"Funding" Your Trust
July 14, 2017
If you have a living trust, congratulations! You are on the right track to avoiding probate, while providing an orderly disposition of your estate according to your wishes. But a trust is “empty” and will not avoid probate if it is not “funded.” Simply, what “funding” means is that the trust obtains legal title to your property. In other words, you transfer title from you as an individual to you as trustee of your trust. Having an unfunded trust is analogous to having a bank account with no money in it. You may have checks sitting on your desk that you intend to deposit into your bank account, but they are not in your account until you actually do so. Similarly, merely listing those assets you intend to hold in your trust (typically, this is done on Schedule “A” attached to your trust) does not suffice. This is only a declaration of intent and does not constitute funding the trust.
Most importantly, you must retitle your real estate. This can be done by executing Trust Transfer Deeds, Quitclaim Deeds, or Grant Deeds that transfer your real property from you as an individual to you as trustee of your trust. These deeds must be recorded with the County Recorder’s offices in the counties where each piece of real estate is located. While there is a nominal recording fee for each deed, there will be no reassessment of your real estate for tax purposes, as a transfer into a living revocable trust is not deemed a “change in ownership.” Nor will there be any documentary transfer tax, as this transfer is not deemed a “sale.”
Moreover, you should change the vesting on all bank accounts, Certificates of Deposit, stocks, bonds, and brokerage accounts going into the trust. For bank accounts, this will require you to sign new signature cards as trustee of your trust. Note that some banks and brokerage firms have their own Certification of Trust form that you must complete for transferring title to your trust, and if stocks are involved with your brokerage account, you will likely be asked to get a Medallion Guarantee of your signature.
Tangible personal property without written title can be transferred to the trust by simply executing an assignment frequently called a “Transfer of Personal Effects.” This will give the trustee of your trust the authority to distribute all personal assets according to your written wishes.
Do not forget about “intangible” property rights when funding your trust. For example, if you are the owner of a copyright or patent or are entitled to royalties under any other type of contract, such property rights can be quite valuable and should be assigned to the trust. Similarly, business interests under partnerships, LLCs, or other entities should be assigned to the trust.
Some people desire to retitle their vehicles and vessels into the trust. This is not necessary for most vehicles due to their minimal value. If you choose to retitle your vehicle ownership, simply endorse your pink slip and indicate that this transfer is a “gift” to you as trustee of your trust. Mail the pink slip to the DMV with the proper fee, and you will receive a new pink slip changing title to you as trustee of your trust. If you choose not to retitle your vehicle or vessel, upon your death, your trustee will complete an “Affidavit for Transfer Without Probate” available from the DMV to transfer title to any California-titled vehicle or vessel.
It is not advisable that you transfer qualified accounts to your trust, or you could experience serious tax consequences. These accounts should have named beneficiaries who will take directly from that account upon your death without the necessity of probate. While it is permissible and sometimes desirable to name the trust as beneficiary of such accounts, it is not always advisable due to tax and other financial consequences. Therefore, it is important that you consult with your financial planner or CPA to discuss the advisability of such action.
Similarly, the ownership of life insurance policies and annuities does not need to be retitled into the trust, as these policies also have named beneficiaries and will pass outside of probate. Unlike qualified accounts, however, you can freely name the trust as primary or contingent beneficiary of these policies. If you wish to change the beneficiaries of your life insurance policies or annuities, request a Change of Beneficiary form from your life insurance carrier.
To summarize, having a living trust prepared is an important first step to avoiding the costs and time delays that would result if your estate were subjected to the probate process. Properly funding your trust is an important second step to ensure that your estate will, in fact, avoid probate.*
*The information contained herein is not to be construed as "legal advice." If legal advice is required, you should seek the services of a competent estate planning attorney.
