Hello, everybody. It's time for a whiteboard lesson. My name is Robert Mansour, and I'm a lawyer in the Santa Clarita area. And one of my areas of practice is estate planning. So estate planning involves things like wills, living trusts, powers of attorney, healthcare documents, guardianship nominations, a lot of that stuff.
But today I want to talk about a very common question that I get, which is "Rob, what is the difference between a will and a living trust?" And what's the main differences. So let's talk about that briefly. So let's talk about a will. So what is a will? I tell clients that a will is basically a letter to the judge? It says, "Dear Judge, I'm dead. My name is so and so and I am dead. The following people are to get my stuff. My cousin Louis gets this. My cousin Sally gets that. My brother Tommy gets this and my baseball card collection goes to so-and-so." And that's what a will does now, who is in charge of administering the will, who is in charge of that? Somebody called the executor.
Now you can pick who your executors are. Generally speaking, you want to pick one person. And if that person can't do it, then you pick a successor executor, etc. One of the main differences is that a will only goes into effect (as a general rule) only goes into effect after you die. So while you are alive, this thing is not doing you much good. It springs into action after you die. So after you die, your executor says, "Oh, John died. We need to do something. Let's read the will." So they read the will and it says, "Give this to cousin Louie...give this to so-and-so and Sally, etc." So that's what the will is now. What else can you do in your will? You can also give away certain assets. Like we talked about, this goes to this person, this goes to that person, but you can also name guardians for your children - guardianship nominations.
So if you have any minor children, your will is often the place where you might say, hey, if I can't take care of my kids or if I die or whatever the case may be, and I have minor children, meaning children, at least in California, under the age of 18, you can name the people that you want to take care of those kids. And that's where you would put all of that information. Or you can also do a separate guardianship nomination if you want. But a will only goes into effect after you die as a general rule. It doesn't do you much good while you are still alive. Now what's the difference between that and the living trust. Let's take a look at a living trust here - living trust.
Something an individual makes just one person. My name is John. This is my will. A living trust can also be made by one person, but sometimes it's made by two people like a married couple. And essentially it's very similar in nature to the will. Basically it says, you know who you are, what you own and where you want your stuff to go when you die. And the person in charge of your living trust is called your trustee. Now, initially, you're going to be your own trustee. My wife and I are the trustees of The Mansour Family Trust. After I die, my wife will be the trustee of The Mansour Family Trust. And then we will have these people called "successor trustees." These are the people waiting in the wings who are going to mind the store. If my wife and I can no longer do it, or if it's one person, if that one person can no longer be the trustee.
One of the main differences is that this legal tool is effective the day you sign it. Whereas this legal tool, the will, only goes into effect after you die. So it doesn't do you much good while you're still alive. This is a "living" trust living. It's "living" the day you sign it. And so it's kind of like you create your own little corporation that exists that very day and continues even after your death. So a living trust distributes your assets to certain people, etc. The nice thing is that you don't have to go to court to handle this. Oftentimes you have to go to court to handle a will. A judge has to get involved. Now, if you have a very small estate, you may not need to worry about going to court and you can still handle it outside of the court process.
But much of the time you're going to end up in court. A judge is going to be handling the administration of your will, which can take a lot of time and cost a lot of money. Plus this is a public affair. Now the fact that this is in the court system - everybody can know your business and it's a lot easier to contest a will than it is to contest a living trust. Everything in the name of your trust stays outside the court system - all of the assets that are inside the living trust. When I say "inside" the living trust, I mean that the asset's title is changed. So your bank accounts no longer say "John and Mary Smith," - they say the "Smith Family Trust". As for your real estate, it doesn't say "John and Mary Smith." It says the "Smith Family Trust" on the deed. So everything inside the circle avoids the court system.
