Answer: Neither, a will and a trust govern different property.

If a person has a living trust, they should have a will as well. The trust document covers only things that are put into the trust. The will covers anything that is not in trust, and not in a designated-beneficiary account like life insurance or retirement accounts. Normally a will created alongside a trust is a “pour-over” will, and it leaves everything to the trust.

For example, let’s say I own a house in my own name and I have a will leaving everything to my son. The house is controlled by my will. Then I make a trust leaving everything I own to the Humane Society. The house is still controlled by my will because it’s not in the trust. Then I create a Deed transferring the house from myself, Daniel Printz, to myself as trustee: “Daniel Printz, as Trustee of the Daniel Printz Trust.” NOW the house is controlled by the trust and will go to the Humane Society.

Feel free to contact me directly at (858) 740-4370 if you have questions about these documents and how they interact.

A Living Estate is what we own while we are alive. All of those things that go into  your financial junk drawer: your cash, real property, vehicles, jewelery, 401K accounts, etc., are part of your living estate. Some folks don’t think their living estate amounts to much, or feel that with student loans, underwater real estate, they might actually have a negative net worth.

New parents unfortunately don’t realize their living estate could be much more than they think. One father-to-be told me: “I don’t have an estate, why do I need a trust?”

The Father-To-Be.

“Daniel, I am a father-to-be, but I don’t have much money. Do I need a trust?” You do have a lot of money. Or, to be more accurate, you can make sure that if you are taken out of your child’s life they have more than enough money to get by. You can fund your Living Estate with basic term life insurance. Very inexpensive, especially for young, healthy parents. Contact a life insurance agent, or ask me for a referral, and just find out how much a simple 15-year term life insurance policy would be. Then, if you die and your child is orphaned, there will be a pool of assets your child’s trustee can pull from for her education, medical care, etc. This will be your child’s Trust Fund.

Trust Fund?

You bet. Trust funds are just for the Mitt Romneys of the world. If you have a term life insurance policy, or assets of your own, your money will go into a trust fund for your child until he or she reaches the ages you designate. While the trust fund is active, the trustee can pull from it to pay for her education, as we mentioned above, and other purposes. Then, the principal will go to your child when you want it to. It’s popular now to have the trust fund distribute out in three stages: for example, 33% at age 21, 33% at age 25, and the balance at age 30.

But don’t think you can, or should set this up yourself. Find a San Diego estate planning attorney to help you out.

San Diego Estate Planning Attorney?

Absolutely. A San Diego estate planning attorney has the expertise to create a trust into which you will transfer your living estate. Everything remains your money, managed and accessable only by you, but on your death the trust will create a trust fund for your beneficiary (your child).

Why Get a Will?

A will is most important when one has children between the ages of 0 and 18, because a will is where you name a guardian for your children. But everyone needs a will because if you don’t have one, all of your assets and personal property will be divided up according to the laws of the state you are living in when you die, which for some people means that your young children will end up with more assets than your spouse!

Besides, everyone has something, even if it’s an old guitar or a sentimental necklace, that you’d prefer to give to someone specific.

Can I Make My Own Will?

You can, but you shouldn’t. For some people, online or over-the-counter software works alright. Whether you should use a lawyer depends on your personal circumstances and comfort level. But if you’re at all unsure, it’s probably worth paying for a professional. Actually, the introduction of do-it-yourself software has forced lawyers to dramatically lower their prices for these entry-level estate planning documents, so it’s well worth your investment to hire an attorney.

If you are naming a guardian for children hiring a lawyer is a must –software won’t talk to you about the important questions like a lawyer will. For example, let’s say you name your sister Sarah and her husband Bobby as guardians of your child. What if Sarah and Bobby get divorced – do you want the child to stay with Sarah, or Bobby? Okay, Sarah. Now say Sarah has passed away or become incapacitated. Do you want your child to stay with Bobby, who isn’t any relation to you at all, or move to another family member? This is not something you want to get wrong.

Others who should seek a professional help: Small-business owners, parents of children with special needs or couples where one partner is facing an illness like Alzheimer’s or who may have early signs of dementia.

Or maybe you’re remarried but still want to leave most of your assets to your children. This may also call for a lawyer’s assistance, since “disinheriting” a spouse can get tricky. You may want to invest in a prenuptial or post-nuptial agreement.

Do I Need More Than a Will?

Everyone should have documents in place that allow others to make decisions for you in case you become incapacitated. These documents are very inexpensive to have a lawyer prepare, and save your loved ones much heartache later on.

