Dear Liza: When putting property into a Living Trust does it trigger a tax reassessment under Prop 13? My parents purchased their property in 1968 and we didn’t want moving it into a Living Trust to trigger a reassessment. Nope. If your parents put their house into their own living trust, no reassessement is triggered. There are no ‘new’ owners, really. It’s just your parents owning the property under a different legal title. Putting property into a revocable trust for your own benefit is an exception to Prop. 13 reassessment. When your parents record the deed changing title to the trust, they will also need to file what’s called a Preliminary Change of Ownership Report (PCOR). This form tells the county assessor about the transaction. There are a whole list of checkboxes on the first page of the form, and one box is that the transfer is to or from a living trust. Once the assessor sees that, they know that they can’t reassess the property. Note: This is an issue for my California readers. Proposition 13 freezes property tax rates at a value that’s set when the property is purchased by a new owner. Needless to say, those with low property tax rates do NOT want to see that rate reassessed while they still own the property.
Category Archives: Trusts
Dear Liza: My 91 year old mother had a stroke in April. Her living trust designates my brother as Medical Power of Attorney and myself as Financial POA. Her lawyer is asking for letters from two doctors stating our mother is mentally incapacitated before he can talk to both of us about her trust. Why would a lawyer ask for them? Wasn’t the point of the trust to make everything hassle free? Your mother’s lawyer is asking for letters from two doctors stating that your mother is incapable of managing her own affairs because, most likely, the trust states that you and your brother can act as successor Trustees only upon your mother’s incapacity. The trust probably also states that incapacity is to be determined by two letters from physicians stating, under penalty of perjury, that your mother is incapacitated. Many trusts are drafted this way. The idea is to protect your mother from having her powers as Trustee taken away unless she really can’t manage her own affairs. Ask the attorney to provide you with letters for the doctors to sign — that shouldn’t be a big deal if, in fact, she isn’t able to manage.
Dear Liza , My partner and I have each executed our wills, naming the person to be legally responsible for our minor son (age 12) and indicating that our assets would flow first to one another, then to our son in the event of our deaths. We assumed that the person we have named guardian for our son would have control over these funds, but recently learned that may not be the case. The person we have named guardian is not a blood relative, and there are blood relatives living who may not want the guardianship responsibility, but want to control the funds. Also, we would not want our son to have access to all the funds upon attaining age 18, but would want funds to be able to be spent for college expenses, etc. We completely trust the guardian named to make the right decisions, but need to know how to best make this happen from a legal perspective. You, like any parent, have two different problems to solve. The first is, “Who is the best person to raise my son to age 18?” The second is what’s the best way to manage the money my son will inherit and who is right person to take care of that money?” Nominating a guardian of your son in your Will solves problem number one. To solve problem number two, you need your Will to establish a trust for your son, to hold his money until he’s older, say 25 or 30, and name a Trustee of that trust to manage the money until that time. The alternative is to name a guardian of the estate, this person would manage the money for your son, but only until age 18, when he becomes a legal adult. You can certainly name the same person to both roles, many people do. But, if the best person to raise your son would spend his college money on a pony, naming someone else is a better choice.
Hi Liza, I have a living trust and I’m the trustee in the trust. I have a will in the trust. I wanted to make some changes to the will and I’ve been told by my lawyer that I would have to
make another trust if I want to change the people in my will. If the will doesn’t have to go to probate why can’t I just make the changes in the will and have my designated
trustee distribute my estate after I’m dead? One of the people in my will has died, one is in a nursing home and two I haven’t heard from in years. This doesn’t make
any sense to me. Can you explain this to me? Well, truthfully, now I’m a tiny bit confused. It sounds like you have a trust, and in that trust you leave assets to various people. (I think that’s what having a “will in the trust” means.) Assuming that you are the Grantor of that trust (the person who established it) and it’s a revocable trust, you can certainly amend the trust to reflect your current intentions. It is common that we lose touch with people over the years, or change our minds about what we want to do with our assets over time. To make a small change to an existing document you would have your lawyer draft a trust amendment for you to sign, changing whatever sections of the existing trust needs revising. If you are making a lot of changes, you’d do what’s called a Restatement of Trust, which is like having an all-new trust with all current terms, but with the same name as the old trust, so you don’t need to retitle assets that are already in it. Maybe that’s what your lawyer meant by a “new trust.”
Dear Liza: I set up a living trust and back up will naming my 3 minor children as beneficiaries. What if one day, me, my husband and all children die at the same time in an accident?
Both my parents and in-laws do not live in US. If none of me, my husband and children survives, I want our estate to pass to our families in Asia. What is the best way to set this up in my will and living trust? Here’s what you do: put in a section that says that if you, your husband, and all of your children (and their issue–your grandchildren, great grandchildren, and so on…) don’t survive you, that you want your estate split equally between your husband’s surviving parents and siblings and your surviving parents and siblings. I call this the “God Forbid Clause” since it covers an unexpected, but not impossible, scenario. You can leave your estate to anyone you choose to of course–family, friends, charities. The important thing is to be specific if you have specific people that you want to benefit. If you don’t really know who to leave your assets to at this point, you could be more lawyerly and less specific and say “your legal heirs” and this would then be determined under the laws of the state in which you executed your estate planning documents. If you name specific people you would say where they presently live. And you would let your Trustee and Executor know how to find them by giving them a list of where your parents/siblings live and how to reach them. If your family lives abroad, the tax treatment of their inheritance will depend upon the laws in that jurisdiction.