Why? Because you want to keep your affairs private. You don't want a court getting involved or a judge. Your trustees will handle the distribution of your assets and the handling of your assets per the rules of your living trust. So those are some of the major differences between a will and a living trust. So hopefully that was helpful to you. There are also many kinds of other things that work with living trust. They work in connection with each other, but that's beyond today's lesson. Hopefully this will help you understand the difference between a will and a living trust. My name is Robert Mansour and thank you for watching this whiteboard lesson.
Hello everyone, this is Rob Mansour. And I wanted to make a very brief video today about a phone call that I took today that I think is a very illustrative of a mistake that a lot of people make. So here's the scenario. This lady calls me, her name is Linda and she calls me about her father Paul, who passed away three years ago and she is now concerned about the estate and why she didn't receive the inheritance. First mistake - you shouldn't wait three years. You may forfeit any claims that you have if you wait that long. So that's the first issue. The second issue is she told me that her father had a life insurance policy and she thought all four of the kids were supposed to get a portion of the life insurance policy.
And she said that the reason she thinks that is because her father's will said that all four kids should inherit equally. I explained to her that a life insurance policy doesn't work with the will. The beneficiaries are whoever is listed on the beneficiary form and it turns out her father only wrote her sister Michelle. So Michelle got the life insurance policy and Michelle used that money for whatever she used that money for. I told her that Michelle has no legal obligation to share the insurance proceeds if she was the only beneficiary on the policy, no matter what the will said. The only other thing that her father had when he passed away was a fully paid for house with about $500,000 in equity. Before he died (several years before) he put his daughter Michelle on title with him. Now what that means is that his daughter and Michelle is a joint owner on the property.
So Linda says to me, I thought I was going to get part of the house because the will says that we are all to share equally. And I had to explain again, the joint ownership trumps whatever the will says. I told her the will doesn't matter if Michelle was on the property with her father Paul, and then Paul passes away. Michelle owns the entire property. And that's what happened in this case.
So the mistake that some people make is waiting too long, first of all. And the other mistake that some people make is they think that the will controls everything. The will does not control anything when it comes to beneficiary designations on a life insurance policy and joint ownership. The last person standing and gets the entire asset, a will only controls assets that are in your name alone that do not pass by any other means. And in this particular case, the life insurance policy passed by way of beneficiary and the house passed by way of joint ownership.
So I hope this brief lesson is helpful once again, a will does not trump beneficiary designations and does not trump joint ownership. Thank you very much for watching. I hope you found this video helpful.
Hello everyone. This is Robert Mansour and today we are going to do an estate planning pop quiz. All my contact information is on the screen right there for you. First, an estate plan is not a living trust or a will. A lot of clients think that their living trust is their estate plan. An estate plan includes several legal tools, including wills, powers of attorney, healthcare documents, living trusts, beneficiaries, and a lot more. All of these things are tools in your legal tool box. So what you should know is that an estate plan is the toolbox and a living trust or a will is just one component of that. So let's have our pop quiz:
In California, what do we call the document people use to designate a person to make healthcare decisions for them? The answer an "advance health care directive." A lot of people think it's a living will - many states still use that term. In California, we call it an advance health care directive. And there is no "D" at the end of the word advance.
Number 2 - Jimmy and Sue own a home. They have no estate plan. They passed away in a car accident. Their home has to go through the probate court. The lawyer says the process could take a year or more. Does the mortgage payment on their home need to be paid during the probate process? The answer is "Yes, it does." Just because you died doesn't mean the mortgage company doesn't want their monthly payment. If your family is stuck in court for two years, that's not going to be a lot of fun for them. So the mortgage payment is still due after you pass away on a monthly basis.
Number 3 - Charlie has five siblings. Charlie's mom has $500,000 and put him as a joint owner on all of her accounts so he can help her pay the bills. She also wrote a will that states, "All my children shall share my estate equally." She even videotaped herself saying the same thing. When Charlie's mom dies, how much does each child get? Well, let's see...there are five siblings, so let's do the math. The answer is "Charlie gets all the money." Why? Because Charlie is a joint owner on all of the accounts. So Charlie gets the money. It doesn't matter what the will says or the videotape.
