What shouldn’t I put in my Living Trust?

 

Automobiles

I don’t recommend putting your automobile into a Revocable Living Trust mainly because if you should get into an accident, and the other person sees that your car is owned by a Trust, they may think you are wealthy and look to sue in a situation where they otherwise would not.

Now, if you own a classic car, hot rod, or other collectable car that you plan on keeping for a long period, then it makes more sense to put the auto into the Trust.  Usually these types of cars are not “daily drivers” and pose less of a risk of lawsuit like discussed above. 

  

IRA’s and 401(k)

IRA and 401(k) accounts present a specific problem if we try to put them into a Living Trust by changing the title of the asset.  The problem is that doing so creates a “taxable event” and too much of the value of the IRA will be lost to taxes.  Not good.  So what do we do with IRA’s?  The question depends on your situation.  If you are married, likely the best solution is to name the spouse as the beneficiary (and not a Trust).  If you are not married, then a beneficiary designation can still be utilized to pass the asset on to someone else such as a child.  Another method is to name a specially designed Trust called a Standalone Retirement Trust (or SRT) as the beneficiary.  Using a Standalone Retirement Trust provides some benefits to the beneficiary that an outright gift cannot.  Naming an individual as the beneficiary (and not a Trust) is considered an “outright gift” because once they are entitled to the funds, there is no control over how the funds are to be used (provided they are over 18 years of age).  They get the lump sum and off they go.  You can see how this can be a bad situation for the young, those bad with money, those subject to predators, or even those bad marriages!  In a recent case called Clark v. Rameker, the Supreme Court held that an inherited IRA cannot be shielded from creditors or bankruptcy.  This is why a Standalone Retirement Trust can be so beneficial.  There are other tax advantages to using a SRT that I won’t go into here, but in a nutshell, the distribution may be able to be streached out and keep the beneficiary in a lower tax bracket, and provide opportunity for the IRA to continue to grow. 

  

Other items that shouldn’t go into your Trust

There are other items that should not go into your Living Trust that I won’t cover here.  Please check my future blogs for possible discussion of these items (or of course consult an attorney!)

Please feel free to give me a call and we can review your Estate Planning goals, or start your Estate Plan today!

 

See lots of estate planning information on my website at: www.myestate-plan.com

 

Thanks for reading.

 

William Daniel Powell (Dan)

619-980-2297

This email address is being protected from spambots. You need JavaScript enabled to view it.

 

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This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information

Also, please remember that I speak in generalities in my blog and my website. There are so many different factors that can contribute and completely change the outcome that it would be impractical to discuss all of them here.

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Does my Home go into my Living Trust?

People often ask “what items do I put in my Revocable Living Trust?”  Usually the biggest and most important item is your home.  The process for putting your home into a Revocable Trust is fairly simple, but you must take care.  The attorney will obtain the latest deed to your home if you don’t have one, then he or she will prepare a new deed that transfers the home from you as an individual to you as Trustee of your Revocable Living Trust.  It does not matter if you are still paying a mortgage on your home, it can still be put into the Living Trust.  Reverse mortgages can cause some issues, and it is very advisable that you contact an attorney before changing any titles to such property. If you have property outside of California, then an attorney in the other state will need to prepare a deed and have it recorded.  Your estate planning attorney will explain all of the details to you.

 

A “PCOR”, or Preliminary Change of Ownership Report is also filled out and submitted with the deed to the County Recorder’s Office.  This PCOR basically tells the County Recorder that the home is being transferred to a Revocable Trust, and that no reassessment is needed (so property taxes don’t go up!).  This is also a very important step. 

   

It is important to remember that one does not lose control of their property when they create a Revocable Living Trust (sometimes called an Inter Vivos Living Trust, or just Living Trust).  Think of a Living Trust like a bucket that you built.  You decide what to put in your bucket (with advice from an attorney), and what to take out of your bucket should you so choose.  The IRS, as a matter of fact, views this bucket as an extension of you and doesn’t require a separate tax return.  You just do your taxes as normal.  If something happens to you, you can decide who is going to hold your bucket next.  This person is called the Successor Trustee.  Should you kick the bucket, you can decide what happens to what is left inside.  Forgive the attempt at humor.  We can’t take life too seriously! 

 

Please feel free to give me a call today and we can review your situation and other Estate Planning goals.  Everyone’s situation is different, and I can help create solutions. 

 

See lots of estate planning information on my website at: www.myestate-plan.com

 

William Daniel Powell (Dan)

619-980-2297

This email address is being protected from spambots. You need JavaScript enabled to view it.

 

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This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information

Also, please remember that I speak in generalities in my blog and my website. There are so many different factors that can contribute and completely change the outcome that it would be impractical to discuss all of them here.

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What Does the Typical Estate Plan Include?

