NBI 2007 Drafting Effective Wills and Trusts

This article is not intended to be relied upon for legal advice. All cases are individual and all viewers are instructed to contact a licensed attorney for the area in which they are seeking information and advice.  Attorneys use their education, training and experience to advice strategies and techniques to protect client’s rights and try to obtain their legal goals.  As the client’s interests are always placed first in our firm, a free in-house consultation is always offered with no obligation which is completely confidential.  Forms frequently change and the official website for the County of San Diego should be reviewed for current forms and procedures.  This is not meant to be inclusive or exclusive and is only for general information.  The law changes frequently and the information in these articles was accurate as of the time of the preparation of the articles.

DEFINITION OF TRUST: a fiduciary relationship with respect to property arising from the manifestation of intention to create a fiduciary relationship and subjecting the person who holds title to the property duties to deal with it for the benefit of a charity or for one of more persons at lease one of whom is not the sole trustee

GOAL: transfer wealth from one generation to the next in the most economical, expedient and tax minimizing strategies        

PROBLEMS: uncertainty as to the estate tax rate as of 2011+

SOLUTION: long term care planning; estate tax analysis, gift tax analysis; complete and comprehensive estate plan analysis

LANGUAGE: allowing spouse to transmute property from community property to separate property of the well spouse may prevent unnecessary depletion of the estate.  Powers allowing transfers of real and personal property may preserve the inheritance for the next generation and avoid a spend down before qualifying for certain public benefits.   

CONFLICTS OF INTEREST: on separate forms for actual and potential conflict of interest in each married trust of issue from different spouse/non spouse

1. Sample clauses and forms included in program materials: review and integrate with existing trust template: SEE LAST SECTION

2. Revocable Living Trusts
   -effective during life and after death
   -estate over $100,000 or any real property over $20,000
   -name, address, phone number, date of birth and relationship for all beneficiaries, executors,        administrators and agents for identification and location purposes typed
   A. Benefits
        1. Avoid Probate
        2. No court supervision and attendant costs
        3. Privacy
        4. Avoid conservatorship
            NOTE: if locked facility or psycho tropic drug need conservatorship
        5. Avoid guardianship
   B. Disadvantages            
        1. No court supervision
        2. Lack of understanding of legal ramifications and duties
   C. Documents
        1. Durable power of attorney for finances
            NOTE: all poa’s expire as an operation of law upon death
            NOTE: no compensation for any agent for poa as this limits their liability
        2. Advance Health Care Directive
            A. Make sure to have separate HIPPA form signed IN 14 POINT TYPE
            B. If in skilled nursing home, need to have the Ombudsman and no relations
            C. Make sure to have witnessed as may be needed in other state which has this                                     requirement
            D. Anatomical Gifts
                 1. Specific gifts
                 2. Specific locations and/or organization
                 3. Register AHCD and HIPPA with all other pertinent information with DocuBank
       3. Authorization to release protected health information
       4. Nomination of guardians
       5. Nomination of conservator
       6. Assignment of property to trust
           A. Obligation of attorney to have real property deeds recorded transferring title
       7. Certification of Trust
       8. Pour over will
       9. Letters transferring financial assets to trust
     10. Trust protector clause
     11. Incorporated special needs trust
   D. Witness
        1. Having drafting attorney witness trust will be given great weight if contested due to                        capacity or undue influence
   E. Disinherit Clause
        1. Give nominal amount to discourage contest
        2. Skip to next generation (beware generation skipping tax)
   F. No Contest Clause
        1. Use safe harbor provision to obtain court determination prior to filing a contest
        2. PC 2130(b) (1)-(12) for exceptions
   G. Bypass Trust
       1. Subject to ascertainable standards
           A. Health
           B. Education
           C. Maintenance
           D. Support

3. Wills= only effective upon date of death
   A. Witnessed (PC 611): must meet all requirements
         1. In writing
         2. Signed by testator or signed under direction of testator
         3. Signed by testator in presence of two witnesses present at same time
         4. Signed by two witnesses with the understanding they are signing a will as witness
   B. Holographic: minimal requirements
        1. Must be in own handwriting
        2. Must show testamentary intent
        3. Inform all client to make holographic will pending finalization of trust
   C. Statutory: printed form
        1. No changes allowed to verbiage
   D. International
        1. Look to laws in country of origin and country where will executed

4. Capacity: PC 810-813
    A. Full capacity: both wills and trusts
    B. Diminished capacity: will but not trust
    C. No capacity: neither will nor trust
    D. Expert opinion from geriatric specialist may be needed
    E. Competency form for client to fill out in office in their own handwriting as appropriate

5. Probate Administration
   A. Formal court supervision
   B. No will
   C. Will
   D. Exceptions
        1. Joint tenancy with right of survivorship
        2. Contract

6. Trust Administration
    A. Informal supervision
    B. May always petition court as needed

7. Gift tax: donor pays tax
     BASIS= purchase price plus improvements
     NOTE: STEP UP BASIS AT TIME OF DEATH FOR REAL ESTATE AND                            BENEFICIARY TAKES WITH THE STEP UP BASIS
     DONORS BASIS IF GAIN
     FAIR MARKET CALCULATION IF LOSS
    A. Real property deed with name added for co ownership
    B. Accounts with name added for co ownership
    C. Gifts
         1. Exclusions
             A. $12,000 per year per individual
             B. Educational purposes paid directly to provider for tuition (no relationship necessary)
             C. Medical expenses and medical insurance premiums paid directly to provider (no
                 relationship necessary)
             D. 529 plan
             E. Charitable deductions
    D. Valuation is fair market value of gift as of date of gift
    E. Non US Citizen spouse: use QDOT
    F. Outright gift= date of gift
    G. Co ownership= date of death
    H. Marital deduction referral

8. Estate Tax
    A. CPA for analysis

9. Joint Tenancy
     A. Equal percentages
     B. Right of survivorship

10. Tenancy in Common
     A. Unequal percentage
     B. No survivorship

11. Irrevocable Life Insurance Trust
     A. Not included in estate
     B. Use “Crummy” provisions
     C. 3 year look back window for existing policy transfer
     D. No look back window for new policy

12. Generation Skipping Transfer Tax: 1986
    A. Applicable to passing directly to two generations or more below grantor
    A. Not applicable to deceased child passing to their issue
    B. Grandparent to grandchild and beyond scenarios

13. Disclaimer Trust
     A. Allows 90 day window period to disclaim B trust
     B. Never use with blended families

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