Mental Capacity to Make Wills and Trusts

 

For someone to create a valid will or trust, the individual must be of “sound mind”, which is a term for determining mental capacity. If an individual is determined to lack sufficient mental capacity, then any document that individual signs is invalid under California law. Under California law, there are different laws for determining mental capacity based on whether an individual is signing a will or a trust. This article will examine the role mental capacity plays in estate planning.

Mental Capacity Required for Wills

California law presumes that everyone has the mental capacity to make a will. As a result, it is up to the individual challenging the legitimacy of a will based on mental capacity to pursue these matters in court. To make a will, an individual must be at least eighteen years old and of sufficient mental capacity. The mental capacity required to make a will in California is considered the lowest. The mental capacity law for wills require an individual to understand several things:

  • The individual must understand that he or she is creating a will.
  • The individual understand what property the individual owns.
  • The individual must understand the relationship the individual has to the beneficiaries that are named in the will.
  • The individual must not suffer from mental disorders with symptoms that include delusions or hallucinations.

Mental Capacity Required for Trusts

The mental capacity required to make a trust is higher than the capacity required to make a will. The mental capacity required to create a trust dictates that an individual understands the following:

  • The rights, duties, and responsibilities created or affected by the decision.
  • The probable consequences for the decision maker in addition to the various individuals who are influenced by the decision.
  • The significant risks, benefits, and reasonable alternatives created by the trust.

Mental Capacity and Estate Planning

Have the loved ones in question examined by medical care providers. Due to the differences in standards, individuals who display any signs of memory loss or dementia should be evaluated by a primary care provider for mental capacity. While a person with the beginning stages of dementia likely has the capacity to create a will, that individual likely does not have the capacity to create a trust. It can be particularly difficult to determine exactly when an individual’s mental capacity is no longer fit to make either a will or trust because individuals are often resistant to admit a decline in mental aptitude. Have estate planning devices in place by the time mental capacity is affected.

If you have any questions about mental capacity might influence an individual’s ability to write a Will or Trust, contact a seasoned and experienced California estate planning lawyer today.

The Purpose of No Contest Clauses

One of the primary goals of estate planning is to reduce the disputes that occur among a deceased individual’s loved ones. While there are many ways to achieve that goal, these methods often include ensuring that all proper requirements are followed when executing documents, including carefully drafting trust terms and keeping estate planning documents unambiguous. When a family member feels that they were unjustly treated as a beneficiary, estate planners utilize a “no contest” clause. This article will examine some essential information about “no contest” clauses in California.

Purpose and Explanation

A “no contest” clause is term in a will or trust that can penalize a beneficiary if he or she files a contest with the probate court. A “no contest” clause provides that a beneficiary loses all inheritance from the estate plan if the beneficiary seeks to invalidate any of the estate plan’s provisions or documents. “A no contest” clause aims to discourage litigation by beneficiaries who are unhappy with litigation and require the beneficiary to choose between accepting the gift provided in the estate plan and losing one’s inheritance.

When No Contest Clauses Apply

While “no contest” clauses are rarely used to disinherit beneficiaries, these clauses still apply in cases where the requirements of the California probate code apply. To meet these requirements, the following standards must be met:

  • Triggering Event: Individuals who undertake a “no contest” action must describe in the complaint an action that is specifically listed in the types of triggering events. Triggering events include direct contests of a document or attempt to directly overturn a will, trust, or creditors’ claims, and challenging the characterization of property as either community or separate.
  • Probable Cause: An individual who files a no-contest clause must file this action with probable cause of success.

Disinherited

Individuals who do not meet established standards can be disinherited from legal actions.

Examples of Bad Trustees

Parties filing “no contest” actions must remember that there is no basis to disinherit a bad trustee simply for breaching a duty to the trust. This lack of basis means that trustee cannot have legal action brought against them simply for engaging in breach of a trust. As a result, the burden is on individuals filing the lawsuit to prove the case at trial.

Recent “No Contest” Clause Law

There are two substantial and recent California laws dealing with “no contest” clauses. In 2002, the California Supreme Court decided a case that upheld the requirement of probable cause in pursuing “no contest” clause cases in California. In 2013, in another case, the California Supreme Court limited the types of cases against which “no contest” clauses are applicable. These laws are largely remembered for shaping the current requirement for a “no contest” clause-based legal action in California.

If you are curious about the role of a “no contest” clause in estate planning, contact a seasoned and experienced California estate planning lawyer today.

