trusts Archives - Page 2 of 2 - Lonich Patton Ehrlich Policastri

Transfers from Parents & Grandparents to Children: Avoid an Increase in Property Tax

June 4, 2012/1 Comment/in Estate Planning /by Michael Lonich

Do you know how to shield your intra-family property transfers from being reassessed for property tax purposes? Understanding the law about exclusions from reappraisal is the first step towards avoiding an increase in property tax.

In California, real property is reassessed at the market value if it is sold or transferred, and property taxes can sometimes increase dramatically as a result. However, if the sale or transfer is between parents and their children, or from grandparents to their grandchildren, the property will not be reassessed if certain conditions are met and the proper application is timely filed.

Transfers of real property are excluded from reassessment if either (1) the transfer is a primary residence (no value limit); or (2) the transfer is of the first $1 million of real property other than the primary residence. The $1 million exclusion applies separately to each eligible transferor. For example, a grandchild may exclude $1 million of property transferred from her father and his parents (paternal grandparents); and $1 million of property transferred from her mother and her parents (maternal grandparents) for a total of $2 million.

It is important to note that claiming this exclusion is not always beneficial. The attorneys at Lonich Patton Erlich Policastri have decades of experience handling complex property matters. If you are interested in developing a property transfer strategy tailored to your family’s needs or learning more about estate planning, contact the experienced estate planning attorneys at Lonich Patton Erlich Policastri for further information. Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results. While this post may detail general legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

How a Charitable Remainder Trust Might be Right for You

February 15, 2012/in Estate Planning /by Michael Lonich

A charitable remainder trust (CRT) provides the ability to control income flow as needed, which is very helpful when it comes to retirement planning. Given the current economy’s uncertainty, many may be reluctant to make donations to charity in case they encounter cash-flow problems in the future. However, many charities are also facing financial setbacks and need more support now than ever before. A CRT may be the answer for those who are charitably inclined but concerned about having sufficient income for the future.

A CRT has the ability to fund the charity of your choice while potentially boosting cash flow, shrinking the taxable estate, reducing or deferring income taxes, and providing investment planning advantages. CRTs are irrevocable trusts which provide you, and potentially your spouse, with an income stream for life or a term of up to twenty years. Upon termination of the trust term, the remaining trust assets are distributed to the charity, or charities, of your choice.

Among other advantages, CRTs helps to facilitate tax-efficient investment strategies. For example, rebalancing your portfolio typically generates taxable income; however, contributing those assets to a tax-exempt CRT allows investors to freely reallocate assets without undue concern about immediate tax consequences. CRTs are also helpful in selling highly appreciated assets that would generate substantial immediate capital gain and capital gain taxes. Rather than selling those assets, contributing them to a CRT and allowing the trustee to sell them allows for reinvestment of the proceeds in more diversified assets with greater returns unburdened by capital gains taxes.

While CRTs offer a great deal of flexibility and retirement planning advantages, they require careful planning and solid investment guidance to ensure proper structure and funding. If you are interested in learning more about retirement and estate planning, please contact the experienced estate planning attorneys at Lonich Patton Erlich Policastri for further information. Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results. While this post may include legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

General Assignments Effectively Transfer Shares of Stock to a Trust

January 17, 2012/in Estate Planning /by Michael Lonich

Recall that in order to ensure the creation of a valid trust, there must be trust property. See Ensuring the Creation of a Valid Trust blog. Written declarations and general assignments generally are not the best ways to create trust property; however, they can be sufficient to transfer shares of stock, but not real property, to a trust, according to a recent California Appellate case.

In Kucker v. Kucker, 192 Cal. App. 4th 90 (2011), Trustor signed a declaration creating a revocable inter vivos trust, a general property assignment, and a pour-over will. Later, Trustor signed an amendment to the general property assignment transferring all of her shares of stock in eleven specified corporations and funds. However, Trustor did not include her 3,017 shares of stock in Medco Health Solutions, Inc. At the time the amendment was signed, the Medco stock certificate was lost and the issue before the court became whether the Trustor intended to include all the stock she owned when she amended the general assignment.