Estate planning is crucial in ensuring that your assets are distributed according to your wishes and that your loved ones are taken care of after you're gone. However, an estate plan is not a set-it-and-forget-it document. Regularly updating your estate plan is essential to reflect changes in your life, family, and the law. Here’s why it’s necessary and when you should consider making updates. Why You Need to Update Your Estate Plan Reflect Current Wishes and Circumstances Life is dynamic, and your estate plan should be too. Changes in your personal or financial situation may affect your initial decisions. Updating your plan ensures it accurately reflects your current wishes and circumstances. Accommodate New Family Members Births, adoptions, and marriages bring new members into your family who may need to be included in your estate plan. Ensuring these individuals are considered can help prevent disputes and ensure everyone is provided for according to your wishes. Account for Deaths and Divorces Unfortunately, deaths and divorces are part of life’s changes. If a beneficiary or appointed executor passes away or if you get divorced, it’s crucial to update your estate plan to reflect these changes and avoid unintended consequences. Adjust to Changes in Law Estate planning laws can change, potentially affecting the distribution of your assets. Regular updates ensure your estate plan remains compliant with current laws and takes advantage of any new benefits. Incorporate Changes in Assets Over time, you may acquire new assets or dispose of existing ones. Your estate plan should be updated to include new assets and remove those you no longer own, ensuring accurate and intended distribution. When to Update Your Estate Plan After Major Life Events Marriage or Divorce: When you get married or divorced, your estate plan should be updated to reflect your new marital status and any changes in your wishes regarding asset distribution and guardianship. Birth or Adoption of a Child: New children or adopted children should be included in your estate plan, with considerations for guardianship and financial provisions. Death of a Beneficiary or Executor: If someone in your estate plan dies, you must update your plan to appoint new beneficiaries or fiduciaries. Significant Financial Changes Acquisition or Sale of Assets: Buying or selling significant assets, such as a home or business, requires updating your estate plan to reflect these changes. Changes in Financial Status: Increases or decreases in wealth can impact your estate planning strategy, including how much each beneficiary receives and potential tax implications. Changes in Relationships Estrangement or Reconciliation: If relationships with beneficiaries change, such as becoming estranged or reconciling, your estate plan should be updated to reflect these new dynamics. Health Changes Diagnosis of a Serious Illness: A severe health diagnosis may prompt you to review and update your estate plan to ensure that all healthcare directives, powers of attorney, and end-of-life wishes are current. Moreover, if one of your fiduciaries or beneficiaries suffers from health concerns, you may need to adjust your estate plan. Changes in the Law New Estate Planning Laws: Periodic reviews with an estate planning attorney can help you stay abreast of any legal changes that might affect your estate plan or estate tax situation. Conclusion Regularly updating your estate plan is critical to ensure that your final wishes are honored and your loved ones are protected. It is crucial to revisit your estate plan after significant life events, financial changes, relationship shifts, health issues, and legal updates. Consulting with an estate planning attorney can provide guidance to navigate these updates and maintain an accurate estate plan. An outdated estate plan can lead to unintended consequences, legal challenges, and family disputes. Keep your estate plan current to ensure peace of mind for you and your loved ones.
No one likes to think about the possibility of becoming incapacitated due to illness, injury, or old age. Planning for incapacity, however, is a critical aspect of estate planning that ensures your wishes are respected and that your affairs are taken care of if you cannot do so yourself. This blog post outlines the essential steps to prepare for this possibility, helping you maintain control over your financial, legal, and health care decisions. Understanding Incapacity Incapacity means being unable to make decisions for yourself due to mental or physical impairments. This could be temporary, due to an injury or illness, or permanent, as with advanced age or chronic conditions. Planning can help prevent court-appointed conservatorship, which might not align with your personal preferences, and can save your loved ones significant financial burdens, stress, and confusion. Legal Documents to Prepare Effective planning for incapacity involves setting up several key legal documents: Durable Power of Attorney For Finance: This document allows you to appoint someone you trust to manage your financial affairs if you become incapacitated. Unlike a general power of attorney, a durable power of attorney remains in effect if you lose mental capacity. Advanced Health Care Directive: This health care power of attorney allows you to designate a person to make healthcare decisions on your behalf if you cannot do so. This document should be accompanied by discussing your medical preferences with the appointed individual. In this document, you outline your wishes regarding medical treatment if you are incapacitated and unable to communicate. This can include instructions on life support, resuscitation, and pain management. Revocable Living Trust: A trust allows you to maintain control