Methods of Irrevocable Trust Modification

An irrevocable trust refers to a trust that cannot be modified or terminated without the permission of the beneficiaries. Irrevocable trusts offer the benefit of reducing the grantor’s estate tax liability while simultaneously transferring wealth to a deceased individual’s loved ones. Irrevocable trusts, however, can be modified in several ways, many of which do not require court approval. This article will discuss the ways, by which in accordance with California law, irrevocable trusts can be modified:

  • Consent of all Trust Beneficiaries: In accordance with California code, beneficiaries can petition the appropriate probate court for trust modification provided the trust does not contain specific clauses. One of the most substantial problems with this problem is that beneficiaries often do not live in the same area. Sometimes not all beneficiaries may be born yet.
  • All Trust Beneficiaries and the Settlor Consent: Provided all of these parties consent, no court method is needed for modification through this method.
  • At Least One Trust Beneficiary and the Settlor Consent: Assuming that the interests of the non-consenting beneficiaries are not substantially impaired, this method is allowed. Keep in mind that if the trust does substantially impair the interests of non-consent beneficiaries, then this method is not permitted.
  • Principal is Uneconomically Low: A trust is considered uneconomically low if a trust principal is considered by the court to have a fair market value to defeat or substantially impair the accomplishment of the trust’s purposes or the trust’s principal is less than $40,000. If the trust’s purpose is considered uneconomically low then the trustee is permitted to terminate the trust immediately.
  • Changed Circumstances: Petitioning a court for modification is especially beneficial when a grantor has died and the beneficiaries desire to modify the trust in response to changed circumstances. If the purpose of a trust is substantially changed, then modification of the trust is permitted. A common example of changed circumstances is when a charity is the beneficiary of a trust but the charity no longer exists at the time the trust becomes irrevocable. Filing a petition to request a change of the trust in these cases does not require the consent of the remaining beneficiaries.
  • Conform to Tax Laws: If the primary reason for modifying a trust are tax laws, in accordance with California code, a trust can be modified to achieve intended tax purpose of the trust. A skilled and seasoned attorney will likely be essential to review the trust and determine whether or not the trust conforms to existing tax laws.

Any party who is seeking to modify a trust must carefully examine the proposed methods for trust modification. The parties must understand the various harms and advantages that will result from a trust modification. A trust modification can have gift, estate, generation-skipping tax, and income tax consequences. If you need the advice of a skilled and knowledgeable California trust lawyer, do not hesitate to contact our firm today.

The Advantages of a Totten Trust

Forbes has named the Totten Trust as one of the six types of trusts for the person who has everything. A Totten Trust is a type of trust account that is established at a local bank. Totten Trusts originated as a method of creating trusts for people who possessed no real property and could not afford to draft a will. The Totten Trust, however, still serves a useful function. The individual who establishes the trust is known as the “depositor” because the individual deposits money into the trust account. The recipient of the trust is called the “beneficiary.” The depositor then deposits a sum of money into the account for the beneficiary, which is paid to the beneficiary on the date of the depositor’s death. Prior to the depositor’s death, the depositor may add to or withdraw money to the account at any time. Upon the depositor’s death, the beneficiary can present an original death certificate to the bank to obtain proceeds from the trust. For clients who are planning an estate there are several advantages to Totten Trusts, which include the following:

  • Anonymity: A Totten Trust can be anonymously created without even the beneficiary learning of the account’s existence until the date of the depositor’s death.
  • Beneficiaries Cannot Access the Trust: California code dictates that a Totten Trust only grants the beneficiary an expectancy interest while the depositor is alive and the depositor is able to decide at any point in time to change who the named beneficiary is.
  • Beneficiaries Have an Easier Time Accessing Fund:. After the depositor’s death, all that a beneficiary needs to do is present the bank where the depositor made the Totten Trust with a certified copy of the depositor’s death certificate and a copy of the beneficiary’s government-issued identification.
  • Depositor Maintains Complete Control: The depositor maintains complete control over the Totten Trust until the individual’s death. As a result, the depositor is allowed to use money within the account for living expenses.
  • Easy to Open: Totten Trusts are easy to open in comparison to other types of trusts. All an individual need does is go to a bank, ask for the appropriate forms, fill out the required documents and turn this paperwork into the bank.
  • No Tax Disadvantage: While the contents of a Totten Trust are used to calculate estate tax liability, there are no estate tax disadvantages to the establishment of a Totten Trust.
  • Not Estate Assets: While assets remaining in a Totten Trust are factored into the calculation of estate tax liability, these assets are not considered part of the deceased individual’s estate and pass outside the realm of probatable estate assets. Because Totten Trust amounts pass outside probate law, Totten Trusts are invaluable when the deceased individuals does not leave behind a will.

