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).

As so often happens, the most important story is the one not told.  Yesterday, Inside Edition broke the news that the late Tony Curtis, who passed away in September of 2010, had specifically disinherited his children in his will. To the tabloids, what is important here is that, five months before his death, Tony Curtis re-wrote his will.  (Amusingly, some have referred to five months before his death as his “last days.”)

I haven’t personally seen the will, so I’m don’t know whether Inside Edition is correct in it’s implied allegation that Mr. Curtis apparently didn’t leave anything to his children. After all, he could have easily provided for them in other ways (life insurance, direct beneficiary investment accounts, etc.).

Assuming that they are correct,  what is astonishing is not that he disinherited his children, which frankly happens often enough not to produce comment by estate planning attorneys like myself, but that he chose to do so publicly when it would be so easy to privately leave his estate to his widow, Jill Vandenberg Curtis.  Let me quote InsideEdition.com:

“INSIDE EDITION has obtained the will, written five months before his death from cardiac arrest last year at age 85. His children are listed by name, including Jamie Lee. Then there’s this statement: “I acknowledge the existence of my children…and have intentionally and with full knowledge chosen not to provide for them.”  Instead, Curtis leaves his estate to his widow, Jill.”

Ignore for a moment that Tony Curtis has joined a long line of celebrities who fail to consider the ramifications of the Probate process.

Instead, consider this: Tony Curtis could have accompished the exact same thing, disinheriting his children and leaving his entire estate to his wife, and done it privately, without his widow and children being exposed to our prying eyes.

If Tony Curtis had made a trust, then his will would simply direct that his entire estate be distributed to the trust. Then, in the trust document, which would remain private, he could direct that everything be distributed to his wife.  Voila!  The exact same result, but without dragging the family through the tabloid mud. After all, it’s really none of our business.

Furthermore, by using a trust, he could have easily left something to his favorite charities, to particular friends, or to his grandchildren or great-grandchildren, who one assumes are too young to have voiced disapproval over Mr. Curtis’ life choices. It begs the question: was the omission intentional? Did he actually desire this result, or did he just not ask anyone’s advice? I think it was the latter – most people simply don’t know the right questions to ask.

Ironically, Jill Curtis’ response to the tabloid reports was: “Tony’s last will and testament and his passing wishes . . . are private family matters.” Sadly, they’re not private at all. But they could have been. 

I was recently asked the following question on the legal answer website AVVO.COM.  My answer was chosen as “best answer” by the questioner.

Question: My father wants a copy of my parent’s trust. He wants to request this in writing as it is difficult for him to get around. My mother claims she has misplaced the trust. My father would like to get a copy of the trust for me, but he is partially paralyzed and we had to hire full time help to assist him with his daily activities.

The trust attorney told me I would have to write a letter requesting it with the signatures of both of my parents. My father would do this, but my mother refuses. Is there any other way to get a copy of this trust? My mother constantly threatens me, telling me she is going to change the trust.  If my dad is a Trustee, can the Trust attorney legally refuse to do so? Would my dad’s request have to be notarized?

Answer (after another attorney had stated that the questioner’s mother would have to approve): I disagree. Your father, as a settlor and trustee, has a right to a copy of the trust that he and your mother hired the attorney to draft, assuming the attorney still retains a copy in the file. The request does not have to be notarized; in fact, he should simply be able to pick up the phone and call. If the attorney is skeptical about your father’s identity, then he should go to the office himself to pick it up, even if it is difficult to get around.

However, if I were you I’d talk to an estate planning attorney about this, and the underlying family issues that seem to be present. Where is the original? Was it destroyed? Lost? Is there in fact any property still in the trust? Is there a pending divorce?

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If you want to pose legal questions anonymously and have them answered by a handful of attorneys practicing in the field, consider coming to AVVO.com.  Or, just call me directly at (858) 740-4370, and I’ll answer your question myself or find someone who can.

