Category Archives: Trusts & Estates Law

Benefits of Living Trust

Benefits of Setting Up a Trust

Trusts are an important part of your estate plan when you want to leave money to your minor children. Trusts ensure that money, managed by a trustee, is set aside and made available to them when they reach a certain age. Trusts are often complex, time consuming to set up and oversee, and cost you money. So you should have a good reason to go to all this trouble!

Here are some common benefits and objectives of using trusts:

  • Avoiding taxes: One common tax-saving trusts is an irrevocable life insurance trust. After you die, the proceeds from your life insurance policy (the death benefit amount) are added back into your estate, often turning an estate that isn’t subject to federal estate taxes into an estate that needs to write a substantial check to the IRS!However, an irrevocable life insurance trust shelters life insurance death benefit proceeds from estate taxes. After setting up the trust, you still have life insurance, and your beneficiary or beneficiaries still receive the proceeds from your policy upon your death. But now, estate taxes may not be a problem.
  • Avoiding probate: By keeping certain property out of your probate estate, you may be able to avoid many of the hassles, costs, and lack of privacy concerns related to probate.
  • Protecting your estate (and your beneficiary’s or beneficiaries’ estate): One of the primary uses of trusts is to protect your property even after it becomes someone else’s estate.For example, suppose that you want to leave $500,000 to your only son, but you’re concerned that before you can say, “sail around the world,” he will have spent the entire half million.You can use a trust to parcel out the money to your son as you see fit. The trust can give him a little bit each year for some duration, and then a final lump sum at some age when you think he’ll be mature enough to protect the money as if he had actually earned it himself.

    Or you can add conditions to how the money in the trust is dispersed, such as your son receives a little bit of money until a certain age, and then he gets the rest only if he graduates college or meets some other criteria you determine when you set up the trust.

  • Providing funds for educational purposes: Trusts can make money available to your children, grandchildren, other relatives, or even nonrelatives (your employees’ children, for example) for educational purposes, such as college tuition and living expenses.You can set up and fund trusts that parcel out money for educational purposes with a no-school, no-money restriction.
  • Benefiting charities and institutions: You can help out charities by setting up some type of charitable trust that may, for example, annually give money to the charity while you’re still alive, give a larger amount upon your death, and then continue to make regular payments out of the remainder.You can even set up a charitable trust to make regular payments to the charity for some amount of time but eventually “give back” whatever is left to you or, if you’ve died, to someone else in your family. Alternatively, you can set up a charitable trust to work the other way — pay you while you’re still alive, and upon your death, the remaining amount in the trust goes to the charity.

By N. Brian Caverly, Esq. and Jordan S. Simon

CONTACT San Diego Trusts Attorney (619) 630-7766

Questions? – Please feel free to comment!

90 Seconds: What is a Trust?

What Is a Trust?

A trust agreement is a document that spells out the rules that you want followed for property held in trust for your beneficiaries. Common objectives for trusts are to reduce the estate tax liability, to protect property in your estate, and to avoid probate.

Think of a trust as a special place in which ordinary property from your estate goes in and, as the result of some type of transformation that occurs, takes on a sort of new identity and often is bestowed with super powers: immunity from estate taxes, resistance to probate, and so on.

Suppose that you want to set up a trust. Just like with a cooking recipe or building something in your garage workshop, you need to make sure you have everything you need before you start. To cook up a trust, you need these seven basic ingredients:

  • Person setting up the trust. The person is commonly known as the trustor, though you may sometimes see the terms settlor or grantor.
  • Objective of the trust. You use different types of trusts to achieve a variety of specific estate-planning objectives. You can use some trusts for a single estate-planning objective, while others help you achieve more than one goal.
  • Specific kind of trust. Trusts come in many different varieties. Regardless, when you’re setting up a trust, you need to decide what type of trust you want and make sure that you follow all the rules for that particular type of trust to make sure that it’s proper and legal, and carries out your intentions.
  • Property. After you place property into a trust, that property is formally known as trust property.
  • Beneficiary. Just like with other aspects of your estate plan (your will, for example), a trust’s beneficiary (or, if more than one, beneficiaries) benefits from the trust in some way, usually because the person or institution will eventually receive some or all of the property that was placed into trust.
  • Trustee. The person in charge of the trust is known as the trustee. The trustee needs to understand the rules for the type of trust he or she is managing to make sure everything in the trust stays in working order.
  • Rules. Finally, some of the rules that must be followed are inherently part of the type of trust used, while other rules depend on what is specified in the trust agreement. You will find still more rules in state and federal law.

