What Happens to Your Things When You’re Not Here?

When we own things like cars or houses, they’re in our name. But if we’re not here, we need a way to make sure they go to the right people. That’s where a living trust comes in handy. It’s like a plan for your things so that they go smoothly to the people you choose, without any big hassles.

 Why Not Just a Will?

Some people think just having a will is enough. But here’s the thing—a will still has to go through a process called probate, where a court decides how to distribute your things. This can take a long time and cost a lot of money. Not fun, right?

 Living Trusts to the Rescue

A living trust is different. You set it up while you’re alive, and it lets you control where your things go after you’re not here. The best part? It skips that whole probate court thing, saving time and money. Plus, it’s private, so only the people you choose know about it.

 What Can You Do With a Living Trust?

• Avoid Court Hassles: Your things go directly to your loved ones without court delays.
• Keep Things Private: Only your chosen trustees and beneficiaries know the details.
• Make Specific Plans: You can say exactly who gets what and when—maybe you want your grandkids to use some money for college or traveling.

 Setting It Up

Creating a living trust might sound big and complicated, but it’s actually something many people can benefit from. It’s not just for the super-rich. It’s about making sure your things are taken care of the way you want.

Ready to Take Control of Your Future?

Setting up a living trust is a smart way to protect your things and make sure they go to the right people, the way you want. If you’re ready to take the next step or just want to learn more, give me a call. I’m here to help make the process clear and straightforward.

Contact Jonathan Alexander at (949) 334-7823 for a consultation and start securing your legacy today.

As someone who has worked with many people to plan their estates, I’ve learned something important: having a trust is crucial for everyone, and here are 4 Reasons Why Every American Needs a Trust.

 1. A Trust Keeps Your Things Organized

A trust is like a big box where you can keep all your important stuff, like your house, money, and other valuable items. It’s a smart way to make sure everything is in one place. This makes it easier for you to manage your wealth and pass it on when the time comes. Think of it as the base of a building; without a strong base, the building won’t stand. A trust does the same for your wealth, keeping it strong and together.

 2. A Trust Keeps Your Matters Private

In today’s world, keeping your personal details safe is more important than ever. When you have a trust, it’s easier to keep your name off public records. This means people can’t easily look up what you own. It’s like having a secret place where you keep your treasures, and only you know where it is.

 3. A Trust Avoids the Hassle of Courts

When someone passes away, their belongings usually have to go through a court process called probate. This can take a long time and cost a lot of money. But if you have a trust, you can skip this step. Your things can go directly to the people you’ve chosen without the court getting involved. It’s a smoother path for your loved ones to follow.

 4. A Trust Exercises Control Over Your Belongings

With a trust, you get to set the rules. You decide who gets what, and when they get it. For example, you might not want a young family member to get a lot of money all at once. A trust lets you spread it out over time or set conditions, like finishing college. It’s a way to help guide your loved ones in the right direction, even when you’re not there.

Creating Your Trust: Taking the First Step

You’ve learned the four reasons why Every American needs a trust. Starting a trust might sound complicated, but it’s a powerful step towards taking care of your future and your family. It’s not just for the wealthy; it’s for anyone who wants to make smart choices about their belongings and their legacy.

Ready to get started? Let’s talk about setting up a trust that fits your life. I’m here to make it simple and clear, so you can feel confident about your plan. Call me, Jonathan Alexander, at (949) 334-7823 for a consultation and take the first step towards securing your legacy.

The Seeds of Discord

Imagine the scenario: You have worked tirelessly to accumulate assets and create a legacy for your children. However, without a well-crafted estate plan, your intentions may be lost amidst disagreements and hard feelings. Sibling rivalries, misunderstandings, and differing expectations can sow the seeds of discord, turning your cherished legacy into a source of bitterness. The stakes are high, and it is crucial to take proactive steps to protect your family’s unity.

The Power of Communication

Open and honest communication is the cornerstone of conflict prevention. By engaging in heartfelt conversations with your children and loved ones, you can understand their hopes, aspirations, and concerns. Expressing your intentions and thoughtfully explaining your estate plan can help foster understanding and eliminate misconceptions. With the guidance of an experienced estate planning attorney, such as myself, you can navigate these discussions with ease and clarity.

Tailoring Your Estate Plan

One of the primary benefits of estate planning is the ability to customize your plan to suit the unique needs and dynamics of your family. By working closely with an experienced attorney, we can design a comprehensive estate plan that addresses potential conflicts head-on. Strategies such as equal distribution, specific bequests, or setting up a family trust can help prevent disputes and ensure fairness among your children.

Choosing the Right Executor and Trustee

The selection of an executor and trustee is a critical decision that can significantly impact the smooth administration of your estate. These individuals should possess the skills, integrity, and impartiality necessary to carry out your wishes without bias. By carefully choosing trustworthy individuals or professional fiduciaries, you can minimize the potential for conflicts of interest and ensure the efficient execution of your estate plan.

Providing Clear Instructions

Ambiguity in estate planning documents can be a breeding ground for disputes. It is essential to provide clear and unambiguous instructions regarding the distribution of assets, beneficiaries’ responsibilities, and any specific conditions or requirements. By leaving no room for interpretation, you can eliminate confusion and reduce the likelihood of conflicts arising among your children.

Updating Your Estate Plan

Life is ever-changing, and so should your estate plan. As your family dynamics evolve, it is crucial to review and update your plan accordingly. Births, deaths, marriages, divorces, or changes in financial circumstances may necessitate modifications to your estate plan. Regular consultations with an experienced estate planning attorney will ensure that your plan remains up-to-date and aligned with your family’s current needs.

The Role of Mediation

In some cases, despite your best efforts, conflicts may still arise. Mediation can provide an effective resolution method that promotes open dialogue and compromise. With the assistance of a neutral mediator, you and your children can work through disagreements and find mutually agreeable solutions. The goal is to preserve relationships and reach a resolution that respects everyone’s interests and desires.

Preserving Unity and Protecting Legacies

The significance of preserving family unity cannot be overstated. By embracing the power of estate planning, you can prevent conflicts and hard feelings that can tear families apart. As an Orange County estate planning attorney with two decades of legal experience, I am dedicated to helping you protect your loved ones and your legacy. Contact me, Jonathan Alexander, at (949) 334-7823, to schedule a personalized appointment. Together, let’s create an estate plan that fosters family harmony, safeguards your assets, and secures a bright future for your children.