over your assets while alive, even if incapacitated, and simplifies management and transfer after your death. You can appoint a successor trustee who will manage the trust’s assets if you can no longer do so. HIPAA Release: This document authorizes your doctor to write a letter of incapacity -or capacity, as the case may be- so that your successor can step into your shoes. Choosing the Right People Selecting individuals to act on your behalf is crucial to planning for incapacity. Consider the following when making your choices: Trust and Responsibility: Choose individuals who are trustworthy and capable of handling the responsibility, whether they are family members, friends, or professionals. Willingness to Serve: Confirm that the people you designate can act in these roles when needed. Understanding Your Wishes: Ensure that the designated individuals fully understand your preferences and are prepared to advocate on your behalf. Communicating Your Plans Once your documents are in place, it is important to communicate your plans clearly: Inform Key Individuals: Make sure that anyone named in your documents and close family members know about the plans and where the documents are stored. Obtain Legal Advice: Consult with an estate planning attorney to ensure that all documents are legally sound and reflect your current wishes. Update Your Wishes: Review and update your documents regularly, especially after major life changes such as divorce, the death of a designated individual, or significant changes in your health. Conclusion Planning for incapacity is a proactive step that protects you and eases the burden on your loved ones. By establishing clear, legally sound documents and communicating your wishes, you can ensure that your preferences are honored and your affairs are well-managed, no matter what the future holds. Call to Action If you have yet to plan for potential incapacity, or if your current plans need updating, consider contacting an estate planning attorney today. Protecting your future starts now, and we are here to help guide you through every step of the process. Contact us to learn more about how we can assist you in securing your peace of mind.
The definition of family has broadened significantly, with blended families becoming increasingly common. These families, consisting of spouses, their children from previous relationships, and any children they might have together face unique challenges—especially regarding estate planning. Proper estate planning is crucial to prevent disputes and ensure that all family members are treated fairly and according to the estate holder's wishes. The Unique Challenges of Blended Families Blended families often face complex dynamics that can complicate estate planning. Issues such as previous marital agreements, children from prior relationships, and varying financial situations can create potential conflicts. Without a clear estate plan, there's a risk that certain family members may feel overlooked or unfairly treated, leading to disputes that can strain family relationships. Key Components of an Effective Estate Plan For those navigating estate planning within a blended family, several key components should be considered: Wills: A will is essential. It specifies how assets should be distributed and can help ensure that no family member is unintentionally disinherited. It's important to address any promises made to children from previous relationships. Trusts: Trusts can offer a flexible way to manage assets. For example, a bypass trust can ensure that the surviving spouse is cared for during their lifetime, with remaining assets then passed to children from a previous marriage. Guardianship: It’s vital to make guardianship arrangements for any minor children, particularly if they are from a previous relationship and their other biological parent is not the chosen guardian. Life Insurance: Life insurance can provide specifically designated funds for certain family members or help cover estate taxes, thus not depleting other assets intended for different parts of the family. Retirement Accounts and Beneficiaries: Updating beneficiary designations on retirement accounts is crucial, as these assets typically pass outside of a will and can be a significant source of contention if not carefully allocated. Legal Considerations Neglecting estate planning in a blended family can have serious legal ramifications. Without a clear directive through legal documents, state laws will determine how assets are divided, often not reflecting the deceased’s wishes or the family's needs. Engaging with an attorney skilled in blended family estate planning is essential to navigate these waters smoothly. Tips for Open Family Communication Open communication is perhaps the most critical component in estate planning within blended families. Here are a few tips: Hold Family Meetings: Regularly discuss estate plans with the entire family present. This can help manage expectations and reduce misunderstandings. Be Transparent: Honesty and transparency about what each family member should expect can prevent feelings of resentment. Encourage Questions: Allow family members to express their concerns and ask questions to ensure they feel heard and valued. Conclusion Estate planning in blended families is about distributing assets and caring for loved ones after you're gone. It’s also about ensuring that all family members are provided for in a way that supports your overall family dynamics and respects your relationships. Don’t wait until it’s too late. If you’re part of a blended family, consider speaking to an estate planning attorney to create a plan that affirms your wishes and protects your family’s future. For more information or to start your estate planning, contact us today .