By N. Brian Caverly, Esq. and Jordan S. Simon

CONTACT San Diego Trusts Attorney (619) 630-7766

Questions? – Please feel free to comment!

Cost to Create a Living Trust

The cost of a revocable living trust depends on how valuable and complicated the assets are, how many assets must be transferred to the trust itself , and whether additional tax planning is needed.

If you set your trust up so that you are the trustee the costs are less than appointing another as trustee.  If you do not plan to serve as trustee, you should consider any fees you might have to pay the trustee to administer the trust.

A standard revocable living trust package should include the trust document, the transfer of assets to the trust, a “pour-over” will to add any other assets (not already included in the trust) to the trust, a durable power of attorney, and a health care directive.  More complicated trusts have digital asset assignments, a living will, or guardianship documents.

35% Gift Tax Rate?

Pass Along Real Estate Now

Right now, for gift tax purposes, there is a maximum gift tax rate of 35% and an exemption of $1 million. Take advantage of your $1 million gift tax exemption by gifting property — like real estate — that has the potential to appreciate in value. Give it to your heirs now rather than at your death. Regardless of how much that property appreciates after you give it away, only the value on the date you give it away is used to determine your estate tax when you die.

If you give property to someone who is a “skip person,” you are not subject to GST tax – but you still will be subject to gift tax. In 2010, the top gift tax rate of 35% is a relative bargain, considering the gift tax rate is set to surge to 55% in 2011. And even if Congress changes that, most experts don’t see lawmakers making the gift tax rate lower than it is is now.

CONTACT San Diego Trusts Attorney (619) 630-7766

Questions? – Please feel free to comment!

Business Sucession Planning

Family Business Succession Planning
Part 1: Succession Planning Issues For Family Businesses

Business succession planning should be a priority for every family business.

Sooner or later, everyone wants to retire. But if you own a family business, retirement isn’t just a matter of deciding not to go into the office any more. Besides ensuring that you have enough money to retire on, the whole question of what happens to the business becomes paramount. Who’s going to manage the business when you no longer work the business? How will ownership be transferred? Will your business even carry on or will you sell it?

Business succession planning seeks to manage these issues, setting up a smooth transition between you and the future owners of your business. With family businesses, succession planning can be especially complicated because of the relationships and emotions involved – and because most people are not that comfortable discussing topics such as aging, death, and their financial affairs.

Perhaps this is why more than 70 percent of family-owned businesses do not survive the transition from founder to second generation. In most cases, the “killer” is taxes or family discord, both issues that a good family business succession plan will cover.

Think of business succession planning as broken into three main issues; management, ownership, and taxes.

It’s important to realize that management and ownership are not necessarily one and the same. You may decide, for instance, to transfer management of your business to just one of your children but transfer equal shares of business ownership to all your children, whether they’re actively involved in operating the business or not.

The taxes component of succession planning looks at the minimization of taxes upon death. There are asset transfer tax strategies that will help you do this, such as freezing the value of your interest in the company while you transfer ownership to your children.

By reorganizing your corporation to exchange your common shares in the business for preferred shares with a fixed value equal to the common-share value, you can pass all future capital appreciation and income tax liability on that future appreciation to your children while you retain control, and access to the current value of the business, in effect freezing the corporation.

Accountants and lawyers who specialize in business succession planning can provide invaluable advice about these tax strategies.

For many family businesses, family is the primary emphasis of succession planning. Whether you’re thinking about the future management of your business, how ownership is going to be passed along, or taxes, you won’t be able to help thinking about how your decisions will affect your family.

