Wills & Trusts
What is a Trust?
A trust is a legal entity that holds onto your property for a named beneficiary. Creating a trust protects your assets and specifies how they will be held, gathered, and distributed in the future. In contrast to other estate planning tools, this tool allows you to specify the exact terms for assets you own today. Trusts can provide asset protection, beneficiary protection, and continued control over assets in the event of death or incapacity. There are different types of trusts, however, and there are legal requirements involved in their creation. A legal professional can assist those who wish to use trusts as a part of their estate plans or have concerns about how assets will be managed in case of incapacity or death.
There are many types of assets that can be held by a trust, including money, stocks, bonds, real estate, or even a business. You (the trustor) give another party (the trustee) the right to hold title to property or assets for the benefit of a third party (the beneficiary).
Benefits of trusts include:
- Probate can be avoided.
- Gives you significant control over the disposition of your assets after your death.
- Using a trust, you can transfer assets without incurring heavy tax burdens.
- Assets can be protected from creditors.
- It is even possible to use them to create or preserve eligibility for public funds when your assets or income would otherwise disqualify you.
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Wills & Trusts
Sandoval Legacy Group is Southern California’s premier estate planning law firm with extensive experience with trust creation and trust administration. Our firm represents both trustees and beneficiaries and specializes in representing trustees dealing with difficult beneficiaries or beneficiaries concerned that their trustee may not be acting appropriately.
A trust is an arrangement in which a property is legally transferred from one person (the trustee) to another (the beneficiary). Trusts can be set up as part of a will or as a separate entity with its own terms and conditions. Trust administration deals with the representation and distribution of property according to the terms set out by the trust. Trust administrators are responsible for reporting to the probate court on how assets have been distributed and must ensure that beneficiaries are properly notified of their status.
In cases where the trust was properly funded during the decedent’s lifetime, there is no need for marshalling, as the assets will already be titled in the trust’s name. When the decedent becomes disabled or dies, the Successor Trustee may assume responsibility for the trust without the court’s approval. The surviving spouse and remainder beneficiaries can maintain trust assets under the umbrella of the trust, providing important divorce protection and creditor protection.
In many ways, a trust administration is much like the probate of an estate. Probate is often confusing and emotionally draining and loved ones, typically more expensive and takes much longer than trust administration. A notable contrast to probate is that trust administration is not subject to public scrutiny and can cost considerably less than probate. Fortunately, assets held in trust do not require a probate proceeding. This allows heirs to access their inheritance right away and avoid the uncertainty and emotional toll of months of court proceedings.
Although every trust administration is unique, most follow these steps:
- Identification and retitling of the decedent’s assets;
- Taxes and debts are paid;
- The decedent’s final income tax return and the estate or trust return are filed;
- Unless the beneficiaries waive this requirement, an accounting will be prepared (of assets, credits, expenses); and
- Assets are distributed to beneficiaries, and a reserve fund is often held by the trustee for unanticipated costs.
Contacting an attorney as soon as possible after a decedent’s death is a good idea. Sandoval Legacy Group has experience in all aspects of trust administration. Managing real estate, bank accounts, and investment accounts, as well as other assets in the trust, are just a few of the services we can provide. Despite being a quicker process than probate, more often than not, this process is more complicated than it appears and can take several months to a year.
In almost all situations, our team of experienced attorneys will advise clients to handle funeral arrangements and other personal matters before worrying about legal matters. You can rest easy during this difficult time knowing that we will work tirelessly to ensure that your responsibilities are carried out and the trust assets are protected.
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If you have questions on the trust administration process and the role of the successor trustee, contact us today.
Wills & Trusts
Trust Administration for Married Couples
If the trust is for a married couple, there may be additional administration required. In some cases, the revocable trust is split into multiple trusts at the death of the first spouse. The A Trust, or Survivor’s Trust, contains the share of the trust assets belonging to the surviving spouse. The B Trust, Bypass Trust, or Exemption Trust, contains the share of trust assets belonging to the deceased spouse that can be passed free of estate taxes. If the deceased spouse’s share of the trust is greater than what can be passed free of estate tax, the excess amount is transferred into the C Trust, Marital Trust, or QTIP Trust. As an alternative to this procedure, an estate tax return can be filed showing the deceased spouse’s assets and “portability” can be claimed. There are pluses and minuses to each option, so be sure to consult with an estate planning attorney who also has a tax background.
Fortunately, with the increase in the amount that can be passed free of estate tax, this type of planning and administration can now be avoided in many cases. Again, be sure to consult with an experienced estate planning attorney and don’t just assume the decedent’s estate was not big enough to require this type of planning.
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Wills & Trusts
A trust might also be challenged for reasons including lack of capacity or undue influence. To successfully challenge a trust for lack of capacity, the person must prove that the trustor’s capacity is impaired to the extent that he or she did not understand the content of the trust he or she was signing. Undue influence occurs when a person with power over another person causes that person to act in such a way as it brings about an unnatural result. In addition to lack of capacity or undue influence, a trust might be challenged for other reasons.
Litigation over trusts can be extremely expensive and lengthy. In most cases, probate attorneys will not take on a case on a contingency basis, so the challenger must be prepared to pay substantial legal fees. Additionally, under most circumstances, it is the challenger’s responsibility to prove their case, not the trustee’s or other party’s to disprove the challenger. The majority of trust litigation does not result in a trial. Most trust litigation cases are settled between the parties, sometimes through mediation.
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Wills & Trusts
To succeed in challenging the Will, the challenger would have to provide medical evidence and other testimony which proves that the senior was susceptible to influence and that the undue influencer used his position of confidence to take advantage of the testator.