The lower court denied the petition to attach the Medco stock for failing to meet the writing requirement under the California Civil Code (which required a writing for contracts that granted credit for over $100,000). The Second District California Court of Appeal reversed and held that a general assignment of assets was sufficient to transfer shares of stock to a trust, even if the assignment failed to specifically identify the stock. The court further elucidated that, “There is no California authority invalidating a transfer of shares of stock to a trust because a general assignment of personal property did not identify the shares. Nor should there be.” The Civil Code section used by the lower court applied to agreements to loan money or extends credit made by persons in the business of loaning money, not to transfers of shares of stock to a trust.

There are many intricacies involved in the creations of trusts, and estate planning in general. To ensure your affairs are in order, or if you are interested in learning more about how to ensure the validity of your trust, please contact the San Jose estate planning attorneys at Lonich Patton Erlich Policastri, LLP. Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results. While this post may include legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

Update: Gifts to Caregivers Prohibited

November 18, 2011/in Estate Planning /by Michael Lonich

Recall that gifts to caregivers are generally prohibited by law under California Probate Code section 21350. (See blog: Gifts to Caregivers Prohibited noting what activities constitute “caregiving”). However, section 21351, enumerates several exceptions to this general rule. One of the exceptions—found in Section 21351(a)—provides that section 21350 does not apply if the transferor is related by blood or marriage to, is a cohabitant with, or is registered as a domestic partner of the transferee. Cal. Prob. Code § 21351(a) (West). The issue in a recent California case was whether this provision applied to a stepdaughter by marriage.

In Hernandez v. Kieferle (October 31, 2011), the Second Appellate District of California reviewed a probate court decision which invalidated an amendment to a trust designating stepdaughter Claudine Kieferle as the trustee and sole beneficiary of her stepmother Gertrude’s estate. The designated beneficiary of a prior amendment, Gertrude’s next-door neighbor Florentina Hernandez, challenged the validity of the second amendment removing her as the trustee and principal beneficiary of the estate. The probate court found for Florentina noting that section 21350 established a presumption that transfers to care custodians are the product of fraud, duress, menace, or undue influence and, since Claudine lived with Gertrude and cared for her in the evenings, Claudine was disqualified from taking under the trust.

In reviewing the lower court ruling, however, the Appellate Court reversed this decision and concluded that it was an error not to apply the exception found in section 21351(a). The Court rejected the argument that the exception did not apply to Claudine because she was not an “heir”—where her stepmother’s estate did not actually contain property attributable to her father (who passed away eleven years prior)—and found that a person is the transferor’s heir if some intestate rule identifies the person as the transferor’s successor, regardless of whether the transferor’s estate includes the type of property distributed under the rule. Therefore, the section 21351 exception applied and the second amendment was deemed valid allowing Claudine to remain as the trustee and sole beneficiary of Gertrude’s estate.

If you are interested in learning more about making amendments to a trust or creating an estate plan, please contact the San Jose estate planning attorneys at Lonich Patton Erlich Policastri, LLP. Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results. While this post may include legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

Testamentary versus Inter Vivos Trusts

September 23, 2011/1 Comment/in Estate Planning /by Michael Lonich

A trust is an arrangement where property is transferred with the intent that it be held and administered by the person to whom the benefit is for. There is a large assortment of trust types, however, the two main types of trusts are (1) the inter vivos trust and (2) the testamentary trust. The inter vivos trust, often referred to as a living trust, refers to a trust transfer made during one’s lifetime. The testamentary trust, on the other hand, only arises upon one’s death—typically specified in one’s will.

