Living Trust

A living trust (also called a revocable living trust) is an important Estate Planning tool serving a variety of needs. While a revocable trust serves useful property management functions during your lifetime, it is primarily used as a convenient and efficient way to distribute your assets upon death. Perhaps the most important benefit is protecting your estate from the probate process, which can be time consuming and expensive.

In most metropolitan areas in California it takes a relatively uncomplicated estate 6 to 18 months to move through the probate process. All of this delay creates additional expense. California probate proceedings typically consume 3% to 6% or more of the gross value of the probate estate. A living trust can be settled in a matter of weeks at a fraction of the cost.

In its simplest form, a living trust is a written agreement which sets forth what happens to your assets in the event of your death. During your lifetime, you maintain complete control over all assets in your living trust. You also have the power to alter, add to or even revoke the living trust at any time for any reason.

In addition to the advantage of avoiding probate, living trusts provide additional benefits. Living trusts allow a trusted family member, friend or advisor to manage trust property if the settlers are incapacitated. In addition, if a trust holds out of state property, there will be no need to open another probate proceeding in the state where the property is located. Finally, a living trust is usually more difficult to contest than a will.

At Lonich Patton Ehrlich Policastri, our estate planning attorneys don’t believe in offering services that are “one size fits all.” We understand that each family has particular needs and concerns, and we can customize our estate planning services to meet these specific needs and ensure that your long term wishes are carried out. We invite you to visit our office in San Jose for a free, no obligation consultation.

A couple sets up a trust with a trust attorney in San Jose, CA.

Special Needs Trust

If you would like to make provisions for the care of a disabled child or adult, you may want to consider setting up a special needs trust (also known as a supplemental needs trust or SNT). A special needs trust lets you leave property and other assets to your loved one without disqualifying them from certain government funded benefits, such as Medi-Cal or Social Security Income (SSI). At the same time, it allows you to provide for their special needs and ensure that they are able to live the quality of life and have the quality of care that you wish to provide for them even after you are gone.

Many public benefits are only available to “low-income” individuals who have little to no assets. Therefore, leaving a large sum of money to a loved one who depends on such benefits may automatically disqualify him or her from receiving these benefits. Establishing a SNT will allow you to provide for your loved one without jeopardizing their eligibility for government benefits.

As money cannot be distributed directly to the person with a disability, it is up to the trustee that you’ve appointed to administer and manage the funds to pay for your loved one’s special needs which can include:

  • Transportation
  • Rehabilitation
  • Food
  • Clothing
  • Out of pocket medical care
  • Hobby or recreational activity items
  • Vacations and other travel expenses
  • Entertainment expenses
  • Specialized care services
  • Other goods and services that are not covered by government funding
  • Personal care

Setting up a SNT for your loved one also allows him or her to receive assets from other people. For example, if a step-grandparent leaves your child $75,000, this money can be left to their SNT as well. Additionally, if you have an irrevocable life insurance trust (ILIT) where your child is a beneficiary, you can name their SNT as the beneficiary so that he or she can utilize the income from the ILIT while still receiving government-funded benefits.

It is important that the documents for your SNT provide specific instructions for how you would like your appointed trustee to handle the funds, ensuring that your disabled loved one is properly cared for and supported. Lonich Patton Ehrlich Policastri can help you draw up the paperwork necessary to establish the trust while making sure to include your specific instructions.

A trust attorney in Santa Clara goes over a legal document about a client's trust.

Life Insurance Trust

An irrevocable life insurance trust (ILIT) is created to significantly reduce or eliminate estate taxes. Other benefits that can come from an irrevocable life insurance trust include:

  • Any estate settlement taxes can be paid with proceeds from this trust.
  • Assets from the trust are protected from taxes as they are transferred from one generation to the next.
  • Your estate is provided with tax free liquidity.
  • Proceeds from the trust can be used in conjunction with charitable gift giving.

You may also want to set up an ILIT to make significant cash gifts without any gift tax consequences. There are specific laws governing this type of gift, so you will want to make sure that you consult with an e state planning attorney before setting this up. Whether you would like to set up an insurance policy for your trust or you already have a policy that you would like to transfer to the trust’s ownership, Lonich Patton Ehrlich Policastri can help you.

You will need a trustee to manage your policy, pay any premiums from your trust to the policy, and distribute your trust assets after your death. It is important to note that an irrevocable life insurance trust is permanent and cannot be changed once it is established. This means that the names of beneficiaries that you choose for the trust are also irrevocable.

At Lonich Patton Ehrlich Policastri, we can help you select the right life insurance policy to go with your trust. We also can carefully set up your trust so that it doesn’t trigger the very same taxes that you are hoping to avoid. For example, electing to transfer an already existing policy to your trust might not be the best decision for you to make if you are an elderly person. If you were to pass away within three years of transferring the life insurance policy to your trust, your policy’s proceeds would be considered part of your taxable estate.

Charitable Trust

Charitable trusts may be incorporated into your estate plan to carry out your charitable wishes. Charitable contributions may be made of a partial interest in property or of the donor’s entire interest. There are a number of trust vehicles which may be utilized to meet your charitable goals depending on your specific circumstances and wishes.

For example, a charitable remainder trust provides for deferred charitable giving. A charitable remainder trust may be set up to pay income to noncharitable beneficiaries for their lifetime or for a stated term of years. Following the death of the final beneficiary or at the end of the term, the balance of the principal is distributed to a charity.

There are many different types of charitable trusts, all with different estate tax, gift tax, generation skipping tax and income tax implications. It is important to work with an experienced estate planning attorney, such as those at Lonich Patton Ehrlich Policastri, to ensure you are able to accomplish your philanthropic goals.

Dynasty Trust

Individuals with significant wealth may wish to set up a dynasty trust, a long-term generation-skipping trust set up in a state that allows the trust to continue in perpetuity. Generally, these trusts are created in Delaware due to favorable tax, duration and confidentiality laws. A dynasty trust can provide for future generations while taking advantage of significant benefits related to inheritance taxes, estate taxes and generation-skipping taxes.

The laws related to dynasty trusts are complicated and all requirements must be strictly followed. Accordingly, it is important to contact an experienced estate planning attorney to assist in the formation of a dynasty trust. If you are interested in providing for future generations with a dynasty trust, please contact our office for a free, no obligation consultation.

Grantor Trust

Grantor trusts are a class of trusts, constructed in such a way that all income and capital gain from the trust are taxed to the grantor (creator). As a result, more money is eventually given to the final beneficiaries, which is especially useful for individuals nearing their lifetime untaxed gift maximum or owners of stock in a corporation that will go public in the near future. Grantor trusts are incredible, multi-faceted trusts which can have amazing tax benefits if properly created. Due to their complexity and potential for negative tax implications if created incorrectly, it is imperative that you speak with an attorney if you are interested in having this type of trust.

Please contact Lonich Patton Ehrlich Policastri for a free initial consultation if you have any questions regarding trusts or your overall estate plan. Our attorneys can be reached by phone at (408) 553-0801 or by clicking the button below.