Small Estate Administration
Sample Trust with Explanation
FAQ -- Probate, Joint Tenancy, and Trusts
Domestic Partner Rights and Responsibilities
Administration of a Trust
Attorney General Warns about Living Trust Mills
California Estate Planning - Easy As One, Two, Three
Step One: We meet for a no-charge, confidential consultation. I access your needs and make my recommendations. If you want, we proceed to Step two.
Step Two: I prepare the documents. We meet a second time to review and sign the documents that will create your trust.
Step Three: I record transfer deeds for your real estate assets. Your brokerage and bank accounts are re-titled into the name of your California living trust. Your California living trust is now funded.
Small Estate Administration
If someone dies without owning real estate and had assets less than $100,000, a declaration under California Probate Code Section 13100 is effective to transfer assets to heirs. The declaration works well if all heirs are in agreement and willing to cooperate with each other. A spouse is the sole heir, so no issue of cooperation arises on the death of the first spouse. A sample declaration for a spouse is provided below.
DECLARATION UNDER PROBATE CODE SECTION 13100
DECLARATION OF JAYNE DOE FOR COLLECTION OF PERSONAL PROPERTY OF DECEDENT, JON DOE
I, Jayne Doe, declare:
• I make this Declaration to induce the
First National Bank to transfer to Jayne Doe as Heir of the Estate of Jon Doe, the property described below under California Probate Code Section 13100-13115.
• Jon Doe died at Irvine, California on May 5, 2005, leaving no will.
• At least forty (40) days have elapsed since the death of the decedent, as shown in a certified copy of the decedent's death certificate attached to this declaration and made a part thereof.
• No proceeding is now being or has been conducted in California for administration of the decedent's estate.
• The gross value of the decedent's real and personal property in California, excluding the property described in California Probate Code Section 13050 does not exceed one hundred thousand dollars ($100,000).
• The interest in the property of the decedent that should be transferred to is described as follows:
Bank Account 123 with an balance of $5,000.
• The declarant is the successor of the decedent (as defined in California Probate Code Section 13006) to the decedent's interest in the described property.
• No other person has a right to the interest of the decedent in the described property.
• My name, address, relationship to the decedent and age is as follows:
Jayne Doe. Surviving spouse. Adult.
• The declarant requests that the described property be paid, delivered, or transferred to the declarant.
• I agree to hold First National Bank free and harmless and indemnify them against all liability, claims, demands, loss, damages, costs and expenses whatsoever that they may incur because of the transfer, payment or delivery to me of the property.
• The declarant declares under penalty of perjury under the laws of the State of California that the foregoing is true and correct.
Dated: _____________________ __________________________________
Jayne Doe
Sample Trust with Explanation
Click here for Related Microsoft Word Document file:
Sample_Trust_with_Explanation.doc
Frequently Asked Questions -- Probate, Joint Tenancy, and Trusts
Why group these terms together?
Answer. These are the most common methods used upon death of an individual to transfer assets to someone living.
Why not include Wills?
Answer. A will states your intent, but does not provide a method to transfer assets. With a will, probate is needed to transfer real estate and all estates with assets over $100,000.
What is probate?
Answer. Probate is the process of transferring assets from a person who has died to his or her heirs using the California Probate Court. A Will states to whom assets are to be distributed, but it does not provide a mechanism to accomplish that goal. As a result, the assistance of the Superior Court of California becomes necessary through the probate court.
What is so bad about probate?
Answer. Probate is a legal action. Probate is costly, time consuming and open to the public. Expenses run about 5% of the gross estate. The complete process requires about one year. The forms and court procedures are complex and demanding.
How can I avoid probate?
Answer. You can avoid probate with either a trust, or joint tenancy.
What is joint tenancy?
Answer. Joint tenancy is the co‑ownership of property with the right to survivorship. Upon the death of a joint tenant, all legal rights and ownership interest in the property transfer to the surviving joint tenant.
A trust costs money, joint tenancy does not, so, why use a trust?
Answer. Joint tenancy gives up control of the asset to the co‑owner and subjects the asset to creditors of the co‑owner. A trust maintains control and protects the property against the debts of others. A trust provides a mechanism to transfer assets and reduces estate taxes. Also, a trust is flexible and provides a multitude of options that joint tenancy does not provide.