The next page of this article presents six tips to make succession planning less painful and more successful for your family business.

Have you been putting off succession planning? Use these tips for family business succession planning to get the succession planning process underway and ensure a smoother transition from one generation to another.

1) Start business succession planning early.

Five years in advance is good. Ten years in advance is better. Many business advisors tell budding entrepreneurs to build an exit strategy right into their business plan. The point is, the longer you get to spend on family business succession planning, the smoother the transition process is likely to be.

2) Involve your family in business succession planning discussions.

Making your own succession plan and then announcing it is the surest way to sow family discord. “Opening a dialogue among family members is the best way to begin the process of a successful succession plan — one where close attention is paid to the personal feelings, ambitions and goals of everyone concerned” (Grant Thornton, LLP).

3) Look at your family realistically and plan accordingly.

You may want your first-born son to run the business, but does he have the business skills or even the interest to do it? Perhaps there’s another family member who is more capable. It may even be that there are no family members capable of or interested in continuing the business and that it would be best to sell it. Examine the strengths of all possible successors as objectively as possible and think about what’s best for the business.

4) Get over the idea that everyone has to have an equal share.

While this is a nice idea in theory, it may not be in the best interests of your business. Remember that management and ownership are separate business succession planning issues. It may be fairer for the successor(s) you have chosen to run the business to have a larger share of business ownership than family members not active in the business. Or it may be best to transfer both management and ownership to your chosen successor and make other financial arrangements to benefit your other children.

5) Train your successor(s) and work with them.

How can you expect your successor to take over and run your business successfully if you haven’t spent any time training him or her? Your family business succession plan will have a much better chance of success if you work with your successor(s) for a year or two before you hand over the reins. For solo entrepreneurs, sharing decision making and teaching business skills to someone else can be difficult, but it’s definitely an effort that will pay big dividends for the business.

6) Get outside help with your business succession planning.
Lawyers, accountants, financial advisors – there are many professionals that can help you put together a successful succession plan. There are even companies that specialize in family business succession planning, who will facilitate the process of working through both family and succession plan issues.

If you want to pass your family business along to the next generation, putting off business succession planning is the worst thing you can do. A good succession plan can ensure that you have the funds you need to retire and that the business you have built continues to thrive in the hands of the next generation.

By Susan Ward,

CONTACT San Diego Trusts Attorney (619) 630-7766

Questions? – Please feel free to comment!

Components of an Estate Plan

Living Trust
Components Of A Living Trust

This is a list of important documents that should be included in a living trust, and should be included in your estate planning folder alongside a living trust.

There are many components of a living trust that should be included and covered in the trust. This includes an assets list, as well as a variety of other documents. While not all of these are actual components of a living trust, they should be included right along side the living trust, therefore they are just as important.

Below is a checklist that you can go through with your attorney to make sure that he will provide these documents. This includes components of a living trust, as well as additional documents that might be necessary. Even though every attorney will have his own method and his own thoughts as to what the most important components of a living trust are, the below list includes important documents that everyone should include in their estate planning folder.

• Revocable living trust

• Trust Amendments

• Certificate (Declaration) of revocable living trust

• Community Property Agreement

• Last Will and Testament (Pour-Over Will)

• Financial Durable Power of Attorney

• Health Care Durable Power of Attorney

• Directive to Physicians (Living Will)

• Funding Instructions to transfer assets into your trust:

This includes all of the following:

• Jointly-Owned Property

• Personal Property

• Jointly-Owned Assets

• Separate Property of Husband and/or Wife

• Assets with Named Beneficiaries

If you include all of the above components with your living trust, as well as any additional documents that your attorney recommends, your estate will be properly planned. This also makes it possible for that plan to be properly executed.

CONTACT San Diego Trusts Attorney (619) 630-7766

Questions? – Please feel free to comment!