Remember, a comprehensive estate plan is not merely a legal document—it is a testament to your love, care, and dedication to your family’s well-being.

One bright summer morning, they woke to a thought that had been quietly creeping into their minds – what would happen to Jack and Emily if they were no longer around? It was an uncomfortable realization, and they knew it was an essential question they couldn’t ignore. This story is a wake-up call to you, dear reader, a reflection on the importance of providing for minor children in an estate plan.

Recognizing the Need

As Robert and Linda pondered the future, they recognized a missing piece in their grand scheme – a comprehensive estate plan. Having been responsible parents, they understood that providing for their children was not only about the present but also about ensuring a secured future, irrespective of life’s unforeseen turns.

An estate plan is not just about how your assets will be distributed after your death. It is a broader and more proactive approach to protect and provide for your loved ones, especially minor children.

Setting the Scene – Understanding an Estate Plan

As Robert and Linda began to delve into the world of estate planning, they encountered numerous terms, concepts, and legal jargon that initially seemed overwhelming. Wills, trusts, guardianship – it was a whole new world. However, they were resolute to not let this deter them from their goal of securing their children’s future.

A Will is a document that spells out the distribution of your assets upon your death. It’s a basic but crucial component of an estate plan. However, when it comes to minor children, a will alone is not sufficient.

Trusts, on the other hand, provide a flexible and robust way to manage and distribute assets, especially for minors. A trust can be set up to provide financial security for your children at predetermined ages or milestones. For example, a portion of the inheritance could be held until the child reaches a specific age, or funds could be released for their education or wedding.

The Unexpected Twist – Guardianship

In their journey, Robert and Linda came across an aspect they hadn’t thought of – guardianship. Guardianship is appointing someone trustworthy to take care of your minor children in your absence. This person will have the authority and responsibility to make decisions about the child’s upbringing, education, healthcare, and more.

Choosing a guardian is not a decision to be taken lightly, and it brought about much discussion and contemplation for Robert and Linda. They understood that this decision could potentially shape their children’s lives.

The Happy Ending – A Comprehensive Estate Plan

Eventually, Robert and Linda, with the help of a skilled estate planning attorney, created a comprehensive estate plan. It included a Will, a Trust, and a detailed Guardianship plan. This plan would ensure that, come what may, their children would always be provided for and cared for in the best possible manner.

Robert and Linda’s story may be fictional, but the lessons it carries are very real. As parents, we want to protect our children from the world’s uncertainties. A well-crafted estate plan is the tool to do just that.

The journey to estate planning might seem daunting, filled with complex terms and difficult decisions. However, the peace of mind it brings is worth every step.

Your Own Story

Just like Robert and Linda, you have the power to write your own story and to secure your children’s future. You have the chance to take control of what happens to your wealth and your minor children after you’re gone. As difficult as these questions might be to consider, addressing them now can ensure your children are protected and cared for, even in your absence.

Estate planning might initially seem like a complex puzzle, but with the right guidance, it becomes an empowering journey. In your narrative, an experienced estate planning attorney like myself can play the role of a mentor, guiding you through the complexities and nuances, enabling you to make informed decisions that best suit your family’s needs.

Having two decades of legal experience, I, Jonathan Alexander, have helped many individuals, families, and business owners in Orange County create robust estate plans. I am passionate about helping you protect what you hold dear, ensuring your peace of mind.

I invite you to write the next chapter of your life story. Give your children the gift of security and certainty in an uncertain world. Take the first step towards crafting a comprehensive estate plan.

No matter where you are on your estate planning journey, whether you’re just starting or looking to update an existing plan, I’m here to help. If Robert and Linda’s story has resonated with you and you’re ready to embark on your estate planning journey, I encourage you to reach out.

Call me today at (949) 334-7823 to schedule an appointment. Let’s secure the future for your minor children together.

Your children’s future is your story yet to be told. Let’s make it a story of security, provision, and unwavering love. Because estate planning is more than just asset distribution – it’s about love, care, and ensuring your legacy lives on through those you cherish most.

Remember, every family’s story is unique. The estate planning process is not one-size-fits-all. You have specific goals, needs, and circumstances that should be considered and incorporated into your plan. As an experienced estate planning attorney, I understand this. I’m ready to help you navigate the process and make the best decisions for your family’s future. Call today.

How Does a CLT Work?

1. The grantor contributes assets to an irrevocable trust establishing the CLT and selects the term (fixed period or for duration of the life of one or more people).    The grantor may, depending on the type of CLT selected, be eligible to take a partial tax deduction.  The tax deduction calculation considers the trust’s term, the projected lead payments, and the IRS interest rate used to assume a specific rate of trust asset growth. 
2. Payments are made from the CLT to the selected charity or charities.  Charitable remainder trusts have more limited terms than CLTs. A charitable remainder trust’s term, if you choose the limited term option instead of using a beneficiary’s lifetime, is limited to 20 years.  CLTs that use a fixed term are not subject to this 20-year limitation.  The amount the CLT must pay the charitable entity is also flexible as there is no minimum or maximum payment amount, as long as, payments are made each year.
3. When the term expires, the remaining assets are distributed to the non-charitable beneficiaries (typically children, grandchildren or trusts arranged for their benefit). 

What are the Two Types of CLT?  

1. A CLT with a unitrust payment, which is referred to as a charitable lead unitrust or a CLUT.  The charity receives a fixed percentage of the net fair market value of the CLUT’s assets that are revalued each year. 
2. A CLT with an annuity payment, which is referred to as charitable annuity lead trust or CLAT.  Here the charity will receive an annuity payment that is either
   1. A fixed amount; or
   1. A fixed percentage of the initial fair market value of the property that is initially transferred into the trust based on the Internal Revenue Code Section 7520 rate that exists in the month that the trust is created. 

What’s the Difference Between a Grantor and Non-Grantor Charitable Lead Trust?