Dear Liza: My Mother passed in Feb of this year. She opened a joint account with my Sister, so, should she become incapacitated, my sister could write checks on her behalf and it was opened with the understanding, that should something happen to my mother, the joint checking account should be split with her six other brother’s and sisters. My sister is claiming the money is now hers to do with what she wants, who is right? This is one of those estate planning situations that come up a lot, and it’s also one where the law is clear, the moral obligations murky. Aged parents often put one child on an account like that, to make it easier to let them take care of their finances. But in making your sister the joint owner of the account, your mother also made her the legal owner of the money now because she is the surviving joint owner. If your mother had wanted to make absolutely bullet-proof sure that any money in that account was to be split equally among all seven of you, she should have put that account into the trust (assuming that the trust splits everything seven equal ways) or named all seven of you as pay-on-death beneficiaries. But, of course, that’s no solace now. If your sister wants to honor your mother’s wishes, she could do that, but she’s not legally obligated to do so.
Dear Liza: I collect estate jewelry, and ancient and antique coins. As I am inventorying my belongings to determine what should be left to whom, I wonder if this all needs to be spelled out in the document, or if I can maintain an inventory spreadsheet with pictures of the items. Or would I need to go ahead and spell out every single item in the will itself, updating the will every year or two? So, estate jewelry, and coins, and the like are what’s called “tangible personal property” in estate planning. These are items that you own, but that don’t have a title document (like a deed, or a pink slip). Often, a Will will leave all such tangibles to a spouse or to children. Sometimes, a Will will say that the testator (that’s the person making the Will) may leave a separate, signed list, with gifts to specific people of specific objects. That might work best for you. That way, you can update that list periodically, without the expense of having to update your Will. If your collection is really valuable, you might want to transfer it to a living trust, to avoid a probate proceeding upon your death–but that’s pretty unusual and only appropriate if the value of those tangible items are high, such as with a Steinway piano, or vauable jewelery.
Dear Liza: Do you have any recommendations on naming children as secondary beneficiaries for life insurance/investments? Why, as a matter of fact, I do! If your children are minors (under 18 in most states), your estate plan should establish some way of managing money for them until they are old enough to handle money responsibly. This is usually accomplished by creating a trust for them until a certain age, say twenty-seven. Until then, you would name a trustee to manage and distribute the child’s assets for them; after that, the money’s theirs to manage and invest. If you have created a living trust, you would name that trust as the beneficiary for your life insurance and the secondary beneficiary for your retirement accounts — that way, the money will be available to your children, but be managed by your trustee.
You can instead use a Will as your main estate planning document and your Will can set up exactly the same structure of a trust for children managed by a trustee until the children reach a certain age. However, if you use a Will, your estate will go through probate BEFORE the trust for the kids can be funded (don’t worry, the kids will have access to your estate during the probate process). Think of this as two roads to the same place — one road (the living trust) just gets you there faster.
If, however, you name minor children directly as beneficiaries on those forms, and you die while they are still minors, a guardian of the estate will have to appointed to manage these assets, and, when a child reaches the age of 18, they money will be all theirs.
If your children are adults, you can and should name them directly. It makes it easier for them to deal with these assets after your death and there are special advantages to doing this with respect to retirement accounts.
Dear Liza, my brother and I are in the process of distributing the personal/real property of our recently departed mother’s estate/trust according to her wishes. The attorney for her estate initially included his fee of $17,000+ as part of one document. When questioned, he stated because of the divisive and hostile relation between my brother and me, he was going to charge fees in anticipation of the estate having to be probated, instead of treating it as an dissolution of an estate. Can he do that? Yikes! $17,000 is A LOT of money to settle a living trust. Here’s my advice–fire that lawyer. Remember, you are the client and if a lawyer isn’t serving your needs (or is charging way too much), get yourselves a new one. Most attorney’s charge an hourly rate for trust administration services. At a rate of $200/hour (which is sort of low), you are being charged for EIGHTY FIVE hours of time. Most estates take only a fraction of that. As for his decision to submit the estate to probate–that’s your decision, not his. Probate can be an effective forum for resolving disputes, but in a trust administration that would be an unusual step. If the estate goes to probate, he can charge you a statutory fee equal to a percentage of the value of the assets in the estate, and $17,000 may actually be about right. But, he’s not entitled to bill you for services he hasn’t provided. Ask for a detailed billing statement outlining exactly how he is spending his time on your matter. If he can’t, or won’t, provide it, fire him and report him to the state bar. I have found that just mentioning your intention to report a lawyer to the state bar can result in an amazing reduction in an excessive bill. Also, ask for your client file on the way out–legally that’s yours, not his.
I am about to create my Will and Living Trust. My son has two sons and his wife is pregnant with twin girls. I would like to know if I can name the twins in my Will/Trust now although they are not due to be born until December? I’ve written Wills that name children soon-to-be born. You could say that you want to benefit all of your son’s children, including the twins girls due in December. Or you could just say all of the children of your son that are alive at your death (which, unless you die before December would certainly include the new twins). Good luck!