If you are in the process of estate planning, you likely need the experience of a knowledgeable and informed lawyer to explain all of the options available to you so contact our firm today.

Essential Information About Undue Influence in Estate Planning

Undue influence occurs when a testator is unable to exercise independent action and the person exercising the influence makes that person do something against his or her free will. Kind actions and charm are not enough to classify as undue influence. In determining whether undue influence has occurred, courts look towards the vulnerability of the victim, the influencer’s apparent authority, actions used to influence, and the equity of the result. This article will list some essential information about the role that undue influence plays in estate planning in California.

  • Circumstantial Evidence: Parties can use the existence of circumstantial evidence to demonstrate that undue influence exists in a trust or will contest. A case need not be established through “direct” evidence, but instead “circumstantial” evidence can be used to demonstrate that an event occurred. The California legal system has used circumstantial evidence in numerous cases to demonstrate that undue influence has occurred. While still difficult to establish, undue influence cases are easier to prove than some parties might believe. Consequently, parties who believe that undue influence has occurred should not hesitate to contact skilled and experience estate planning attorneys.
  • Codified: The state of California has codified the definition of undue influence, which means that for the purposes of the law, it is easier to determine exactly when the act of undue influence has occurred. This codified definition does not drastically change the concept of undue influence but instead serves to codify previously established concepts. The four-part test for undue influence under California law helps determine more easily whether undue influence existed.
  • Equity is Not Enough: Based on the factors used to determine undue influence, an unfair result by itself is not enough. As a result, individuals can choose to act unfairly in regards to beneficiaries of an estate and this act alone is not enough to establish that undue influence has occurred. As a result, a party that lost money or other things of value does not alone mean that undue influence occurred.
  • Parties Can Shift the Burden of Proof: The party accused of acting under undue influence can shift the burden of proof to establish that the accused party did not act under undue influence. This burden shifting element means that parties accused of undue influence have a defensive tool that can be used to argue undue influence did not occur in a case.
  • A Weak Mental State is Required: To establish the existence of undue influence, a party must demonstrate that an individual was susceptible to being unduly influenced. This susceptibility is an essential element of any undue influence case that must be demonstrated in order for a party to collect damages.
  • Undue Influence Requires a Compelling Reason. To demonstrate that undue influence existed, a party must demonstrate a compelling reason to overturn a Trust or Will. A judge in deciding a case will require a unique and compelling reason to overturn an estate planning decision due to undue influence.

If you believe that undue influence occurred during estate planning, you likely need the experience of a knowledgeable and informed lawyer to explain all of the options available to you so contact our firm today.

Essential Advice for Selecting an Executor

Individuals traditionally select family members to serve as the executors of their estates. Sometimes, however, family situations become complicated after the death of a loved, like the current situation involving the estate of Muhammad Ali. Individuals hope to be able to count on their family members during a difficult time. Selecting an individual, however, to serve as the executor of one’s estate is a large responsibility. This article will provide some tips in selecting an executor for one’s estate.