In a landmark shift that promises to reshape the landscape of healthcare eligibility in California, Governor Gavin Newsom signed Assembly Bill 133 into law on July 27, 2021. This transformative legislation heralds a two-phased approach toward a more inclusive Medi-Cal program, specifically targeting Non-Modified Adjusted Gross Income (Non-MAGI) Medi-Cal programs, encompassing Long-Term Care and Medicare Savings Programs. The essence of this law is the elimination of the asset test, a move that aims to make healthcare access more equitable and less cumbersome for applicants. The Journey to Change The path to this significant change wasn't immediate. It involved careful planning and the federal Centers for Medicare and Medicaid Services (CMS) approval. On July 14, 2023, CMS gave its nod to the California Department of Health Care Services' (DHCS) State Plan Amendment, effectively giving the green light to do away with the asset test for determining eligibility. As of January 1, 2024, the way Medi-Cal evaluates eligibility has fundamentally shifted: an applicant's assets will no longer weigh in the balance. Instead, the focus shifts entirely to the applicant's and their spouse's income to determine the share of cost - or the monthly out-of-pocket expense for the applicant. What This Means for Applicants This change is monumental, especially for those with substantial assets. Previously, many individuals found themselves ineligible for Medi-Cal benefits that would subsidize their long-term care costs due to the asset test. Now, the doors to essential healthcare support are wider, allowing more Californians to qualify for benefits irrespective of their asset holdings. However, while the asset test for eligibility is now a thing of the past, Medi-Cal's stance on asset recovery remains intact. Medi-Cal will continue to seek recovery from assets that pass through probate upon the death of a beneficiary. This is crucial for Medi-Cal recipients and their families to understand, as it underscores the importance of informed estate planning. The Importance of Estate Planning With the elimination of the asset test, individuals who benefit from Medi-Cal for their long-term care will likely possess more substantial assets. This change brings to light the critical role of estate planning. These assets should not be subject to probate to shield assets from Medi-Cal estate recovery claims after the beneficiary's death. One effective strategy to achieve this is by holding the individual's assets in a Trust. Estate planning, particularly in the context of this new Medi-Cal landscape, is more vital than ever. It ensures that beneficiaries can enjoy the full scope of their benefits without the looming threat of asset recovery. It secures a legacy for future generations, safeguarding assets within the family. Looking Ahead The enactment of Assembly Bill 133 and the subsequent approval of DHCS' State Plan Amendment marks a pivotal moment in California's healthcare policy. It reflects a shift towards a more inclusive and equitable system, where financial assets are not a barrier to essential healthcare services. This change offers Medi-Cal applicants and recipients a new opportunity to secure their health and financial well-being. As we navigate this new era, the importance of comprehensive estate planning comes into sharp focus. By taking proactive steps to manage assets effectively, Californians can ensure that they and their loved ones can fully benefit from the Medi-Cal program without jeopardizing their financial legacy. In summary, eliminating the Medi-Cal asset test is significant in making healthcare access more equitable. It underscores the need for diligent estate planning to protect assets from recovery claims, ensuring beneficiaries enjoy peace of mind and security in their later years.
In 2024, the Corporate Transparency Act (CTA) ushered in a significant change in the landscape of corporate regulations in the United States. One of the key provisions of this act is the Beneficial Ownership Information Reporting Rule (BOIR Rule), which aims to enhance transparency in corporate structures and prevent illicit financial activities. Understanding the BOIR Rule is crucial for businesses and individuals, as compliance is now mandatory. Let's delve deeper into what this rule entails and its implications. What is the BOIR Rule? The BOIR Rule requires certain businesses to report information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN). Beneficial owners are individuals who directly or indirectly own or control a significant portion of the business. This rule aims to curb illicit financial activities, such as money laundering, terrorism financing, and tax evasion, by providing law enforcement agencies access to crucial ownership information. Who is Affected? The BOIR Rule applies to a broad spectrum of legal entities, including corporations, limited liability companies (LLCs), and other similar entities formed under state law. Specifically, entities created or registered after the rule's effective date are subject to reporting requirements. Even entities formed before the act must comply with reporting obligations during specific triggering events, such as ownership or corporate structure changes. What Information Needs to be Reported? Businesses covered under the BOIR Rule must report detailed information about their beneficial owners to FinCEN. This includes the owner's full legal name, date of birth, current residential or business address, and a unique identifying number from an acceptable identification document, such