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Attorney Prepared Living Trusts, Wills and Estate Plans
Any California resident owning real estate or other assets in excess of $150,000 needs a trust to avoid probate and reduce or eliminate estate taxes. A Will goes through probate, a trust does not. A trust will most likely save $15,000 to $45,000 in legal fees when compared to a Will and the probate process.
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Types of Trusts Prepared
"The top three reasons clients plan are:
Other findings indicated that 74 percent of clients are aged 50 or older."
Trusts and Estates Feb 2, 2010 Press release
Comprehensive estate planning includes:
Funding a Trust
In California the vast majority of trusts are created to avoid probate and provide for the orderly transfer of assets at a minimum cost and effort. By avoiding probate court, living trusts save money and time and are not part of the public record. But a trust cannot just be created, it must also be “funded.”
An unfunded trust is exactly like a Will in that it does not avoid probate. This is a common and very costly mistake that many do-it-yourselfers make in their estate planning.
“Funding a trust” is the transfer of ownership from the individual to the trust and naming the trust as a designated beneficiary. Assets are transferred into trusts as follows.
Real estate is transferred by deed from the trust creator to the creator’s trust. The deed is recorded with the County Recorder. In each trust document a person known as the “successor trustee” is identified. Upon death of the trust creator, the successor trustee takes control of the real property via a document known as “affidavit of death of trustee.”
The affidavit of death of trustee puts the County Recorder on notice that the owner has died and provides the name of the Successor Trustee who has authority to transfer, sell, distribute or convey the real property. The affidavit is recorded in the County where the real estate is located.
No transfer tax, property tax increase or capital gains tax is incurred on real property transfers into a trust. Transfers out of the trust due to death also have no transfer tax. Real property tax increases can be avoided if the death transfer is from parent to child or grandchild. No capital gains tax is incurred on death transfers but estate tax may be incurred on estates over $5 million.
Bank, brokerage and stock accounts are funded into the trust by ownership transfer from the individual into the trust. The owner contacts the bank and stock brokers to change ownership. Documentation and procedure requirements vary for each bank and broker.
Retirement plans and life insurance policies are funded by designated beneficiary. A designated beneficiary is a person or trust identified as the heir of a retirement account or life insurance policy.
Plan administrators and life insurance companies provide forms for the owner to name the designated beneficiary.
For retirement accounts, the primary designated beneficiary should be the non-owning spouse and the alternate or secondary beneficiary should be the trust. For life insurance policies, the primary designated beneficiary should be the trust.
A trust also needs a Will, commonly referred to as a “Pour-Over Will”. Most trusts are prepared to avoid probate. But if an asset is not funded into a trust, the probate of a Will is needed. California law provides that a Will witnessed and signed by two individuals is self-proving and will be admitted as evidence of the testator’s intent.
In the event probate is needed, the Will is the document to file. In the body of the Will the distribution of assets should be into the trust. The assets of the probate estate then “pour-over” into the Trust.
In conclusion, funding a trust is an important step in avoiding probate through proper estate planning. This tip sheet is intended to provide information and education, but it’s advisable to consult with an attorney when finalizing your plans in order to avoid even larger and more costly problems in the future.
Services include the following:
Estate Planning Law and Administration
Wills, pour-over wills, trusts, living wills, powers of attorney, and other planning documents
Revocable family trusts
Revocable trusts to reduce or eliminate estate taxes (death tax)
Advanced estate planning; irrevocable charitable trusts, family limited partnerships, qualified personal residence trusts, irrevocable life insurance trusts (ILITS)
Special needs trusts
Advice and legal representation of executors, administrators, trustees, and guardians on transfer of assets and estate administration
Pre-marital (premarital) and post-marital agreements
Mark W. Bidwell, Attorney at Law and CPA, Inactive. Office is located n the City of Irvine, Orange County, California