  • An Executor Should Be Trustworthy. It is imperative that an executor be trustworthy because he or she will be exposed to a variety of financial secrets. He or she will be responsible for reviewing the assets of the estate, determining the deceased individual’s liabilities, and paying off the deceased individual’s debts.
  • Anticipate Potential Conflicts. Consider whether naming an individual as executor will create any potential conflicts among loved ones.
  • Economical Decisions are Necessary. Individuals must make sure that estates do not lose value prior to successful distribution.
  • Choose Someone Capable of Handling the Responsibility. An executor must have a great capacity for organization, be attentive to detail, meet deadlines, and perform other tasks. An individual should be selected who will be able to best fulfill these responsibilities.
  • Do Not Decide Executors Based on Emotional Connections. Do not let your emotional connection to an individual determine who you choose to act as executor. Not every beloved family member possesses the skills requisite to become an executor.
  • Ensure That Your Executor is Diplomatic. In deciding who to serve as executor, select an individual who would be diplomatic in nature while acting as executor.
  • Executors Must Be Organized. The individual who is named executor will be tasked with a variety of detailed assignments including making lists of assets and ensuring that timely distributions for estate taxes are made.
  • Executors Should Be Sensitive. Executors should be sensitive and compassionate enough to ensure that a deceased individual’s last requests are successfully carried out.
  • Make Sure an Individual Knows You Have Named Him or Her as Executor. If you do decide to name an individual as executor of an estate, make sure this individual is informed of your decision. Make sure that alternatives are lined up as well.
  • Make Sure an Individual Named as Executor Has all the Information. If you do decide to appoint either a family member or another loved one as executor, make sure the individual is given the contact information for a reputable estate planning attorney who can assist in ensuring that the executor’s duties are properly carried out
  • Realize There are Other Options. Individuals should know that if they cannot find someone to satisfy all of these qualities, other choices exist including naming a bank or financial institution as executor. Individuals can also ask an estate planning attorney to partner with the individual who is named as an executor.
  • Sometimes a Professional is the Best Choice. You might be unable to select a third party to serve as executor and instead select an attorney or other professional to act as executor of your estate. In this case, make sure you know what fees must be paid into your estate.

Appointing an executor can prove to be a difficult task. If you are faced with naming an executor or have any questions for an estate planning lawyer, contact a seasoned and experienced California estate planning lawyer today.

If Something Should Happen to You, is Your Pet Cared For?

Pets are important members of our families. If you are a pet owner, you know just how important it is to make sure your pet is happy, cared for, and loved. But what if something happens to you and you can no longer care for your beloved furry friend? It is important to consider making sure that your pet is addressed in your estate plan. If you make arrangements in your will or trust to ensure your pet is cared for, you will not have to worry about what will happen to them in the event of your death or incapacitation. There are a few different ways you can ensure that your pet will be taken care of if something happens to you. If you wish to add a provision for your pet into your estate plan, the attorneys at The Leslie Legal Group can help.

Account for Your Pet in Your Will

One option is to provide for your family pet in your will, including instructions and a monetary gift for the animal’s care. However, in California, the law does not allow for a direct gift to an animal. Permitted beneficiaries include individuals, corporations, governments, and organizations, with no mention of animals. In order to work around this restriction, you can devise your pet to a specific beneficiary and ensure that you provide money to be used for the pet’s care. Unfortunately, California law does not allow for you to require that the money you provide is used for the care of an animal, but you can certainly make the suggestion.

Account for Your Pet in a Trust

Accounting for your pet in a trust is a more effective way to ensure your pet is provided for, as the California Probate Code does allow a trust to be established for the care of an animal. In that trust, you can establish who will get custody of your pet and provides funds that can go directly to the care of the animal in the event of your incapacitation or death. California Probate Code allows you to set aside any dollar amount you wish, even your entire estate, in a trust for your beloved furry family member. In the trust, you can also provide the specific information that the beneficiary would need to ensure your pet is cared for.

Contact an Experienced Attorney

It is vital to ensure that your assets are protected in the event of your incapacitation or death. Creation of an estate plan, including a plan to ensure your pet is cared for, can be a complex and overwhelming legal endeavor. The knowledgeable attorneys at the Leslie Legal Group are here to help guide you through this process and create an estate plan that is right for you. We will ensure that you understand every step in the estate planning process. Contact us today for a consultation.

Revocable Living Trusts: An Overview

A living trust is a significant part of an estate plan. A revocable living trust is a partial substitute for a will. You can put your assets into the trust, and they are managed for your use during your lifetime. The remaining assets are transferred to your beneficiaries upon your death. Generally, most people will name themselves as trustee (person in charge of managing the trust), so they can remain in control of their own assets for their lifetime. It is advisable to name a replacement trustee, in the event of your incapacitation or death. A revocable living trust can be revoked or amended at any time by the settlor (the person who created the trust).

A revocable living trust should:

  • Provide the trustee with the right to control the assets within the trust;
  • Declare that the trustee manage the trust’s assets during the lifetime of the settlor;
    • The trustee has a fiduciary duty to act in the best interests of the settlor; and
  • Identify future beneficiaries that will receive the assets of the trust upon the death of the original trustee.

Who needs a Revocable Living Trust?

