Answers to Frequently Asked Questions
Kimball, Tirey & St. John, LLP - Serving the San Francisco Bay Area From Pleasant Hill, Fairfield, and San Mateo, California
1. My spouse and I already have a trust. Do we need to do any further estate planning?
Having a trust is the first building block of a complete estate plan. You will also need pour over wills, durable powers of attorney for financial decisions, and advanced health care directives for a basic estate plan.
Your trust should be reviewed periodically to ensure that the provisions continue to accurately reflect your wishes, that there have been no changes in the law, and that your estate has not changed requiring revisions to your estate plan. Often, as people age and their estates grow, they may need advanced estate planning to minimize or to eliminate estate taxes. And, of course, if there are changes in your family or personal situation, your estate plan should be reviewed by a qualified attorney.
2. I had a trust and then my spouse and I divorced. I am about to re-marry, do I need to do any estate planning?
You should contact an attorney immediately to insure that your previous estate planning documents and beneficiary statements are no longer in effect. You should consider a premarital agreement and receive advice as to the best estate plan for your new marriage.
If you are considering a premarital agreement, please leave enough time to receive legal counsel, to draft the premarital agreement, and to consider it before signing. There are strict time limits that apply to premarital agreements, and you should begin planning more than 30 days before your wedding day.
3. My loved one has recently died. What do I need to do?
One of the advantages of having created a living trust is that it gives survivors time to grieve. Nothing will need to be done immediately and most legal matters can probably wait for two to three weeks. However, if there are pressing business or legal matters, an attorney should be called immediately. An attorney also should be contacted before you make any asset transfers or decisions about retirement plan rollovers.
You should order at least ten death certificates at the funeral home or mortuary. They also will notify Social Security of your loved one’s death.
If a trust exists, you will review your assets with your attorney and make sure that they are properly held in trust. Organizing assets in certain ways can reduce present and future taxes. Finally, certain administrative steps must be taken, such as lodging the Will at the local courthouse and giving notices to creditors and beneficiaries, when required. Your attorney also will assist you with notifying pension plans, insurance companies, and financial institutions.
Some estates may require probate court action link to transfer assets to the surviving spouse. This usually does not require formal probate proceedings! Instead, California law provides for a probate shortcut, a Spousal Property Petition, which usually takes about 60 days to complete.
In all estates, final income tax returns should be filed and annual trust tax returns may be required. If your estate is of sufficient size, an Estate Tax Return must be filed within nine months of the date of death. In all estate matters, your attorney should coordinate with your tax professional.
4. My parents don't have a will or a trust. Which one do they need?
In California, anyone who owns real estate worth more than $20,000.00, or other assets totaling more than $100,000.00, needs a living trust or other probate avoidance plan. All adults need a will (called a pourover will if made in connection with a living trust), a durable power of attorney for financial decisions, and an advanced health care directive. A particular individual's needs must be assessed by an experienced estate planning attorney. At Kimball, Tirey & St. John, LLP, we have helped over 2,000 families with their estate planning needs. All of those matters were handled by attorneys; not like “trust mills” who deliver “cookie-cutter” documents without offering the benefit of an attorney's attention and guidance.
5. What is the difference between a Will and a Trust?
A will sets forth who is to receive a person’s assets after death. It must be “proved” in probate court to be effective. It is a public document which can be examined by anyone who walks into the courthouse.
A trust is a self-proving instrument in which the trustee holds property for the benefit of another. It does not need to be “proved” in probate court. Therefore, what would take a year or more in probate court can be accomplished in less than half the time with a trust. Unlike a will, the terms of the trust remain private and are revealed only to the beneficiaries, in most cases.
6. What can I do to take care of my pets when I die?
In many homes, pets are loved members of the family. You may use a will or trust to determine who will take care of your pets and to set aside money or other assets for their care. However, a pet may not inherit your estate. At Kimball, Tirey & St. John, LLP, we have created many “kitty trusts” (and “puppy trusts”, “horse trusts”, “bird trusts”, and “turtle trusts”, too!).
7. How can I help my grandchildren go to college?
A direct gift of $12,000.00 per year from each grandparent to each child is always possible. However, there are a number of ways to help grandchildren with college costs, while making sure that they are not in control of large sums of money before they are ready.
One of the most effective ways is a §529 Plan, which permits up to five years worth of gifting in a single year, and permits the money to grow and to be spent on college costs, tax free. Some families may choose to create their own college trust, which is an effective way to provide for a number of grandchildren of different means and needs.
8. One of my children has a drug or alcohol problem. What should I do?
There are a number of alternatives which may fit your family’s situations. Delayed distributions or incentives to promote healing; annuities to provide guaranteed retirement income; or, a lifetime trust with limitations on pre-approved expenses can be drafted into the estate plan instead of providing for an outright distribution.
Each of these alternatives will insure an inheritance for a loved one. However, you should also carefully consider who should serve as trustee. Professional fiduciaries, such as banks, attorneys, or other certified specialists, can serve as a trustee and relieve a responsible family member from the strain of dealing with a drug or alcohol dependent child who is exerting pressure for more money.
