Why Don’t More Families Have Living Trusts? Read These 4 Excuses!

Why don’t more East Bay families have Living Trusts? Good question. But here are some of the excuses:

1. I don’t have an estate–why do I need an estate plan?

This is, of course, the classic excuse. Certainly those with a lot of assets have more to protect and more to lose by not making plans for the distribution of their estates. Yet many people are surprised at the cumulative value of their assets. Here in the Bay Area, with our inflated real estate market, anyone who owns a home has a significant investment. Cars, antiques, artwork, jewelry, brokerage accounts and life insurance policies—collectively, all of these can contribute to a significant total net worth.

2. Won’t my spouse automatically inherit my estate?

Some families assume that if something happens to one spouse, everything will, by default, go to the surviving spouse. In general, this may be true, but what if something happens to both spouses? A tragedy, but it happens. And sooner or later, that remaining spouse will die. So far, no one has figured out a way to beat the odds. Without a Will or Trust, along with their grief, their heirs will be dealing with Probate. Depending on the complexity of the estate, Probate can take several years, and it is entirely preventable by creating a Living Trust.

Or here’s another scenario that will affect spousal inheritance

Let’s say someone refinanced his/her mortgage, and one spouse’s name was taken off the house? Then imagine that spouse dies. That estate will not “automatically” pass to the surviving spouse. In fact, it will potentially make the surviving spouse’s life very difficult indeed.

3. I don’t want to inherit my parents’ credit-card debt

This was a new excuse we heard a few weeks ago. One son had discouraged his parents from creating estate-planning documents because he didn’t want to be responsible for his parents’ credit card debt when they died. In general, children aren’t responsible for a deceased parent’s debts, and in some cases, a spouse may be exempt as well. In general, the estate is responsible for paying debts. Once assets are liquidized and if there isn’t enough money in the estate to cover the amount owed, the debts generally go unpaid. It’s those who are owed money—not the heirs–who are left holding the bag.

4. I have a Will, so my estate won’t be subject to Probate

In fact, all Wills are subject to Probate. It’s the process in which a court determines whether the document is valid and ensures that relatives and creditors are notified. This process can take several months and drain thousands of dollars from the value of the estate. A Living Trust is the legal document that holds your property; when you die or become incapacitated, the property in your Living Trust is smoothly transferred to your beneficiaries.

Something else to think about:

• If you own property in more than one state—even if it’s a timeshare–you DO want a Living Trust. Going through Probate in multiple states is an experience that you will never forget.
• If you value privacy, you want a Living Trust. A Will is a public document, and anyone can come to a Probate
• Keep your Trust updated with life events.What’s a life event? Think about anything that will affect the inheritance of your heirs—births, deaths, divorce, important investments.

We encourage everyone to create a Living Trust

Creating a Living Trust is one of the most thoughtful things you can do for your family. If you need to create or update your Trust, contact California Document Preparers at one of our three Bay Area offices today to schedule an appointment. Our dedicated team is helpful, compassionate and affordable.

Complexity of Blended Families Creates Need for Multiple Trusts

“Julie” came in to our Oakland office to get more information about creating a Living Trust. She and her husband headed a blended family, and theirs was a complex scenario. Wanting to avoid going to an attorney, she was hoping we could help her. She and her husband, “Jerry”, had both been previously married, and each brought children and assets to their relationship.

Julie and Jerry owned two properties together, and they agreed that these properties would go to Jerry if she passed away first; after he died, they would be divided among their collective five children. Julie also owned four properties that were in her name only, and she wanted these properties to go directly to her three children when she died--not to Jerry or his two children.

After carefully reviewing her estate and options, she decided to prepare two Trusts:

• A Joint Trust would be created to hold their community assets, including the two properties that Julie and Jerry owned together. They agreed that the surviving spouse would inherit these assets. After he the surviving spouse died, these assets, including the properties, would be equally distributed among the couple’s five children.
• An individual Trust would be created just for those four properties Julie owned as her separate property; upon her death they would be distributed among Julie’s three children only.

This was a clever way to separate assets, allowing for different distribution strategies

• We would help Julie and Jerry transfer title of their jointly owned properties into the Joint Trust, and these assets would go to the surviving spouse. After the death of the survivor, these would go to the beneficiaries they named in their Joint Trust.
• We would also help Julie transfer title of her separate properties to her Individual Trust. Since their Joint Trust can be amended by the surviving party, Julie took the extra precaution of segregating these properties because her Individual Trust becomes irrevocable and unamendable after she dies. Julie wanted to avoid any confusion about wanting to distribute the four separate properties among her three biological children.