Here are the factors that should be weighed by the trustee in establishing his or her compensation:

-  Amount of time spent 
-  Gross income of the trust 
-  Appreciation in value of trust property 
-  Unusual or special skills – attorney, accountant 
-  Degree of fidelity or disloyalty to trust 
-  Amount of risk/responsibility 
-  Fees charged by other trustees in the local community for similar services 
-  Character of trustee’s work: did it involve skill/judgment, or was it mostly ministerial
-  His own estimate of the value of his services 

A good place to start in establishing how much you will claim as trustee is to poll local professional fiduciaries to establish the ‘local community’ factor. 

But bear in mind, the Court can review the compensation, on request of a beneficiary.  The last thing you want to do is provoke a dispute with the beneficiaries.

PURPOSES OF AN INTERNATIONAL TRUST

There are two main purposes of an international trust for U.S. citizens.  The first is to combine domestic and offshore assets into a unified estate plan with a common trustee and set of instructions.  The second use of interantional trusts is for asset protection.

ASPECTS OF AN INTERNATIONAL TRUST

International trusts for asset protection are refered to as “Asset Protection Trusts.”  The countries which provide for Asset Protection Trusts are: The Cook Islands; Nevis; Belize; Bahamas; the Channel Islands; Switzerland; and, Liechtenstein.

According to Jacob Stein’s treatise on asset protection, common provisions enacted among some, but not all, of these countries are:

1. there is no recognition of foreign judgments with respect to trusts
2. there is a very short statute of limitations on fraudulent transfers
3. to establish a fraudulent transfer the creditor must show that the debtor was insolvent, and must establish the debtor’s intent to “hinder, delay or defraud” beyond a reasonable doubt;
4. the anti-duress provisions are incorporated into the statutes; and
5. spendthrift protection is extended to self-settled trusts.

CAUTIONS REGARDING INTERNATIONAL TRUSTS

Two things should be noted.  First, transferring your assets offshore does nothing to relieve a U.S. citizen from declaring income for tax purposes; we must declare non-domestic income and capital gains.  Also, there has been an increase in regulation regarding reporting requirements – as a result, some resident trustees in the foreign jurisdictions have either retired or greatly reduced the number of separate trusts they are willing to handle at a time.

Before implementing any estate planning, financial planning, or tax planning strategy, be sure to consult with and heed the advice of a professional certified to assist you with these matters!

Question:  How can my parents change their revocable trust without an attorney?  My parents reside in Wisconsin and have a revocable trust with 3 of 8 children designated to administer the trust.  If they wish to delete 1 of the 3 or replace 1 of them, would they need to go through an attorney?

Answer: It’s probably best to use an attorney to create an amendment to the trust – it shouldn’t be expensive at all if they are making simple changes like altering the named successor trustees.

To do it themselves, they would make a new document, entitled “First [or second, or third] Amendment to the John and Jane Doe Trust”, identify themselves, identify the trust, cite and quote the language in the trust granting them the right to modify, cite the section being modified, include the newly re-written section, and sign and notarize the document with all the formalities necessary for a trust in their state. Then they should create a Certificate of Trust as appropriate in their state.

As you can see, it requires a certain familiarity with trust drafting. Considering the amount of money at issue in a trust, it’s well worth your parent’s money to spend $100 to $300 to have a professional do the work for them.

- Daniel K. Printz, Esq.

Steve Fromm, Esq., then noted: The prior attorney is right on point here. You do not want to jeopardize the validity of a trust by trying to undertake this task without a lawyer. The costs here are minimal versus the things that could go wrong.  (Thanks, Steve!)

Q. As beneficiary of a California Trust Agreement now supporting my mother, am I entitled to an accounting?  I co-signed the original Trust Agreement (“Trust Estate”) as a beneficiary.  I suspect mismanagement of the trust, or worse. The trustees have refused to send me the latest version of the Trust Agreement and the latest accounting of the Trust.