What is a trust?
Answer. A trust is a legal entity authorized by state law. A trust has three actors: a creator known as a Grantor or Trustor; a trustee, the person who acts for the trust; and a beneficiary, the person who enjoys the assets of the trust. While the Grantor/Trustor is living, the three positions are the same person. But, when the Grantor/Trustor becomes incapacitated or dies another person acts on behalf of the trust as the successor trustee. While living, the Grantor/Trustor is the beneficiary. Upon death of the Grantor/Trustor, alternate beneficiaries identified in the trust enjoy the assets of the trust under the terms and conditions identified in the trust.
Is a trust taxable?
Answer. No. The standard revocable trust passes all income to it's owners and is transparent for income tax purposes. No separate tax identification is needed. While the owners of the trust are living, no tax returns are filed for the trust.
What is a living trust?
Answer. A living trust is simply a trust created while you are living.
California has enacted the California Domestic Partner Rights and Responsibilities Act of 2003
California has enacted the California Domestic Partner Rights and Responsibilities Act of 2003 ("the Act"). The Act is intended to help California move closer to fulfilling the promises of inalienable rights, liberty, and equality contained in the California Constitution. The Act provides all caring and committed couples, regardless of their gender or sexual orientation, the opportunity to obtain essential rights, protections, and benefits and to assume corresponding responsibilities, obligations, and duties. This further the state's interests in promoting stable and lasting family relationships, and protecting Californians from the economic and social consequences of abandonment, separation, the death of loved ones, and other life crises.
The Act extends the rights and duties of marriage to persons registered as domestic partners on and after January 1, 2005. The Act provides that the superior courts shall have jurisdiction over all proceedings governing the dissolution of domestic partnerships. These proceedings will follow the same procedures as proceedings with respect to dissolutions of marriage. For example, assets acquired after January 1, 2005, from the earnings of either partner will belong to the domestic partnership. If a domestic partnership is dissolved, those assets will be divided between the two partners.
In addition to the rights and obligations of marriage, a surviving registered domestic partner, following the death of the other partner, has the same rights, protections, and benefits that have been granted upon a widow or a widower.
For domestic partners, the Act substantially imposes rights and obligations that they may not have contemplated when the partnership was formed. If you have any concerns or questions on the impact of the Act, please do not hesitate to contact Mark Bidwell at 949-474-0961.
Administration of a Trust
Trust Administration
Overview. A trust requires attention when first created, at the death of the first spouse and at the death of the second spouse. Periodically, a trust should be reviewed by an attorney.
Keep in mind, a trust has three actors: a creator known as either the Grantor, Trustor or Settlor; a trustee, the person who acts for the trust; and a beneficiary, the person who enjoys the assets of the trust. While you are living, you hold all three positions. You will always be the Grantor/Trustor/Settlor. But, when you become incapacitated or die another person acts on behalf of the trust as the successor trustee. While living, you are the beneficiary. Upon your death, alternate beneficiaries identified in the trust enjoy the assets of the trust under the terms and conditions identified in your trust.
Trust Creation
After creating your trust, you must transfer title of your assets into the name of the trust. For example, instead of owning an asset as John Doe and Jane Doe, an asset will be titled John Doe and Jane Doe, Trustees of the Doe Family Trust, dated May 5, 2005. This is known as funding the trust. Trust funding, involves six major types of assets; tangible, real estate, accounts with financial institutions, retirement accounts, insurance policies and business assets.
Tangible Assets. Tangible assets are assets you can hold and touch. Tangible assets include cars and boats registered with a department of California or a department of the federal government. For example, automobiles are registered with the California Department of Motor Vehicles. Registered assets are transferred using forms mandated by the department of registration. Tangible articles not registered are simply handed to the beneficiary by the successor trustee as directed in your trust. There is no actual transfer of tangible assets into a trust.
Real Estate . Evidence of ownership of real estate is at the county recorder = s office where the real estate is located. Ownership of real estate is transferred with a deed. The deed has many names, grant deed, quit claim deed, inter-spousal grant deed and so on. The deed used to transfer real estate into a trust is, quite reasonably, called a trust transfer deed. A trust transfer deed is prepared granting ownership from yourself to yourself as trustee.
