So you have a living trust? Remember you must place assets IN YOUR TRUST. You can’t just think about it…you actually have to take the time to change title to your assets. This is known as “funding” your trust. In fact, failure to “fund” a trust is the biggest reason most trusts fail.
In most cases, the following assets go “IN” your trust: checking accounts, savings accounts, CDs, regular investment accounts, stocks, bonds, credit union accounts, and real estate. Typically, your attorney should take care of the real estate during the signing meeting. However, you should make sure your assets are properly titled as the years go on and as you accumulate further assets. Simply put, assets IN your trust are governed by the trust and avoid the court system. Also, assets "in" your trust can be managed by your successor trustees. Assets NOT in your trust won’t necessarily receive the same benefits. Again, make sure trust assets are listed on your “Schedule A” - a schedule of all trust assets that should also be provided to your by your attorney.
How do you go about putting assets into your living trust? My practice is to prepare letters for my clients to present to their financial institutions. The main purpose of these letters is to illustrate how title should be held. In most cases, the institutions will just want to see the language on the letter. They won't necessarily want to keep the letter. In many cases, they might have you fill out their own forms as well. In addition, some may want to see your “Certification of Trust” which is also something your lawyer should give you as part of your overall plan. Finally, some institutions may ask for copies of certain pages of your trust. That is perfectly fine.
How should title read? In most cases, assets in your trust will be titled as follows: For single people, “YOUR NAME, as Trustee of the NAME OF YOUR TRUST, dated X/X/XXXX” and for married couples, it would be “YOUR NAME and YOUR NAME, as Trustees of NAME OF YOUR TRUST, dated X/X/XXXX.” By doing so, you are placing the asset IN your trust. For example, “John Smith, trustee of the John Smith Living Trust, dated July 5, 2003” or “Mary Smith and John Smith, trustees of the Smith Family Trust, dated July 2, 2010.”
If I can help you with your estate plan, please call my office at (661) 414-7100 for an appointment.
Every good living trust needs a good schedule of assets. The schedule is sometimes known as "Schedule A." Basically, this schedule is a written list of all the assets that are in the name of the living trust. This includes bank accounts, investments, real estate and much more. Anything that is governed by your living trust should be listed on the schedule. The schedule can usually found a near the end of your living trust or in a separate section. It must be clear that this schedule is for your particular living trust. Therefore, the title of the schedule would say something like "Schedule A: Trust Assets for the John Smith Trust, dated November 4, 2004."
Essentially, there are two reasons to have a good schedule of assets for your living trust. The first reason is practical. Having a list of all the trust assets basically makes life easier for your trustee. They don't have to wonder what's in your trust or scour your entire home, wrestling with boxes of documents.
The second reason to have a schedule of assets is legal. You are listing assets to establish your "intention" to include said assets in your trust. Basically, if you forgot to put an asset in your trust, the mere fact that you had listed it on your schedule of assets is good enough for most judges. A court case from the 1990s known as the Heggstad matter allowed a family to include assets listed on a written schedule as "trust assets," even though the assets were not in the name of the trust. They argued, and the judge agreed, that listing the assets on a schedule of assets was evidence of "intention" to include an asset.
Therefore, instead of a full probate proceeding regarding an asset or two left out of the trust, attorneys can sometimes petition the court (a Heggstad Petition) to include the asset(s) as a trust asset if evidence of "intention" can be established. Therefore, by listing an asset on your schedule, most judges are convinced that you had the intention of putting the asset in your trust, even if for some reason, it did not end up in the name of the trust.
To learn more about estate planning, please call our office at 661-414-7100.
If you are the trustee of a living trust, perhaps you are a bit overwhelmed by what to do when someone passes away. This video will give you an overview of what to do if you are the trustee of a living trust. It won't give you every single detail, but it will give you an excellent idea of what steps to take when handling the administration of a living trust. Take notes and make a checklist for yourself.
If you hire a lawyer to help you, then you will have a great idea of what's involved. Whatever you do, don't panic. If you take things step by step, you will get through the process. It might take a few weeks, a few months, or even longer, but if you have a plan of attack, you will eventually get through this.
A client recently came to my office to help him with his mother's estate. She passed away earlier this year, and he was trying to distribute all the assets according to her living trust's instructions.
During the distribution of the estate, my client discovered his mother got a "reverse mortgage" on her house about 3 years ago. In order to facilitate the loan, the lending company took the house OUT of my client's trust and put it into her name alone. Some lending institutions still insist on doing things this way. I'm not sure why some lenders are more sophisticated than others, but some insist on doing things the "old fashioned" way.