9. Do I need to record any of my estate planning documents? What if I have previously recorded a power of attorney?
Recording estate planning documents is not required. The only document that is required to be recorded is the deed which transfers real estate that you own into your trust. In most situations, it is not recommended; a living trust is a private document which only needs to be shared with the persons of your choosing. However, in some situations, it may be advisable to record powers of attorney to give notice that the agent has the legal right to act on a disabled adult’s behalf or to give notice that a previously-recorded power of attorney has been changed.
10. My husband and I invested in real estate over the past years. We now have a number of rental investments, but I no longer want to manage them. I have heard that I might have to pay a lot in taxes if I sell them. What should I do?
There are a number of options which allow real estate investors to avoid capital gains taxes. Our firm can assist you with a §1031 exchange, installment sale, or charitable remainder trust. If you wish to keep your investment real estate, but do not want to manage it, we can help you with management contracts for professional managers, as well as trusts or family limited partnerships to transfer management to your loved ones.
11. Should I give a copy of my living trust to a financial institution that demands it?
A living trust is a private document. However, many financial institutions require proof that a trust has been created. California law provides that a Certification of Trust may be given and that the financial institution is required to accept it. At Kimball, Tirey & St. John, LLP, a Certification of Trust is created for you whenever we create a trust.
12. Should I change my 401K and IRA's to the name of the trust?
Usually, transferring retirement accounts such as 401k's and IRA's to the name of the trust is not advisable because it may trigger unwanted tax consequences. Instead, death beneficiaries should be reviewed carefully to ensure that the correct beneficiary is stated. In some cases, listing the trust as a contingent beneficiary may be advisable.
In all cases, the worst thing you could due is to fail to make any beneficiary designation at all, or to leave an out-of-date designation in place (such as naming an ex-spouse as the beneficiary of your 401k!). Please consult with your attorney or tax advisor before making changes to beneficiary statements.
13. I want to make changes to my trust, can I just write them on the trust?
No. In many cases, writing changes on a will or trust will invalidate the document! A will or trust often includes many legal provisions which are hard to understand without an attorney’s help. Therefore, please consult an attorney to before making changes to a trust document.
14. Why does the hospital need a Health Power of Attorney?
A Health Power of Attorney, also referred to as an advance health care directive or a power of attorney for health care decisions, gives your agent the authority to make health care decisions for you when you can not. With the passing of the Health Insurance Portability and Accountability Act (“HIPAA”), privacy and accountability have become the norm. Hospitals and doctors are reluctant to provide information to your agents without proper authority. Therefore, hospitals and doctors properly insist upon receiving a copy of your Health Power of Attorney before discussing your private medical situation with your agent.
Your power of attorney may address several important decisions, such as life support, organ donation, autopsy, and burial or cremation. For many people, it is the most important estate planning document to have.
15. What is a Financial Power of Attorney and how is different than a Health Power of Attorney? Do I need both?
A Durable Power of Attorney for Financial Decisions allows your agent to take care of your financial needs. A Health Care Power of Attorney is limited to health care and end-of-life decisions. You need both to plan completely for incapacity arising from illness or injury.
16. How do the new Domestic Partnership laws affect my estate plan?
While there are significant benefits to same sex partners under new legislation, California domestic partnership does not apply to federal tax law or benefits. Furthermore, there is great confusion within California and in other states as to what a California domestic partnership means.
Domestic partners should not rely on registration alone to guarantee an inheritance or other rights. Just like married partners, domestic partners should create a complete estate plan, which may include premarital agreements, wills, trusts, and powers of attorney.
17. We have a trust, but recently refinanced our home. How can I tell if the house was returned to the trust?
If you are one of our clients, we will ask our title company representative to check title for you. If necessary, we can create and record a deed for you to return your property to the trust, saving your estate the potentially high cost of a probate if the real estate is not in your trust at time of death.
18. My parent just died and I am the named executor or trustee. What do I need to do?
A trustee or executor of an estate must carry out the deceased’s wishes. They may also be sued if they do not administer an estate correctly.
If you are called on to administer an estate, we will set an initial consultation to review all of your duties with you. We will then assist you with all of the steps necessary to administer the estate and to protect you from legal action by tax authorities, creditors, or disgruntled heirs.
19. I have a small business. Do I need to incorporate?
Businesses may be held in a wide variety of ways. Sole proprietorship. Partnerships. Corporations. Limited liability companies. Which form of ownership should be chosen depends upon many factors including the assets held; whether there are multiple owners; the type of business venture; and the needs of the business (growth, investment, or business succession).
Corporations, limited partnerships, and limited liability companies may shield the owner’s personal assets. And, in all cases, when more than one person is involved with a business, it is very important to have a written agreement in place which deals with potential business issues.
Our attorneys will help you think through issues and decide on the best business form. We will assist you with business formation, annual maintenance, and issues as they arise.
20. My attorney charges me every time (s)he says “Hello!” on the street or picks up the telephone. What should I do?
Change attorneys. While attorneys sell their time and expertise, and should be paid for this, they should not be taxicabs. When you become our estate planning client, we do not charge for most e-mail questions from our clients. Most questions can be answered simply and quickly and e-mail takes much less time than playing “telephone tag.” However, if you ask a question that will require significant time to research and answer, or will require billable activity on our part, we will let you know before we start working. Email Us!
