tax worries than individuals who pass away later. That’s because federal exemptions and the estate tax rate are expected to change. Strategies among estate planning attorneys, tax advisers and financial consultants differ.

If Congress does nothing before year’s end, estate tax exemptions will fall from above $5 million to $1 million. The tax rate may jump from 35 to 55 percent for assets above the exemption amount.

Sources explain that a life insurance policy offers immediate liquidity at death and can be used to cover taxes that would otherwise be paid by heirs. Some states add inheritance taxes on top of the IRS burden, which may also be paid using insurance.

Term life insurance is cheaper than a permanent policy. Term policies cover a measureable time period. Permanent plans stretch to a policyholder’s death. Term insurance is renewable but costs more as the policyholder ages. However, with a paid-up, permanent life insurance policy, time is not a worry. Policyholders never have to be concerned that they live longer than the policy terms. Health issues can drive up premiums for individuals who purchase plans in later life.

Experts say the amount of insurance an individual needs for estate purposes depends on the tax structure and the expected liquidity of the estate minus a policy. Any change in the estate tax rate may be dependent upon the person who wins the White House.

Life insurance isn’t just used to pay estate taxes. Policies can be arranged to help a spouse remain in a marital home, mortgage free. Insurance can be used to equalize business assets between family members or secure a future for a loved one.

Source: foxbusiness.com, “Life Insurance Muzzles Estate Tax Bite,” Chris Kissell, Oct. 29, 2012

Posted in Estate Planning | No Comments »

An article published in a California newspaper last summer led to a task force and a proposal that could change fees paid to conservators of the estates of dependent adults. Court officials in Santa Clara County are considering rules that would limit what court-appointed estate administration officials charge for services.

The published report stated that estate managers like trustees, lawyers and conservators charged as much as $330 an hour and nearly $300,000 annually to handle estate complexities for incapacitated adults. Officials have called the charges “exorbitant” and put together a new fee structure that would slash the maximum hourly rate in half.

Services that did not require extensive work like the routine management of a pet or a simple purchase could not be billed by estate managers at the highest rate. Officials want the pay to match the workload of conservators. Fees would be capped at $165 an hour, with lower rates for uncomplicated tasks. Officials want charges that are now made for vague services and corrections for managers’ errors to be dropped. Monthly invoices would be required to detail the work an estate manager has done to earn the established fees.

The public hearing on the proposal to reduce estate managers’ fees will be followed by input from local judges. State lawmakers will receive the measure by mid-November.

In between the time the public has a chance to voice an opinion about the measure and the next step, the task force may consider even further restrictions that would slim down fees for attorneys of fiduciaries. The sponsoring officials want to concentrate on reducing “fees-on-fees,” additional legal charges tacked on to the bills of incapacitated adults in certain circumstances.

Provided no objections surface to stop the task force’s mission to curb estate management costs, enactment of the rules would take effect Jan. 1, 2013. The radical fee change would follow the initial publication of the article about conservators’ charges by just six months.

Source: mercurynews.com, “California lawmaker calls on the public to help protect incapacitated adults from excessive fees in probate court,” Karen de Sá, Oct. 22, 2012

Posted in Estate Administration | No Comments »

Voters are subjected to various risks regarding the upcoming presidential election. Estate administration and decisions would be lot easier if individuals, estate planners and California heirs knew what to expect from the candidates and the Internal Revenue Service.

Today’s $5 million dollar estate tax exemption could fizzle to $1 million on the first day of 2013. Even more maddening may be the prospect that nothing will change until the year after next and estate planning worries will never really go away. Everything that affects estate planning could be wrapped around the outcome of the election or how Congress feels between now and New Year’s Eve.

With the fate of estate taxes and exemptions in limbo, estate counselors are advising clients based on experience. Since it is unclear how estate and gift taxes will fare under an old or new presidential administration, some advisors are using strategies that help clients shore up estate planning gaps. Wills, trusts and powers of attorney are estate planning constants that deserve attention while tax issues are being determined.

People affected by inheritance taxes are also studying presidential promises.

Republican presidential candidate Mitt Romney promises to eliminate estate taxes. The standing president has hinted that estate tax exemptions will drop to $3.5 million — a compromise between the current estate tax structure and the $1 million bottom line.

Romney hopes to repeal the estate tax and keep the gift tax at 35 percent. Would people stop making gifts if the plan were put into effect? Estate planners are also concerned how long an estate tax could remain repealed. Valuation discounts, important to family limited partnerships, might be limited under Obama’s estate tax plans.

Some estate planning historians note that the unified tax credit for estate and gift taxes

has never been reduced during the 40 years in which it has been in effect. That makes some advisors and clients feel comfortable that tax exemptions will remain favorable, while others fret that change is due and imminent.

Source: forbes.com, “Romney Wants No Estate Tax – Case For 2012 Mega Gift Remains Compelling,” Peter J. Reilly, Oct. 14, 2012

Posted in Estate Administration | No Comments »

Legal and money experts talk about covering all the bases for financial consequences before and after death. Estate planning can involve a few or many methods to preserve assets and control things we choose to leave to heirs. What about virtual belongings? Who gets those when we die?