So what did they do? After they put the home in her name and got the reverse mortgage in place (and presumably got their fees), they left the home OUT of the trust. When she died, the house was only in her name, thereby forcing the family to go to court. If the house had been titled in the name of the trust (as it should have been), my client's family would have been able to avoid the probate court system altogether.
So what is the lesson learned? If you are entertaining a refinance, or you are in the middle of one, make sure your lender doesn't leave you out in the cold.
If they are going to start the job, they should also FINISH the job and put your real estate BACK into your living trust.
If you create a living trust, you need to "fund" the trust. That means you have to put things "into" the trust. This doesn't occur by magic. You can't just create a trust and go about your life without taking the time to put your assets into the trust. You do so by actually changing title to the assets. You need to go to the bank and change title to your accounts. The accounts will no longer be in your name, but in the name of the trust instead. That requires time and paperwork. The same holds true for any real estate you have. You have to sign a deed which puts the real estate in the name of your trust.
For example, let's say you hold title as "Mary Smith and John Smith, husband and wife as joint tentants." In fact, that is how most married couples hold title to their real estate. When funding your trust, you should sign a new deed (most lawyers will help you with this) which places the house in the trust. Therefore, your new deed would say something like, "Mary Smith and John Smith, husband and wife and joint tenants, hereby grant to Mary Smith and John Smith, trustees of the Smith Family Trust, dated March 30, 2013 the following real estate..." Then you have to file the deed with the county recorder's office. Now, the house (or whatever real estate) is "in the trust."
When you transfer a parcel of real estate into a trust, you are actually "transferring" the asset. The transfer will trigger a reassessment of your property taxes if you're not careful. Therefore, you need to file a Preliminary Change of Ownership Report (PCOR) with the county tax assessor's office. The PCOR let's the assessor's office know about the transfer and prevents the real estate from being reassessed provided the transfer falls under one of several allowable exclusions. The most popular "exceptions" are transfers between a husband and wife and transfers to a living trust. Therefore, you can't just file the deed with the county, but you also need to find out if filing a PCOR would be prudent. In most cases, you need to file one.
If you need help creating an estate plan for your family, contact Robert Mansour's office at (661) 414-7100. Robert serves Santa Clarita, Valencia, Saugus, Canyon Country, Newhall, Castaic, Stevenson Ranch and surrounding areas.
People often ask me why they shouldn't buy their estate documents online or purchase their documents from a paralegal. Of course, they are free to do what they want. However, when it comes to legal documents, you have to be very careful. You might buy the prettiest documents in the world. They might even come in a fancy binder. However, they may leave a lot to be desired at the end of the day.
When it comes to estate planning documents, you need to make sure you are dealing with quality. An attorney who is experienced in the field of estate planning knows the language that should be included depending on your situation. They've been "down the river" before, and they can often anticipate what might be a trouble spot for your family.
It is often what is NOT addressed in the documents that becomes a problem. There are many common issues in life that must be addressed in the documents. Therefore, if all your documents do is split up your estate among your heirs, that is often far too basic. Depending on your situation, an attorney with experience might recommend some kind of special language over another. Also there are many common provisions that should be considered when dealing with certain specific situations. Again, what is unaddressed can become a thorn later on. When a document is silent on a particular issue, that issue can become a big problem.
For example, a client came to me and asked why his brother should get a fair share when his brother had borrowed money from his parents several times over the years. When his parents passed away, his brother had borrowed about $100,000 over the years. He asked me whether or not his brother's share should be reduced by the amount of the money borrowed from his parents over the years. Of course, his brother wanted his share without any reduction. I explained the living trust did not address what to do with loans. The document did not say anything about reductions to account for prior loans. Therefore, since the living trust was silent on the issue, his brother was to get a fair share just like him. This of course caused a big problem between the brothers, and they don't speak till this day. This may not be an issue in your family, but most families have their own issues that should probably be addressed in the documents. Also, if issues are addressed in the documents, that causes less family problems because the documents say exactly what the Trustee is supposed to do. Nothing is simply left to the imagination.
It is very important to make sure your documents say exactly what you want them to say. Having a living trust and other estate planning documents in place is wise, but don't get inadequate documents that do not address your specific issues. Also, you want to revisit your trust and other documents over the years to make sure they continue to suit your needs and address your family's issues.
A critical component to most living trusts is establishing who the successor Trustee is going to be. Sometimes, it is very difficult for people to choose two or three successor trustees (I usually like my clients to choose at least two alternates in the event their first choice is unable to serve). However, even if you know who your successor Trustees are going to be, you still need to outline a clear mechanism for succession in your living trust. In other words, how will we know when it's time for the successor trustee to serve? There are generally a handful of ways a successor trustee can step in and start handling your trust.