A grantor charitable lead trust allows the grantor to take an immediate income tax charitable deduction for the present value of the future payments that will eventually be made to the charity.  There are, of course, deduction limitation that apply depending on whether the beneficiary is a public charitable entity or a private foundation. With a grantor CLT, the trust’s income is taxable to the grantor during the term.

With a non-grantor charitable lead trust, the trust itself—not the grantor—is the owner of the trust assets.  The grantor cannot take an income tax deduction for the amounts paid to the charitable entity. The trust itself pays tax on undistributed net income and is allowed to claim an unlimited income tax charitable deduction for payments to a charitable beneficiary.

Where can I get more Information?

Setting up a charitable lead trust requires the assistance of a qualified estate planning attorney. Call the Law Office of Jonathan Alexander at (949) 334-7823 to learn whether a CLT is the correct option for you and your estate plan.  Mr. Alexander has 20 years of legal experience and can help you create an estate plan that protects you, your family and your legacy. 

To learn more about Mr. Alexander, his firm, and his estate planning philosophy click here.

How Does It Work?

In a nutshell, here’s how a SLAT operates.  

1. The grantor spouse transfers ownership of his separate property into the trust and reports the gift on a gift tax return.  SLATs may only be funded with separate property. Because California is a community property state it is wise to draft a partition agreement to ensure that the property being transferred into the SLAT is indeed separate property. 
2. Once the property is transferred to the trust (referred to as “funding” the trust), the beneficiary spouse may request distributions of income or principal from the SLAT that may also indirectly benefit the grantor spouse. 
3. When the SLAT is terminated (typically when the beneficiary spouse dies) the assets that are still in the trust pass to the remainder beneficiaries as described in the trust (usually children and or grandchildren).

What Kind of Assets can be funded/transferred into a SLAT?

A SLAT may be funded with several different types of assets if they are the Grantor’s separate property.  It makes sense to transfer assets that will go up to in value.  If you were to transfer a depreciating asset into the trust, you would waste part of your individual lifetime gift and estate tax exemption.  If you transfer $2 million of Apple stock to your SLAT and it goes up in value to $20 million, you will have only used $2 million of your exemption and the $18 million dollars of increased value is outside of your taxable estate.

What are the Risks?

To truly maximize the benefits afforded by SLATs, a couple would each create a SLAT for the benefit of the other.  The IRS; however, may interpret two trusts as constructively related under the Reciprocal Trust Doctrine.  Applying this doctrine, the IRS may conclude that because two SLATs are reciprocal and disregard them by including the SLAT assets in the grantor’s estate (destroying the entire purpose of the SLAT).

To avoid the reciprocal trust doctrine, consult with a qualified attorney.  Your attorney will likely counsel you to, among other things, create the trusts and transfer assets to them at different times, use different trust language, and provide beneficiaries alternative rights of withdrawal.

Where Can I Get More Information?    

Drafting a spousal lifetime access trust is a complicated endeavor and will require the assistance of a qualified California estate planning attorney.  For more information about how to properly create a SLAT that maximizes your individual lifetime gift and estate tax exemption call the Law Office of Jonathan Alexander at (949) 334-7823. 

To learn more about Mr. Alexander, his practice, and his estate planning philosophy please visit his bio linked here. 

Why are Irrevocable Trusts Used?

Irrevocable trusts are used to transfer assets (e.g., money and/or property) from a Grantor to a beneficiary in order to avoid taxation and to provide asset protection.  A revocable living trust provides a Grantor no asset protection (even though they can be drafted to provide asset protection to beneficiaries). 

Once the assets are transferred to the irrevocable trust, the Grantor no longer owns them.  But if the Grantor no longer owns his assets, cannot act as trustee, and cannot modify this type of trust, why is this a good idea? Irrevocable trusts are a good idea because the proper use of one can help you:

• To avoid federal and state estate taxation (note, at the time of this post only 17 states impose some type of estate or inheritance tax).  Property transferred to an irrevocable trust does not count towards the value of an estate.  For high value estates—those that exceed the estate and gift tax lifetime maximums—proper irrevocable trust use can avoid millions of dollars in taxation.  The federal estate tax exemption is currently $12,060,000 for an individual and $24,120,000 for a married couple.  The exemption will be essential cut in half ($6 million individual / $12 million for a couple) effective January 1, 2026, so now is the perfect time to use an irrevocable trust to avoid the 40% excise tax for amounts over the exemption. 
• To prevent beneficiaries from wasting assets.  The Grantor can create rules regarding how the assets will be distributed and under which conditions. 
• To qualify for federal and state means tested government benefits like Social Security and Medicaid.  This type of planning is especially relevant when planning for a special needs child. You can provide gifts for the benefit can care of a special needs child without interfering with his or her eligibility for government benefits. 

What are Some Common Irrevocable Trusts and How do they Work?

The cornerstone of every estate plan is a revocable living trust; however, the following irrevocable trusts can provide incredible benefits to you and your family:

1. Spousal Lifetime Access Trust: allows one spouse to create an irrevocable trust for the benefit of the other spouse, while removing the assets from their combined estates.   
2. Special Needs Trust: allows you to provide support to a disabled individual without interfering with his or her eligibility for government benefits (e.g., Social Security and/or Medicaid).
3. Charitable Lead Trust: provides financial support to one or more charitable entities for a specified period of time; thereafter, the remaining assets are gifted to family members or other beneficiaries. This is the inverse of a charitable remainder trust.   
4. Charitable Remainder Trust (CRT):  this trust is a split interest trust whereby you can contribute money, receive a partial tax deduction and an income stream for you as the donor or for other beneficiaries with remainder, after a specified period of time, going to the charity or charities of your choice.   
5. Charitable Remainder Annuity Trust: this type distributes a fixed annuity amount annually, but additional contributions are disallowed.  
6. Charitable Remainder Unitrust – this trust distributes a fixed percentage based on the balance of the trust assets (updated and revalued every year).  Additional contributions are allowed. 
7. Dynasty Trust:  used to pass wealth from one generation to the next but designed to avoid transfer tax like the gift tax or generation-skipping tax while the assets are in trust.
8. Grantor Retained Annuity Trust: involves transferring quickly appreciating assets to a fixed-term, irrevocable trust.  The Grantor retains the right to receive an annuity stream (a fixed sum of money) during the trust’s term.  When the term ends, the remaining assets are distributed to non-charitable entities, usually the Grantor’s children. 
9. Intentionally Defective Grantor Trust:  involves “freezing” specific assets for estate tax purposes but not for income tax purposes.  That is, it allows a Grantor to transfer assets out of his estate in order to avoid estate taxes; however, the transfer is intentionally defective as to income taxes.  The Grantor pays the income tax on any income generated by the assets in the trust, but any asset appreciation is excluded from the Grantor’s estate.  This is a great way to handle assets that are appreciating quickly like stock or real estate. 
10. Irrevocable Life Insurance Trust is a trust that this funded during your lifetime with one or more life insurance policies.  Upon your death, the policies pay your loved ones and avoid estate and income taxation. 
11. Qualified Personal Residence Trust is an irrevocable trust for your home.  It will remove the home from your estate (for estate tax purposes) and helps transfer the property to a beneficiary (typically children) while avoiding probate.
12.  Qualified Terminable Interest Property Trust allows the Grantor to provide for a surviving spouse but maintain control over how the assets are distributed once the surviving spouse dies. 