So, instead of holding title to real estate as John Doe and Jane Doe, husband and wife as joint tenants, a couple = s real estate is titled as John Doe and Jane Doe, Trustees of the Doe Family Trust, dated May 5, 2005. The trust transfer deed is recorded with the county recorder. For quality control, the county recorder = s office requires very specific information on the deed. Its easiest to let your attorney prepare the trust transfer deed.
Financial Institution Accounts. This group excludes retirement accounts, but does include bank accounts and stock brokerage accounts not having deferred income tax consequences. Common types of financial institution accounts are checking, money markets, savings and time deposits. The easiest way to transfer these assets is to talk to your bank representative or stock broker. They will have a form for you to complete. Often, they will want to see the trust. There is no need to provide the trust if you have a certificate of trust. A certificate of trust is a one page document to provide the information needed by your financial institution.
Retirement Accounts. Any asset that is taxed upon distribution, such as a 401k plan, IRAs or annuities cannot be transferred into a trust. Such a transfer is a change in ownership for IRS purposes and creates a taxable distribution. Instead, use a designated beneficiary form available from your administrator. The designated beneficiary form identifies who is to receive the retirement account upon your death. To minimize required distributions, your spouse should be able to rollover the retirement account into her or her name. To minimize confusion, designate your spouse as the primary beneficiary with your trust as the alternate beneficiary.
Insurance Policies. The owner of an insurance policy can not be changed to your trust. Your life insurance agent or administrator can provide you with a designated beneficiary form. On the form designated the trust as the primary beneficiary. Often, life insurance policies become a major asset of the estate and should not be overlooked in trust administration. Leaving them directly to individuals may impair your estate plan.
Business Assets. Any business entity should have be assigned into the trust. Any evidence of ownership, such as membership interests or stock certificates should be transferred into name of the trust. If you operate a business as a sole proprietor, consider forming a business entity to facilitate transfer. Also consider developing an exit strategy to maximize value received and avoid dissipation of the business.
Income Tax Returns. Your standard revocable trust passes all income to you and is transparent for income tax purposes. No separate tax identification is needed. While you and your spouse are living, no tax returns are filed for the trust.
New Assets and Refinancing. Any new assets acquired should be titled in the name of your trust. If you refinance any real estate, your lender may require you to transfer the property out of the trust. If the lender does not transfer the property back into the trust, transfer it back in. Please don = t hesitate to contact me if you have any questions or want to transfer an asset into your trust.
Reviewing Your Estate Plan. I try to draft trusts to minimize changes in the future. Often it depends on your comfort level. It is prudent to have your trust reviewed when the tax laws have a major revision or when a major life event occurs. Such life events can be any time your assets increase a million dollars; when one spouse dies; when your youngest child attains an age of financial maturity; if you are single, then marry, or married, then divorce.
Death of First Spouse
Don't Delay. You should schedule a meeting with an attorney to discuss options available to you.
Divide Trust In Two. If your estate is over the exemption amount, $1,000,000 in the year 2011, you will need to create a separate trust as directed in your trust document. Then fund the trust with assets of the deceased spouse. This new trust is to shelter up to $1,000,000 of the deceased spouse's assets from estate tax.
File Estate Tax Return. If your combined estate is over $1,000,000 you will need to file an estate tax return. No estate tax will be incurred on the second million of assets due to the division of your trust in two.
Death of Second Spouse
Notices. Within 60 days of the death of the second spouse, the successor trustee is required to notify all beneficiaries of the trust. The notification by trustee shall contain the following information: (1) The identity of the settlor or settlors of the trust and the date of execution of the trust instrument. (2) The name, mailing address and telephone number of each trustee of the trust. (3) The address of the physical location where the principal place of administration of the trust is located (4) A notification that the recipient is entitled, upon reasonable request to the trustee, to receive from the trustee a true and complete copy of the terms of the trust. Additionally, the notification by the trustee shall also include a warning, set out in a separate paragraph in not less than 10-point boldface type, or a reasonable equivalent thereof, that states as follows: "You may not bring an action to contest the trust more than 120 days from the date this notification by the trustee is served upon you or 60 days from the date on which a copy of the terms of the trust is mailed or personally delivered to you during that 120-day period, whichever is later."
