Trust Administration

Most estate plans in California include one or more trusts.  The process of managing the assets in the trust, and those that are added to the trust upon your death, is called trust administration.  As long as the “Grantor” (the person who set up the trust) is still living, most trusts remain amendable and “revocable” by the Grantor.  The Grantor generally manages the trust assets in the same (or almost the same) way they were managed before being transferred to the trust.  The assets in the revocable trust are also taxed to the Grantor as though they were owned by him or her outright.

All of that changes when a trust becomes “irrevocable”.  Trusts usually become irrevocable when a Grantor dies, or when the Grantor loses capacity.  When that happens, the trust can no longer be amended or revoked, and it changes the way the assets are taxed.  In addition, the law requires notice and reporting to the new trust beneficiaries.

Trusts include instructions for how the assets are to be managed, and distributed, when this happens.  Administering a trust can be complicated.  The successor manager, called the “Trustee”, must identify and collect all of the assets, determine and pay the debts and expenses, identify and locate the heirs, file income, estate and other tax returns, comply with statutory notice requirements, prepare accountings for beneficiaries, handle claims and disputes, maintain adequate records, and sell or otherwise manage the trust assets in a manner approved by law (i.e., as a “reasonable person” would do).  To accomplish this, the Trustee must work with lawyers, accountants, realtors, appraisers, financial advisors, and other experts, and must sometimes petition the probate court for instructions.  Depending on the type of trust, and the ages of the beneficiaries, a trust administration may last as little as a year, or as long as decades (for example, when a trust provides for the lifetimes of the children and grandchildren). Our professionals have decades of experience guiding trustees through the trust administration process, helping them to comply with deadlines, maintain adequate records, file required tax returns, prepare annual accountings, reduce misunderstandings, manage beneficiary expectations, and ultimately to terminate and distribute the remaining trust assets.  We look forward to the opportunity to guide you and your family through this complex process and simplify it as much as possible.

Estate Planning

An estate plan is simply the rules for managing your assets if you lose capacity, and distributing your assets after you die. We counsel our clients through this process, and provide thoughtful legal plans which include Wills, trusts (if appropriate), health care and financial powers of attorney, and other documents tailored to their particular assets and wishes. Making a plan allows you to make decisions for your future care if you ever lose capacity (including providing for your dependents), and a plan for how (and when) your loved ones should receive their inheritance after your death. We can also help you to minimize current and future taxes, including estate, gift, income, generation-skipping and property taxes — tax planning more than pays for itself.

What happens if you never sign an estate plan? Generally nothing good. You actually already have an estate plan, even it you never wrote a Will or a trust. The state designed it for you in case you never get around to doing this planning. It might not be what you want, but it exists.

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The state plan for your incapacity is not great. If you lose capacity, the court will appoint someone willing to manage your assets, and to decide where you will live and what kind of care you receive (a “conservator” of your estate and your person). Since you will not have provided any input, that person will decide what is best for you – even if it is not what you would have chosen for yourself. You might be moved into a facility instead of allowed to live in your home, or you might receive treatments you would never have approved (such as intubation or radiation). The financial costs of a conservatorship are high – requiring payments to the conservator (to manage you/your assets), to the courts, and to a lawyer to oversee the process, which leaves less money for your care and comfort.

California’s plan for your death (called probate) is expensive, and anyone who wishes can see a list of your assets, their values, and who receives them. The law includes a method for determining your “natural” heirs which does not take into account your relationship (or lack of one) with the ones to receive these assets. Nothing will go to your significant other, friends or charity. Instead, everything will be distributed first to blood relatives. If you are married, all of your community property will be distributed to your spouse, even if you have children from a former relationship. If you have any separate property, that will be divided between your spouse and your children (even if the children are joint with the spouse and are too young to receive it), with two thirds going to your children if you have more than one. If you are unmarried, your assets will go equally to your children (and the descendants of any deceased child), then to your parents (if living), then to your siblings and/or their issue. More distant relatives may receive assets after this, based on how closely they are related to you. Funds left to a minor will be held in a court monitored “blocked” account that generally is unavailable for the child’s needs and can be consumed by court and attorney fees before the child every receives. Perhaps worst of all, your children receive their inheritance at age 18 when many are too young to manage it.

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Making an estate plan is a loving act that protects your family (and you), keeps the details of your assets private, and minimizes taxes.