A. If the trust is still revocable, the trustee has no duty to account to you. If the trust has become irrevocable, however, then according to California Probate Code Section 16061:

“…on reasonable request by a beneficiary, the trustee shall provide the beneficiary with a report of information about the assets, liabilities, receipts, and disbursements of the trust, the acts of the trustee, and the particulars relating to the administration of the trust relevant to the beneficiary’s interest, including the terms of the trust.”

This may be modified by the trust document itself, but to avoid an accounting they will have to prove that the trust waives the duty to account.

It sounds as if the trustee will not take you seriously without an attorney on your side. I suggest you contact one to speak on your behalf, and to remind the trustees of the potential they will be held personally liable for breaches of trust.

Good luck!

Q: if a person only has one child and her name is on bank accounts as POD, and there are two homes, is a trust still necessary? what is the best way to transfer homes without a trust. Would a will still go to probate?

My Answer: The only way to transfer the homes to your child without a trust (and avoid probate) is to place her name on title as a joint tenant. On the parent’s death, the child would record an “Affidavit – Death of Joint Tenant” with the proper County Recorder to clear the title.

However, there are drawbacks to doing this type of self-help estate planning. The first is that your child would be a co-owner of the house. There are two obvious problems with this. A: Her creditors could go after the house to collect on judgments against her, and her interest in the home would be an asset if she ever declared bankruptcy. B: If you had a falling-out, she could break the joint tenancy by recording a deed from herself to herself, and then petition to force a sale of the real property and split the equity. I have personally represented both parents and children where this has happened – there is no way to force her to return the property.

The second drawback is that, in addition to any immediate gift tax issues, your child would lose the step-up in basis she’d get by receiving the property on your passing. Consider this. Let’s say you bought the house at $400K, and it’s currently worth $600K. You pass away in 2020, when the property is worth $800K, and she sells the house immediately for $800K. If you transferred the property on death, through a trust, she would pay no capital gains because she would have assumed ownership at $800K. However, if you grant her an interest now, at $600K, she’d have to pay capital gains tax for the increase to $800K.

It’s far better, and safer, to pay a competent attorney to create a trust that would protect your property for yourself while you’re alive, and for your child on your passing.

If you’d like more information on this topic, contact a local estate planning attorney for a free consultation, and good luck!

1. Revocable Living Trust

A living trust, also known as a Revocable Living Trust or a Family Trust, is a legal document that holds title or ownership to your real property and assets. In the event of your death or incapacity, a successor trustee is named to immediately step in and handle the assets in accordance with your instructions.

2. Pour-Over Will(s)

A pour-over will (1) is where you nominate Guardians for your minor children and (2) will direct any property left out of the trust to go into the trust for disbursement. This must go through probate if over $100,000!

3.  Assignment of Personal Property

This one-page document transfers your personal property into the trust – this is an optional document especially useful for single people who don’t anticipate transferring property to a spouse on their death.

4.  Quitclaim Deed

This document, recorded in the County Recorder where the property is, transfers your real property from you to you as trustee of the trust. Most attorneys will handle the primary residence without additional charge.

5.  Advance Health Care Directive

This document names an agent (also called an attorney-in-fact) to make your health care and living decisions should you be incapable of making them yourself. This document replaces the previous “living will” and “durable power of attorney for health care” documents.

6.  Durable Power of Attorney for Property Management

This Power of Attorney names an agent to make your property decisions and handle property matters should you become incapable of handling them yourself. This includes such powers as: filing lawsuits on your behalf; filing your taxes; and, applying for government benefits.

7.  Certificate of Trust

This is like an ‘abstract’ of your revocable living trust. It specifies the trustees and their powers without including all of the private provisions of the trust. You can use this Certificate of Trust to show account holders like banks and portfolio managers that you have the power to deal on behalf of the trust, without revealing the personal details of your estate plan.

Additional Resources:  If you’d like more information, call the Law Office of Daniel K. Printz right now at (858) 740-4370.