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Santa Ana Estate Planning & Probate Blog

Write a will, protect your legacy

Picture the beautiful ring your grandmother gave you before she passed away. Now think about that ring, sold in an estate auction, on the finger of a random buyer. If you could prevent this situation, you would do everything in your power to do so, wouldn't you?

Writing a last will and testament directs your precious valuables to your most trusted loved ones. Doing so at a young age provides multiple benefits.

Funding college with an educational trust

Sooner or later, California parents begin thinking about how they will pay for their child's college education. Some people may want to consider setting up an educational trust.

Although some people may think of a trust as a way to pass down a child's inheritance, there are many ways a trust can be used. According to Nolo, parents can set up an educational trust to fund their son or daughter's college education and specify that the funds are intended for educational purposes. However, they may want to consider if these funds should be used only for a four year university or if their child can use the money to pay for an online program or trade school.

Understanding probate when there is no will

Some California residents may not consider what will happen to their belongings if they die without a will. These assets are usually still given to a person's family members but it generally becomes the state's job to distribute these assets.

FindLaw says that if people do not have a will, their estate is intestate. A person's estate typically still goes through probate after he or she dies. Because there is no will to name an executive, the state generally picks a person to oversee the probate process and act as the executive. This person usually makes sure all of the taxes and debts are paid and assembles the assets. Sometimes an estate can be intestate even if there is a will, as a probate court may sometimes rule that the will is not valid.

Estate planning after saying "I do" again

Residents in California who have been divorced or widowed may well choose to get married again. The opportunity to start fresh with a new partner may bring someone great joy for many years. However, couples in this situation should also take the time to plan what they want to have happen to their estates after one or both partners die.

Perhaps one of the most commonly thought about issues in a blended family is how to provide inheritances for each spouse's separate children. As explained by CNBC, the qualified terminable interest property trust is often used by people to do just this. It allows the development of a trust that specifically grants assets not to one's spouse but to one's children from a previous relationship or marriage.

What are the basics of a special needs trust?

As a resident of California who is caring for someone with special needs, you will also have to handle unique areas of litigation that many others may not have to within their lifetime. Even matters involving trusts can differ. In fact, there are special needs trusts that are available specifically for people in your situation.

According to FindLaw, trusts are created when property of any sort is managed for one person by another. Under this definition, special needs trusts are specifically beneficial to people who have special needs or other disabilities that might make them incapable of managing their own property. 

Should your attorney be your executor?

As part of creating a will in California, you designate an executor, the person you want to carry out the provisions of your will after you die. You can choose anyone you want to serve in this capacity, but you should carefully consider all of the things that (s)he will need to do to take your estate through probate. You, therefore, should choose someone who is not only willing to do this work but also is capable of doing it. In other words, you should pick someone who is trustworthy, stable and financially responsible.

Your executor will have many duties, including the following:

  • Collecting all your estate assets
  • Inventorying and valuing the assets
  • Protecting and managing the assets during probate
  • Paying valid claims against your estate, such as unpaid bills and taxes
  • Defending your estate against invalid claims or will challenges
  • Preparing a final accounting and distributing the assets to your designated beneficiaries

Do you owe taxes on a trust?

When you decide to set up a trust in California, you may not always consider how this trust will be taxed. Taxes can be different depending on the kind of trust you establish, so it is important to understand how this difference affects your taxes.

Regardless of the type of trust you set up, a trust will typically be taxed. Zacks Investment Research says that you usually owe taxes when you transfer assets as a gift. This is the case when you move these assets from a revocable trust to one of the beneficiaries and when you transfer assets into an irrevocable trust. You generally do not owe taxes on every transaction. Instead, financial gifts below $13,000 are usually exempt from taxation. Gifts above this amount are typically taxed.

What does it mean to have power of attorney?

When you administer an estate in California, you may think that your job starts once your loved one has died. Sometimes, though, your duties may start before your loved one's death if you have been granted power of attorney.

You are typically granted power of attorney if your loved one is incapacitated and no longer able to make decisions. According to the National Caregivers Library, you generally choose what kind of medical treatments this person will receive and decide how to handle this person's finances. Some people may choose to grant power of attorney to more than one person. In this situation, you may only make financial decisions while another person handles all of the medical decisions. 

What does a trustee do?

When you become an administrator of a trust in California, you may not initially realize how much responsibility you are taking on. It is important to understand your duties as a trustee and how you should administer the trust.

When you administer a trust, you are one of its fiduciaries. According to the American Bar Association, this means that you are responsible for carrying out all of the tasks associated with a trust. Sometimes these duties may be financial. You usually need to file the incomes taxes of the trust. It is important to make sure these taxes are paid on time, as you may sometimes be considered liable for the penalties of paying late. You also need to ensure that each beneficiary receives an income tax statement. All of the trust assets should usually be held in an investment account and you should generally look over the statements from this account at regular intervals. In some situations, you may need to invest certain assets. It can be beneficial to work with a financial professional to ensure that you handle these duties responsibly.

New estate tax law may affect estate plans

Previously, each person in California and the rest of the United States was entitled to a federal estate tax exemption of $675,000. This meant that parents who wished to leave a monetary gift for a child tax-free could each give the child $675,000 and not have to worry about the federal government taking a portion of it. A new tax law has increased the federal state tax exemption, which may give people reason to update a will or trust.

Most people will not be subject to a federal estate tax, simply because the bar is raised so high. With the new law, the estate tax is raised to $11.2 million per person, nearly doubling the previous amount. This is partially meant to adjust to inflation and today’s current financial climate.