Number 4 - A will is generally effective upon your death. True or false? The answer is "True." A lot of clients have a will and they think they're all set. What a lot of people don't know is that a will generally goes into effect after you die. It doesn't do you much good while you are still alive. Keep in mind a will is simply a "letter" to the judge telling the judge where you want all of your assets to go.
Number 5 - Mary is in a troubled marriage and is contemplating divorce from her husband Todd. Mary's parents died and left her $750,000. Mary decides to file for divorce five years later. Will Todd get any of the $750,000? Well it depends what Mary does with the money when she inherits it. When you inherit stuff from your family, that's your "separate property," unless you choose to treat it as community property. So if Mary takes the money and deposits it into a joint account or a trust account with her and Todd on it, that's going to be a problem for Mary when she gets a divorce five years later because Todd is probably going to want a piece of that.
Bob and Sally have two kids. They own their home as "joint tenants." Mary dies and Bob remarries years later, Bob puts his new wife Susan on title with him as a joint tenant to the house. Bob dies a few years later. Who gets the house? Well, you would hope that Bob's kids get the house, but the answer is "Susan" - the new wife is going to get that house because Bob put her on as a joint owner with him on the property. The kids get zero. Now, Susan might choose to give the kids the property, but that's a whole other discussion.
Number 7 - John and Mary owned their home as "tenants in common." Mary has an old will that gives everything she owns to her former boyfriend, Jimmy. When Mary dies, who owns the home? Well, when Mary dies, John is going to be owning the property with Jimmy. Why? Because Mary's will gives her share of the property to Jimmy. Notice that it's "tenants in common" - not joint tenants. So that's the trick. The verbiage on the deed is critical.
Laurie has two minor children. One is 10 years old, and one is 16. She also has a life insurance policy for $500,000. She listed her living trust as the beneficiary of her life insurance policy. Why would she do that? The reason it is is because Laurie smart - she doesn't want that money going to a 10 year old and a 16 year old because once they turn 18, they're going to have full access to that money and they're probably going to blow it. So she has it payable to her living trust, and her trustee that she's chosen will be in charge of that money and distribute it to the children in a responsible manner.
Number 9 - Kenneth added his son Mark to his home to make sure Mark inherited the home after Kenneth passed away. Neither Kenneth or Mark have any estate planning documents. Mark got into a car accident and became incapacitated. Kenneth now needs to sell the house in order to pay health care bills. Can he do so? The answer is "It's gotta be tough." Why? Because his son Mark is now incapacitated and is on that deed. Mark can't sign anything. So if he can't sign anything, Kenneth cannot sell the house because the title company is going to be looking for two signatures. That's going to be a problem.
Number 10 - Bob's sister Ann got into a car accident and was unable to handle her affairs. Bob went to Ann's bank with Ann's durable power of attorney so he can withdraw some money for her medical expenses. They said they could not honor the power of attorney because it was "springing." What does this mean? That means that the power of attorney that Ann has probably requires her to be declared incompetent first before Bob can do anything. Sometimes I see documents requiring two or even three physicians to declare the principal individual incompetent before the persons named can do anything. So Bob now has to cart Ann all around town, trying to find doctors to declare her incompetent.
Number 11 - Mary was the named beneficiary on her boyfriend John's life insurance policy. John and Mary broke up a year ago. Last month, John wrote a will giving all his assets to his siblings in equal shares. When John passes away, who gets his life insurance money? The answer is "Mary does." Why? Because he listed her as the beneficiary of his life insurance policy. It doesn't matter what the will says.
Number 12 - John and Mary die leaving minor children and no estate plan. The children will inherit $500,000. Mary's estranged brother has taken any sudden interest in the kids, and he petitions the guard for "guardianship" of the children and control over their inheritance. Can her brother do that? The answer is "Yes he can." Anybody can petition the court for a guardianship of the children. What matters is if John and Mary took the time to nominate guardians for their children. If they didn't do that, then generally speaking, the first person to the courthouse who impresses the judge might end up with those kids and also might end up controlling the money.
