Do you know when it's time to review and update your estate plan

Dear Readers:

It’s that time of the year again.

Many of you already have revocable trusts that you made years ago, or maybe your parents have been kind enough to give you a copy of theirs. Many people are under the impression that since they have a trust, they don’t need to do anything else. That’s not true. The trust you created years ago may not be appropriate for you now. Don’t blame your lawyer. Things change. What was a good idea fifteen years ago may not be such a good idea today. As a rule of thumb, you should look through your trust at least every other year. If you are an optimist, do it during the Summer or Winter Olympic Games. If you are a pessimist, review your trust during the National Election. Let’s do it now. Go get your trust binder. We’ll wait.

Start with the Table of Contents, if there is one. There should be a paragraph labeled something like, “Successor Trustees.” Turn to that page. Are the trustees you named still alive? Are they honest? Are they good with money? Do they get along with the rest of your family, or are they a source of conflict? If the eldest son you named as trustee (you know that you did) thinks that since he’s trustee he can lord it over his brothers and sisters, then he’s not the right man for the job.

Next, find the paragraph that says something like “Disposition on Death” or “Disposition on Death of Surviving Spouse.” That’s the paragraph that says who gets what when you die. Read it. Does it still make sense? Have any of your children died? Are any of your children now disabled? Do you have a spendthrift child who can’t be trusted with money? Does your trust leave your son’s ex-wife an inheritance you don’t want her to get any longer? Does your grandson have a drug problem? Maybe you need to make some changes.

Now look at the last pages of your trust. There should be a Schedule of Trust Assets. Read it. Have you moved? If so, is your new home in the trust? Are your retirement accounts listed in your trust document (they shouldn’t be). Who are the beneficiaries of your retirement accounts and life insurance policies? Did you leave your IRA to the trust? (Don’t unless your lawyer says so.)

If you’re married, find the part of the trust that talks about what happens between the first death and the second. Do you have an A/B trust that divides everything between a “Survivor’s Trust” and a “Bypass Trust” or “Exemption Trust?” If so, then maybe you don’t need or want an A/B trust any longer. An A/B trust is a great way to avoid death tax, but it’s more expensive to administer after the death of the first spouse to die.

As of January 2017, up to $5,490,000 of your assets may pass free of Federal Estate Tax upon your death, and that amount goes up annually with inflation. Even better, this death tax exemption won’t expire - it will remain the law unless and until the Congress and President change it. This means that many of you with A/B trusts should restate (amend in full) your trusts to the ordinary type of trust that leaves everything to the surviving spouse, answerable to no one.

Is either you or your spouse in a nursing home? Do you suffer from an ailment that will likely put you in a nursing home before you die? Are you already on Medi-Cal running up an estate claim that will be due and payable upon your death? If so, it’s not too late to protect your assets from the cost of your medical care.

If you are not completely comfortable with the answers to all of these questions, then you need to see a trusts and estates attorney and update your estate plan.

Len & Rosie

What to do with those accounts that were left out of the Trust

Dear Len & Rosie,

My dad died two years ago. He has an investment account, which is still in limbo. My dad had completed all the paperwork to put the account into his trust and he submitted it, but there was a discrepancy on one of the forms. His declining health prevented him from clearing it up before he died.

According to the company, the account needs to be put into an estate account in the name of my father’s probate estate. Mom is executor and trustee, according to dad’s will and trust. We need to get a letter from the court stating my mom is the executor. I’ve asked my mom’s lawyer about this several times. He says he’ll take care of it, but every month we check the statements and the change has not been made. How to I get the letters I need from the court for my mother?

Judy

Dear Judy,

What your mother needs to do depends on how much the account is worth. If the total value of this account and any other accounts in your father’s estate is less than $162,250 (up from $150,000 last year), then she can transfer the account via a small estate declaration under California Probate Code section 13101. Your mother’s lawyer can include a cover letter to the financial institution explaining why there won’t be an estate account.

If the account is worth more than $150,000, then there are two options left. One is to file for probate, which isn’t the best idea, because probate will take at least nine months to complete. It would also be relatively expensive because probate isn’t cheap in California.

Alternatively, she can petition the court asking for a court order declaring that the investment account belongs to her as the successor trustee of the trust, because your father meant to put it into the trust and tried to do so, even though he failed.

Under a California appellate court decision in a case called Estate of Heggstad, more or less anything that your father listed on the schedule of trust assets attached to the back of the trust can be transferred to the trust by court order without having to go through probate. Since your fathers will probably leave his estate to the trust anyway, it’s hardly likely anyone will object. The court would probably approve your mother’s petition.

Check with your mother’s attorney one last time to see if he or she is actually working on your father’s estate. If nothing is happening now, your mother should probably see another lawyer. It’s been two years since your father’s death, so unless there are other complications we are not aware of, your father’s account should have been transferred long ago.

Len & Rosie