Where can I get Help Understanding Which Trust is Best for Me?

Contact the Law Office of Jonathan Alexander for counsel and guidance regarding which irrevocable trust and plan design will best fit your needs.  Call us today at (949) 334-7823.  Mr. Alexander has 20 years’ experience and can help you create a plan that avoids unnecessary taxation, provides protection for you in the event of incapacity, and that allows to create a legacy for sustains your family for generations to come. 

For more information about Mr. Alexander, his practice, and his estate planning philosophy please read his bio linked here.

In 2008, the U.S. Congress passed House Resolution 1499 designating the third week in October as National Estate Planning Awareness week. 

According to Caring.com’s 2022 Wills Survey, over 66% of Americans believe that having an estate plan is important, but only 1 in 3 Americans have a will or a trust.  Many of the respondents stated that they meant to establish an estate plan but had simply procrastinated.  Others who took the survey confessed to believing a common misconception. They believed that they did not own enough property or money to bother putting drafting an estate plan. 

Why Should You have an Estate Plan?  

You should have an estate plan drafted so that you can decide who inherits your money and property and who can make financial and health care decisions for you if you become sick or disabled.  Remember, if you do not establish an estate plan, the State of California has one for you.  It’s called probate and it is time consuming and expensive. 

What are the Essential Elements of an Estate Plan?

• A revocable living trust and pour-over will.  These two documents are the cornerstones of a well-drafted estate plan.  The proper use of a revocable living trust will help you avoid the expense and delay of probate. A pour-over will provides additional protection if not all your assets are transferred (funded) into your trust and allows you to name guardians for any minor children.
• Durable Power of Attorney appoints an agent who may handle your financial affairs in the event of incapacity.
• Advance Health Care Directive appoints someone to make health care decisions when you cannot and can even contain health care instructions.  
• HIPAA Authorization vests a person of your choice with the authority to view all your medical records.
• Insurance is something that all responsible adults must have.  Make sure that you have the right amount of coverage in place if you die.  You would not want to leave minor children and/or a spouse who rely upon you without financial support.  If you do have coverage, make sure your loved ones have your policy information if they need to make a claim.  
• Personal Inventory.  Compile a list of all your accounts and other important information that would be necessary to handle your affairs in the event of incapacity or hospitalization. This includes:
  • Social security card, passport, and birth certificate.
  • Bank accounts.
  • Investment accounts.
  • Credit cards accounts.
  • Loan accounts.
  • Digital accounts.

How Should you Encourage Your Loved Ones to Create an Estate Plan?

Now is the perfect opportunity.  Simply remind them that it is Estate Planning awareness week.  You can then segue into a discussion about how having an estate plan in place will provide protection against their own incapacity by designating agents of their choice to make financial and health care decisions.  You might mention that a properly drafted estate plan will save time and money by helping their families avoid probate.  Please do schedule your own appointment with a qualified California Estate Planning Attorney to create your estate plan and take the time to speak to your parents, friends, relatives, and co-workers about the importance of estate planning.  For their benefit and the benefit of their families.  

Where Can You Get More Information about Creating a Plan?

Call Orange County Estate Planning Attorney Jonathan Alexander at (949) 334-7823.  Mr. Alexander has decades of legal experience and can guide you through the estate planning process by answering all your questions, explaining the law clearly and without legalese or jargon.  Call today to schedule a confidential consultation. 

For more about Mr. Alexander, please read his bio linked here to learn more about him, his practice, and his estate planning philosophy.      

What Happens When the Surviving Spouse Dies?

The unlimited deduction is no longer available after the second spouse (the surviving spouse) dies.  If the value of the estate is greater than the applicable estate and gift tax exemption—and no advanced estate tax planning has been drafted—the estate may be subject to taxation when the property is passed to children.   A surviving spouse may; however, use the unlimited marital deduction if she remarries.  The surviving spouse may leave the entire estate to her new husband tax free.  This is a nice windfall for the new husband, but not all at what the first husband would want especially if he has surviving children.  With proper estate and tax planning, you can avoid estate and gift taxes while providing for surviving children, grandchildren, other loved ones and charitable institutions (if you so choose).

What is the Individual Estate and Gift Tax Lifetime Exemption?

In 2022, the individual estate and gift tax lifetime exemption is $12,060,000. For a married couple it is $24,120,000.  This means that you and your spouse can transfer up to this amount to other individuals or entities (i.e., not each other because no tax applies to spouse-to-spouse transfers) tax free.  There are 17 state that impose an estate or inheritance tax.  California is not one of them.

The IRS does put an annual limitation on gifting. In 2022, there is a $16,000 annual gift tax exclusion.  Each spouse can gift up to $16,000 annually per person tax free up to the lifetime exemption amount.  Please note that the lifetime exemption is frequently adjusted by law.  The lifetime exemption and applicable tax rates for amounts over the exemption has fluctuated dramatically throughout the last one hundred years. 

What Does this Mean for Couples Who have Taxable Estates?

If you have assets in excess of or that will be in excess of the estate and gift tax lifetime exemption before you die, you should engage the services of a qualified California estate planning attorney. With the help of an attorney, you can create a gifting strategy that may avoid estate and gift tax altogether saving your family millions of dollars in taxes that your estate otherwise would have paid. 

