CA Estate Planning Blog

Tuesday, June 11, 2013

To Zoom or Not to Zoom a Living Trust

We’ve all heard the claims that we’re an instant gratification society.  We drive thru windows for sustenance, find our new homes virtually without crossing the threshold and diagnose our ailments with the help of our handheld devices.  So why then would it not make sense to use a quick and easy online service to create some of our most important legal documents?  

While the rhetorical question may have satisfied its own query let me offer a few supporting arguments for the benefits of substantial, real and comprehensive.  First, fast food is cheap and convenient but it’s notoriously unhealthy and not meant to make up the basis of nutrition.  Second, a picture is worth a thousand words but sometimes the picture doesn’t tell the whole story.  And lastly, while you might be able to cure a simple stomachache, would you really want to bet your life on the idea that you didn’t overlook a more serious problem.

There’s no point in trying to bombard you with clichés, or instill you with doubt and fear about the process.  The point is to educate you and help you understand what is involved with the quick fixes of the world.  The following is an excerpt from the Disclaimer on LegalZoom, “We are not a law firm or a substitute for an attorney or law firm. We cannot provide any kind of advice, explanation, opinion, or recommendation about possible legal rights, remedies, defenses, options, selection of forms or strategies.”

In the spirit of thoroughness I attempted to create a Living Trust online.  The questions that were posed to me were straightforward, however on occasion my answers were not.  If I had been a single person with one beneficiary, the online version probably would have provided sufficiently for my estate planning needs.  However, what if I was a divorced woman who owned property with my ex husband as well as my brother and wanted to designate my best friend as my children’s guardian.  While I’m sure the support staff would have made an effort to help me through those questions, the system was not set up to deal with these anomalies.      

There are a variety of benefits to dealing with a live attorney when discussing your estate planning needs.  They provide comprehensive tailored help to address all of your unique needs.  They ask pertinent questions and take time to understand all of the nuances of your case.  And in the end the best of them provide substantial legal advice, explanations of the consequences of your choices and make appropriate recommendations.  We may very well be a society of instant gratification, but sometimes there is no substitute for the real thing. 

Thursday, June 6, 2013

Credit Card Debt & Your Estate Plan

Our office received an interesting question the other day about credit card debt. He wanted to know if his credit card debt is automatically forgiven upon his death. A lot of people are under the impression that your credit card debt dies along with you.  That is not exactly correct. There is no black letter law or one size fits all answer for this. It all depends on a number of factors including who else is on your account, whether your estate will go through probate, and what state you live in. 

First, upon your death, your estate is expected to pay off any outstanding debt, including your credit card debt. Creditors of all kinds will come out of the woodwork to try to get what you have, and they can be very aggressive with debt collection, knowing that the deceased person's spouse or their estate may be responsible for that debt. However, the estate trustee or the executor is responsible for contacting the creditors and geting these debts paid off.

Although credit card debt should be paid off, it is not the first priority on the list of outstanding debt to pay off in an estate. Sometimes, the credit card company loses.  If the estate does not have the assets to pay off the credit card debt, the debt may be forgiven becauase a credit card company cannot force someone else to pay. However, if the account was shared [i.e. joint bank account, or co-signer], that survivor may be responsible for the outstanding balance.

States vary on what funds are used to pay off credit card debt. 401(k) plans with a specific beneficiary or IRAs are not considered part of an estate, and will go straight to the beneficiary, not through probate. Insurance benefits are similar in this regard.  

In community property states, however, it can get complicated. Most assets (and sometimes debts) acquired during a marriage are considered joint property. Therefore, even if a credit card was only in the deceased person’s name, the surviving spouse still might be responsible if they lived in a community state such as Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin. But community property laws are different in every state so check with a probate lawyer to find out more.

The bottom line on any credit card debt question is: Never rely solely on what the creditor or collections agent tells you. Contact your probate attorney and ASK MORE QUESTIONS.

Friday, May 31, 2013

Single Parents Need Trusts Too

Single parent trusts look slightly different from that of a married parent. Usually, in a married revocable living trust for married parents, the trust language and laws are set in place to ensure that both the custody and the property go to the surviving spouse. However, for single parents, the courts will determine your next of kin and disperse your property accordingly. For minor children, the courts will appoint a guardian based on California laws. Although it's great that these laws are set in place as a default when there is no will or trust in place, it is not so great when the person[s] the court chooses are not the people you would have chosen yourself. Worse yet, they may choose the exact opposite of the person you would want to have guardianship over your child[ren]. 