as a driver's license or passport. Furthermore, entities are required to provide updates to this information within a specified time frame following any changes or upon request by FinCEN. Benefits of the BOIR Rule: Enhanced Transparency: By requiring businesses to disclose information about their beneficial owners, the BOIR Rule promotes transparency in corporate structures, making it more difficult for individuals to hide illicit activities behind complex ownership arrangements. Improved Law Enforcement: Access to accurate and up-to-date beneficial ownership information empowers law enforcement agencies to investigate and prosecute financial crimes more effectively, including money laundering, fraud, and terrorism financing. Leveling the Playing Field: The BOIR Rule helps level the playing field for businesses by ensuring that all entities, regardless of size or industry, adhere to the same reporting standards. This fosters a fairer business environment and reduces the risk of illicit actors gaining unfair advantages. Reporting Timeline: The Beneficial Ownership Information Reporting Rule (“BOIR RULE”) under the Corporate Transparency Act (“CTA”) became effective January 1, 2024, implemented primarily through a rule published by the Financial Crimes Enforcement Network (“FinCEN”) on September 30, 2022. This rule triggered beneficial ownership reporting requirements for millions of businesses and entities (unless exempt). If the business was established before January 1, 2024, the initial report is due by January 1, 2025. This provides existing entities with a grace period to gather and submit the required information to FinCEN. If the business was established after January 1, 2024, but before January 1, 2025, the initial report is due 90 calendar days after it was established. This timeline ensures that newly established entities promptly comply with reporting requirements. For businesses established after January 1, 2025, the initial report is due 30 calendar days after it is established. This tight deadline emphasizes the importance of immediate compliance for newly formed entities. It is important to note that failure to comply with the reporting timeline and requirements outlined by the BOIR Rule can result in hefty penalties. Noncompliance may subject businesses to fines, sanctions, or other enforcement actions imposed by FinCEN. Therefore, businesses must understand their reporting obligations and adhere to the specified timelines to avoid potential penalties. Challenges and Concerns: While the BOIR Rule offers numerous benefits, its implementation may pose challenges for businesses. Compliance with reporting requirements can be time-consuming and resource-intensive, particularly for small and medium-sized enterprises with limited administrative capacity. Moreover, there are concerns about the privacy and security of the information provided and the potential for misuse or unauthorized access by third parties. Conclusion: The BOIR Rule introduced under the CTA represents a significant step forward in combating financial crimes and promoting transparency in corporate ownership structures. By requiring businesses to disclose information about their beneficial owners, the rule aims to deter illicit activities while leveling the playing field for businesses of all sizes.
https://abcnews.go.com/Health/coronavirus-leads-surge-wills-thinking-mortality/story?id=69874540
There are two types of special needs trusts (“SNTs”). A third-party SNT is by far the most common type of SNT, and this article presents a general overview of such trusts. A third-party SNT is a specialized trust that allows a family to provide support to a disabled child or other family member without jeopardizing the disabled person from qualifying for public assistance. These trusts are established and funded by someone other than the disabled person--typically, parents, grandparents, or siblings. Such trusts generally are funded upon the death of the donor, and the trust typically is drafted as part of a will or a living trust, although a stand-alone trust document can be drafted and structured to receive gifts from several donors. If properly structured, the SNT will allow the disabled family member to inherit money without being disqualified from various federal and state public benefit programs. Assets that can be owned by the SNT include real property, personal property, cash, stocks, and bonds. Moreover, the SNT can be named as a beneficiary of life insurance policies. The trustee of the SNT will have full discretion to determine how to best utilize the funds in the trust to supplement the basic benefits provided from government public assistance agencies, thus enhancing the beneficiary’s quality of life without jeopardizing the receipt of valuable public assistance. This specialized trust is drafted so that the inherited funds will not be considered as belonging to the beneficiary in determining the beneficiary’s eligibility for “needs-based” or “means-tested” public benefits; rather, the trust itself holds title to the property for the benefit of the disabled beneficiary. “Needs-based” public benefits include SSI (supplemental security income), Medi-Cal/Medicaid, IHSS (in-home support services), and Section 8 housing. The SNT is not necessary to protect regular social security, such as SSA and SSDI. “Special needs” are defined broadly and include anything necessary to maintain the beneficiary’s health, safety, and well-being when such benefits are not provided by public assistance agencies. These needs may include rehabilitation and