San Jose Estate Planning Lawyer Blog

I've written before in this blog and elsewhere about the importance of transferring title to assets such as your San Jose home into your California revocable living trust, or "funding" your trust, once it has been finalized and signed. And as I've also noted, this is something our San Jose estate planning attorneys help our clients accomplish as part of the estate planning process. But as we all know, life is messy, and sometimes, people pass away in California leaving a property outside of their revocable living trust.

This can happen for a variety of reasons. Perhaps the decedent owned the property at the time the trust was settled, but she relied on a traveling trust mill lawyer she hired one day at an estate planning seminar to prepare her trust, and he never prepared a deed for her to transfer the property into the trust. Or she went the Do-It-Yourself route in creating her trust with forms she ordered from that $199 living trust advertisement she saw on TV. Or, perhaps she did actually transfer title into her California living trust, but her new lender subsequently required her to deed the property out of trust in order to close a refinance on the property, and then she simply forgot to see her estate planning lawyer again to deed it back into the trust.

Continue reading "What Happens if I Forget to Transfer a Property into My San Jose Living Trust?" »

I regularly receive calls from prospective clients interested in creating a California living trust both because they have heard about the delay and exorbitant cost involved if their estate gets tied up in a California probate when they pass away, and also because they want to protect their assets from some ill-defined potential liability. These are entirely distinct estate planning goals, and the first thing I explain is that a California revocable living trust is not an asset protection trust. So long as it is properly funded, a revocable living trust is an excellent vehicle for avoiding a probate of your estate at death, avoiding a conservatorship the of your estate while you are alive but incompetent, and ensuring that your assets are transferred to your chosen beneficiaries in the manner you desire when you pass away.

But, I explain, when you create a California revocable living trust and transfer your home, investment property, brokerage accounts and the like into that trust--and this is the critical point--you still own these assets. You can still sell or liquidate these assets to use for whatever personal need might arise in the future. For that matter, you can pull all these assets out and revoke such a trust because, by definition, you still own the assets held in a revocable living trust. Precisely to that extent, if you incur a debt for which you are personally liable, any asset held in your self-settled revocable living trust will be available to pay your debts. Because the settlor of a California revocable living trust still owns the assets held in his trust, it does not protect his assets from his liabilities. Put simply, if you can get to these assets, then so can your creditors.

Continue reading "Does a California Revocable Living Trust Protect Your Assets from Your Creditors?" »

All of your hard work to provide for your family has been a lifetime of giving. Sadly though, many of us seldom think about our family's security after we pass on. It's all too easy to procrastinate when it comes to Estate planning. The San Jose estate planning attorneys at the Law Offices of Jon G. Brooks would like to remind you that without proper estate planning, though, your loved ones can be burdened after you pass away with a lengthy and expensive probate process before your assets can be distributed to your heirs, and your wishes for your loved ones may not even be followed. Perhaps the most thoughtful holiday gift you can give to your family is a comprehensive California estate plan.

If you own any significant assets, such as a home in California, unless that property is held in a California revocable living trust, then your estate will most likely have to go through a formal court Probate when you pass away. California probate entails significant delay--frequently a year to a year and a half until the probate is completed--but perhaps worse still, California probate lawyers are entitled to charge a percentage of the gross value of your estate as attorney fees, and are entitled to be paid by order of the Court from your assets before any distribution to your rightful heirs.

Continue reading "Settle Your California Estate Plan This Holiday Season and Give the Gift of Peace of Mind to Your Family" »

This may seem like a radical proposition at first pass, but I propose that in very particular situations, an elderly person or couple with significant unsecured debt, and assets of only certain types, may be very well advised to consider filing for Chapter 7 bankruptcy so that their estate will not be liable for those debts after they are gone.

California's bankruptcy exemptions (or the amount of assets that may be protected in a Chapter 7 bankruptcy) are among the most generous in the U.S. An individual or couple where at least one of them is over age 65 can protect up to $175,000 of home equity under California's homestead exemption, even in Chapter 7 "liquidation" bankruptcy. Furthermore, all 401(k) accounts and IRAs are totally exempt (or nearly so--IRAs have an exemption amount of $1 Million) from being taken away in Chapter 7 bankruptcy. Social security benefits and private employer defined benefit pension plans are likewise entirely exempt in bankruptcy. Such exempt assets cannot be taken away by the bankruptcy trustee.

