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Sacramento Estate Planning Blog

Important trust basics Sacramento residents need to know

Understanding the basics of trusts as estate planning tools can be crucial for California residents. Trusts are essentially agreements that dictate how assets will be managed and distributed to named beneficiaries. The creator, or grantor, of a trust can name a trustee to manage the trust. This trustee has a fiduciary duty, meaning that he or she must make decisions regarding the trust and trust assets that further the best interests of the trust's beneficiary.

There are many reasons why creating a trust can be beneficial. To start, trusts, unlike wills, allow assets to bypass the probate process. This can reduce the amount of time needed to distribute estate assets and it can save beneficiaries money. Since the probate process can be bypassed, those who utilize trusts can protect the privacy of their estate. Also, trusts are a viable way to financially provide for those a grantor cares about while allowing restrictions to be placed on the distribution of those assets.

Incompetence can lead to the invalidation of a will or trust

The creation of a will or trust should leave an individual feeling comfortable with how his or her estate will be distributed upon death. Sometimes, however, squabbles arise over the validity of these estate planning documents when individuals challenge the creator's competence at the time of the creation of those documents. This can lead to a multitude of issues, including the invalidation of a will or trust which, in turn, can lead to distribution of an estate that is counter to a person's intentions.

Under California law, an individual can only be found incompetent for the purposes of executing a will or trust if there is evidence that shows a deficiency and that deficiency can be shown to affect the execution of the document in question. This evidence must pertain to at least one of a number of statutorily identified characteristics, including deficiencies in an individual's consciousness, orientation to time and space, shortcomings in memory and an inability to understand and appropriately communicate.

Fashion icon may have utilized pet trust for beloved cat

Fashion icon Karl Lagerfeld recently passed away, leaving many wondering what will become of his estate. Lagerfeld, who was 85 at the time of his passing, had a pet cat, Choupette. The feline has even become famous in his own right, with an Instagram account and followers, table book and career modeling. Because this pet was so well cared for during Lagerfeld's life, many think that he may have left his estate in a way that ensures that Choupette is taken care of for a long time to come.

There are a few ways this could be accomplished, but the most likely way is through the utilization of a pet trust. Although people used to leave pets to loved ones, as if the pet was a piece of property, trusts have become more common because people are more frequently viewing their pets as beloved family members. Through a pet trust, an individual names someone to manage the trust assets and make dispersals. An individual who provides care and maintenance for the pet is then tasked with utilizing those assets in furtherance of the pet's best interests.

Do you need an estate plan if you don't have kids?

The vast majority of people who find estate planning imperative are those who have children. These individuals often want to make sure that their assets are left to their kids and their spouse in a way that protects their financial future and maintains the estate's financial viability. While these individuals certainly should consider how best to plan for the distribution of their estate upon death, even those without children should consider engaging in estate planning to ensure asset distribution that fits their desires.

When you pass away, someone will inherit your assets, even if you don't have children. Absent an estate plan dictating how those assets are to be distributed, state law will determine which individuals will inherit your estate. This may mean that a relative you barely know could inherit everything. By utilizing a will or trust you may avoid state-mandated distribution and utilize a distribution plan that benefits those you find deserving. Creating trusts can help you avoid the probate process, which may otherwise allow lesser known relatives the ability to intervene and try to lay claim to estate assets.

Unique situations that require adept estate planning

No two families are the same. Some families may appear "traditional," with two spouses remaining married for the long-term and raising children, while others are "untraditional." These latter families can involve step-parents and step-children, unmarried couples, families with adopted children and even children conceived through artificial means. Regardless of the dynamics of a family, estate planning is crucial.

Yet, those who have a complex family structure may need to give their estate plan more care. Failing to address what may seem like minor details may lead to loved ones missing out on intended inheritances. For example, a step-parent may need to be abundantly clear in their will and trust documents whether they are leaving assets to their step-children. The law otherwise doesn't necessarily allow for those children to inherit from a step-parent.

No mental incapacitation found in mogul's estate plan case

Estate plans can address significant wealth. When familial tensions run high, these plans can run into conflict, with multiple parties claiming that they should have their fair share of an estate's assets. Those who are not prepared to head off these disputes can have their estates distributed in a way that is in opposition to their wishes.

This was almost the case for media mogul Summer Redstone. Redstone, who is 95, recently found himself embroiled in litigation regarding amendments he made to his trust that removed his former companion as the person in control of his healthcare directive. It also kicked her out of Redstone's mansion. The dispute started when the former companion claimed that Redstone lacked the mental capacity to make these changes. That companion has now agreed to repay more than $3 million in gifts that were given to her.

Estate planning: consider utilizing accounts in trust

We've spent quite a bit of time on this blog discussing various types of trusts. These estate planning vehicles can serve an important purpose. They can allow an individual to leave assets to others with certain restrictions applied. There are oftentimes tax advantages to utilizing a trust, too. In order to pick the trust types that are right for an individual in his or her situation, it is important to carefully consider the options.

One option available to Californians is the account in trust. Here, an account is placed in trust, meaning that it will be managed by a designated trustee for the benefit of another. As with other trusts, terms and restrictions may be placed on the trust and the dispersal of assets from the trust. A variety of assets can be placed in an account in trust. Stocks, bonds, mutual funds, even real estate can be placed in an account in trust.

Remarriage can affect estate planning and distribution

It's no secret that divorce is a common occurrence in California and throughout the country. So, too, is remarriage after divorce. While statistics show that less than one out of every five divorced individuals remarry, the rate is significantly higher for those 55 and older. For this population, remarriage occurs 57 percent of the time.

Remarrying after a divorce can bring about a lot of changes. Of course, emotionally, an individual has fallen in love with someone else and decided to share his or her life with that person and, in many instances, his or her family. Things can change logistically, too. Parenting time with kids from a previous marriage, adapting to new routines with stepchildren and generally getting acclimated to the ins and outs of daily life can be an adjustment. While most people are able to recognize these changes, many of these individuals neglect to identify the ways that remarriage after divorce can affect their estate and how it will be distributed upon their passing.

Transfer on death accounts can help avoid probate

Most, if not all, Californians want to avoid the probate process. After all, having an estate subjected to probate can make the matter public, and it is usually lengthy and costly. For these reasons, many people who engage in estate planning do so, at least in part, to avoid probate. In order to do this successfully, though, Californians need to understand the estate planning options available to them, choose those legal avenues that are right for them, and create legally valid documents that will withstand any challenges.

One action that can be helpful in one's pursuit to avoid probate is to utilize transfer on death accounts. Accounts that contain a transfer on death provision remain held by the account's creator until the time of his or her death. At that time, the assets subjected to the transfer on death provision are diverted to named beneficiaries. This completely bypasses the probate process.

What is a blind trust?

There are a variety of trusts that can be utilized to fulfill the needs of an estate planner. Previous posts here have discussed a number of options, including irrevocable trusts in general, charitable trusts and generation-skipping trusts. There is another option: a blind trust.

This type of trust allows trustees to possess full discretion in the handling of trust assets. The beneficiaries of the trust, as well as the trust's creator, have no knowledge about how those assets are handled. The trust's creator can terminate the trust, but he or she will receive no reports from the trust and its investments, if any.

My Sacramento law practice, Michael A. Sawamura, Attorney at Law, focuses on wills, trusts and estate planning law in addition to business law and corporate defense services. My clients include professionals, government employees, small businesses, blue-collar workers and national corporations.

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