The Law Offices of Saman Behnam, with over 25 years of experience, can help you make the Estate Planning process easy to understand, and advise on how to protect the assets you have worked so hard to accumulate during your life.
Estate planning is an important step one should take to plan for the unexpected or tomorrow. A properly planned estate with an experienced attorney is designed to maximize your estate tax benefits, protect your loved ones from lengthy and public Probate proceedings and associated uncertainties. An Estate Plan drafted by a licensed attorney can ensure your estate is distributed and disposed of according to your wishes and not the Court.
An experienced estate planning attorney can consult with you and guide you through the process and advise you on how to properly distribute your estate assets upon death. We can also assist your loved ones on the proper administration of your estate to ensure the beneficiaries receive their inheritance per the terms of your estate plan.
A trust is a legal entity that can own property, much like a corporation is a legal entity that can own property. The trustee named in the trust document manages the trust assets, and can sell trust assets, invest the assets, collect income, and pay bills. The beneficiaries of the trust receive income and principal of the trust at the times set forth in the trust document, according to the instructions given to the trustee in the trust document. The "settlor" (sometimes called "grantor or trustor") is the person who creates the trust. In estate planning, two types of trusts are generally used--"living trusts" and "testamentary trusts."
A "living trust" is a trust which is set up while the settlor is living. A trust which is set up under the terms of a will, after the settlor's death, is called a "testamentary trust." In a living trust, the settlor usually acts as trustee as long as he or she is living and competent. The settlor of a living trust would change the legal title of his or her assets during his or her lifetime so that the trust, not the settlor, becomes the legal owner of the settlor's assets. With a testamentary trust, assets are not transferred into the trust until the probate court directs distribution from the deceased settlor's probate estate to the trustee of the testamentary trust, which usually occurs toward the end of the probate proceedings.
Either a living or a testamentary trust can provide estate tax and generation skipping transfer tax benefits. Both types of trusts allow the settlor to keep "strings" attached to his or her property after death by distributing assets to beneficiaries over a period of time or limiting distributions to beneficiaries only for certain purposes. For example, many parents do not wish to leave assets outright to their children if they are young, but prefer to have a trustee hold the assets and distribute them to the children only as needed until they attain one or more designated ages.
A living trust is often called a "will substitute" because, like a will, it says what is to happen to property when the settlor dies. However, unlike a will (which only has legal effect after a person dies), the living trust also says that during the settlor's lifetime, the trust property is to be used for the benefit of the settlor. A will controls all of a person's property which is owned by a person in his or her own name at the time of his or her death other than joint tenancy property (which automatically goes to the surviving joint tenant), or property which passes by beneficiary designation (such as life insurance or pension plan proceeds.) The living trust controls only property transferred to it. A settlor of a living trust will try to transfer all of his or her property into the trust while he or she is still living. However, if some assets remain out of the trust, then after the settlor's death those assets will be probated and the settlor's will should direct that they will be added to the trust. A living trust is not treated as a separate taxpayer for income tax purposes during the lifetime of the settlor, and all income from trust assets is reported under the settlor's Social Security number on the settlor's own individual income tax returns.
There are several benefits to a living trust over and above those which can be provided by a testamentary trust. Some of these advantages are summarized below.
Many people establish a living trust to avoid probate. Probate is a process for establishing the validity of a Will, paying the decedent's death taxes and creditors, and transferring the legal title of a decedent's assets to the decedent's beneficiaries. The judge of the probate court decides if the decedent's will is valid (i.e. that the will is not a forgery, the decedent wasn't crazy when he signed it, he wasn't forced to sign the will against his wishes, and there is no later will.) The judge appoints an executor (who is usually named in the will) to locate the decedent's assets and pay the bills and taxes. When these things have been done, the judge signs a court order to transfer legal title to the decedent's beneficiaries.
If assets are placed in a living trust during the settlor's lifetime, then on the death of the settlor, the trust continues in existence as the owner of the trust assets. The successor trustee named in the trust document simply takes over management of the trust, and is responsible for paying the decedent's death taxes and creditors. Accordingly, no court proceeding is needed to transfer title on death, since assets continue to be held by the trust.Reasons people may wish to avoid probate are:
The executor and the executor's lawyer are entitled to be paid for their work. California law sets the maximum fees payable to executors and lawyers for "ordinary services" based on the gross value of the probate estate assets. Maximum fees for each of the lawyer and executor usually are between 1% and 3% of the estate's value. The executor and lawyer are entitled to these fees, but family members who serve as executors often do not charge for their work, and lawyers will often agree to work on an hourly rate basis (but may not charge more than the maximum fee.) In addition, executors and attorneys are entitled to extraordinary fees for special services such as handling lawsuits, selling real property and tax work. Usually, fees are payable when the probate is over. There are also court filing fees and fees for appraisers.