Continue reading "Should Bankruptcy Factor Into End of Life Estate Planning?" »

California law provides for two different kinds of conservatorship, which can be imposed by the Probate Court either concurrently or independently of each other. A conservatorship of one's estate may be imposed by the court when the person is "substantially unable to manage his or her own financial resources or resist fraud or undue influence ..." (Probate Code §1801(b)). However, the code continues, "[s]ubstantial inability may not be proved solely by isolated incidents of negligence or improvidence." When a person loses the capacity to prudently manage his or her own money and assets, she has most likely lost the ability to understand the meaning and consequences of a contract, a deed, or debt instrument, for example. Similarly, she may have lost the ability to pay her bills or to resist unscrupulous scam artists trying to sell her unneeded insurance or bad investments over the phone, for example.

Clearly, when a person loses capacity to handle his money and property prudently, something must be done, and someone else must be enabled to manage his financial affairs on the incapacitated person's behalf. A court imposed conservatorship of the estate of this person in California is a last, important resort that may be necessary and desirable in some cases. However, a conservatorship can also result in a professional conservator--a stranger--being appointed by the court. Such a conservator, once appointed by the court can bill the conservatee's estate at hourly rates equivalent to those of an attorney, CPA or other professional to sell the conservatee's home, manage his investements, and just to open and pay the conservatee's bills. There should be an easier, simpler, and less expensive option available, right? With careful planning, our San Jose living trust lawyers can help you avoid a conservatorship of your estate.

Continue reading "A California Revocable Living Trust Can Help Avoid a Conservatorship of Your Estate" »

From the perspective of estate planning attorneys and their clients, the requirement of many home mortgage lenders that in order to refinance a property, the borrowers must transfer title out of their California revocable living trust and back to themselves (e.g., as husband and wife) prior to closing on the refinance is profoundly annoying at best. At worst, this all happens without the borrower paying much attention to the consequences of leaving their California property out of their trust, and they forget to consult again with their estate planning lawyer after the refinance closes. At that point, if one or both of these borrowers dies while the property is still not titled in their names as trustees, then their entire estate plan may be frustrated, delayed or defeated.

Why is this even an issue, you might ask? Luckily, a few lenders have begun to abandon this practice, but the majority still require that if you want to refinance your home, before you can complete the refinance, you must transfer title to the property back to yourself and out of your California revocable living trust. Typically, the lender's escrow agents cannot be relied upon to prepare a new deed transferring the property back into your trust after closing, either, so you must go back to your estate planning attorney to ensure that the property is again titled in the name of your trust. We receive several calls every year at our San Jose estate planning practice from clients whose lenders have asked them to deed their property out of their trust. We're just glad they call us and tell us.

Continue reading "Transferring Title Out of Your Trust to Refinance? Don't Forget to Put it Back In!" »

A solid estate plan for a middle class California family should anticipate several serious life events and provide a detailed roadmap for what will happen upon such events. Typical clients of our San Jose estate planning practice are individuals or younger families with a home and one to three children. What major live events should their estate plan deal with? And what instruments are effective at dealing with those events? Of course, when thinking about estate planning, the first thing that comes to mind is, well, death. And death is the most certain event that all of us will eventually face, so of course, our clients' estate plans must comprehensively deal with all of the issues raised by death in various contexts--for example, what happens when one spouse dies? What if both spouses die in an accident leaving minor children? What happens when the second spouse dies at an advanced stage in life with adult children, grandchildren, or none of either?

The central instrument for dealing with this most certain of life events is a California revocable living trust. First and foremost, that living trust must avoid a probate at each settlor's death. To ensure this, it must be reviewed regularly throughout one's life in order to ensure that no assets have been left out of the trust that would, due to their aggregate value, trigger a California probate. A tailored, well thought out revocable living trust for a younger family must anticipate what will happen at each spouse's death. For example, as we have discussed in our recent blog posts about choosing one's successor trustees wisely, the trust of a younger couple with children must adequately deal with distributions to children who might be minors at the time of the parents' deaths. This means, it should provide for the creation of children's subtrusts to administer assets for the benefit of minor children for potentially a number of years before they are old enough to receive an outright distribution of assets.