Sandoval Legacy Group has successfully represented persons challenging the validity of a Will due to the testator lacking the required understanding to execute a valid Will. We have also succeeded in invalidating Wills where the testator was subject to undue influence by a person in a position of trust or authority. Additionally, we have also prevailed in cases where we represented executors defending a Will against accusations that the testator lacked mental capacity or that he or she was subject to undue influence. Executors in this position generally may use the income and assets of the estate to defend the validity of the Will (although caution should be exercised if the executor is the person being accused of unduly influencing the testator).
Southern California Will Contest Attorney: Do You Need to Contest a Will?
A Will contest is the formal challenge to the validity of a will based on the contention that it does not reflect the testator’s (the person who allegedly made the will) actual intent. Let our Southern California expert estate planning attorneys help you through the process.
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Wills & Trusts
What Is the Difference Between a Revocable Trust, Irrevocable Trust and a Living Trust?
Generally speaking, a “living trust” and a “revocable trust” refer to the same thing, although not all living trusts are revocable, they can be irrevocable or revocable. All revocable trusts are living trusts, so “revocable living trust” tends to be abbreviated to “living trust.” A trust that is designed to take effect during your lifetime is a “living trust”, whereas one that takes effect when the grantor dies is a “testamentary trust.” One that can be revoked, amended, or destroyed, by the grantor, even after it is finalized, is a “revocable trust.” An “irrevocable trust” is one that cannot be modified, even by the grantor, once it goes into effect.
It is important to note that each of these has its own unique advantages. There is a lot to consider when making such a decision. A trust’s flexibility or ability to access its assets are the most relevant distinctions for most people. The best way to think about a trust is whether it is revocable or irrevocable.
Revocable living trust
- A trust that can be revoked and takes effect during the grantor’s lifetime.
- You can designate yourself to be the trustee and take control of assets in the trust. Revocable trusts are subject to estate taxes, but the federal estate tax applies only to the extremely wealthy.
- You have the power to amend trust rules at any time.
- You’re free to change beneficiaries or undo the trust altogether.
- You relinquish control over the trust when it is created, and the trustee becomes the legal owner.
- Upon the death of the grantor, it becomes irrevocable.
- Usually made to avoid probate.
Advantages and Disadvantages
Revocable living trusts are popular estate planning tools because they allow you to maintain control over your assets and modify or update their provisions at any time while you are alive. The terms can be adjusted as your circumstances or wishes change. Another key advantage of a living trust is that they bypass probate court, assets in a trust can be managed privately. This is in contrast to a probate proceeding that is public record; probate requires the public reporting of all assets in the estate.
It is important to note that even though you maintain control and access to everything in a revocable trust, one major disadvantage is that your assets are not protected from creditors or lawsuits.
Irrevocable Living Trust
- A trust that cannot be revoked and takes effect during the grantor’s lifetime.
- Usually made to transfer wealth, protect assets, or reduce taxes.
- Is active and cannot be changed — even by you.
- Automatically converts to an irrevocable trust on your death.
Note: Despite its irrevocable nature, with proper planning, you or someone you designate may be able to change the trustees or the beneficiaries if the circumstances require it.
Advantages and Disadvantages
In spite of the fact that irrevocable trusts entail the loss of ownership and access to assets, they offer some very significant advantages. Like revocable trusts, an irrevocable trust protects your wishes, bypasses probate, and is administered privately. Irrevocable trusts also provide protection from taxes, creditors, and lawsuits. Additionally, since you do not have access to the funds, assets and income are not ‘countable’ against public funds. This can protect eligibility for public programs like Medi-Cal, SSI, or VA benefits while protecting the assets themselves from being spent down.
The rigidity that comes with an irrevocable trust can have some major disadvantages; it might be worth the tradeoff for those who are not looking for flexibility.
Consult an expert estate planning attorney to help you match you with the appropriate trust to meet your goals.
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Wills & Trusts
Will vs. Trust: Which Is Right For You?
To summarize, the purpose of trusts is to manage and distribute your assets during your lifetime and after you die. By contrast, a Will allows you to name guardians for your children, appoint an executor for your estate, and state your final wishes. By understanding the differences between these legal documents, you can create an estate plan that is clear and comprehensive. The powers of wills and trusts are limited, meaning that wills cannot do what trusts can do, and trusts cannot do what wills can do. The majority of estates include both a will and a trust. The most common misconception is that revocable living trusts are essential only if you want to avoid probate or if you have a large estate. However, revocable living trusts have many other uses as well. Choosing one that fits best with your estate and your overall goals for efficiency, cost, privacy, and more is best determined with the help of an estate planning attorney.
The Trust Lawyers Who Will Help Explain All Of Your Estate Planning Options
They both have their pros and cons which is why we explain them in detail below to help you make the right decision. Contact us to discuss what is best for your unique situation.
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With office locations throughout Southern California, Sandoval Legacy Group, a division of Holstrom, Block & Parke, offers comprehensive and personalized estate planning, special needs planning, trust administration, probate, and conservatorships expert services in Riverside County, San Bernardino County, Orange County, San Diego County, and Los Angeles County.
Why Choose Us?
A comprehensive approach to estate planning that preserves your family’s legacy and wealth based on your individual circumstances.
Prepare for the unexpected by obtaining a medical power of attorney, healthcare directives, and eldercare options.
Please contact us if you need representation in probate court, or if you wish to avoid probate court altogether. Incorporating probate avoidance strategies into your overall estate plan is one of the greatest gifts you can leave your loved ones.
Special Needs Trusts
In addition to being members of the Special Needs Alliance and the Academy of Special Needs Planners, our law firm can also advise you regarding the intricacies of administering a Special Needs Trust.