Everyday there are news stories where this scenario plays out and dozens more that do not make the headlines.  James Gandolfini, the star of HBO’s Sopranos, died suddenly of a heart attack at the age of 51.  Mr. Gandolfini had a will but did not engage the services of attorney to perform any advanced tax planning.  He died with an estate worth about $70 million of which about $30 million went to the IRS.  Another tragic story involves the pop music icon, Prince.  Prince died unexpectedly of a fentanyl overdose and without a will.   If he had sought the advice of an estate planning attorney, his family could have avoided the $80 million dollar tax bill on his $165 million estate.

Advance tax planning’s return on investment for taxable estates is self-evident.  

What Does this Mean for Couples Who Do Not Have Taxable Estates?

Every Californian should have an estate plan even if estate tax issues are not a factor.  A properly drafted and funded estate plan will protect you, your family, and your legacy.  In California, if you pass away with only a will and an estate worth 184,250 in 2022 (this amount changes every three years), you will be subject to the probate process.  Probate is time-consuming and expensive. And, in most cases, absolutely in your best interest to avoid it.   

Where Can I Get Help?

To get your estate plan started call the Law Office of Jonathan Alexander at (949) 334-7823 today.  Mr. Alexander has 20 years of experience and is ready to help you establish a customized estate plan that avoids federal taxation, the perils of probate, and protects you, your family, and your property. 

To learn more about Mr. Alexander, read his bio linked here. 

• Name the individuals who will inherit your property (your “beneficiaries”).
• Avoid probate (a time consuming and expensive court proceedings where a judge determines who inherits your money and property).
• Avoid conservatorship (a court process where a judge decides who controls your money and property is you lack the mental capacity to do so on your own).
• Exercise control over children’s gifts. You can create highly customized distributions strategies that incentivize beneficiaries to reach milestones (e.g., graduating college) and even provide protection from your children’s creditors and/or divorcing spouses. 
• Keep your affairs private and out of the public judicial system (i.e., Probate court).  Wills are public, a properly funded revocable living trust will preserve your family and loved ones’ privacy. 

A revocable living trust is the center piece of a properly drafted comprehensive estate plan.  For more information about living trusts, read: 14 Benefits of a Living Trust. 

To speak with a qualified California estate planning lawyer, call the Law office of Jonathan Alexander, Esq. today at (949) 334-7823.

Mr. Alexander has 20 years’ experience and is ready to help you create a legacy that protects your family and loved ones. Call us today.

The person who creates a trust is called a grantor. The person who carries out the terms of the trust is called the trustee.  The persons or organizations who receive property or money from a trust are called beneficiaries.   

The trust is, in essence, an agreement between the grantor and the trustee.   The grantor transfers ownership of his or her property and money to the trust. That is, the assets inside your trust are now your held by trustees in a fiduciary capacity for the benefit of the trust’s beneficiaries. The trust describes how the property and money are to be distributed to beneficiaries.  The trustee carries out the terms of the trust to ensure that beneficiaries receive their gifts.       

There are several types of trusts.  One of most commonly used trust in estate planning, especially in California, is the revocable living trust.   If you would like to learn more about why your estate plan should be centered around a living trust, read 14 Benefits of a Living Trust.

To get your estate plan started today, call estate planning attorney Jonathan Alexander at (949) 334-7823.  

Law Office of Jonathan D. Alexander, Esq.

A living trust is one of the most efficient estate planning tools available but there are some common misconceptions. According to a survey made by Caring.com only 42% of responders have created or prepared an estate plan.

There are three reasons why someone may put off their estate planning:

• They’re procrastinating.
• They don’t know how to do it.
• They believe they don’t have enough assets.

While these are understandable, it is in your best interest to start creating your estate plan today. Most of my clients establish revocable living trust centered estate plans because they provide a litany of benefits including flexibility, asset protection, privacy, and avoid the exorbitant expense of probate court.

1. What Is a Living Trust?

A living trust is a legal document created during an individual’s lifetime where a designated person, the trustee, is given responsibility for managing that individual’s assets for the benefit of beneficiaries. A living trust’s primary purpose is to avoid probate and/or to provide asset protection.

2. Why Establish a Living Trust?

Aside from protecting your assets, living trusts serve many purposes. My clients use living trusts to avoid probate, plan for incapacity or death, and to distribute their property quicker, faster, and cheaper as compared to probate.

I recommend to my clients that they include a pour-over will to catch any assets left out of the trust, although your main goal should be to put as many assets in as possible.

3. What Is Probate?

Probate is a legal process supervised by a court of law where it validates your will and determines how it is going to distribute your assets to your beneficiaries. Probate can be an expensive and time-consuming process before your beneficiaries get access to the assets.

Most people prefer to avoid probate since it can lead to confusion, stress, and more legal fees. In these cases, having a living trust can ease some of the complications in the process since assets in a trust do not have to go through probate.

4. What Assets Can You Put into a Living Trust?

You can place several asset categories in a living trust, such as the following:

• Real estate
• Jewelry
• Fine art
• Intellectual property (digital property)
• Mining rights
• Cars or other vehicles
• Bank accounts
• Cryptocurrency

5. How Does a Living Trust Work?

The process of creating a living trust is not as complex as it may seem; it just takes good guidance to get everything in order.

First, the person who establishes the trust is called the “grantor.” In this case, you, as the grantor, would transfer ownership of your property into the trust. During the trust creation process, a trustee is appointed. The trustee is the person responsible for managing the trust in the best interest of the trust’s beneficiaries.

Once you become incapacitated or die, the trustee ensures all the assets are distributed according to your wishes. Since a living trust can avoid probate, the assets may reach the intended beneficiaries much faster.

6. What Are the Two Main Types of Living Trusts?

• Irrevocable Trusts: In an irrevocable trust, you are giving full control over your assets to your trustee, and you cannot change an irrevocable trust’s terms without a judge’s permission. The benefits of this trust type include reducing the taxable estate.
• Revocable Trusts: As opposed to irrevocable trusts, you can adjust, amend, or cancel a revocable trust at any time during your life as you consider appropriate. You may also name yourself as the initial trustee to keep controlling your assets while you’re living.