Number 13 - Sharon is 65 years old. She decided to add her son Brian to her house as a joint owner so he can get her home when she dies. Brian later got sued for causing a bad car accident. Can they get to Sharon's home? The answer is "Yes they can." Why? It's because Brian's name is on the house. Anytime you put somebody on property with you or on a bank account or anytime you add a name, you've added a massive "bulls-eye" to that asset. So any trouble that Brian gets into is now Sharon's problem. That's another reason to think two or three times about adding your kids or anybody to your property or to your assets.
One more question: James and Cheryl got a divorce because James was verbally abusive and financially irresponsible. They have minor children, and Cheryl took out a $1 million life insurance policy to make sure her children would have enough money when she died. If she dies, who will likely end up with the kids and have control over their money? The answer is James. The reason for that is because James is the natural father. Now, he probably would petition the court for guardianship over the children or get automatic guardianship depending on the divorce. However, Cheryl may not want James to control anything, in which case Cheryl should have created a living trust - perhaps naming somebody else to be responsible for that $1 million of life insurance. So just be very careful when it comes to a divorce and things of that nature.
So once again, this was an estate planning pop quiz and less than 10 minutes. Thank you very much for watching. I really appreciate your patience. My name is Robert Mansour. My website and my phone number are on the screen. Take care. I hope you enjoyed the pop quiz.
Hello everyone. This is Robert Mansour and today I'm going to make a brief video about how to fill out the estate planning questionnaire and how to go about doing that. So if you go to my website, which is mansourlaw.com, and you click on the button that says "Get Started" at the very top, you will see that it takes you to our "Get Started" page where there is a brief video there. Then you're going to find three steps. Number one - you make an appointment with my office to make sure that we can help you. Step number two is to choose the applicable questionnaire below and that's what we're going to focus on today. You will notice you have three options here - single client, couples and post death. So basically what we're focusing on here today is the questionnaires for single people as well as couples with special focus on couples.
Now you'll notice under each one you have the ability to fill out our secure online form or a printable form. The printable form is obviously just a PDF that you can print out, fill out by hand and send to our office. You can fax it, email it, or just mail it to us. We only ask that you do so and get us all the information a few days before our meeting so I have time to review it. And with the couples is the same thing. You get the secure online form as well as the printable form. Now if you click on the secure online form, it will take you to the questionnaire, which is right here. So I'd like to spend some time reviewing this questionnaire so you can kind of see what it's like to fill out the questionnaire before you have your estate planning meeting.
So at the very beginning you'll see some general instructions. Don't worry if you don't have all the answers to everything. Also, at the very bottom of the form, you will find a place where you can save your work and it will give you a link that you can pick up where you left off. It mails you a link to your email here. It's going to ask you for the date of your consultation, how you learned about my office, spouse number one (usually the person filling out the form), how you want your name to appear in the documents, spouse number two, how you want your name to appear in the documents as well. Basic contact information, mailing address, etc. Let's go to the next page. Now here it asks if either of you have been divorced. If the answer is yes, you click here.
If there's anything in particular that affects your plan, you would indicate so otherwise you can put "No." If you have any prior documents, we'd like to know about those and please send them to our office well before the meeting so I have time to review them. Let's go to the next page. The next section talks about the beneficiaries of your living trust. Who is going to be the beneficiaries of your estate? Here is where you indicate all of that. Now here you can indicate if you have any children from previous relationships. If you click "Yes," it will ask you about that. Otherwise, you just leave it as "No." Do you have any common children? Once again, if you click "yes," you can list the names of the children and the birth date and you can add as many children as you need to add.