A thorough estate plan cannot be complete until a person is prepared to hand over everything he or she has, including digital assets. All the legal documents that allow an executor, a trustee, a beneficiary or an heir to possess belongings can be frustrated indefinitely if no virtual key unlocks account names and passwords on the deceased’s various Internet accounts. Usernames and passwords are so numerous and commonplace, that individuals forget to share them with people who need them when they are no longer around to log in to a bank or retirement account, emails or even Facebook.

An individual who fails to leave behind the correct combinations of letters, numbers and symbols to access accounts places a heavy burden on estate managers and heirs. There may be no way to locate and identify a person’s total liabilities and assets without a list of online accounts and access information.

Google and Facebook may not cooperate when a “stranger” requests access to a deceased person’s account. Disputes over online account access can go to court, even as an executor or heirs remain clueless to the full extent of an estate.

The easy fix for this dilemma is to write down every account number, name and password on paper and store it in a safe place where the right person can find it. Update the information when passwords and accounts are added or changed.

More sophisticated digital solutions are available at a cost. Websites like SecureSafe and Legacy Locker save virtual property for beneficiaries and even portion account access information to several different people, at the request of a customer. Annual or one-time fees are charged for the services.

Posted in Estate Planning | No Comments »

You may think you’re too poor or too young to consider having an estate plan, but you’re not. These are a few of the assumptions many people in Los Angeles make when they think about wills and trusts, health directives and estate planning strategies.

Regardless if you have assets or not, a will is valuable guidance for the people you leave behind. Assets are distributed to heirs through wills. Even if assets are minimal, consider a will to assign a guardian for your children. Without a will, a court will decide who will raise your children. With a will, you have that power.

Well-off individuals are not the only ones who must pay attention to the estate tax rate. The estates of people who die in 2012 must be larger than $5.1 million to become federally taxable. That makes most estates tax-free — this year.

It’s possible that the federal estate exemption could fall to $1 million. While that seems like it would represent a lot of assets, it really doesn’t. Combine the value of a house with a savings, stock or retirement plan and $1 million adds up fast.

Estate planning is not just about death. Documents also include health care directives and financial powers of attorney. These documents assign a person to make medical and money decisions for you, if you become unable to choose.

Many people fear not having a will because they believe the government will take their assets. Courts don’t keep assets; they determine who should get them.

Most wills are public documents, which means anyone can contest the contents in court. People believe trusts are needed to avoid probate. In fact, several assets never go to court including life insurance, most retirement plans and jointly-owned real estate.

Some Californians believe they will save money through do-it-yourself estate planning websites. Not necessarily. Documents found online may be generic or outdated and there are no legal advisors standing by in case you have a question or make an error.

Source: forbes.com, “10 Common Estate Planning Myths That Can Be Detrimental to Your Family,” Erik Carter, Oct. 3, 2012

Posted in Estate Planning | No Comments »

The belief that trusts are only for wealthy individuals is fading as Californians discover the estate planning benefits of trusts. Sometimes wills are enough for the distribution of assets to heirs. Often trusts are beneficial supplements because they serve multiple purposes — not the least of which is potential estate tax savings.

Revocable and irrevocable living trusts give asset protection at different times for different people. Irrevocable trusts protect personal assets before your death, while revocable living trusts safeguard assets meant for beneficiaries.

Assets placed in revocable living trusts are often excluded from estate taxes. Revocable trusts are kept private and out of probate court, unlike wills which are publicly accessible and can be contested in probate. When estate planning documents are properly prepared, assets that beneficiaries receive from RLTs cannot be touched by creditors, ex-spouses, bankruptcy courts or lawsuits.

Trusts are managed according to the creator’s desires. Details in a trust instruct trustees which and how many assets to assign and when to give them to beneficiaries. Trusts can also be highly conditional and canhelp beneficiaries who may not be capable of handling assets. Trustees may be told to portion asset distributions to certain beneficiaries who are immature or irresponsible. For example, a college student who receives a full trust inheritance all at once could be tempted to spend it frivolously. A trust can ensure that the heir receives staggered payments at certain ages or stages of his or her life.

Other trusts address concerns of heirs with special health needs. A child with a disability who inherits assets may be financially disqualified from receiving valuable government benefits. Trusts can be designed to help special needs beneficiaries to retain the benefits they get.

Probate issues may take years to resolve. Because trusts are private and settled outside probate, beneficiaries save time and preserve more of what they inherit. Estate planners universally recommend wills, but trusts are also highly-effective documents that keep assets safe before and after death.

Source: postcrescent.com, “Carissa Giebel column: Revocable living trust helpful tool to manage assets,” Carissa Giebel, Sept. 22, 2012

Posted in Trust Administration | No Comments »

Actor and filmmaker Dennis Hopper was 74-years-old at the time of his death in 2010. Two months before he died of cancer, Hopper celebrated his recognition of celebrity on the Hollywood Walk of Fame with his 7-year-old daughter, Galen — Hopper’s fourth child and the daughter of his fifth wife.