Federal Estate Tax

  • Both the estate tax and the generation-skipping transfer tax (on assets given to grandchildren) were repealed at the end of 2009.
  • Both taxes are scheduled to return in 2011 at the unfavorable rates that applied 10 years earlier. The amount that is exempt from each of these taxes will then be $1 million, and the tax on the rest will be 55 percent.
  • There is still a gift tax if you give away more than $1 million during your lifetime, but the tax rate has been reduced from 45 percent to 35 percent.

CONTACT San Diego Trusts Attorney (619) 630-7766

Questions? – Please feel free to comment!

Assets in Excess of 100K


If something happens to you in the state of California and you do not have a living trust, and you have accumulated assets in excess of $100,000, and you have sole title to these assets (meaning that you don’t hold them in joint tenancy and there is not a pay-on-death designation), you are an open book. Every single asset will be laid out and brought before all of your relatives, in open court. The probate court is left to decide how your assets are to be distributed. A living trust avoids probate.

CONTACT San Diego Trusts Attorney (619) 630-7766

Questions? – Please feel free to comment!

Business Succession Plan

Business Succession Plan – what to do?

The death of a principal owner of a closely held business can create serious financial problems for the estate, the business, and the survivors of the decedent. Often, the decedent’s interest in the business is a major portion of his or her total estate. Upon his or her death, the survivors may be faced with significant problems concerning the continuation of the business and its orderly transfer, such as:

  • The estate tax generated by the closely held business can place a substantial burden on the estate, which may necessitate a forced liquidation.
  • If the corporate stock is sold to an outsider, the surviving owners’ interests may be jeopardized and their control diluted.
  • The decedent’s heirs can be left in a disadvantaged position to negotiate a fair purchase price for their shares.
  • Should the heirs desire to remain in the business, they may not be able to take part in management—which would limit their ability to determine business policy or compensation to business owners.

Buy-Sell Agreements Can Provide an Orderly Transition

Most business continuation problems can be avoided with planning that includes a buy-sell agreement. These agreements provide for the orderly transfer of the decedent’s business interest to key employees, business partners, co-shareholders, loved ones, or the company itself at a fair value, determined in advance of the business owner’s death.

Under the terms of a buy-sell agreement, the parties agree in advance to purchase the interest of an owner upon his or her death or, in some cases, disability. Generally this means that either the remaining partners, key employees, family members, or the company agree to buy out the shares of the deceased’s successors, and the successors agree to sell. Prices and terms of the buyout are established prior to the event and apply to all parties subject to the terms of the agreement.

CONTACT San Diego Trusts Attorney (619) 630-7766

Questions? – Please feel free to comment!

Donating Your Organs

Family Disputes About Donating Organs.

Donating organs and tissues is popular because of the great demand.  Medical technology has made transplanting organs and tissue safer, easier, and less expensive.  Common transplants include:

  • SKIN

Tissues, like corneas can be taken from almost anyone.  Some donated organs are used only for research. Sometimes in donating major organs such as hearts, livers, or kidneys, it is difficult to find a matching recipient. For example, while there are tens of thousands of people now on waiting lists to receive a donated liver, but only about 1% of all people who die are suitable donors.

If you wish to donate your organs, it is important you have the correct authorizing documents in place.

First, to properly authorize organ donation, you should obtain a donor card and carry it with you at all times. In California, you can use your driver’s license for this purpose because the DMV will send you a sticker to place on the front of your license.

In addition, using an advanced health care directive or living will you can state your wishes regarding organ donation.  This will allow you to specify not only the organs, tissues, or body parts that you want to donate but also the limited purposes for which your donation may be used.  For example, you may specify: transplant, therapy, research, or education.

Donations generally must be carried out immediately after death, so if you want to be a donor, you should make arrangements in advance and discuss your plans and wishes with those closest to you.   You should assign and authorize a health care agent in your trust or living will.  We can help you with this process.

Family members could object to your will to donate your organs.  Even if you have already expressed a desire to donate your organs, it might not be enough to overcome a legal challenge after you die.  An objection from close family members could defeat your intentions. The best safeguard is to have an attorney put your wishes in writing.