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Estate Planning, Trusts

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See the perfect way to inherit: THE DYNASTY TRUST

A Trust may be used for married couples, or single people. This brochure discusses the benefits for a single person. Click here if you would like our Brochure for Married Couple, Married Couple Without Children, or Unmarried Couples.


This Article 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.


Estate Planning encompasses Wills, Trusts, and other devices to allow you to leave the most assets to your beneficiaries with the least governmental interference.

The best Will reads, "Being of sound mind, I spent it all." For most people, life is not this perfect and more complex planning is needed.


A Living Trust is advisable for anyone with an estate which would otherwise need to be probated.

If you think that you need a Will, a Living Trust is probably appropriate.


Probate is the process whereby the Court supervises the transfer of the assets of a decedent. In California, the estate of a person with assets in excess of $100,000 must be probated. PROBATE IS REQUIRED whether you have a WILL OR NOT.

Probate is wasteful, both of time and money.

Probate fees (Executors' fees and lawyers' fees) are avoided with a Trust. Probate fees are based on the gross value of a person's assets (before reduction for mortgages or other debts).

Probate fees are about 5% of the estate; $8,000 for an estate of $150,000; $42,000 for an estate with a gross value of $1,000,000.

Probate is full of delays. The Judge's permission is needed for many actions. Notice must be given (frequently it must be published in a newspaper) and a hearing must be held to decide to sell assets or pay money to the family. A Probate usually takes 1 year but can easily take twice as long.

A Trust does not die and Probate is avoided entirely.

With a Trust, decisions can be made immediately. Investment decisions or payments to heirs can be made even before the funeral.

A TRUST WILL NOT COMPLICATE YOUR LIFE. While you are alive, the Trust will not change the way you do anything. No special tax returns are required; no reports to any government agency. No control is lost. In fact, once the Trust is set up, you can forget it; everything should work automatically.

Furthermore, a Trust is private. (Once a Will is admitted to Probate, its terms become a matter of public record. The Will and assets held by the deceased are public knowledge.) A Trust is a private document and its contents and provisions are fully confidential.


A "Living Trust" is formed during the lifetime of the founder. The founder is the manager (TRUSTEES) of the property, the same as prior to the formation of the Trust.

He is also the sole BENEFICIARY of the Trust during his life. He has full control. He is entitled to do anything he wants to do with Trust assets. No one else has any power.

The Trust may be amended easily at any time during the lifetime of the founder. As family circumstances change, the Trust should be amended to reflect changes.



Oftentimes a family does not object to a person in an alternative living arrangement, but gets quite aggressive if everything is left to a lover.

A Living Trust is extremely difficult to challenge, which makes it a perfect tool for many single people.

Unlike a Living Trust, a Will is very easy to contest. During Probate of the estate of a person with a Will (or who died without a Will) a Court proceeding already exists. The terms of the Will are known to all. Undue influence or lack of capacity are very easy to allege, even without a lawyer, causing a major, expensive controversy and delay with very little effort.

It is very difficult to challenge a Living Trust. First, there is no pre-existing Court proceeding. Rather, a lawsuit must be started from scratch.

Second, the disgruntled heir does NOT have a copy of the Trust. In fact, he does not even know what it says. This makes it nearly impossible to hire a lawyer on a contingency. Most lawyers would want a significant retainer (more than $5,000) before taking on such a case.

These two factors normally eliminate contests over Living Trusts.


The Trust provides for automatic replacement of the manager (with a person previously selected by the founder).

A major advantage of a Trust is the speed and flexibility it provides. Since Court approval is not required, property can be transferred immediately after death, providing for family needs without the delay and expensive procedural requirements of Probate.


For a single person, a Trust will NOT save any death taxes. No Federal or California death taxes are due if a taxable estate does not exceed $1,000,000. Above that amount, tax rates start at 37%.


A Living Trust does not produce income tax savings (although Probate fees may be reduced or eliminated). During his lifetime, the founder hasfull powers over the Trust. For tax purposes, since he has total control, he is considered the owner of the Trust; therefore, he is taxed on all income from Trust property. No annual tax return is needed for the Trust.


Should the heirs receive assets in stages [1/3 at age 25, 1/3 at 30, 1/3 at age 35]? Should they get a big allowance, or be encouraged to get jobs? Almost anything you want is possible.


A Living Trust allows flexible, personal administration of assets after death.

One concern clients have is distributions to minors. At what age is a beneficiary mature enough? The client may specify any age (or ages) or a formula to determine when the beneficiary is old enough to receive outright ownership of the assets without any supervision.