Common guardians to have custody of a child upon the parent's death are usually the other parent, grandparents, a close aunt, or relative. In many families, any of these would be a good choice. However, if there has been a falling out between family members, or the grandparent is too elderly, or the other parent is insufficiently able to care for the child[ren], then perhaps a better choice could have been made. 

Appointing a guardian is only of the most pressing issues for which a single parent would need to see an estate planning attorney such as OC Wills & Trusts. We can help you create a financial plan to help support your child[ren] even if you are not there such as a trust that not only protects the money from certain creditors against the beneficiary, but also protects them from being heavily taxed as well as give you a say on how the money is to be allocated/spent. 

We make sure that everything is in order for your estate planning needs, and also follow up with you in the event of new emerging laws. Since every family is unique, we attorneys here at OC Wills & Trusts do our very best to make sure you have the best plan that works for your specific needs. 

Friday, March 15, 2013

Top 3 Clauses to Make Sure You Have in Your Living Trust

Living Trusts are a great tool to save time and money by avoiding the probate process when the Trustor dies. However, that is not all of the living trust offers. Besides skipping the probate process, living trusts also offer other benefits that may even surpass the importance of avoiding probate. However, you must make sure that the clauses are included in your trust in order to get all the benefits that the trust offers.  The following are some provisions and clauses that you should make sure are included in your living trust.

  • Protection Property from Certain Beneficiaries and Creditors.  Spendthrift clauses in trusts allow you to give your well earned money and property to the ones you love, and at the same time, protect it from them.  Spendthrift clauses protect beneficiaries from themselves as well as creditors because it keeps the money in the trust [which shields them from creditors] rather than their own personal accounts [where creditors can reach].  It also protects beneficiaries who accumulate bills such as medical problems or job loss.  Most think that when you have an estate plan, you are intending to protect your loved ones such as your husband/wife/children when you die. However, some of the beneficiaries may not be able to handle an inheritance given to them in a large lump sum. Trustor's might turn in their graves if they knew what their 18 year old beneficiary is doing with their money after they are gone.  Hence, many attorneys advise that the Trustor[s] implement an age [usually 25 yo] that their beneficiaries have to be in order to get the Trust assets outright. Even then, many beneficiaries over 25 years of age should not have access to those funds either. Some may be going through divorce, so it can keeps a creditor or ex-spouse of a beneficiary from being able to reach the beneficiary's interest in the trust.  The clause also prevents a future beneficiary from alienating ("selling") his or her interest in the trust (usually for pennies on the dollar).  

    One of the important provisions of this paragraph is the discretionary right it gives to the Trustee to hold any distribution for a beneficiary deemed by the Trustee to be incompetent or suffering from substance abuse, or because the beneficiary's financial circumstances are such that failure to delay the distribution would actually reduce the trust benefits to the beneficiary (e.g., a beneficiary who is receiving state assistance of some kind).

  • No Contest Provision.  The “No Contest” provision in the trust states that, to the extent permitted under California law, if anyone challenges the validity of the trust or your intent as expressed in the trust, that person and his or her descendants will receive nothing from the trust.   Revocable living trusts are a huge deterrent for contests for a number of reasons.  1) They are incredibly hard to contest. 2) They are much more expensive to contest. The will contest is heard in probate court and the person contesting doesn't have to put out much money if they can find an attorney that can work on contingency. Whereas the revocable living trust contest is heard in civil court which encompass substantial filing fees and procedures that can add up to be very costly for the person contesting. 3) Defending a will costs a lot of money, which is generally paid for out of the estate. This means that the beneficiaries end up with a lot less.  4) Contests are usually settled instead of going to court, so the settlement will further diminish the Estate. Overall, these are huge deterrents for contest the revocable living trust as they can be very time consuming and expensive for both parties.
  • Residual Clause.  Residual clauses are safety nets to help ensure that no part of your estate goes through probate. Basically, a catch all within the estate plan.  Once all the taxes, payments, debts, claims, and distributions are settled against the estate, the money that is leftover is called the residue.  There are also assets that can also be part of the estate, the most common are assets that are purchased or acquired after the trust is drafted. The residue clauses catches these assets under the net of the Estate.  Failing to include the residue clause can be very problematic for the Trustee as the remaining assets will have to go through probate [i.e. court and legal fees]. Residual clauses can be added to the trust at any time so make sure that it is included in your trust!