Also you would indicate here if you don't want your estate to distribute equally among your children. You can indicate here where you want your estate to go. Also if there will be any distributions upon the first death, how you want your beneficiaries to inherit from you? Anything specific that we need to know? Also important - how much control should the surviving spouse have? So after one person dies, does the other person have full discretion to make changes to the living trust? That is an important issue. Let's go to the next page. On this page, you're going to list who your successor trustees are. These are the people who are going to manage your living trust if you can no longer do so yourself and you can indicate the individual's name and add successor trustees by clicking on this button.
Usually we like people to have about two or three people in line just in case. The executors are the people in charge of your will. The will is a backup to your living trust. If you have a living trust, your will is going to serve as a backup. And then if you have any minor children, you would indicate right here. That is because you may want to indicate who the guardians are of those minor children. If you and your spouse can no longer be parents to those kids, who do you nominate to be the guardians of those kids? Otherwise you leave that as "No." Let's go to the next page. Here is your chance to indicate who the health care agents are going to be.
So part of your estate plan is to indicate who your agents for health care are going to be. And these are not just people who "pull the plug." These people are your advocates - the people who healthcare professionals need to talk to - the people who have access to medical records and each spouse can name however many agents they want, in the order that they want. Usually the spouse is first in line followed by those that you indicate here. And of course, here you can indicate whether you would prefer that your life be prolonged as much as possible or whether you don't want your life to be prolonged on machinery, etc. If you have any preference - cremation, burial, or if you're unsure, you would indicate that.
And any other special health care instructions you might have. Another part of the estate plan is something called "power of attorney" - where you list someone to make decisions for you if you cannot make them yourself. Now these are non-healthcare matters, and there's a lot of things in the world that people might need to help you with that don't have anything to do with health care. And here, spouse number one can indicate who his or her agents are going to be. And spouse number two - again - backups beyond your own spouse. Usually your spouse is number one in line.
Let's go to the next page here. Now this last page is going to deal primarily with assets that you have, which helps me give you tips about how to title your assets. So the first part here is if you have any real estate. If you say "Yes," then you will have the opportunity to list your real estate right there and add property if you need to do so.
Assets include bank accounts, credit unions, investment accounts, stocks, mutual funds, things like that - life insurance policies, retirement accounts. If you have any business interests of any sort, any other additional assets like annuities, savings accounts, savings bonds, things like that. Time shares. And if you click "Yes," you will have the opportunity to list those here. I'd like to know a little bit about your primary reasons or goals for creating your estate plan. That way, I can tailor our meeting to those goals and any additional information you would like to add. You can add that here and you actually can upload documents to attach to your questionnaire as well. Once everything looks good, you will be able to submit your questionnaire by clicking on the bottom here. Now, a copy of all your responses will be sent to the email that you provided at the very beginning of the questionnaire. Thank you so much. I hope you found this overview of the estate planning questionnaire to be very helpful. Again, my name is Robert Mansour, and I thank you very much for taking the time to watch this video.
Many of my clients often ask me how often they should check on their estate plan. I used to recommend every 5 years. Then I realized that, for most people, not much changes every 5 years. Then I used to recommend every 10 years. However, that seemed to be too long. Now I tend to recommend at least every 7 years.
Just like anything in life, circumstances change. Therefore, I tell clients to take a look at their estate plan every 7 years or sooner if there are any major life changes. Also, I definitely recommend revisiting the plan if they wish to make any significant changes such as choosing different trustees, changing their executives, choosing different agents for power of attorney, etc.
Most people go to their doctor regularly for a physical exam. Some people go every year and some people go every other year. Of course, some people never go. I tell clients that reviewing their legal documents is very similar to reviewing their physical health. If you have a physical examination and everything checks out, that doesn't mean you should never go for another medical physical examination. Every couple of years or so, you should go to your doctor to check on your overall health. The same goes for your "legal health" - you want to make sure your legal house is in order every few years.