 

Well, let’s start with discussing what a “typical” estate plan is, and is not.  The fact is that there is not really one typical estate plan as everyone’s situation is a bit different.  There is a fairly common set of circumstances that creates a “typical” estate plan, and usually covers most people.  However, there are several situations that require special estate planning, and push some people out of the more typical estate plan.

 

 

Special Estate Planning to Avoid the Federal Estate Tax

 

Most of us don’t have assets that would push us into the realm of needing to worry about federal estate tax.  If you have assets that meet, exceed, or will exceed the Federal Estate Tax Exclusion amount, then you will likely want some non-standard estate planning.  For the year 2016, the Federal Estate Tax Exemption is $5,430,000 for an individual, and $10,860,000 for a married couple.  This means that an individual can leave $5.43 million to their heirs and no Federal Estate Tax will be imposed, and a married couple can leave $10,860,000 to their heirs without worrying about triggering the Federal Estate Tax. 

 

 

Special Estate Planning Required for Other Situations

 

Some other situations that generally require special estate planning include those adults with special needs, or those with children that have special needs.  A Special Needs Trust is used to ensure that those receiving means-tested public benefits don’t become disqualified by receiving an inheritance or other income. 

 

Another familiar situation is where there is a “blended family”.  In these situations, there is a couple or person with children from a previous marriage.  Their desire is to make sure their child or children receive an inheritance.  A married couple with a “standard” Joint Revocable Living Trust is set up in such a way so that the first spouse to pass leaves everything to the surviving spouse.  As you can imagine, in a blended-family situation, the surviving spouse is free to change the distribution scheme and leave the entire estate to whomever he or she wishes.  An A/B Trust prevents this by becoming irrevocable upon the passing of the Trustor that dies.

There are other “non-standard” situations that I won’t discuss here for the purpose of brevity.  If you have questions, please contact me, or an attorney licensed in your jurisdiction.

 

 

So get on with It!  What is in a Typical Estate Plan?

 

Okay!  So for the vast majority of us, and especially those of us in San Diego, the typical Estate Plan includes:

  • If you are single, it includes a Revocable Living Trust (sometimes called an Inter Vivos Trust, Living Trust, or even perhaps just a Trust)
  • If you are married, it includes a Joint Revocable Living Trust
  • A Pour-Over Will
  • Power of Attorney
  • An Advance Healthcare Directive (sometimes called an AHCD, or AHD)
  • It also includes a HIPPA release
  • A Certification of Trust
  • Trust Summary
  • The funding of the Trust with the family home

 

So as you see, it can be a bit different for each person.  Call me today and let’s get your plan together and get you some peace of mind!

 

Please feel free to give me a call today and we can review your situation and other Estate Planning goals.  I help create solutions. 

 

See lots of estate planning information on my website at: www.myestate-plan.com

 

William Daniel Powell (Dan)

619-980-2297

This email address is being protected from spambots. You need JavaScript enabled to view it.

****************

This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information

Also, please remember that I speak in generalities in my blog and my website. There are so many different factors that can contribute and completely change the outcome that it would be impractical to discuss all of them here.

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Thursday, 21 April 2016 21:55

Out of State Property and California Trusts

Should I Put my Out-of-State Property in my California Trust?

 

We have discussed the benefits of a Revocable Living Trust elsewhere in my Blog, but to recap, the most important reasons are to:

  • Avoid the cost and delay of Probate (probate is the judicial proceeding that resolves all of the decedent’s claims and distributes his or her property)

  • Provide for management of assets and the estate should the person creating the Living Trust become incapacitated

  • To protect the beneficiary

  • Provide more privacy than a Will

  • Better tax and gift planning

 

After a Revocable Trust has been created it must be “funded”.  This is simply the process of titling certain property in the name of the Trust so that the Trust can do its job.  The most obvious item that goes into the trust is your home.  But what if you own out-of-state property?  Your out-of-state real estate should also be put into the trust, and a deed should be prepared by an attorney that is licensed in that state.  This (depending on the law of that particular state) should avoid ancillary probate in that state.  Such is the case in California – an out-of-state trust that holds a properly transferred California property will avoid California Probate proceedings.  If the out-of-state real estate is not put into a California trust, then the real estate would have to be probated in its home state which can cause additional delay and cost.

 

See lots of estate planning information on my website at: www.myestate-plan.com

 

I would love to help you create your estate plan and help you provide the kind of gift that you want to give to your beneficiaries.  Call me today and we can get it done!

 

Thanks for reading my blog.

 

William Daniel Powell

619-980-2297

This email address is being protected from spambots. You need JavaScript enabled to view it.

 

This document is for informational purposes only.  Nothing in this is to be considered legal advice.  Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship.  If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction.  I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information

Further, please remember that I speak in generalities in my blog (and on my website). There are so many different factors that can contribute and completely change the outcome that it would not be practical to discuss all of them here.

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