Recent reports say the girl, now age 9, is the beneficiary of her late father’s assets, including cash and property worth in excess of $3 million. Hopper allegedly placed the assets in a trust, which cannot be accessed or controlled by the girl’s mother and Hopper’s estranged wife, Victoria Duffy.

The actor and Duffy separated in January 2010. A bitter exchange of accusations followed over the next few months between the estranged spouses. Duffy asserted that Hopper’s children from earlier marriages were influencing the terminally-ill filmmaker to eliminate her from his will.

Hopper requested and was granted a restraining order against Duffy, which ordered the woman to maintain a 10-foot distance from the severely-ill celebrity. The actor told his lawyer he wanted Duffy banned from his funeral but wished for his daughter to attend.

When Hopper died in May, neither Duffy nor Galen attended the funeral services in New Mexico. Duffy claimed she did not want Galen to fly from Los Angeles to Taos alone.

Dennis Hopper lived apart, but was not divorced, from his wife at the time he died. He and his wife had signed a prenuptial agreement that reportedly excluded Victoria Duffy from any inheritance.

Galen received more than half a million dollars in property and $2.85 million in cash from her father’s estate. Reports have not detailed the inheritances, if any, among Hopper’s three other children — two daughters and a son — or his former wives.

Changes in personal relationships — marriages, divorces, births and deaths — often radically affect estate plans. Experts advise thoughtful reviews of beneficiaries and estate documents before predictable and after unpredictable life-changing events.

Source: dailymail.co.uk, “Dennis Hopper’s ‘daughter, nine, inherits almost $3m of his fortune’,” Sept. 18, 2012

Posted in Trust Administration | No Comments »

Trusts can be essential to an estate plan. Individuals can spend a great deal of time deciding which assets are placed in a trust. Estate planning advisors say equal consideration should be given to choosing the fiduciary or trustees who will manage the trust.

The size of a California estate, the complexity and scope of a trust and the financial skill set of a potential trustee are factors used to come to a trustee decision. Family members, close friends or associates are often first choices. Professional estate managers, like trust companies or banks, offer expertise and neutrality on family matters.

A trustee’s duties can be extensive. Estate asset management and distribution are time-intensive tasks, especially when trusts affect heirs over several generations. Financial and legal savvy or experience is almost an unavoidable requirement for the trustee position.

What might be hardest for a family member who becomes a trustee is managing the trust without overlapping personal influence. A trustee’s own feelings or the desires of heirs cannot affect administrative duties.

Corporate trustees have no personal investment, but they do cost money. Fees paid for professional trustees are inescapable, usually equal to an asset percentage. Family members are often willing to manage a trust for little or nothing.

Banks or trustee companies are frequently recommended for trusts with more than $50,000, although a larger trust that is not complicated could readily be handled by an individual. Corporate trustees are also advised for long-term trusts, simply because the trusts often outlive individual trustees.

Consider the work the trustee job entails, especially when considering an individual to do the job of asset management. Asset distribution, tax filings, investment choices and administrative work are required.

Third-party or professional trustees can be useful for individuals who expect disputes among heirs. A compromise solution that an increasing number of estate planners are suggesting is a co-trustee arrangement – a family member and a corporate entity who work together to manage the trust.

Source: online.wsj.com, “A Matter of Trust,” Jeanine Skowronski, Sept. 10, 2012

Posted in Trustees Executors & Fiduciaries | No Comments »

Legal professionals stress choosing estate executors and trustees carefully. One of the reasons is the enormous financial responsibility that trustees carry for beneficiaries of an estate. The person assigned to a trustee position must have the competence and professional advice and resources to do the job.

Among the duties of a California estate trustee is a trust accounting, a yearly statement that is sent to beneficiaries detailing trust activities. The accounting must meet the requirements of the California Probate Code and fully explain how the trust’s assets, liabilities and expenses have been handled in the previous year.

Beneficiaries receive the trust accounting along with a mandatory notice, which spells out the recipient’s legal rights to dispute the trustee’s work within three years. Sometimes trustees ask a court to preapprove the accounting to limit the time beneficiaries have to contest it.

Trustees are expected to retain all the supporting documents for the information provided in the accounting. Trusts may instruct trustees to add new beneficiaries to the accounting update over time or dispense completely with the accounting duty. Trustees who are absolved of providing a trust accounting often voluntarily provide it to minimize the chances of a legal claim against the management of the estate. Beneficiaries always have the opportunity to ask a court to intervene when they believe an estate is being mishandled.

Rules pertaining to trust accounting differ from similar tax or business document preparations. Trust accountings involve “balancing” estate charges and credits using unique “carry values” and separate schedules for liabilities, processes that could easily overwhelm a trustee with little financial experience.

The complexity of a trustee’s duties, especially for estates of great depth and wealth, are open to constant legal scrutiny. Estate planning experts encourage individuals to take into consideration how much time, effort and expertise are needed to deal with estate management before appointing a person for the role of trustee.

Source: lakeconews.com, “Estate Planning: Basics trustees should know about trust accountings,” Dennis Fordham, Aug. 31, 2012

Posted in Trustees Executors & Fiduciaries | No Comments »