One thing I have found is that certain legal documents sometimes get "stale." That is not to say they are not legal. So while a living trust and/or a will can last for many many years without any problem, I have found, as a practical matter, that some places will start to give my clients a hard time if they present a power of attorney or any health care documents that are more than 10 years old. They will often be asked, "Do you have anything newer than this?" As such, at the very least, I think you should renew your durable power of attorney and health care documents every 7 years or so. Those are some general guidelines that I provide to my clients. I hope you found this helpful.
A few years ago, I created the above graphic to help illustrate to clients how their assets will pass once they create a living trust. Basically, I explain that every asset they have will pass through one of the two funnels. Like animals at the zoo, we don't put all of the animals in the same cage.
Some clients make the mistake of believing that all of their assets are controlled by their living trust (simply because they created a living trust). A living trust has no magical properties that control your assets. A living trust only controls assets that are actually titled in the name of the living trust. That being said, not every asset you have will be in the name of the living trust...only certain assets.
If you take a look at the above graphic, you will notice that real estate, bank accounts, regular investment accounts, certificates of deposit, credit union accounts, and savings bonds need to be titled in the name of the living trust. There may be other assets as well but these are the big ones. What does it mean to "title" the asset in the name of your trust. That means your asset will no longer simply have your name on it. For example, your bank account or real estate won't simply say "John Smith" on it. It will say "John Smith Living Trust" instead.
You will also notice the graphic indicates you must change title to the assets for them to be considered "in your trust." However, the graphic also indicates that certain assets will pass through the "beneficiary" funnel. These are basically retirement type accounts and life insurance policies. This would include individual retirement accounts (IRAs), 401k, 403b, other retirement accounts, pension benefits, annuities, health savings accounts, and life insurance.
These type of assets are driven by a contractual relationship with the financial institution. When you open these accounts, you will fill out something called a "beneficiary form" which dictates who gets the account upon your passing. Notice they don't care what your living trust says or whether you even have one! All they care about is who is indicated on the beneficiary form.
For these assets, you have to make sure you fill out the proper forms and indicate both primary and secondary beneficiaries. In some cases, you can name your trust as a beneficiary but you should not do so automatically. You should consider the pros and cons. Like any estate plan, there is often no perfect answer - only the best answer given all the circumstances.
As a general rule, assets owned "jointly" do not pass through either funnel. Assets owned jointly pass to the surviving owner. Therefore, If Bob and Sally own a bank account together and are listed as joint owners, Sally gets the entire account when Bob passes away. It doesn't matter what the living trust says. This can be especially problematic when people have second marriages. If they put the new spouse on an account or a parcel of real estate, that new spouse gets the entire asset. For example, let's say Bob and Sally are married. When Sally passes away, Bob gets remarried a few years later to Mary. Bob puts Mary as a joint owner on his assets. When Bob dies, Mary gets everything - end of story! It doesn't matter what Bob's living trust says. Joint ownership trumps.
There are three general benefits to having your assets titled in the name of your living trust. First, anything in the name of your trust avoids the court system. Second, anything in the name of your trust is managed by your named successor trustees in the order you list them. Finally, any assets in the name of your trust are governed by the rules of your trust. Again you have to change title to the asset. You can't just think about it or list of the asset somewhere in the trust or on a schedule somewhere. That's not the same thing.
Again, once you create your living trust, you should understand that your assets will pass through two separate funnels depending on the nature of the asset. It's one thing to have a living trust - it's another thing to understand how it works. Hopefully this will assist you in understanding proper trust funding and proper beneficiary designations. If you need help with your estate plan, please call (661) 414-7100 to see if we can assist you.
Hello, everyone, this is Robert Mansour, and today I wanted to make a brief video about The Parent/Child Exclusion. When you inherit real estate from your parents, or even your grandparents, frankly, if you inherit real estate from them and they're paying a certain amount of property taxes every year, you can actually keep the property taxes exactly where they are because you are inheriting from a parent or from a grandparent. That is know as The Parent/Child Exclusion. Pursuant to Proposition 58, which was passed many years ago here in Los Angeles County area and California.