Age 18 is the legal minimum. But most 18 year olds are not wise enough to own substantial wealth. You may decide to distribute a portion at each of several different ages, allowing a trusted person to retain management and control of the balance of the assets.

Some clients give the Trustee total control, using such language as, "When my Trustee deems my child to be of sufficient maturity, he shall distribute, free of Trust."

Some clients put other or additional prerequisites on bequests, such as college graduation, drug free testing, non-participation in certain religious groups, or any other matters which meet the particular needs of the client.

With a little imagination, whatever is right for each client's situation can be constructed.

Two horror stories illustrate the concern:

A 17 year old girl (with $2,000 in the bank) wants to take her boyfriend (the dishwasher) to college to share an apartment. She meets parental opposition. She says, "When I turn 18, it's my money, and I can do it if I want to!"

A 34 year old woman says, "I cannot pay the $2,000 debt, because I already spent the $100,000 per year I get from grandmother's trust fund. [She spent it on `a couple of trips to Hawaii' and has nothing to show for it except a suntan.] But I'll pay it in 6 months when I turn 35 because then I get the millions grandmother left me in Trust."

Deciding on the distribution or `strings' is very difficult sometimes, but total flexibility is achieved with a Living Trust.


Should adopted children be treated identically to natural children? Should children's spouses receive a share? Should the `black sheep' of the family be excluded?

The Trust allows anything to be accomplished, privately, with a minimum of difficulty.

Handicapped children present special needs in planning. The Trust is the ideal way to provide for a handicapped child in such a way to retain eligibility for most public assistance.


Often, clients ask if there are any disadvantages of a Trust.

With a Trust, Probate Court is avoided entirely.

However, there are two advantages of Probate. First, Probate's restrictive rules may eliminate your manager's ability to steal from your heirs. However, this is very expensive protection [5% of the GROSS estate].

Typically, there is only one other disadvantage to a Living Trust: its cost of formation. (There are no other costs of its operation during the lifetime of the founder - no tax returns, no management fees, no legal fees, no filing fees.)

Forming a Living Trust is not expensive, especially in view of the savings of Probate.


If an unmarried person does not have a Will, on his death, California requires all assets go:

If these dispositions meet your needs, do you still need a Will? YES! Probate Court proceedings are much more efficient and less costly if a Will exists.


A form has been jointly prepared by the California Medical and Bar Associations. (This may be the first time Doctors and lawyers ever agreed on anything!) This form authorizes another person to grant consent for medical treatment for you, in the event that you are unable to do so. [This form is also called a "pull the plug" form, or a `Living Will,'although it has nothing to do with Wills.]

A 1992 law allows such forms to be valid forever in California, rather than merely 7 years as under prior law.


A document authorizing another person to act on your behalf is a Power of Attorney (POA). A POA may be very limited or broad.

A POA may be limited to a particular transaction (e.g., sign documents to sell my house while I am out of town), or broad to allow the person you select to act on your behalf for all matters.

It may be effective immediately; or "spring" into effect only on the occurrence of a future event (such as upon your future incapacity). It may be canceled, enlarged or restricted (in scope or in time).

A Will is used to control assets after death; a POA may be used to control assets during life, in periods of absence or illness. A POA rounds out estate planning, ensuring that someone is authorized to act on your behalf in the event that you are not able to do so.

Click here for more details on POAs.


A Living Trust is a simple to use device which:

  1. Provides the founder with full control over all of the assets during his life;

  2. Provides for an orderly transition of management and use (benefits) at the death of the founder;

  3. Eliminates Probate Court, saving time, money, and publicity, ensuring privacy of your financial and personal affairs; and

  4. Provides flexibility for management and distributions of Trust property.


In the past there had been another disadvantage of Living Trusts which has been almost eliminated by a new statute.

Probate provides a creditor's claim cut-off not formerly available under a Living Trust.

People with Living Trusts were faced with a potential unlimited duration of claims. This only applied to people with unknown creditors.

An unknown creditor is someone you owe, but don't know it yet. An example is an Obstetrician whose malpractice on delivering a baby doesn't show up for many years.

While Probate of his estate would cause a cut-off of all claims, including those which were unknown or even unknowable, under old law, if the Doctor had avoided Probate by using a Living Trust, the creditors' cut-off would not apply, so that a later discovered victim could pursue the Doctor's heirs years after his death.

Effective January 1, 1991, any claim against a decedent must be filed within one year of his death, or it is forever lost.

Now, even the remote risk of a claimant appearing long after death of a person who avoided Probate by use of a Living Trust is eliminated, although the one year period applies, rather than a 4 month cut-off.

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