While Julie and Jerry could have stated in the Joint Trust that these properties were to be given upon Julie’s death (rather than after the death of both of them), sometimes spouses worry that circumstances may change after their deaths and their wishes won’t be followed. These Trusts are now structured so that Julie’s wishes will be carried out.

Creating a Living Trust is an important part of end-of-life planning

Contact California Document Preparers at one of our three Bay Area offices today to schedule an appointment. We’re helpful, compassionate and affordable.

Executor Creates Process for Distributing Mother’s Assets

Clients who prepare their Living Trusts identify their assets and how they will be distributed among their heirs when they die. Assets include the obvious things such as real property, brokerage accounts, life insurance policies and other financial resources, but they also include other high-ticket items such as cars, jewelry, artwork, antiques, valuable collections, etc. Many people carefully allocate the large items but fail to identify how the smaller items will be distributed among their surviving family members. These are often items that may not have great financial value but are rich in sentiment, and their distribution can become highly contentious.

An Oakland client distributes mother’s assets

An Oakland client, the executor for his mother’s estate, shared this story of how he successfully distributed his mother’s assets among his siblings. His mother had created a Living Trust and had divided her estate equally among her three children. But she had not identified how the many small, sentimental items were to be divided among her three children. His brother and his wife were aggressive and greedy, and he wanted to avoid their taking the most valuable items, leaving his sister and him with the leftovers. He wanted to prevent potentially hard feelings and conflict, making sure that each of them was the recipient of household items and mementoes that would comfort them and keep their mother’s memory alive.

He knew, for instance, that his sister loved a beautiful Wedgewood plate that his mother always used for their birthday cakes, and she had a lovely gold bracelet that he would like to give his daughter. A wicker rocker in her study was where his mother used to sit and read, and he would love to have that chair in his own study. None of these things was worth a lot of money, but each was rich in memories.

As executor, he devised a plan that included only the three siblings, not their spouses

• Each would create and prioritize a written list of the items he/she wanted from their mother’s belongings, without saying one word to each other.
• They would flip a coin to see who would choose first.
• The sibling who won the coin toss would select the first item, segregating it physically into a pile.
• The person who came second would do the same, then the third, continuing until all of their mother’s belongings were taken.
• If somebody’s choice was already taken, they would take the next item on their list, if that item was still available.
• After all items were chosen, conversation was allowed and trading could begin. “You really wanted that item bracelet, and I really wanted that ring; would you be willing to trade?” Etc.

Siblings satisfied with the process

There was only one case where two siblings really wanted one item and a settlement/deal couldn’t be reached. Our client’s sister wanted something that he had chosen, but he wasn’t willing to part with it–their mother’s favorite pasta bowl that she had bought in Italy. There was no dispute, no loud discussion, and everyone was very satisfied with the process and the results—including his brother.

Have you created your Living Trust and named your executor? Contact the California Document Preparers team today to schedule an appointment. We help you through every step of the process.

Living Trusts and the Baggage of Second—or Third–Marriages

There are many things to keep in mind as you plan the distribution of your assets among your heirs for your Living Trust. But for those in their second or third marriages, replacing the name of the former spouse with that of the new one on all assets, including life insurance policies and Deeds, then making sure they all get transferred into the Trust often means that this process requires significantly more attention.

Husband dies unexpectedly in his 50s, without a Living Trust

In a recent example, one woman’s husband of five years died. He had children from a first marriage, a family business in his name, lots of debt and no Living Trust—he was in his late 50s, after all, and he, like many people, figured that he had plenty of time to do this when he got old. Unfortunately, “old” never came. He also owned timeshares in Hawaii and Mexico, a cabin in Tahoe and oil rights in Oklahoma. His widow’s name had never been transferred to the Deeds of any of these properties.

In addition to the costs and delays of the inevitable Probate, this grieving widow now had to fight with her husband’s sister to keep her own interest in the family business, file a lawsuit to divide real estate her husband owned with a friend of theirs and fight with a large life insurance company over a life insurance policy on which her husband had forgotten to make her the beneficiary.

With second and third marriages come baggage and complexities

These days 50% of US marriages end in divorce. And now, there’s an even greater percentage of couples over 50 getting divorced. There’s a greater likelihood than ever before that married couples will grow old with their second or even third husband or wife. There is a common misconception that all assets owned by husbands and wives automatically belong to the other at death. This can be the case but it’s not an automatic rule—especially for these divorced couples whose financial landscapes are more complex. It’s not uncommon that a husband and wife, especially in a second or third marriage, neglect to get all of their assets into both of their names, then get them moved into their Living Trust.

Have you and your husband updated the assets that go in your Living Trust? Call the California Document Preparers team today to make an appointment. We help you through every step.