The grantors of the revocable living trust (e.g., you and your spouse) are almost always the initial trustees. That is, you act as the grantor (creator) of the revocable living trust and the initial trustee. Upon your death, the surviving spouse serves as the remaining trustee and finally upon the survivor’s passing a secondary trustee (named in the living trust) will serve as trustee.

7. What Are the Advantages of Living Trusts?

Some of the most important advantages of having a living trust include the following:

• More privacy to your assets since living trusts are not considered public records.
• More difficulty to contest than a will.
• Saved time and money since assets in your trust do not have to go through probate.

8. Are Living Trusts Different than Wills?

Living trusts tend to be confused with last wills. A will is an individual’s written declaration of his or her wishes about the transfer of his or her property after death. A will’s primary function is to pass your property to people that you choose. A will also ensures that there are guardians for your minor children.

A will won’t, by itself, allow you to bypass probate. In California an estate worth $150,000 is subject to probate.

There are some scenarios where a will may suffice.

• You have minor children and your primary intention is to merely arrange for guardians.
• You do not own a home or real estate
• You are not concerned about the cost of probate, or your estate is smaller than the probate limit ($150,000 in 2021)
• You require the assistance of a judge to determine complex creditor issues.

For a young couple with no assets and a baby a will may be fine. Once the couple buys a house, starts investing, and gets more assets a more comprehensive revocable living trust centered estate plan will be a better fit.

9. What Do You Need to Begin Creating Your Living Trust?

You should complete a list of your assets and beneficiaries then contact my office immediately for a consultation. My team and I make the estate planning process a breeze and I offer a 100% satisfaction guarantee.

Establishing a living trust centered estate plan will help you protect your assets, keep the transfer to your beneficiaries private, and ensure they get to your family sooner than later.

Contact us today!

One of the first things we tell our clients is that the key to better protection for your assets is to prepare and fund your trust correctly. If you do not take the right steps, your family may end up in probate court.

Failing to properly prepare will cost you more money. I want you to avoid common mistakes that are made when setting up a living trust centered estate plan. Below is list of common mistakes that you should avoid.

1. Not Funding Your Trust

Many people believe they can sign their trust document and rest easy until they pass away. Keep in mind your trust is not going to do anything for you or your family if you do not fund your trust properly.

Funding involves the transferring ownership of your assets to your trust. The method of transfer typically depends on the asset type.

If you fail to transfer assets to your trust that are subject to probate (real estate, investment accounts, cash, sole proprietorships, partnerships, jewelry, furniture & more) your heir will end up in probate court. While probate court is not evil, it is time consuming and expensive.

2. Leaving Assets Out of Your Trust

Leaving assets out of your trust is one of the most common mistakes on this list. You may leave an asset out for any reason, although people typically just forget. Remember that any asset left out of the trust may have to go through probate, which can be an inconvenience for your beneficiaries.

If you want to avoid as many issues as possible, update your trust periodically and ensure you’re getting all the assets you need there.

3. Not Setting Up Your Trust Document Correctly

You may need to set up your trust document according to your state’s requirements. If you take an online trust form, you may skip some of these particular state requirements, which can invalidate your document in the end.

Additionally, you must ensure your living trust is completing your objectives, which can be avoiding probate, minimize taxes, or others. Regardless of your objective, your trust must include the required information to achieve it.

4. Setting Up a Living Trust and Forgetting About Other Estate-Planning Documents

Living trusts are one of the greatest financial tools for people, but they’re not meant to be a replacement for every other document. While trusts have several benefits for people, they still have some limitations that can be covered by other estate-planning documents, such as a will or a pour-over will.

I counsel my clients to put a comprehensive estate plan in place that is centered around a well-drafted revocable living trust.

5. Failing to Review and Update Your Trust

People tend to forget to update their trust regularly for any changes. Keep in mind your life can change five, 10, and 20 years from now; you may start a family, get a new job, move to a different state, and more.

We recommend people to revise their trust documents at least once every three to five years and every time there’s a major life change for them. If you keep track of your trust as life goes on, you’re going to ensure you’re including new assets and adjusting your status accordingly.

6. Choosing the Wrong Trustee or Not Choosing a Trustee at All

Your trustee must be a capable and mature person in every scenario. Many people make the mistake of choosing a close family member or friend as trustee because they believe it’s the right thing to do. However, if these people don’t know how to manage your estate properly, your family may have to go through some legal issues in the future.

When setting up your revocable living trust you must choose an initial trustee (typically you and your spouse, if married) and a successor trustee. The successor trustee will serve if you become incapacitated or die. Failing to name a successor trustee is a common error that is easily avoided.

7. Not Reading Your Trust Document

It may not seem like a common mistake, but many people do not read their trust documents. There may be some sections of your trust document you do not understand. Any estate planning attorney worth his salt will be able to explain every section to you in plain English.

8. There Any Other Important Estate-Planning Documents

As mentioned before, a living trust cannot replace every other estate-planning document. Some of the most vital estate planning tools include a pour-over will, a durable power of attorney, a HIPAA authorization form, an advanced health care directive, and a property agreement (to name a few).

If you only set up a living trust and forget about the rest, you may lose control over some other important aspects of your last wishes for your family; these aspects include guardians, executors, access to medical records in case of incapacitation, and more.

9. How Can You Avoid These Mistakes?

While there are many mistakes to make while setting up a living trust, they are easily avoided.

If you want to ensure that your living trust is drafted properly, funded, and is designed to minimize tax exposure while protecting your heirs call my office today and schedule a consultation.

1. It allows you to avoid probate.
2. The transfer of your assets can remain confidential. If you merely have a will or no estate plan at all your estate may require administration through the public probate process.
3. Allows more efficient administration of your estate (makes it easier for your heirs to receive assets you’ve left them).
4. You can control your assets through your living trust in the event that you become incapacitated. If you merely have a will or no plan, a court will interfere and may control your assets.
5. You get peace of mind that one set of instructions can control your assets.
6. You can avoid unintentional disinheriting.
7. You can control when your beneficiaries inherit. You can keep assets in trust until your beneficiaries reach certain milestones (graduating college) or until they reach a certain age.
8. Beneficiaries’ inheritance can remain in trust and receive protection from creditors, divorce proceedings, spouses, irresponsible spending, and future death taxes.
9. You may use tax planning to reduce or eliminate federal (or state, where relevant) estate taxes.
10. Allows you, and not the probate court, to control minor children’s inheritance.
11. Special provisions make living trusts more difficult to contest than wills.
12. Prenuptial protection can be included.
13. Living trusts are revocable and can be modified while you are competent and alive.
14. You may choose professional assets management by selecting a professional trustee.