Tax Filings. The Successor Trustee will need to acquire a new tax identification number for the estate. An income tax return, form 1041, is required for the first year and for each following year until final distribution to the beneficiaries of the trust.
Record Keeping. The Successor Trustee, has a responsibility to keep complete and accurate records of each action. Records must show the beneficiaries that all actions taken have been performed with the best interest of the trust in mind and according to law and the terms of the trust. The accountant preparing the trust's federal and state income tax returns also needs records. To fulfill responsibilities as Successor Trustee, the following records are maintained.
Detailed ledgers showing all funds received and paid out
Copies of all bank statements and canceled checks for all accounts maintained by you as trustee and copies of all checks deposited.
All tax returns
All confirmations of purchases and sales of securities and all statements form your broker detailing all transactions for the trust, and all information showing the cost of assets.
Copies of all bills and receipts.
All correspondence from any persons, or to any persons, concerning the trust.
All records of discretionary actions undertaken by you authorized by the trust terms.
A trust synopsis that contains information a successor trustee would need to know immediately if something happened to you and that can serve as a reference for you.
Letters and documentation from income beneficiaries requesting distributions from the trust.
List of the assets in the trust, updated as changes take place, identifying the name on title or on the account, account numbers, addresses and telephone numbers of account representatives, date account opened or asset purchased, and any special tax elections pertaining to assets. (e.g. sub-chapter S election, IRC section 754 election of partnership or LLC)
For California real property, keep a list of purchase dates or new construction and assessed values as of those dates (base-year values) and similar information for any closely held legal entities owning California real property.
Optional Settlement of Creditor's Claims
Upon the death of a settlor, the property of the deceased settlor that was subject to the power of revocation at the time of the settlor's death is subject to the claims of creditors of the deceased settlor's estate and to the expenses of administration of the estate to the extent that the deceased settlor's estate is inadequate to satisfy those claims and expenses.
At any time following the death of the settlor, and during the time that there has been no filing of a petition to administer the estate of the deceased settlor in this state of which the trustee has actual knowledge, the trustee may file with the court a proposed notice to creditors. Upon the court's assignment of a proceeding number to the proposed notice, the trustee shall publish and serve notice to creditors of the deceased settlor
Publication of notice pursuant to this section shall be for at least 15 days. Three publications in a newspaper published once a week or more often, with at least five days intervening between the first and last publication dates, not counting the first and last publication dates as part of the five‑day period, are sufficient. Notice shall be published in a newspaper of general circulation in the city, county, or city and county in this state where the deceased settlor resided at the time of death.
The caption of the notice, the deceased settlor's name, and the name of the trustee shall be in at least 8‑point type, the text of the notice shall be in at least 7‑point type, and the notice shall state substantially as follows:
NOTICE TO CREDITORS OF _____________ #_________
SUPERIOR COURT OF CALIFORNIA COUNTY OF _________
Notice is hereby given to the creditors and contingent creditors of the above‑named decedent, that all persons having claims against the decedent are required to file them with the Superior Court, at _______, and mail a copy to _____, as trustee of the trust dated ____ wherein the decedent was the settlor, at _____, within the later of four months after ____ (the date of the first publication of notice to creditors) or, if notice is mailed or personally delivered to you, 30 days after the date this notice is mailed or personally delivered to you. A claim form may be obtained from the court clerk. For your protection, you are encouraged to file your claim by certified mail, with return receipt requested. (name and address of trustee or attorney) (c) An affidavit showing due publication of notice shall be filed with the clerk upon completion of the publication. The affidavit shall contain a copy of the notice, and state the date of its first publication.
A claimant shall file a claim before expiration of the later of the following times: (1) Four months after the first publication of notice to creditors under Section 19040. (2) Thirty days after the date actual notice is mailed or personally delivered to the creditor When a claim is filed, the trustee shall allow or reject the claim in whole or in part. 19251. (a) Any allowance or rejection shall be in writing. The trustee shall file the allowance or rejection with the court clerk and give notice to the claimant, together with a copy of the allowance or rejection, as provided in Section 1215. (b) The allowance or rejection shall contain the following information: (1) The name of the claimant. (2) The date of the settlor's death. (3) The total amount of the claim. (4) The amount allowed or rejected by the trustee. (5) A statement that the claimant has 90 days from the time the notice of rejection is given, or 90 days after the claim becomes due, whichever is later, in which to bring an action on a claim rejected in whole or in part.