Continue reading "What Goes into a Comprehensive California Estate Plan?" »

We've all heard the horror stories of probate. Most people it seems have at least a vague notion that if you live in California and don't have a living trust, then probate could cost your heirs a sizable chunk of their inheritance and take upwards of two years to complete. But our estate planning attorneys in San Jose hear some pretty far fetched ideas held by the public about what happens if a Californian dies without any type of estate plan whatsoever. That is, no trust, no will, nothing.

Surprisingly, one idea seems to be fairly widely held: that if one dies without a will, all his property will go to the state of California. Now, in old English common law there actually was a rule that if one died without a last will and testament in certain circumstances his estate would "escheat" to the state. In fact when a Californian dies without any estate plan, the Probate Code steps in with default rules to determine to whom her estate will be distributed. These rules, called the "rules of intestate succession" are found in California Probate Code sections 6402.

Continue reading "What Happens When a Californian Dies Without any Estate Plan?" »

In Part 1 of this series of blog posts, I discussed how the choice of who to name as successor trustee(s) in one's California living trust requires carefully thinking through the different possible scenarios in which a successor trustee will take over the management of one's trust. In that post, I emphasized the fact that a married couple with young children will want to name successor trustees who will make good managers of potential children's trusts if both parents were to die while one or more of their children were still minors.

In this post, I want to focus instead how one's choice of successor trustee differs when revisiting the estate plan later in life, say after one's children are adults, or indeed, when one has no children. For example, when our San Jose living trust lawyers review a living trust for possible revisions, or draft an entirely new trust for an individual or couple later in life, we help our clients focus on what would happen in the event the client loses capacity. We underscore the possibility that the successor trustee they name may take on this role not just at the client's death, which is certain, of course, but potentially before death, in the event that the client loses his or her mental capacity due to dementia.

Continue reading "Choose Successor Trustees Wisely, Part 2: Planning in Case of Incapacity" »

Every 401(k) plan, pension plan, Individual Retirement Account, and life insurance policy has them, but once they are made - usually when the plan, account, or policy is first established - people seldom ever think of them again. I'm talking about beneficiary designations - the individual heirs you name in writing to receive the account or insurance benefit upon your death. In fact, our San Jose trust lawyers frequently find that clients have never properly made their beneficiary designations for their IRAs, for example. The client set up the account years before, and no one from the financial institution where the account was established ever followed up to ensure that proper beneficiary designations were ever made.

Retirement account assets held in 401(k)s and IRAs, for example, do not require a California probate in order to be distributed upon the account owner's death, provided that the owner properly designated her beneficiaries with the plan administrator or financial institution. Because such accounts are administered as though they were trusts, the plan administrator or account custodian must pay out the account's assets to previously designated beneficiaries upon receiving proof (usually a certified copy of the death certificate) of the death of the plan participant or account owner.

Continue reading "Don't Forget to Review Your Beneficiary Designations!" »

Your property is your "estate." While you are alive (subject to the rights your creditors), you may sell it, lend it, give it away, rent it out, or bequeath it to your heirs, but whatever you do with your estate, consulting a qualified estate planning attorney should be your first step. Your property is subject to a complex patchwork of laws of ownership, transfer, and taxation that require the perspective of a knowledgeable attorney to unravel. I can't tell you how many times we have learned, for example, that a client's parents several years ago transferred their property into the client's name--as a method of lay person's estate planning--and now we must give them the tragic news that the parents' property is now reachable by a third party that has sued the client. Or, just as bad, our clients tell us that they "added" their son to a savings account many years ago "just in case," but have just received a letter from the San Jose Bankruptcy trustee in their son's bankruptcy case demanding turnover of half the account's value to the trustee--because as a joint tenant, the son's "share" of that account now belongs to the "bankruptcy estate." The moral? Before "adding" someone else's name to an asset, please, please consult with one of our Bay Area estate planning attorneys.

Whenever more than one person takes title to an asset--whether a parcel of real estate, a savings account, or a car--unless the title instrument states a specific ownership percentage for each respective owner, and unless it states some other form of title ownership, such as tenancy in common, the default under California law is that these owners are joint tenants of that asset.