If you’re ready to learn how a living trust centered estate plan can help you and your family, book a confidential consultation.

10 Reasons Why It’s Important to Have an Estate Plan

Proper estate planning ensures that you control the distribution of your assets. It also protects your family, avoids taxes, and eliminates future controversies. Bottom line, it makes sure you have a trusted party to protect your affairs. If you want your loved ones and assets protected after you’re gone, you’ll need an estate plan.

Comprehensive estate planning isn’t only about managing your assets after death. It’s about lifetime planning, too. Lifetime planning may include creating living trusts to protect property and incapacity planning that may include a durable power of attorney and health care power of attorney. Contrary to a popular misconception, estate planning is for everyone regardless of wealth.

You should think about the distribution of your estate any time you experience a major life change. Switching careers, starting a family, and getting married should all prompt a review of your estate plan. As promised, here are ten reasons why estate planning is important:

10. Get an Accurate Picture of Your Financial Situation

Estate planning involves a detailed analysis of your current financial situation. In order to develop an accurate and achievable plan for the future, it is important to know what you have in terms of assets and debts today. Most people start by gathering together any documentation they have with respect to each asset and debt. This includes bank statements, investment documentation, real estate appraisals, and other approximations of value regarding other assets. You may also want to write down a list of personal items of high value that you want to gift to others.

For example, you may want to leave a diamond ring to a particular child or an expensive piece of original art to another. Specifying that you want these individual items to be gifted will prevent your estate from selling them and dividing the proceeds among your beneficiaries. It can also help you find ways to distribute your assets in an equitable way. This will reduce the risk that one beneficiary will try to contest the will.

Visiting an estate planning attorney now will also help your estate trustee or executor manage your estate later. Creating an estate plan requires marshaling all relevant information about your assets. This information will include transaction and account numbers as well as the location of those assets. Family members do not often have this information. Sorting through financial records after someone has passed away can be difficult. If your attorney already has this information on file, it can help make distribution much easier.

9. Prevent Lengthy Legal Battles Over Your Estate

If you die without a binding will or comprehensive estate plan, your family members may become involved in lengthy legal disputes about your estate. The same is true if you become mentally incapacitated while alive but have not yet appointed someone to manage your affairs. Events like these are very stressful occasions, and not all families are able to manage them well. In some cases, family members with conflicting points of view find themselves fighting each other about your wishes.

These legal battles are as costly as they are long. Your estate will have to pay legal fees out of your remaining assets. This can dramatically reduce the amount available for payout to beneficiaries at the end of the court proceedings. Planning out in advance how you want your assets to be distributed will go a long way to avoiding this type of legal mess. To avoid unnecessary legal battles, it’s critical that get qualified advice from an attorney. Your lawyer can arrange your estate to minimize confusion over your wishes.

8. Avoid Taxation

Contrary to popular belief, most of the money your estate loses following death goes to taxes, not legal fees. It’s essential to have a skilled estate planning attorney and accounting professionals. Your team can help cut the state, federal, and inheritance taxes payable by your estate. Most people lack this type of specialized knowledge. It is crucial to meet with an estate planning attorney to ensure that you are able to leave as much as possible to your loved ones. They can also help you care for your family now, while still helping you set aside as much as possible for eventual distribution.

Individuals with complex assets including real estate, businesses and investments, should never try to draft estate documents on their own. Even the smallest errors in drafting can interfere with your plan. An estate law professional will be able to draft a binding document and assist with tax avoidance.

7. Incapacity Planning: Ensure You Are Well Cared for While Alive

Estate planning involves more than thinking about what happens after death. It also means considering how you want your assets managed while you’re living. Incapacity planning involves drafting a document setting out who you want to manage your affairs while you are still alive. This individual does not have to be the same person that you name as your estate trustee or executor. This may be one document, discussing both financial and medical concerns. In some states, lawyers will draft two separate documents. You can name the same person on both documents, or two different people depending on your needs.

Again, it is crucial that you seek professional legal advice when thinking about these matters. Your lawyer can help you choose an appropriate individual. For example, some people may want to use their spouse as their medical proxy. This is a great idea in most situations. Yet, you may also want to name an alternative as well to guard against your spouse predeceasing you or becoming incapacitated. Your attorney can help you identify any potential issues with the people you have selected. They will draft the documents to avoid legal complications in the future.

If you have minor children, you should also use these documents to appoint a guardian. Most people do not consider mental incapacity as a serious concern when they are younger. But, accidents can happen at any time, some have unanticipated medical consequences.

6. Protect Your Business

If you are a business owner, it is crucial that you invest in estate planning. Small business succession is a complicated legal process. It is not as easy as specifying who you want to take over the company in your will. You should look for an attorney with corporate and estate law specialties. Be sure you involve your accountant as well. In some cases, you may need to sign a consent form in order for all these individuals to communicate.

You will need to think about who you want to run the company after you are gone. You should consider things like the day-to-day operation of the business as well as the behind the scenes financial work. The most ideal person for this position will depend on your unique circumstances. Sometimes it is a trusted business associated. In other cases, you may want to pass part of the company along to your children. Talk with your estate planning team about the best way to ensure that your company continues to run smoothly. Your attorney can help draft documentation and begin organizing your company’s legal structure to accommodate your future needs. Bring copies of your business’ legal and financial records with you to your first meeting. Your legal and financial team will want to have an accurate picture of your company’s structure before offering legal and financial advice.

5. Avoiding Probate

If you die without planning your estate, the State, through the probate process, decides who receives your assets and in what amount. Each state has different succession rules, but most of them will pass assets to your spouse and children. They do not leave room for any other bequests or specific gifts. For example, if you wanted a particular child to receive a certain item, you would have to hope that your trustee was aware of your wish and would comply with it. Otherwise, that asset could wind up in the hands of your spouse, or liquidated with the proceeds divided.

