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.

Estate Planning for the Never Married

Married couples and parents usually have an easy time determining who will inherit their assets. An increasing number of Americans are faced with the situation of passing away without either spouses or children in place. In an article published last year, the New York Times reported that it is wiser for unmarried individuals to make the difficult choice of deciding to whom their estates will go rather than allowing them to go to distant relatives that they barely know. According to the Pew Research Center, statistics reveal that 20% of adults age 25 and older in 2012 had never married, which is an increase from 9% in 1960. Meanwhile, the number of women age 40 to 44 who have no children has increased from 10 % in 1976 to 15% in 2014. This article will discuss some essential advice for unmarried individuals during estate planning:

  • Explain Your Decisions: To prevent adverse legal actions and to ensure that your exact plans are carried out, it is wise and helpful to provide an explanation of your decisions. This type of overly thorough explanation is particularly helpful in cases where there is an unequal distribution of assets to persons with reasonably similar relationships to the testator of a will.
  • Need: Need is a potential good factor to decide how much to give a beneficiary.
  • Regularly Review Your Estate Plan: Individuals who are not married and do not have children should review estate plans at regular intervals to identify areas in which changes to the estate plan are desired. They might include third parties that they were close to at one time but lose touch with over time. In other situations, the financial circumstances of a beneficiary might change, which could signify a need to rewrite an estate plan so that individuals who are in greater need are awarded greater amounts.
  • Understand the Decisions Often Made By Others in Similar Situations: In similar situations, individuals who pass away at younger ages tend to select longtime companions, nieces and nephews, siblings, parents, and friends as beneficiaries. Older individuals who pass away in similar situations tend to select charities.
  • Use Clear and Concise Terms: Individuals without spouses or children must be definitive and clear about who should receive what parts of their estates. When there is not a clearly specified order, the state usually makes strict decisions regarding genealogical rules of inheritance. These types of decisions also tend to take an extended amount of time.

If you are unmarried, crafting an estate plan can be a difficult exercise, so do not hesitate to contact a knowledgeable and seasoned California estate planning lawyer today.

A Revocable Living Trust is an Estate Planning Fundamental in California

Busy already in the day-to-day, it can feel like there is no time to set aside for planning on behalf of our loved ones and charitable causes. With the help of an experienced California estate planning attorney, however, estate planning does not have to be overly complex or time-consuming. An attorney can help you select the estate planning tools that are best for your assets and intentions. One such tool is the revocable living trust. This article will introduce Californians to the benefits of this type of trust.

Estate planning is a part of wills and trusts law. In this field of law words carry especially deep significance. Accordingly, to understand the nature and function of a revocable living trust, one must understand the words “revocable,” “living,” and “trust.”

“Revocable” means capable of being canceled or changed. This word and its definition speak to something about the greater picture of what a revocable living trust is – that it is something in effect while its creator is still alive. This feature is unique because some estate planning instruments, such as wills, only take effect upon the death of the grantor (the founder, or creator, of the trust). So, at this stage, we know that a revocable living trust is something that can be canceled (revoked) and operates while the grantor is still living.  

The last word in the series of three,“trust,” is most important and far-ranging. A “trust” is at its roots a relationship between three people: the grantor, the beneficiary, and the trustee. In this relationship, the grantor gives property (e.g. money, real estate, personal property) to the trustee (a trusted friend or relative, frequently) to manage and hold in trust for the benefit of the beneficiary. The terms of the management of the trust property can vary. Sometimes, once the trust is created, the terms are set in stone. Other times, even once the trust has come into existence, the terms can be changed by the grantor. It is this flexibility that makes the trust “revocable.”

Now that you understand the nature of a revocable living trust, it is time to understand the function of the instrument. The reason revocable living trusts are a popular estate planning instrument in the state of California is because they help individuals maintain control over their assets while they are still living and dictate how they are distributed at death. Such control and management allows for a revocable living trust to substitute for a will. In addition, a revocable living trust is capable of reducing taxes and other costs associated with the management and distribution of one’s estate. Finally, revocability is akin to flexibility. Being able to change the trust’s terms allows one to more easily adjust to major life events such as marriage, divorce, and children.  If a revocable living trust sounds like it might be a wise estate planning instrument for you, reach out to a skilled and experienced California trusts attorney.