In a living trust, there are no administrative fees while the settlor is living and serving as the trustee. After the settlor's death, the trustee and the trustee's lawyer are entitled to "reasonable" fees for their work. Unlike a probate, these fees are usually payable on a monthly basis. These fees often will be approximately the same as the fees in a probate, especially if the probate lawyer agrees to charge on an hourly rate basis. Still, there is usually somewhat less legal work in administering a living trust, so costs of administration are usually slightly lower.
It takes about one month after the decedent dies to have the executor appointed in a probate. Administration of a living trust can begin immediately after the decedent dies.
Probate proceedings ordinarily take six to eighteen months. The time period is determined by many factors, including the type of assets being probated, creditor's claims, sales or other dispositions of assets, and other problems concerning the assets, the beneficiaries, or other family matters.
If the estate is large enough to require the filing of a federal estate tax return, the amount of time needed to administer a living trust will be about the same as the time needed to administer a probate. However, there may be a time savings of three to six months.
All documents filed with the probate court are public records, available for public inspection. Among these records are the provisions of the will, a listing of the probate assets and their value, and the names and addresses of the beneficiaries. Furthermore, notices regarding the probate court proceedings must be sent to any person whose name appears in the Will or any Codicil, as well as to all relatives within a certain degree, whether or not these persons are named as beneficiaries in the Will.
Some people wish to place their assets in a living trust during their lifetimes so that these matters won't be open to public inspection upon their death.
A living trust, a durable power of attorney and a healthcare directive can minimize the need for the appointment of a conservator of the estate upon incapacity. A conservator may be needed to handle the assets and financial affairs of a person who loses the capability of handling his own affairs, unless provisions are made prior to incapacity. Conservatorship proceedings are court proceedings in many ways similar to probate proceedings. They involve expense, time, notice to a large category of relatives, and continuous reporting to the court over the lifetime of the conservatee and petition for appointment of a Court Appointed Counsel (CAC). However, if a settlor who has placed his or her assets into a living trust prior to incapacity later becomes incapacitated, the trust document generally provides for a successor trustee to step in. The settlor, in the trust document, can define when his or her incapacity will be deemed to occur. Many settlors provide that upon the certification of one or more physicians, the successor trustee will be authorized to take over the management of the trust from an incapacitated trustee. Except for the change in the trustee, the trust continues to own and manage the trust property and to apply the assets of the trust for the benefit of the incapacitated settlor during the period of incapacity.
The probate avoidance mechanism provided by a living trust is especially beneficial to persons who own real property in another state. Unless the title to the out-of-state property is held in joint tenancy or in a living trust, a separate probate, known as an "ancillary probate," must be conducted in each state where the decedent owned property. This is in addition to the probate being conducted in the decedent's state of residence.
People who enter into a marriage owning separate property or who acquire separate property after marriage which they wish to maintain as their separate property may benefit from the use of a living trust. If separate property assets are placed in a living trust, and the administration of such assets in the trust as a separate entity is properly maintained by the trustee during the marriage, the problems arising from the commingling of separate and community property assets are greatly minimized. Having separate property separately maintained in a living trust also minimizes problems related to the distribution of these assets which may otherwise arise on the settlor's death.
A prospective settlor must review the circumstances of his or her assets and family and weigh the benefits and disadvantages of a living trust as applied to those particular circumstances, to determine the most appropriate course of action in his or her own situation. To avoid the payment of unnecessary death taxes or transfer taxes, the prospective settlor should seek advice regarding the establishment of tax minimizing trusts, either living or testamentary.
If you have a loved one that requires planning for a disability we can offer a special needs trust to accommodate their needs and to protect the loved one with their needs once you have passed away. In a Special Needs Trust we can address your concerns to ensure the loved one receives proper care or financial and social support to help them live their life and be protected from adverse consequences as result of your passing.
The death of a settlor will undoubtedly be an overwhelming and emotional experience for the survivors. Often times added to the grief of passing is the stress and anxiety of having to deal with technical and often complex issues related to distribution of the state, accounting and asset transfers that can be overwhelming. We will assist your loved ones with the process and absorb the stress and anxiety associated with the administration to make the process as easy as possible.