Attorney General Warns About Living Trust Mills
Attorney General Lockyer Warns Seniors about "Living Trust Mills" and Annuity Scams
February 19, 2003 03‑017
FOR IMMEDIATE RELEASE (916) 324‑5500
(SACRAMENTO) B Attorney General Bill Lockyer today warned California consumers to be on the lookout for "living trust mill" con artists who fraudulently sell trusts and annuities to senior citizens.
Sales agents for these scam operations often misrepresent the disadvantages of seniors' current investments and the advantages of the investments the agents are selling. They may even make seniors believe their bank accounts are less safe than the annuities or other investments they want seniors to buy. To give themselves a cloak of legitimacy, these sales agents pretend to be experts in living trusts. They often work in assisted living centers, churches and other places where seniors gather, hooking elderly victims through free seminars and other sales presentations.
"Consumers, particularly seniors and their families, should be wary," said Lockyer. "We believe there are living trust mills violating the law ‑‑ and the trust placed in them by seniors. We are determined to investigate and punish fraudulent conduct, but we also want to help seniors avoid becoming victims."
Seniors pay substantial sums of money to sales agents for living trust mills. But through fraud and deceit, the sales agents damage seniors' estate plans, and the security of their investments and life savings.
A state appellate court recently affirmed a multi‑million dollar judgment the Attorney General obtained against an insurance company that conspired with a living trust mill to commit fraud in selling trusts and annuities to seniors.
In their solicitations, sales agents often pose as expert financial or estate planners. They pass themselves off as a "trust advisor," "senior estate planner" or "paralegal," and schedule an initial appointment with seniors in their homes. Under the guise of helping set up or update a living trust, the sales agents find out about seniors' financial assets and investments.
Usually, the sales agents then schedule a second visit to deliver a completed trust and have documents signed and notarized, and title of assets transferred to the trust. Typically, the agents go over the assets to be placed in the trust. They use that review of seniors' investments to scare them into believing their investments are unsafe, and that by "moving" their money, they can earn higher interest with no risk. The agents may have seniors sign documents that transfer the senior's CD, mutual fund accounts, or other investments to an annuity, or a so‑called "promissory note" or other investment.
Planning an estate and choosing investments involve important legal, financial and personal decisions. If estate planning documents are not properly prepared or executed they can be invalid and cause lasting damage.
Following are additional tips to help consumers avoid becoming victims of living trust mills and their scams:
* Living trust mills' sales agents are not attorneys and are not experts in estate planning.
* Documents in the trust packages may not comply with California law.
* Sales agents may not follow procedures set by law for executing or witnessing wills and other documents. These violations may make the documents subject to challenge.
* Watch out for companies that sell trusts and also try to sell annuities or other investments.
* Sales agents may fail to disclose possible adverse tax consequences or early withdrawal penalties that may be incurred when transferring stocks, bonds, certificates of deposit or other investments to annuities.
* An annuity is not 100% safe, and only a portion is guaranteed by the state. Insurance companies can and do fail, and their assets may not be enough to pay the full value of their customers' investments.
* So‑called "promissory notes" are not insured by the FDIC or any other government agency and may be very risky. They may not be registered as securities with the state.
An attorney qualified in estate planning can help consumers decide if they need a living trust or other estate planning documents, or help them review an existing trust or will. To obtain a list of attorneys who are certified as estate planning specialists, and to receive other written information about estate planning and how to select an attorney, call the State Bar of California's toll‑free number for seniors at 1‑888‑460‑7364. Before consumers buy an annuity or any other investment, they should review it with people they know and trust, such as their financial or tax advisor, their attorney and trusted family members.
Consumers who feel they have been victimized by a living trust mill, or annuity or promissory‑note fraud, should report it to their local district attorney and the California Department of Insurance. Consumer complaints also may be filed online at the Attorney General's Website at http://www.ag.ca.gov/consumers/mailform.htm .