For medical matters, you need what we in California call an advance health care directive. A durable financial power of attorney gives someone legal authorization to handle your financial affairs when you can’t do so on your own.

Many people, including parents of young children and anyone who owns a home, should consider a living trust. Talk with a local attorney about the pros and cons of trusts and see if they work for you.

Where Should I Keep My Will?

I recommend my clients keep their important documents in a fireproof safe in their home or in a safe deposit box. A copy of your advance health care directive and power of attorney should be sent to your designated agent for those decisions so that they aren’t hunting for documents during a crisis.

Need more help or advice? Have more questions? Call San Diego attorney Daniel Printz anytime to schedule a free consultation: (858) 720-8250.

Here is a question recently posed by someone who was promised the world but left with nothing, along with my answer:

Question:

If I share a home with my partner for over 20 years, and helped pay for upkeep and expenses, am I entitled to the property when he dies? We live in California and never married, but he told me, friends, and family that he was leaving me the house. We moved in together when it was new over 20 years ago. He never changed the will and it went to his two kids, but I’m still living in it, paying the taxes, the HOI, all repairs and expenses.

Answer:

You might be able to come to an agreement with the kids, however you are not *entitled* to the property if you were not either (1) on title, (2) designated to receive it in the will, (2) married to your partner, or (3) in a registered domestic partnership.  The best you can argue for is a refund of your contribution to the property, but it would be a hard sell – contact a local probate attorney with the facts and ask for a consultation.

We will establish either a QTIP or Credit Shelter Trust, preferably with a 3rd party trustee not subject to H’s influence, into which the deceased settlor’s property will flow on his or her death. You can give a power of appointment over the survivor’s trust (the “A” trust) while still protecting W’s child in case W is the first to pass. It is not standard to give H the power to reallocate assets between the survivor’s and the bypass trust after W passes – this would make the separation of trusts pointless and would certainly forfeit W’s estate tax exemption.

How long does this planning process take? Most likely about 2-3 weeks, depending on how long the spouse’s take to make decisions. Call the Law Office of Daniel K. Printz at (858) 740-4370 for more information.

Recently there have been allegations of mismanagement, lawsuits, etc., and the trustees want to sell off the land to the renters as a settlement. This would change a trust which held real property to a trust which holds cash that can be invested.

Here’s a brief excerpt from the article:

“BOSTON (AP) — With only eight days to live, a wealthy, ailing Massachusetts merchant wrote in his will 351 years ago that he was leaving a spectacular 35-acre seafront property for the benefit of public school children, decreeing the land should never be sold or wasted.

The dying wish of William Payne, one of the state’s earliest settlers, created the nation’s oldest charitable trust and eventually led tenants to build 167 cottages — most of them used by summer vacationers — on the land he left for the seaside city of Ipswich. The rent money has generated some $2.4 million to help fund public schools over the last 25 years.

Now, the trustees want to tear up the will, convert the property into condominiums and sell them to the tenants to settle a 2006 lawsuit filed by the tenants over rent increases. But hundreds of Ipswich residents have gone to court to block the settlement, saying it violates the sacred intent of Payne’s will and shortchanges the schools.

The Massachusetts Appeals Court is considering whether to nullify the settlement and is scheduled to hear arguments in the case March 2.”

Do I have an opinion on this? You bet I do!

Generally I agree with the public administrators. A revenue stream based on a diversified portfolio is less risky, and easier to manage, than a revenue stream based only on income from real property. If a fair price is paid, they should make the deal.

This is a much different case than the one raging in San Diego’s tawny neighborhood of La Jolla, where a public benefit trust set aside a tidal basin for a children’s pool. The basin has been taken over by a pod of harbor seals, much to the consternation of some local divers. In the Children’s Pool matter, the land was used for a particular purpose. In Massachusetts, it was just used to gain revenue.

It will serve the beneficiaries much better if the Massachusetts trust property was converted to liquid assets.

