Estate planning is similar in other respects to other purchases we make or medical procedures we have done.  Once we buy the item, we have to maintain it.

An irrevocable life insurance trust is created to hold a life insurance policy.  It is utilized by people who have taxable estates.  Today, that means an individual with over $2,000,000 or for a couple with over $4,000,0000; however, next year that increases to $3,500,000 for an individual and $7,000,000 for a couple. 

The way it is supposed to work is that a lawyer prepares the trust.  In the trust, the trustor or trustmaker appoints a trustee who then applies for life insurance on the insured’s life.  In reality, it does not always happen exactly that way, but most of the time it is fairly close.

As with a lot of things, the devil is in the details.  For example, if a married individual is having the trust prepared, the premiums should be paid from separate property funds.  The trust should have its own checking account.  Crummy letters (named after the family in an important court case) need to be sent to each of the beneficiaries every year explaining to the beneficiaries that they have the right to withdraw money from the trust for a certain period of time.

You, the client, need to ask the professionals (attorneys, CPAs, financial planners, and insurance agents) questions when you do estate planning so that the trusts provide the benefit that they are meant to bring.

Uncle Sam taxes those with an estate above two million dollars at their death.  In a sense, this is double (if not triple) taxation, as people are taxed annually on their income.

It is double taxation because the estate tax is taxing monies that have already been taxed once before.  As with most anything else in life, there are ways to avoid or reduce the tax.  However, it does take some planning.  That is where a California estate planning attorney can be of assistance.  Depending on your age, size of your estate, your goals and desires, we can show you a variety of ways in which your estate can be “reduced” so that ultimately more is distributed to those whom who you wish to have it and less to Uncle Sam.

If you think you may benefit from estate planning, and you are in Southern California, please contact our office.

Everyone wants to avoid probate.  This causes people to do all kinds of things in the name of avoiding probate.  For example, some people will give away assets.  Others will put a child on an asset with them.  Both of these “solutions” lead to their own problems which are often much worse than the cost of probate.

Penny wise; pound foolish.  Estate planning is different than most other things in that frequently the results are not measured until after death.  It therefore leads people to try to save money.  There is now a movement for California to join 9 other states and make legal a means to avoid probate.  There is a bill, AB 250, that would create the revocable transfer on death (“TOD”) deed for real property. 

Like everything else, there can be problems.  One is leaving minors as beneficiaries.  In the event that you pass, then there will probably be more administration and court proceedings than under a simple probate.  Certainly a living trust would have been much better.

How about when you leave more than one beneficiary?  Now there are multiple owners of the property.  This may sound good until you actual think about the practical circumstances.  What if one party wants to sell and the others do not?  Ideally there would be a buyout, but what if they cannot agree on price.

What if one beneficiary is deceased?  Now his/her estate is an owner?  There may have to be a probate of the beneficiary’s estate before anything can be done.

What if there is fraud involved?  Undue influence?  In my practice, I frequently see senior citizens do things that they would not have done years earlier.  They are more susceptible to being manipulated.

Frequently, the biggest winners in these attempts to avoid attorneys are lawyers themselves!  That is because, it is much more expensive to litigate than it simply would have been to prepare a living trust.  Frequently instead on there being one attorney in drafting a living trust, there are two are more attorneys.  Unfortunately by the time there are problems, the person who executed the deed, is either incompetent or deceased, so he or she never sees the problems.

Penny wise, pound foolish.  Do not let that be you.  See an experienced California estate planning attorney.  In the event that you are in Southern California, we are available to assist.