Thursday, March 7, 2013

VA Eliminates Annual Eligibility Verification Report for Veterans Aid & Attendance

The Department of Veterans Affairs is eliminating the requirement for veterans receiving the Veterans Aid and Attendance benefit to file an annual report called the Eligibility Verification Report [EVR].  Before, beneficiaries were required to turn in the EVR and that was how the VA determined continuing eligibility.  Now, the VA will verify continued eligibility information through the Internal Revenue Service [IRS] and Social Security Administration. Implementing this new system will reduce the burden on many veterans and their families because they will not have to remember to file these returns each year in order to maintain their benefits.

View the whole article here.


Monday, March 4, 2013

Trust Certifications

You’ve been responsible, consulted a qualified Estate Planning Attorney, created a Trust, correctly transferred your assets.  And now you want to purchase or refinance a home that will be held in your Trust.  In order to do so, you will need a Trust Certification and Legal Opinion letter, which can only be produced by a licensed attorney.


Trust Certification

A Trust Certification involves an attorney reviewing your Trust and making a legal determination that according to the terms of the Trust the Trust assets can be encumbered and that the Trustee has the legal authority to encumber the Trust assets.  This generally refers to the ability to purchase a home or refinance your existing mortgage.  With a Trust Certification your property remains in your Trust.


Legal Opinion

A legal opinion letter refers to a letter written by an attorney which states that as of the day of review and according to the terms of the Trust, the Trust assets can be encumbered and that the Trustee has the authority to encumber the assets.  Only an Attorney can provide a Trust Certification and Legal Opinion Letter.     



By keeping the property in a trust, the property is not exposed to any potential complications.  If you take the property out of the Trust, and something happens to you, your property could be exposed to the probate process, thereby defeating all of your Estate Planning efforts.  Taking the property out of the Trust also involves the added expense of recording the deed additional times.  And, there is always the possibility of forgetting to put the property back into your Trust. 

Thursday, February 28, 2013

Government Lookback Periods Are Changing - Don't Wait to Act

Despite the fact that you planned ahead, you find yourself in need of help paying for long term care.  The options are limited, but may include Medicaid or Veterans Benefits of Aid & Attendance Pension.  For eligibility purposes, the government will determine whether you qualify for the benefit based on the amount of assets and income in your estate.  Also, they may look at whether you have transferred assets out of your estate in order to qualify.


General Info - In California our version of Medicaid is called Medi-Cal, which is a government health program for certain people and families with low incomes and limited resources.  It is a means tested program and is jointly funded by state and federal governments and managed by the state.  As each state moves towards the federal norm, changes will come to Medi-Cal.

Assets and Transfers - If a Medi-Cal applicant’s property and assets are over the Medi-Cal property limit, the applicant will not be eligible for Medi-Cal unless they lower their property and asset levels.  But Medi-Cal will also consider the nature and amount of assets transferred out of a person’s estate.  The term transfer means an outright gift or a sale made at less than fair market value.  If such a transfer of property is made, Medi-Cal may calculate the period of ineligibility for nursing facility level of care.  

Look Back Period - The current look back period for asset transfers for Medi-Cal is 30 months.  However, the Deficit Reduction Act of 2005 changed the look back period to 5 years, which will soon be implemented in California.

Penalty – The length of the ineligibility period is based on the net fair market value of transferred property which would have resulted in excess property, had an application for Medi-Cal been submitted at the time of the transfer and the property retained by the Medi-Cal applicant.  The amount of excess property is divided by the monthly average of private nursing facility cost by County.


General Info – The Aid and Attendance pension is a benefit paid by Veterans Affairs to qualified veterans, veteran spouses and surviving spouses to help pay for long term care.  It is a non-service connected disability benefit, to aid a qualified person who requires assistance with 2 or more Activities of Daily Living.    