An inter vivos trust is created by a settlor and signed by the settlor and any named trustees. It is created and funded during one’s life time and may be revocable or irrevocable. A testamentary trust is usually created in the will of a settlor and must be probated. Testamentary trusts are irrevocable as they are created after one’s death and, therefore, cannot be amended or revoked. Inter vivos trusts generally do not have to go through probate and are created primarily to provide an economic benefit to specific people or institutions. Payments to the beneficiaries can begin immediately during one’s lifetime or upon death as specified.

Whether an inter vivos trust or a testamentary trust is the better plan depends on the settlors’ objectives. Inter vivos trusts are an effective way to reduce the value of an estate and the subsequent effect of federal and state estate taxes. Testamentary trusts can provide for the care of beneficiaries without the need for a public trustee/guardian upon death.

If you are interested in discussing your estate, creating a trust, or creating a comprehensive estate plan, contact the San Jose estate planning attorneys at Lonich Patton Erlich Policastri, LLP. Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results. While this post may include legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

Spendthrift Clauses: Protecting Your Loved Ones’ Inheritances

September 19, 2011/in Estate Planning /by Michael Lonich

Most people consider the protection of their assets from their own creditors when beginning to plan for their estate. However, few consider the prospect of their heirs’ creditors. Adding spendthrift language to a trust may help safeguard their heirs’ assets.

A variety of trusts can be spendthrift trusts as long as a spendthrift clause is included. Despite its name, a spendthrift trust does not simply protect heirs from being recklessly extravagant or wasteful in their use of funds. Spendthrift clauses restrict a beneficiary’s ability to assign or transfer his or her interest in the trust and restrict the rights of creditors to reach the trust assets. If your child gets divorced, it can prevent your child’s spouse from claiming a share of the trust property. If your child predeceases his or her spouse, it can ensure that your children or grandchildren receive their inheritance rather than your spouse. A properly designed spendthrift trust can even protect your heirs’ assets from being attacked by frivolous lawsuits, dishonest business partners, or unscrupulous creditors.

There are, however, some limitations. Government agencies may be able to reach the trust assets, regardless of spendthrift language, to satisfy something like a tax obligation. Further, ex-spouses may be able to reach the trust assets to satisfy child support arrearages. Generally, the more discretion granted to the trustee the greater the protection against creditors’ claims.

If you are interested in learning more about spendthrift trusts or creating an estate plan, contact the San Jose estate planning attorneys at Lonich Patton Erlich Policastri, LLP. Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results. While this post may include legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

Don’t Forget About Fido: Ensuring Your Estate Plan Provides For All Your Loved Ones

August 8, 2011/in Estate Planning /by Michael Lonich

For most people, estate plans are a second thought. In a last ditch effort to put something down on paper, people often rush the process and overlook smaller, crucial details of the estate plan. The big ticket items, such as indicating an heir to your property, are typically covered; but what about Fido? What about all of your online banking and computer passwords? It is important to start planning your estate early so that the oft-overlooked items are not left in the dust.

In the United States, the Humane Society estimates that about 400,000 pets/year must find new homes because their owners pass away. Many people do not realize that the most effective way to ensure your pet receives proper care is to set up a formal trust. Any other option relies on other people to honor your wishes and spend money to care for your pets.

Another area which people do not consider involves assisted reproductive technology. Imagine that your husband passed away; but prior, he had his sperm frozen and transferred to you upon death. You conceive a child with the frozen sperm. How will the child factor into your estate plan? This very scenario will be considered by the Utah Supreme Court. The Social Security Administration denied children’s and mother’s insurance benefits to the mother and child and argued that her husband never intended to father the child and they should not, therefore, receive any benefits. This case would not be where it is has the husband provided for this scenario in his estate plan. With technology steadily changing how our families are created, it’s important that all these scenarios are addressed in estate planning.

Now is never too early to consult an experienced estate planning attorney. If you are interested in learning more about individual estate planning or creating a comprehensive plan so your family members are well-prepared to handle your estate, contact the San Jose estate planning attorneys at Lonich Patton Erlich Policastri, LLP. Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results. While this post may include legal issues, it is not legal advice. Use of this site does not create an attorney-client relationship.

Posts