Among the notables who died either without a valid will or no will at all are Ross Alexander, Fatty Arbuckle, Anura Bandaranaike, Madhav Prasad Birla, Sonny Bono, George Brent, Lenny Bruce, Jacob A. Cantor, Kurt Cobain, Russ Columbo, Sam Cooke, James Dean, Sandy Dennis, John Denver, Divine, Duke Ellington, Cass Elliot, Chris Farley, Bobby Fischer, Redd Foxx, Mary Frann, James A. Garfield, Marvin Gaye, Ulysses S. Grant, Billie Holiday, Buddy Holly, Shemp Howard, Howard Hughes, Andrew Johnson, Florence Griffith-Joyner, Martin Luther King, Jr., Ernie Kovacs, Harry Langdon, Bruce Lee, Abraham Lincoln, Peter Lorre, Jayne Mansfield, Rocky Marciano, Karl Marx, Steve McNair, Sal Mineo, Carmen Miranda, Keith Moon, Rosa Parks, Pablo Picasso, Mihajlo Idvorski Pupin, Tupac Shakur, Don Simpson, Anna Nicole Smith, William Desmond Taylor, Sharon Tate, Tiny Tim, Ritchie Valens, Hervé Villechaize, Barry White, and Jimmy Witherspoon.

http://www.dailyfinance.com/2011/07/26/amy-winehouses-will-singer-songwriter-played-it-smart/

“San Diego-based estate planning lawyer Daniel Printz tells us the myriad of things to be aware of when drawing up a Will, especially in the areas of child guardianship and business succession. Some of the case studies may highlight unfortunate situations, but fortunately for you listeners this was one of our best, most informative interviews thus far. We highly recommend sharing it with your friends and family!”

For a Rocket Lawyer podcast, this interview was fairly long; 23 of the 32-minute podcast consisted of my interview.  Rocket Lawyer is focusing on April as “Make-a-Will Month,” and I couldn’t be happier to be a part of it. 

HERE IS A LINK TO THE PODCAST: 22 Ep 20_ A Series Of Unfortunate Events – Make A Will Edition

Wills are, after all, probably the best bang for the buck in the estate planning arena.  Because of competition from online services, attorneys have dropped their prices for attorney-drafted wills to the point where it has essentially become a loss-leader.

Even so, it’s a vital piece of estate planning package, especially for parents with minor children who need to designate a guardian of the person and a guardian of the estate. While almost everyone could benefit from more sophisticated estate planning than a will allows, it is certainly true that a will is better than  no planning at all!

Wills with guardianship provisions for minor children can usually be drafted and executed in a single day. If you’re interested in finding out about our low prices for simple wills, give us a call right now at (858) 720-8250 – just ask for Daniel.

It’s surprisingly hard to buy a house. In today’s depressed housing market, home prices and interest rates are low. Normally that would mean that homes would be rapidly purchased, thus driving up home prices. But here in the “Great Recession,” buyers are finding it hard to qualify and often need to provide significant down payments.

More and more often, young people and couples are turning to parents for help in making that house purchase. From an estate planning perspective, the devil is in the details; the success of the transaction will lie in making the proper choices given the facts.

First, you need to decide whether the help is a gift or a loan. Second, you need to decide if there will be any type of security if it is a loan.  Third, you need to decide how to treat the assistance in the parents’ estate plan (will or living trust).

If the assistance is a gift, then the advantage to the parent is that they move some money out of their estate, thus reducing potential estate taxes on estates over five million ($5,000,000).  The disadvantage to the parent is that they might have to pay gift taxes on the transfer.

If the assistance is a loan, then there are two advantages that leap out. First, the parent can can secure the loan with a lien against the home. This would be a second, since the mortgage company is going to take the first position as the primary lender. Second, as a lender, the parent is creating a stream of income, essentially creating an annuity earning some interest.

The disadvantage of a loan is that if the parent suddenly needs money, the parent can’t pull the money out of the house, the way they could if they had put the money into a different investment vehicle like a mutual fund.  Also, if the child doesn’t pay back or misses payments, they are unlikely to enforce the lien, thus making the lien a hollow threat.  Finally, if the assistance the parent provides is to actually co-sign the loan, then they could be on the hook for the entire loan amount if child defaults, goes bankrupt, passes away, and can suffer credit blows from late payments.

Parents who want to help out should always remember that their investment could be lost due to child’s creditors foreclosing on the home with no other security.  Therefore, it’s the assistance, rather than the investment, that should be the driving motivation.

Whatever choices the family makes, the parent’s act should be memorialized in a writing so it can be understood in the context of their estate planning.  If this was a gift, was it an advance on their inheritance that should be taken into account when diving property among children?  If it was a loan, will it be forgiven on parent’s passing or should it count against the inheritance?  The idea here is to minimize the possibility of litigation between children on the parent’s passing by making the parent’s wishes about the assistance to that one child very clear.

If you’d like to help out your child with buying a house, or if you need assistance from your parent with a purchase, sit down with a certified financial planner and with an estate planning attorney to make sure it’s done right.  You can call my office at any time for a free consultation at (858) 720-8250.

A great additional resource can be found here – a comprehensive review of parent/child mortgage help advice!