Assets and Transfers – The VA looks at the amount of assets and income of a veteran and their spouses to determine eligibility.  In order to receive the maximum amount of the benefit the claimant’s unreimbursed medical expenses must exceed their income.  And the assets held by the Veteran or Spouse must be of an exempt status, such as the primary residence, car, etc.    

Look Back Period – Currently there is no look back period for the Aid and Attendance Benefit.  However this is soon going to change. Senators and the Veteran's Administration are introducing legislation intended to require a three year lookback period for applicants applying for the Aid and Attendance program.



There are a number of effective planning techniques that can be put in place to protect assets from being counted against an applicant and reducing the liability of those assets.  It is important to note that actions that are taken on behalf of someone for Veterans Benefits may impact Medi-Cal eligibility.  You will want to work with a qualified attorney who can explain the consequences of your choices and help you weigh the alternatives. 

Since Medi-Cal and the Aid and Attendance Pension are both primary sources of paying for long term care it is important to note that the look back periods are about to change and will extend the period of time for penalties.  Don’t wait to act.   

Friday, January 18, 2013

2013 Estate Tax & Gift Update

Once you’re worth more than a certain amount, your estate will have to pay estate taxes upon your death. Under the 2010 tax law, each spouse can transfer up to $5 million tax-free during life or at death. The tax rate for amounts transferred over the exemption was 35%.

If Congress had not acted, the tax-free amount would have been reverted back to $1 million per person and the rate for most estates would have gone up to 55%. This would have greatly affected the middle class by exposing them to the estate taxes. However, on New Year's Eve and New Year's Day, the Senate and the House of Representatives passed the tax law that made permanent the system that has been in effect for the past two years.

EXEMPTION?: $5.25 million per person

Congress did in fact act, and on January 11, the IRS announced that with the inflation adjustment, the estate tax exclusion amount for deaths in 2013 will be $5.25 million from the $5.12 million in 2012.


In 2011 ande 2012, the maximum tax rate was 35%.  If Congress did not act, the amount would have increased to 55%. However, with the new law, the estate tax rate for amounts transferred over the estate tax exemption was increased to 40%.


Yes, portability is still available for the surviving spouse. The new law has made portability permanent. This means that a surviving spouse can use the decedent spouse’s unused federal estate tax exemption, enabling them to transfer up to $10.24 million tax-free.

Wednesday, December 26, 2012

Hazards of Gifting Your Home to Your Kids

We see it all the time as parents get older, they decide that they want to give their kids their real estate before they pass on or put them on title as joint tenants. Usually the rationalize this decision by believing that gifting their property to their kids while they are alive will avoid estate taxes, help them qualify for government benefits such as Medi-Cal or simply to avoid probate.  While these lifetime gifts can accomplish these goals, there are significant negative consequences of doing such transfers including;

  • Loss of your home:  Often a parent who is still living in their home will gift it to their children.  Unfortunately by doing so, the home could be sold out from under them because of debt owed by their children or the children themselves decide to sell the property.
  • Loss of Stepped Up Tax Basis: One of the benefits of inheriting highly-appreciated property is that you get a 100% stepped up basis in that property.  In other words, whatever the property is worth when your parents pass on, is what the IRS considers you having paid for the property.  Thus when you sell the property, you will owe little or no capital gains taxes.  If you receive a property as a gift you get a carryover basis in the property (what your parents paid for the property) and thus when you sell the property you could have a large capital gains tax liability.
  • Gift Taxes:  Gift taxes are paid by the donor at the time the gift is made. If you give anyone more than $13,000 in a calendar year, you are required to report the transaction as a gift to the IRS.  During your lifetime you are allowed to give away 1 million dollars without paying the tax (45% of the value of the gift).  However, whatever amount of the exemption you use during your lifetime will be deducted from your estate tax exemption.  Thus if you give away 1 million dollars during your lifetime and pass on when the estate tax exemption is 3.5 million, you will only have a 2.5 million dollar exemption.  Every dollar above 2.5 million will be taxed at 45%.