1) A common method is resignation. In other words, let's say you are the trustee but you can no longer handle your own affairs. You actually recognize that maybe it would be better if someone else handled your affairs. In that case, you can resign as trustee, and your successor Trustee steps in and handles your trust. The resignation can be accomplished by signing a formal resignation.
2) Death is also an easy way to establish succession. All your successor would need is your death certificate. Unfortunately, that can take weeks to get from the county, but it's a sure fire way to establish succession.
3) The last common way to establish succession is to establish "incapacity." Most trusts say that when a trustee becomes "incapacitated," the successors can step in and handle matters. However, the trick is how the document defines "incapacity." I have seen documents that call for two doctors' declarations under penalty of perjury, one of which must be the primary care physician. Some call for three doctors. Some say the beneficiaries can vote if someone is incapacitated. Sometimes this is very difficult to establish, especially when doctors are reluctant to sign such declarations (and they are often reluctant to do so for fear of litigation). In my living trusts, I usually require only one licensed physician's declaration to establish incapacity. Of course, I always make sure my clients are ok with this. It's much easier to handle things when only one doctor's declaration of incapacity is required. If you've chosen people you trust, why make it difficult for them to help you when the time comes?
Robert Mansour is a lawyer in Santa Clarita, CA. He handles wills, living trusts, and other estate planning matters for Santa Clarita and its communities of Valencia, Saugus, Canyon Country, Stevenson Ranch, Newhall, Castaic and beyond. Call (661) 414-7100 for a consultation.
Clients are often surprised to discover that there are actually several different "kinds" of living trusts. They call the office and say, "Hey, how much for a living trust?" The main reason I believe prospective clients ask that question is because they don't really know what to ask, so they ask about fees instead.
Then I tell them, "Well, the fee partially depends on what type of living trust is best for your family." They respond, "What do you mean? I want a 'LIVING' trust." I explain that there are several types of "LIVING" trusts available, and we will address what kind of living trust is best for the client during the initial consultation."
Therefore, during the initial consultation with my clients, we explore the types of trusts available to them, and we try to figure out what would be best for the clients and their particular situation. I make recommendations based on what I learn during the first meeting.
Some trusts allow the surviving spouse to make changes upon the first death. Others do not. Some trusts are only designed to avoid probate and pass assets to others. Other trusts call for a split of the assets into subtrusts upon the first death - some make the split mandatory and others make the trust split discretionary. There are "probate avoidance trusts," "disclaimer trusts," "AB trusts," "ABC/QTIP Trusts," and other variations. Married couples generally have the most flexibility.
Some living trusts have provisions regarding children and some have even further provisions regarding grandchildren. Some contain "Pet Trusts." Some trusts are specific, and others deliberately broad.
Once clients understand they are not going to a get a "one size fits all" estate plan, they start to understand that estate planning is more than just filling out a couple of forms and going home.
After the death of a spouse, many clients call me and ask me what to do. While there are several things that can be done, there is usually no emergency. I tell the client to take a few weeks and grieve. Then they can call me to discuss any steps they should be taking.
One of the things I usually help my clients with is taking the deceased spouse off of title to the real estate. This is done by filing an "Affidavit of Death" with the county recorder's office. Also, you need to file a "Preliminary Change of Ownership Report" to keep the property taxes at the same level.
The affidavit puts the county recorder's office on notice that a spouse has passed away, and now only one person is in charge of the real estate. This is a simplification of the process, but that's essentially what you are doing with respect to real estate. Why would you take the spouse off the property? Well, if there is any chance the property would be sold in the future, then only one signature would be required (that of the surviving spouse).
Robert Mansour is a Santa Clarita, CA attorney who can help you protect yourself and your family with a solid estate plan. To learn more about estate planning, click here to watch an information video.
Instead of creating separate trusts for each child immediately upon your death, you may want to consider creating a common trust (pot trust) for your children.
When dealing with a common trust, the trustee can spend the trust money on any child that might need the money more than another. For example, perhaps one child is very wealthy and has no need for the inheritance. More commonly, you may have already provided for the college expenses of one child and perhaps your other children have not yet started college.
If each child takes a share immediately upon your death, some of the children may effectively be receiving less since they still have to pay for schooling etc. After the youngest child attains a certain age, your trust can then divide equally among the children. This is just one approach you might consider with your estate planning lawyer.
If you wish to discuss your estate planning needs, visit Santa Clarita wills and trusts lawyer Robert Mansour. Call (661) 414-7100 to make an appointment.