What you need to know is that when you inherit, your property taxes don't have to go up, but you have to file the appropriate exclusion forms with the property tax assessor. Now, they might want to see the living trust or other legal instrument that gives you that property, and they want to make sure that this person is indeed a parent and a child relationship. If you don't file that exclusion, your property taxes might go way up. If your parents bought the property in say 1980 and now in present day that property is worth a lot more, your property taxes might skyrocket if you don't file the proper exclusion forms.
Be mindful of The Parent/Child Exclusion in cases where you might inherit real estate from your parents. Thank you very much for watching.
When it comes to most estate plans, there are four major components. Think of the estate plan like a tool box that has several tools inside it. For example, most tool boxes would have a hammer, a flathead screwdriver, a Phillips screwdriver, a wrench, etc. The legal toolbox (the estate plan) also contains several legal several tools.
The "hammer" of this legal toolbox is the living trust. The living trust is created by someone called the "Settlor" or "Settlors" if there is more than one person You might be more familiar with older terms like "trustor" and "grantor." All these terms refer to the same thing - the person who created the trust. You can die 100 times, but you will always be the creator (Settlor) of your own living trust.
The second major player in the living trust is someone called the "trustee." This is the person who handles all of the assets that are in the name of the living trust. When I say "in the name of the living trust," I mean that title to the asset has been changed to reflect the name of the living trust. Your personal property is no longer owned by "John Smith," but by "John Smith's Living Trust" instead. Bank accounts that used to be in the name of John Smith are now in the name of his living trust. I changing title, you are "funding" the living trust with assets. Failure to "fund" a living trust is one of the biggest reasons most living trusts fail. Think of the trust like a bucket. The problem is some people have this bucket, but they don't put anything IN the bucket. An empty trust might be a useless trust. Generally, you will be the initial "Trustee" of your own trust.
The final cast member of this living trust is the "beneficiaries." In the very beginning, you will be the initial beneficiary of your living trust. After you pass away, other people will serve as "successor Trustees" of your trust and ultimate beneficiaries of your trust. Those persons might be your children or other people that you might designate.
The next component in most estate plans is the the "Will." Unlike traditional wills which simply distribute assets to certain people, this type of will serves as a backup to your living trust. It works in concert with your living trust. In the event some assets are not properly titled or don't have the proper beneficiary, such assets are "caught" by the will and ultimately directed to your living trust. Think of it like a big "safety net" that sits under your living trust and catches stray assets that are not properly titled. If all of your assets are properly titled or have the proper beneficiary (depending on the nature of the asset), the will might be unnecessary upon your death. However, if you need it, it's good to have one in your toolbox.
The next legal tool in the toolbox is something called a durable power of attorney. The durable power of attorney allows those named as your agents to act on your behalf in the event you cannot handle your own affairs. Generally speaking, there are many things in our lives that need to be handled which don't directly involve our living trust. For example, let's say John Smith needs to speak with his wife's credit card company. He needs to demonstrate he has the legal authority to act on his wife's behalf. That's where a durable power of attorney comes into play. Make sure you name people that you trust to handle this very powerful legal tool. You can imagine that in the wrong hands, this power can be abused.
The final set of documents in the legal toolbox are the health care documents. Generally speaking that includes of the Advance Health Care Directive here in California. In the past, this was known as a durable power of attorney for health care. The more modern term since 2001 has been Advance Health Care Directive. You also want to make sure that your health care documents have all the requisite language regarding the release of medical records to your designated agents. In many cases, it is also helpful to have a separate authorization for the release of your medical records. Some facilities and institutions are insisting on a stand-alone authorization for the release of medical records.
While there are many other tools that go into your estate plan, these are the major tools that most people should consider. In some cases, one or more of these tools may be unnecessary. One size doesn't fit all. Please feel free to contact my office if you have any questions or if you'd like to schedule an initial consultation.