training programs, educational expenses, entertainment, recreation, social outings, vacations, home repairs and improvements (including modifications for handicapped use), cleaning and laundry services, telephone, television, and internet services, audio, video, computer, and adaptive equipment, companion services and home health aides, personal hygiene (hair and nail care), furniture, clothing, bedding, toys, musical instruments, cigarettes, transportation expenses (including gas, purchase of a car or van, modification, insurance, and maintenance costs), legal advice, burial expenses, and other items that will enhance the beneficiary’s quality of life. Even certain medical needs can be met by the SNT, such as annual check ups, newer and more effective medications or more sophisticated medical treatments and procedures that are not covered under Medi-Cal/Medicaid, dental expenses, physical therapy, and vision care. Food (including restaurant meals) and shelter (including rent, purchase of a home, property insurance, property taxes, and utilities) also can be paid from the SNT, but some governmental benefits may be reduced if the funds are used in this way; however, the beneficiary’s quality of life can be improved greatly by additional funds, so it is best to give the trustee the discretion to supplant public aid where appropriate. Proper estate planning with the SNT will balance family resources with those available from public agencies, thus making a significant difference in a disabled person’s quality of life. The SNT also can alleviate the caretaking responsibilities of the disabled person’s other family members, such as siblings. If you are considering the SNT as a way of supplementing the basic needs of a disabled family member without disqualifying that person from public assistance, it is essential to contact an attorney with expertise in this area, as SNTs are highly sophisticated and receive a high level of scrutiny from Social Security and Medi-Cal/Medicaid. The Law Office of Patricia L. Andel can properly draft SNTs for your disabled loved ones. Contact us for more information. *The information contained herein is not to be construed as "legal advice." If legal advice is required, you should seek the services of a competent estate planning attorney.
In this virtual world and paperless era, almost everyone has acquired digital assets. Digital assets are a form of intangible personal property and consist of on-line banking accounts, on-line vendor accounts, e-mail accounts, websites, blogs, domain names, digital music libraries, digital photo, video, and movie libraries, e-books, applications (“apps”) and games to be used on your digital hardware, calendars, contact lists, records created in accounting programs (e.g., QuickBooks™ or Quicken™), electronic tax returns, scanned documents stored digitally, and any other digital files stored on your computer, smart phone, cell phone, tablet, flash drives, CDs, DVDs, external hard drives, or on the “cloud.” If you have accounts with a Google™, Facebook™, LinkedIn™, Twitter™, MySpace™, Flickr™, SnapFish™, Drop Box™, Carbonite™, Mozy™, iTunes™, PayPal™, etc., you have digital assets. Many of these assets can have sentimental or monetary value. The disposition of digital assets is often overlooked in estate planning. It is important that your estate planning documents, such as your will, living trust, and durable power of attorney, contain specific language granting your executor, trustee and agent (in the event of your incapacity) the power to access, use, control, distribute, and dispose of your digital assets, including the closing of your digital accounts. Moreover, you should keep an up-to-date inventory of all of your digital assets, including user names, passwords, and security questions for each digital account. It is a good idea to keep this inventory safely locked up with your estate plan so that your executor, trustee and agent can gain control over thee accounts as soon as possible after your death or incapacity. *The information contained herein is not to be construed as "legal advice." If legal advice is required, you should seek the services of a competent estate planning attorney.
While there is no magic timeline for reviewing or updating your estate plan, it is prudent to periodically review all of your estate planning documents. A good rule of thumb is to review these documents with your attorney every three years to determine whether amendments need to be made. Basically, there are four types of key events that should prompt you to review your estate plan. 1. Changes in Family Relationships (relating to you or your beneficiaries) Birth Adoption Marriage Divorce or separation Death of spouse, beneficiary, or fiduciary Attitude change of beneficiary or fiduciary toward you 2. Changes in Personal Conditions Serious illness, deterioration in health, or disability (you, beneficiaries, or fiduciaries) Change of residence to another state Unemployment Retirement Change in insurability (life insurance) Financial irresponsibility of beneficiaries or fiduciaries 3. Changes in Economic Conditions Increase or decrease in assets New business interests (partnership, corporation, LLC) Acquisition of new real estate Acquisition of property in another state Inheritance 4. Changes in the Law State income tax, estate & gift tax, & probate laws Federal income tax, estate & gift tax laws *The information contained herein is not to be construed as "legal advice." If legal advice is required, you should seek the services of a competent estate planning attorney.
