Carmageddon To Do List: Trust and Estate Planning
by Robert A. Hull
Of all the things your Carmageddon To Do list should include, trust and estate planning should be ranking right after:
#1. Avoid driving in Los Angeles unnecessarily this weekend like the city’s infested with bubonic plague (though, I vaguely remember that getting around town during the 1984 Olympics wasn’t so bad – here’s to hoping).
Plague or not, many businesses along the 405 corridor are encouraging visitors by offering discounts and other incentives to lure foolish drivers to their doors. Don’t take the bait. Instead, stay home, relax with your family, and plan for the future. When was the last time you did that?
I know, trust and estate planning is a chore, like dead-heading the geraniums or re-caulking the bathtub. But if you’re not going to plan for your future and that of your loved ones this weekend, when WILL you take the time for it?
That being said, here are some estate planning points to ponder while you’re doing other things around the house:
Is it better to have a will, a trust, or both?
Best to view a will and a trust as a unified whole. With a will, you can decide how to distribute all of your property upon your death and name an executor to do so. However, without a funded trust, your estate will be “probated” – i.e., subject to Court-supervised administration (which can be, to the uninitiated – like re-caulking geraniums and dead-heading bathtubs – all while paying for the privilege in time and money).
With a trust, you have even more flexibility to distribute your property. However, if enough of your assets are not transferred into your trust, you can end up, again, in probate.
A trust can be set up with your spouse or partner, and like a will, you get to name someone to administer the trust (the “Trustee”), who will very likely be your spouse or partner.
Again, you must fund your trust before your demise, so that your loved ones can avoid — da, da, dum — probate.
Make it Easy for Your Executor or Trustee
Don’t hide your assets unless you’re committing an act of revenge.
If you actually like your Executor or Trustee and want to make it easier for him or her, make a list of all of the assets you’re distributing and make sure s/he has a copy, along with your accountant or attorney (or at least one of the above).
Upon your death, your trustee or executor must maintain records regarding any transactions related to your estate, i.e. payments from the estate for your funeral expenses, interests and gains on your accounts, fund transfers between accounts and more. S/he has a fiduciary duty to the beneficiaries of your estate to administer the assets according to the terms of the operative will/trust, and may be liable to beneficiaries for failing to do so.
The executors and/or trustees will have to give notice to your beneficiaries and heirs . . . in some cases, along with regular accounting statements. And courts may enforce notice and reporting, even for trusts outside of the court’s supervision, or not in probate.
Taxing Questions
Currently, California does not have an inheritance tax like some other states, and generally speaking, there is no federal estate tax due upon the death of the first spouse. Currently, there are no federal estate taxes for assets worth under $5 million dollars (and, a surviving spouse may use the deceased spouse’s unused portion of his or her $5 million exemption).
You may gift up to $5 million dollars, tax free. So, if you’re thinking about gifting property or funds to a particular someone…this may be the very time to do it because the law is set to reduce the estate/gift tax exemptions to $1 million dollars in 2013, absent further legislative action. Remember, though, that gifting now will reduce your estate tax exemption to the extent that you use your gift tax exemption…
Trust and Estate Planning Accountability
If you’d like more information, read my colleague’s, Michael Hackman’s blog, “California Trust Attorney – Three Things You Should Know About a Trust.”
Stay safe this Carmageddon weekend, steer-clear of driving and start a little estate planning for the family…