A revocable living trust is not for everyone. Those with simple estate plans and who do not have significant assets may not need a living trust. A living trust is important for those with significant assets. Having a revocable living trust can make the management and distribution of your estate much less complicated should you suddenly become incapacitated or upon your death. Your chosen successor trustee would then be able to manage the assets for you. However, if you did not have a living trust and did not appoint someone to manage your assets should you become incapacitated, the court would have to determine who could manage your assets instead. Having a revocable living trust with pre-made arrangements can save your heirs time and expense, as no court proceeding would be necessary.

Advantages

As previously stated, one of the main advantages to a revocable living trust is that it is probate free. A revocable living trust is revocable and changeable for the lifetime of the settlor. This type of trust minimizes or eliminates challenges to the will. In California, the settlor is allowed to add a provision providing for disinheritance to those who dispute the specified distribution of the estate.

Disadvantages

Because living trusts are not supervised by the court, one of the main potential advantages can also become a disadvantage in the event that you appoint the wrong trustee. The risk that a trustee would be able to not act in your best interest is greater than when an executor is directly supervised by the court. Creation of a living trust can also be expensive and potentially higher than the cost of preparing a will, though this varies on a case by case basis. Another potential disadvantage to a living trust is that lenders may not be willing to lend to a trust in order to purchase real property. This can cause additional administrative headache and paperwork.

Contact an Experienced Attorney

It is vital to ensure that your assets are protected in the event of your incapacitation or death. Creation of an estate plan, including a revocable living trust, can be a complex and overwhelming legal endeavor. The knowledgeable attorneys at the Leslie Legal Group are here to help guide you through this process and create an estate plan that is right for you. We will ensure that you understand every step in the estate planning process. Contact us today for a consultation.

Appointing a Financial Power of Attorney

Creation of a power of attorney allows you or your aging loved one to appoint an agent to act on his or her behalf should they become incapacitated. Appointing a power of attorney provides you or your loved one with assurance that someone they trust will be making financial decisions in his or her best interest. If a power of attorney is not appointed prior to incapacitation, the family likely would be forced to undergo expensive and time-consuming measures to court-appoint a guardian or conservator to handle their financial decisions.

 

What is a Financial Power of Attorney?

A document in which the principal (you or your loved one) appoints an agent to act under specified circumstances. The Principal can decide what she will allow her agent or representative to decide for her, and should plan for a broad range of responsibilities to fit his or her future needs. For example, many people allow their agent to handle some or all of the following: handle everyday expenses, investments, file and pay taxes, maintain or sell property, collection of government benefits, maintain, buy, or sell insurance policies, maintain a small business, trust creation or maintenance, hire an attorney, and manage retirement accounts. The agent has a duty to act in the best interest of the principal, not commingle their property with yours, avoid any conflicts of interest, and retain accurate records.

 

Types of Power of Attorney

A financial power of attorney can take effect immediately when the form is signed, or it can be drafted so that it only begins upon the occurrence of a specific event, i.e., incapacitation. Many spouses maintain ongoing, active power of attorney designations in the event something unexpected happens to one spouse. It is the principal’s decision when a power of attorney begins and ends.

Conventional Power of Attorney: Effective when signed by the principal and ends when the agent becomes incapacitated themselves.

Springing Power of Attorney: Effective only when a specified even occurs, (i.e. the principal’s incapacitation), allowing the principal to remain in control of his affairs until the event. A springing power of attorney can create a whole host of problems for your agent if the form is not drafted to explain exactly when the specified event is deemed to have occurred, and the power of attorney then “springs” into action.

Durable Power of Attorney: Effective when signed by the principal, and remains in effect throughout the principal’s life, unless he or she revokes it. A durable power of attorney is often the best choice, because it remains in effect even after the principal recovers from incapacitation. There is also no ambiguity as to when this type of power of attorney takes effect. The principal can remain in control of her finances even after signing, until she can no longer make sound decisions.

 

Termination of a Power of Attorney

A durable power of attorney terminates at the principal’s death. As a result, you cannot give your agent power to handle your estate – naming the executor of your estate is a separate process entirely. Power of attorney can also terminate if revoked by the principal (so long as they are of sound mind), divorce (if you designated your spouse as your agent), invalidation by court order, or your agent is unavailable.

Contact an Experienced Attorney

Creation of an estate plan, including a power of attorney, can be a complex and overwhelming legal endeavor. The knowledgeable attorneys at the Leslie Legal Group are here to help guide you through this process and create an estate plan that is right for you. We will ensure that you understand every step in the estate planning process. Contact us today for a consultation.

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