MARC  WEISSMAN

Estate Planner


 
FOSTER CITY
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ANNUAL TRUST CHECK-UP

This information is designed to be of general interest. The specific techniques and information discussed may not apply to you. Before acting on any matter contained herein, you should consult with your personal adviser.

What does the New Tax Law mean to my Trust?

It is usually not important to review your Trust, unless there have been changes in your family circumstances. I usually recommend speaking with your estate planning lawyer any time there has been a major life change. Your lawyer should contact you if there have been changes in tax law.

The tax-free amount:  2002 Tax Free amounts.

Your Trust does not need to be changed to incorporate these changes.

However, there are other developments which might be appropriate to consider.

1) You might want to consider a DYNASTY TRUST. Basically, this is a grown-up Minor's Trust.

2) Another more recent development is intriguing. We discussed (when we set up your Trust) that after one spouse dies, the Survivor has full control of the Surviving Spouse's Trust, including the right to change the beneficiary. This is usually called General Power of Appointment. I have found a way to "lock" this Trust. Should the survivor have the right to change the survivor's half? Or should the survivor's half be locked so she may spend it but when she dies, whatever remains must go to the children?

The issues is as follows: Husband dies. The Trust divides into 2 or 3 shares (for tax purposes). Wife has control of everything. She spends all of the dead Husband's half, remarries, and leaves her half to the new husband; the kids get nothing.

My wife and I discussed this. We decided that the assets we have accumulated together are OUR assets, for us and our family. If I die, I want her to be happy; remarriage is a possibility, but I do NOT want her to leave any of OUR assets to her new husband; our kids should inherit our assets.

The standard A - B - C Trust most married couples have allows the Survivor's half (the A Trust) to be changed. Consider "locking" the A Trust. Now, my wife may spend everything, but whatever she does not spend, must be left to our family; nothing may be left to a new spouse.

Some clients do not like this provision. "I should be able to take care of my new husband."

Now we have a choice.

3) We are all older now. Formerly young children are not so young anymore. Formerly wise family sages may be past their prime. Are the people (and successors) you selected to make decisions for you still appropriate? Please review these designations listed in your Trust and Powers of Attorney (financial and Health Care).

When we did your Trust we made "best guesses" regarding the future maturity of young (or unborn) people and spouses. Perhaps these should be reviewed. Example: If my wife and I die, my children do not get control until they are age 25 IF they have graduated from college. Is that threshold still appropriate?

4) Do the people you appointed have copies of your Health Care Power of Attorney? Or have they lost it? (I normally recommend giving them only the Health Care form; in an emergency they may need to make medical decisions quickly, but financial decisions are not usually so urgent.)

If you did your California Health Care Form prior to 1992, it is INVALID. It expired after 7 years and must be updated! [In 1992 the law changed to allow perpetual forms, but the old forms are no longer valid.]

5) We will all die someday. Have you made it easy for the people you entrusted to deal with your financial matters?

  1. Make sure they know where to find me (and your tax adviser). (I have enclosed some business cards, and a letter you may want to give your designated Successor Trustees to help them find me at that time.)
  2. Make a list of investments (name of institution, account numbers) so they can find your assets. (Bank / stock accounts, retirement plans, life insurance, safe deposit box, etc.)
  3. Is everything in your computer? Who knows how to access that information? Who has the password if you are dead? (Some people ask me to hold passwords or safe combinations.)
  4. If you have your own business, what will happen to it the day after you die? Is there a plan in place to deal with your death?
6) As always, it is very important that your assets which have any form of registration are properly titled in your Living Trust. These assets include bank accounts, stock, and real estate. Now is a good time to verify that all such assets are held properly.

You should have received a real property tax bill for each parcel of California real estate you own.

[Please verify from your tax bill that the Homeowner's Exemption is claimed on your personal residence. If not, call your local Tax Assessor for a claim form.]

You also will receive Forms 1099 showing interest or dividends received during the past year, and K-1s for Partnerships.

Please check each real property tax bill, Form 1099, and K-1 to ensure that it reads something along the lines of:

The BIGGEST mistake we regularly find is clients who refinance, remove the property from the Trust, and forget to put it back in the Trust name.  PLEASE CHECK.  This is the single most important omission we see.

If you bought new property or opened new investment accounts, you should verify that these are properly held in the Trust.

There may be other property which should also be in the Trust but may not provide annual reporting, such as stock which does not pay dividends and, therefore, no 1099 is provided.

You should also verify that Pension Plans, IRAs, and Life Insurance beneficiaries are properly designated.

[Creditors (such as your mortgage holder and credit cards) do not need to know about the Trust; only those holding your property should have notice.]

If you inherited any property or received substantial gifts since formation of the Trust, we should discuss its status and your desires.

If your marital status has changed since the formation of the Trust, we should discuss the ramifications.

Although it may not be necessary, it may provide additional certainty to execute annually a statement that all personal property is in the Trust. I have enclosed such a form for your signature. This clarifies that any personal property you may have acquired is in the Trust.

It is important to review your estate plan periodically to make sure that you still trust those people you have appointed to act after your death, as well as to ensure that the dispositive provisions still meet your present desires.

Another concern about which many people are unaware concerns Custodial Accounts. For example, Dad gives $10,000 to Son; since Son is a minor, Dad names himself as Custodian Under the California Uniforms Transfers to Minors Act (CUTMA), or its predecessor, the California Uniform Gifts to Minors Act (CUGMA). IF THE DONOR IS THE CUSTODIAN, the account balance is included in the donor's taxable estate at his death.

Grandpa makes gifts to Son, Custodian for Grandson. Nothing is included in Grandpa's or Son's taxable estates since the donor is not the Custodian.

Son makes gifts to Son, Custodian for Grandson. The entire balance will be included in Son's taxable estate as he is both the donor and the Custodian.

A better way to make gifts is in a Minors Trust.

If you have any questions, please call me.

Best wishes for a happy, healthy, and prosperous New Year.

Sincerely,

Marc S. Weissman

This is to confirm that all personal property apparently owned by John or Mary Smith, is in fact owned by


    John and Mary Smith, Trustees of the Trust of John and Mary Smith, dated January 1, 1991.

____________________
John Smith

____________________
Mary Smith

Dated ___________, 2002

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