If you create a living trust, you will usually need to nominate two or three people to serve as your "successor trustees" in the event you can no longer manage your own trust. Think of a successor trustee like a "vice president" and you are the "president." In most cases, you are the initial trustee of your own living trust. If you cannot serve, your successor trustees take over, in the order that you have selected them.
It is certainly acceptable to name more than one trustee. In fact, many people choose to name "co-trustees" in which case the trustees must generally serve together. Generally speaking, I advise clients to select one trustee at a time since too many "chefs in the kitchen" can cause unintended problems.
Being a trustee is a difficult job. You have to follow the rules of the living trust and act in the best interests of the beneficiaries. In some cases, the successor trustee may also be a beneficiary. Most people who are acting as the trustee of a trust have never done so before. You have to select people that you know will follow your rules as outlined in your living trust. Remember that a living trust generally has no court supervision. In fact, one of the reasons people create a living trust is to avoid the court system. So while a trustee doesn't have to act with court supervision, that doesn't mean they get to do whatever they want. There are still some general rules and protocols they need to follow. The California probate code outlines some of those rules and guidelines.
An estate planning attorney can help a successor trustee after the death of a loved one. How formal the process will be may depend on the family circumstances and other unique issues. Many trustees don't realize they can be personally liable if they breach their fiduciary duty to the beneficiaries. In some cases, if there is enough at stake, some trustees will choose to obtain insurance (yes, they sell insurance for trustees).
When we prepare an estate plan for our clients, we provide detailed instructions for the successor trustees to follow. Essentially, we tried to give them a step-by-step manual that assists them in resolving the living trust after the client passes away. At the very least, the trustees will have a checklist of things to review and consider. In some cases, not every action item will be applicable, but it's still nice to have such a checklist. We also ask our clients to bring their successor trustees (or at least their first pick) to their final meeting so we can brief them on the plan and what may be required of them. The successor trustee can also ask questions during that meeting.
The most important thing a successor trustee can do is NOT to act impulsively or start distributing all the assets immediately. The best thing to do is to be methodical and careful. A trustee's actions should be deliberate and done after consultation with an attorney. Even if the estate is very simple, we generally think it is a good idea to meet with the attorney to have an informational meeting. The attorney might be able to advise the successor trustee of issues he/she may never have considered. When it comes to resolving in the estate, sometimes a successor trustee might do something that cannot be fixed. As such, it is best to proceed carefully and thoughtfully. There is usually no tremendous rush to resolve the estate and consulting with legal and financial professionals is usually the best course of action.
By creating a proper and robust estate plan, you might actually be able to help protect your beneficiaries. In some cases, your beneficiaries may be too young or may not have the wisdom to handle a large inheritance, especially in one lump sum. Do you really trust your 18 year old with $500,000? What about your 30 year old? Your sister? Your brother?
Aside from youth, there may be other reasons to protect your beneficiaries. For example, do some of your beneficiaries have spendthrift tendencies that make it unwise for them to inherit large sums of money? Will they blow through all the money in a matter of weeks? Perhaps a beneficiary might be in the middle of a divorce, a lawsuit, or other situation where inheriting a large sum of cash may not be the best idea. What if one of your beneficiaries has a gambling addiction or a substance abuse problem (such as alcohol or drugs).
What if a beneficiary is elderly or disabled? In some cases, a beneficiary of yours might be on some kind of government benefit program in which case inheriting large sums of money would cause said beneficiary to lose those government benefits. Then they would have to burn through their inheritance before they could get those benefits again.
You also want to make sure you appoint the proper trustees to handle the distribution of your assets responsibly and make sure that trustee can follow your rules as spelled out in your living trust. In some cases, you may choose to have distributions occur at certain ages or upon certain events. In addition to those benchmarks (age-based or otherwise), you might consider allowing the trustee additional discretionary distribution authority for purposes such as a beneficiary's health, education, or other considerations.