Assuming there are no other compelling reasons to gift your homes to your kids, they typically will be much better off if you simply create a living trust or an irrevocable personal residence trust (to avoid Medi-Cal Estate Recovery Lien), transfer the property to the trust and then make their kids the beneficiary.  The property will goto their kids with minimal tax consequences and avoid the high cost and delays of probate.

Wednesday, November 14, 2012

Medi-Cal / Medicaid Eligibility

Although Medicaid eligibility rules vary from state to state, federal minimum standards and guidelines must be observed.


Medi-Cal will pay your long term care expenses if you have less than $2,000 in liquid assets (cash & securities).  However, for most seniors, qualifying for Medi-Cal is quite complicated and we can help show you how to qualify to as quickly as possibe for this benefit.


While Medicaid eligibility with respect to long-term care was not difficult in the past, there has been a steady drift towards more complex and restrictive rules, the latest being the Deficit Reduction Act of 2005 which went into effect in 2006.  These changes have resulted in complex eligibility requirements for those in need of Medicaid benefits.  It’s no longer as easy as reviewing one’s bank statements.  There are a myriad of regulations involving look-back periods, income caps, transfer penalties and waiting periods to plan around. 
Our law firm has the experience and the expertise to help avoid the financial ruin associated with the high cost of long-term care.  Contact us today to start the process of understanding the issues surrounding Medicaid eligibility and to implement the planning and application process. 


Monday, November 12, 2012

How to Pay for Long Term Care

As a senior approaches the twilight of their lives, the issue of paying for long term care becomes ever looming. Unfortunately the odds are fairly high that most seniors will end up in some form of assisted or skilled care. The high cost of long-term care has made planning a critically important issue for most middle class seniors and their families. Sadly, many of them are unprepared for the significant financial burdens it places on their family’s hard earned savings.  Financial devastation looms large for a family facing ongoing care at a rate of $10,000 or more per month.
While some seniors are able to afford private pay care, the cost of long-term care will wipe out savings of all but the wealthiest families in a matter of years.  Those who have planned ahead by purchasing long-term care insurance have a degree of certainty and peace of mind, knowing that they have a lesser need to rely on other sources in the future.  Unfortunately, many can’t afford the high cost of long term care insurance or worse, because of age of medical condition cannot qualify for long term care insurance altogether.  If you do have long-term care insurance, you should be aware of what your policy covers.  Many policies have high deductibles or provide for only a short period of care in facility.  In fact, many who have long-term care insurance still have to resort to Medicaid to pay for their care.

Medicare is available to help at the onset of any medical issues but only cover long term care issues for a few months.  After which your options to pay for in home, assisted or skilled (nursing home) care are

  • Self Insurance:  Using your life savings to pay for skilled care which typically costs around $7,000 per month.  However, cash clients will have the most options available to them when it comes to choosing a care facility.
  • Long Term Care Insurance:  If you were fortunate enough to be able to afford this insurance when you were 50 or 60, such insurance can go a long way to providing the senior the funds they need to pa for long term care.
  • VA Aid and Attendance Pension Benefit:  If you or your spouse were a veteran who served during a war era (ie WW II, Korea, Vietnam etc), you can qualify for long term care benefits of up to $2,000 per month tax free.  Financially qualifying for this benefit is fairly straightforwrd but may involve shifting some of your assets to an irrevocable trust.
  • Medi-Cal/Medicaid:  The safety net available to financially qualified individuals.  Medi-Cal/Medicaid is a joint federal-state program.  Medicaid provides medical assistance to low-income individuals, including those who are 65 or older, disabled or blind.  Medicaid is the single largest payer of nursing home bills in America and serves as the option of last resort for people who have no other way to finance their long-term care.


Archived Posts


© 2020 OC Wills and Trust Attorneys | Disclaimer/Privacy Notice
15615 Alton Parkway, Suite 450, Irvine, CA 92618
| Phone: 949.347.5256
26050 Acero, Mission Viejo, CA 92691
| Phone: 949.347.5256
17011 Beach Blvd, #900, Huntington Beach, CA 92647
| Phone: 949.347.5256
2522 Chambers Road, Suite 100, Tustin, CA 92780
| Phone: 949.347.5256

Overview | | Practice Areas | Resources | FAQs | About Us

FacebookGoogle+TwitterLinked-In CompanyYouTube

Attorney Web Design by
Amicus Creative