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MARC WEISSMAN

ESTATE PLANNER
FOSTER CITY

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 an unmarried couple, gay or straight, domestic partners or not. Click here if you would like our Brochure for Married Couple, Married Couple Without Children, or Single.

ESTATE PLANNING FOR 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 difference in estate planning for lesbian, gay, or other unmarried couples is an additional concern which often arises: giving decision making rights to partners and avoidance of familial interference.

Although the California Domestic Partners Legislation failed due to the political agenda of the Governor, we are able to achieve the same results through well-drafted documents.

We utilize a variety of documents to achieve these goals.

HEALTH CARE AUTHORIZATION

This formally authorizes another person to make health care decisions for you if you are not able to communicate.

[Without such a document, the closest blood relative will be appointed by the Court to make decisions.] Included in the scope of this document is authority to `pull the plug,' withhold heroic life support measures, and control hospital visitors.

POWER OF ATTORNEY-Financial Matters

This authorizes another person to control your finances during any period in which you are incapacitated.

You may define incapacity. For example, "If Mr. X, Ms. Y, and Dr. Z unanimously agree that I am incapable of managing my own finances, Ted is hereby appointed to make all financial decisions for me."

A Power of Attorney may be changed, canceled, enlarged or restricted (in scope or in time).

Click here for more details on POAs.

NOMINATION OF CONSERVATOR

A Conservatorship is a Probate Court proceeding under which an incapacitated person's financial and personal affairs are administered by a person appointed by the Probate Judge.

Without a Nomination of Conservator, the closest blood relative will be appointed. Having a notarized document nominating your preferred Conservator makes it much more likely that your wishes will be respected. In fact, it is the only way in which your wishes will even be known.

WILL

In California, if a person has assets in excess of $100,000, Probate is needed. PROBATE IS REQUIRED whether you have a WILL OR NOT. Probate is public.

The first step of Probate is `admitting' the Will. In open Court, after notice to family members, the Judge asks if any person has any objection to the Will. Unhappy family members may easily start a Will contest, even without a lawyer.

If your assets are less than $100,000, a Will may be sufficient. If your assets are greater or if you are concerned about people contesting the Will, a Living Trust is more appropriate.

LIVING TRUSTS

The most important tool for estate planning is a Living Trust. A Living Trust is advisable for anyone with an estate which would otherwise need to be Probated. A Living Trust avoids Probate, both at death and in the event of incapacity.

Probate Avoidance

Probate is the process whereby the Court supervises the transfer of the assets of a decedent or incapacitated person.

Contestability

A Trust is private. To contest it, a person must first file a costly lawsuit, even before seeing a copy of the Trust. It is not likely that a lawyer will take such a case without first having a substantial retainer in hand.

Publicity

Once a Will is admitted to Probate, its terms become a matter of public record and the inventory of assets held by the deceased are public knowledge.

A Trust is a private document and its contents and provisions are confidential.

Probate is wasteful, both of time and money.

Probate fees (for the Executor and lawyers) 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 gross 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. A Probate usually takes 1 year but can easily take twice as long.

A Trust does not die and Probate is avoided entirely. 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.

Either separate Trusts or one Living Trust can be prepared for an unmarried couple. The founders are the managers (TRUSTEES) of the property, the same as they were prior to the formation of the Trust.

They are also the sole BENEFICIARIES of the Trust during their lives. They have full control. They are entitled to do anything they want to do with Trust assets. No one else has any powers over the Trust.

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

A major advantage of a Trust is the ease of establishing a gift of a Life Estate.

A Life Estate is the right to use a gift for the recipient's entire lifetime, but at his later death, the remaining assets return to the family of the donor or another recipient.

For example, Bob and Ted have a long term relationship. Bob has $500,000 and wants to take care of Ted for Ted's whole lifetime, but at Ted's death, the balance goes to Bob's family. A Living Trust is the ideal tool to accomplish this.

After Bob dies, Ted can be his own manager, with almost total freedom to spend everything, or Bob can appoint another person to be the manager to take care of Ted.

A TRUST IS VERY APPROPRIATE FOR:

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 financial needs without the delay and expensive procedural requirements of Probate.

NO INCOME TAX SAVINGS

A Trust has many advantages, but cannot accomplish everything. A Living Trust does not produce income tax savings (although Probate fees may be reduced or eliminated). During their lifetimes, the founders have full powers over the Trust. For tax purposes, since they have total control they are considered to be the owners of the Trust; therefore, they are taxed on all income from Trust property on their 1040s. No annual tax return is needed for the Trust as long as the founders are alive.

Flexibility

Distributions

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

Some clients give the Trustee total control, using such language as, "My Trustee shall distribute to Ted whatever amount the Trustee deems appropriate."

Some clients put additional strings on bequests, such as 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 method is right for each client's situation can be constructed.

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

Special Circumstances

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

Disabled people present special needs in planning. The Trust is the ideal way to provide for a disabled person in such a way to retain eligibility for most public assistance. Click here for more details on Special Needs Trust.

DISADVANTAGES OF A LIVING TRUST?

With a Trust, Probate Court is avoided entirely. However, there are two advantages of Probate. First, Probate protects against wrongful actions by the manager you appoint. However, this is very expensive protection [5% of the GROSS estate]. In other words, the freedom from court restrictions might allow your manager, after your death, to steal from your heirs. Probate's restrictive rules may eliminate this opportunity.

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

If the Trust remains in existence after the death of the founder, an annual Trust Income Tax Return is required.

INTESTATE

If a single person does not have a Will, on his death, California provides that his assets go to his closest family members on his family tree in the following priority: descendants, parents, siblings, etc.

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