Also, if you die without a will or estate plan you cannot leave any money to charities or other organizations. When the state decides how to split up your assets, they only consider relatives as beneficiaries. They will not permit the appointed executor or trustee to give any money to third parties, including charities. Individuals who want to leave fund to friends, other organizations, or charities need to plan out their estate to ensure such bequests are fulfilled.

Hiring an estate planning attorney to draft a comprehensive estate plan will ensure that any bequests made to family and non-family members are honored. Homemade wills are subject to a higher degree of scrutiny by the counts than those drafted by attorneys. If there is any question about your mental capacity at the time the will was created, a court could deem that bequest to be void. By hiring an attorney, you can mitigate the risk that your estate documentation will see legal challenges.

4. Reduce Stress on Your Family Members

Coping with grief is a very difficult thing for most people. Trying to manage an estate of someone who died without a will or estate plan adds a significant amount of stress to the situation. Not only does the State determine asset distribution, it also selects a person to act as your executor or trustee. This may not be the same individual you would have selected if you had the chance.

Funeral arrangement is also another key part of estate planning. Arranging and paying for a funeral is very stressful. It’s a tough task to take on even at the best of times. Dealing with grief while making speedy funeral arrangements can be overwhelming. It’s a great idea to plan your funeral arrangements ahead of time. Prepaying and arranging for your funeral and burial or cremation will help your family focus on healing after your death.

Paying for your funeral in advance can also save your beneficiaries money. After death, any expense incurred comes out of your estate. Planning for this expense in advance will often reduce the expense. It also helps your family understand your wishes about funeral arrangements. This can also relieve a lot of stress during an uncertain time.

3. Asset Protection

Comprehensive estate planning takes into account asset distribution, incapacity planning asset protection.

Asset protection—like most things in life—is all about the timing. Not much good can come from trying to protect your assets reactively when surprised by situations like bankruptcy or divorce. To take full advantage of asset protection using estate planning is to prepare proactively long before these things ever come to pass — and hopefully many of them won’t. This paragraph is the tip of the ice berg of asset protection planning but, in essence, there are two general types. Asset protection for yourself and asset protection for your heirs.

Asset protection planning for yourself must be performed long in advance of any proceedings that might threaten your assets, such as bankruptcy, divorce, or judgement. There are highly-detailed rules and regulations surrounding this type of asset protection, it’s important to lean on your estate planning attorney’s expertise.

Asset protection for your heirs involves setting up discretionary lifetime trusts rather than outright inheritance, staggered distributions, mandatory income trusts, or other less protective forms of inheritance. The different strategies offer variable grades of protection. For example, a trust that has an independent distribution trustee who is the only person empowered to make discretionary distributions offers much better protection than a trust that allows for so-called ascertainable standards distributions. Don’t worry about the complexity – I am here to help you best protect your heirs and their inheritance. This complex area of estate planning is full of potential miscalculation, so it’s crucial to obtain qualified advice and not rely on common knowledge about what’s possible and what isn’t.

2. Give Yourself Peace of Mind

The best reason to start planning your estate now is to give yourself peace of mind. Regardless of where you are in life, there are people you will want to care for after your death. Ensuring that you have a binding estate plan means that these individuals will be looked after following your death. Parents with young children in particular may feel a lot of anxiety about their children’s futures should anything go wrong. Preparing guardianship clauses and designating a trustee for their future financial needs will relieve that stress. It also gives you a chance to integrate those people in your child’s life now. For example, you may want one of your siblings to act as guardian should anything happen to you and your spouse. Familiarizing your child with that person now can help reduce your child’s stress levels if the worst were to occur. Many parents take comfort in knowing they are doing all they can now to help their child should something go wrong later.

Estate planning involves more than deciding who receives what in the event of your death. It also includes planning for other, worst-case scenarios. Preparing documentation to help protect your assets and provide for your care should you become incapacitated is important. This guarantees that someone you trust will look out for your well-being, even when you are not able to yourself. Taking steps to ensure these wishes are binding now can help you and your family in the future.

1. Protect Your Loved Ones

You should review your estate plan every year, or upon any major life change. Things like having children or the marriage of a change your estate plan. In some cases, you may want to develop a way to protect your beneficiaries after they receive their bequest.

Adult beneficiaries may also need some degree of protection. Most states will require a guardian or conservator if the beneficiary has mental or developmental challenges. Keep this in mind if you do have any beneficiaries in this situation. You may also want to speak with your legal team about adult children who are bad with money or who have a troubled marriage. There are certain ways you can phrase your gift to protect it from themselves, or their partners. You may also want to speak with your lawyers about protecting your assets in the event of lawsuits, either before or after death. The best time to ensure your loved ones receive as much of your estate as possible is now. If you wait until you have concerns about a specific lawsuit, it may be too late to do anything about it.

Regardless of your financial situation there are important reasons for you to have an estate. Even if you do not think you have enough assets to warrant a full estate plan, you should still seek legal advice. Estate planning can help your family when dealing with grief. It can ensure that your wishes are followed after death. Developing an estate plan will also ensure that your loved ones, even non-family members, are cared for the way you intend. It is an especially important task for families with young children. You want to be sure that your children are raised well and receive the best possible care. A comprehensive estate plan organizes your assets, documents your wishes, and protects your family.

You should revisit your estate plan annually. I recommend a quick review at tax time or when there is a major life change. The birth of children or grandchildren should prompt a review. You should also take a look at your estate documentation upon marriage or divorce, either yours or that of a beneficiary. Be sure you keep your attorney advised about any major purchases or sales as well. While most asset exchanges do not require a revision of your estate plan, some may. It is important that you share this information with your attorney to avoid any complications in distributing your estate in the future. One of the best things you can do for your family is to plan out your estate now. It will reduce a significant amount of stress, and protect them in the event of your death.

This article is a service of the Law office of Jonathan D. Alexander. I don’t just draft documents; I ensure you make informed decisions about life and death, for yourself and the people you love. That’s why I offer a free family wealth planning consultation. You will get more financially organized than you have ever been. You’ll also make the best choices for the people you love. Call my office today to schedule a free consultation.