Continue reading "Joint Tenancy Title: The Good, the Bad, and the Ugly" »

This is the first in a series of blog posts that I will be adding concerning the importance of taking care when choosing who to appoint as your successor trustee(s) of your California revocable living trust. In this post, we'll consider the duties of a successor trustee named to manage a children's trust and how the office of successor trustee in this context differs greatly from that of a trustee named to simply divide and distribute one's assets at death outright to adult beneficiaries.

Because our estate planning practice focuses on middle class, and often younger individuals and families, we routinely advise clients to think very carefully about what would happen, for example, if both parents died in a common accident leaving two young children behind. Who would they want to manage their estate for these children? Note the distinction here between the question of who would they want to nominate as guardians of their children (and even in that respect, we have to distinguish between guardianship of the "person" versus guardianship of the "estate" of the children), but we'll leave the issue of guardianship for other future posts.

Continue reading "Choose Successor Trustees Wisely, Part 1: If You Have Minor Children" »

They give us unconditional love and their unwavering loyalty. They live, eat and sleep with us. They somehow know when we are not feeling well and provide comfort to us. For many of us, our pets are cherished family members for whom we will go to any effort to ensure their proper care and well being. There are a handful of options for providing for the care of your pet when you die or become incapacitated, ranging from an informal bequest of money to a legally enforceable separate trust established for the benefit of your companion animal.

If you have a family member or friend whom you trust to carry out your wishes to provide a loving home for your pet for the rest of its life, you may consider informally stating your wishes in your will or trust that this person take on the responsibility of caring for your animal companion coupled with making a gift of money to that person in order to provide for such care. The problem with this approach is that it is not legally enforceable. No one would have any legal recourse to ensure that this person carried out your wishes in the event that he or she failed to do so.

Continue reading "Providing for a Companion Animal in Your California Estate Plan" »

If you have read our blog for any length of time, you will know that our San Jose estate planning law firm's practice is focused on middle class people for whom the estate tax will almost certainly never be an issue. While estate planning for most is about far more than tax planning, we do nevertheless regularly employ a very powerful tool to minimize the impact of the estate tax just in case it should become an issue for our middle class clients. That tool is the "disclaimer trust." To understand what a disclaimer trust is, and why it is used, we should first provide a little background.

The estate tax or the "death tax" (cue ominous sounding music), is quite simply, a bogeyman. It is frequently referenced by pundits in order to scare middle class people who in reality will never owe it. So, let's be blunt - unless you are very rich indeed, it is exceedingly unlikely that your heirs will ever have to pay any federal estate tax. In 2011 and 2012 the estate tax will only apply to estates greater than $5 Million per person. According to one estimate for 2011, the estate tax will affect around 3,300 estates in the entire country. That's approximately 0.001 percent of the population. Since we practice in California, where we do not have a state inheritance tax, we are only talking about the federal tax. Now, it is possible that Congress will act to bring back an estate tax exemption lower than the current $5 Million, and it probably should given our deficit. But given the anti-tax, anti-government political climate of our times, we think it is highly unlikely that the estate tax exemption will find its way back down to $1 Million or less.

Continue reading "Disclaimer Trusts: Maximum Flexibility for California Estate Planning" »

Although parents and students have a number of options when it comes to saving for college, one of the most advantageous is the 529 College Savings Plan. This federal investment plan is named after the Internal Revenue Code (IRC) section under which it was created. Contributions to the plan can be used for tuition, books and most other expenses directly related to the cost of attending an accredited institution of higher learning.

A 529 Plan is an education savings plan created by federal statute but operated by the individual states, which in turn, generally use private brokerages such as Fidelity to administer them. Every state has its own sponsored 529 Plan, which is available to be purchased either directly or through a broker. For example, California's 529 plan, branded the "ScholarShare College Savings Plan," is administered by Fidelity Investments. The specifics of each plan vary, but in most cases, the state plan in which one invests is of little importance. No residency requirements are in place, and money from the plan can be used for qualifying educational expenses anywhere in the United States.

Continue reading "The Benefits of 529 College Savings Plans Are Many" »