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San Diego Probate & Estate Administration Law Blog

Creating a trust that plans for the unexpected

When you create a trust, it is important to think about the unexpected -- about the things that may happen that you cannot predict. You do not want to accidentally keep money from your heirs when you would have preferred to pass it on to them. You can't change the trust after you pass away, so you must plan for all possible outcomes in advance.

For instance, say you create an educational trust for a child that will just pay for school-related expenses like books, tuition, room and board and other such costs. However, your child gets married while in school, and then their spouse gets sick. They quit school to take care of them. Do you really want to say they cannot have money they may desperately need just because they're not paying tuition with it?

Understanding testamentary capacity

One question that the court may ask when determining the validity of a will is if the person who did the estate planning possessed the testamentary capacity to do so. It's very important to understand what this means and how it can impact an estate plan.

Overall, testamentary capacity is simply the ability to understand and fully comprehend the estate planning process. It is sometimes referred to as "being of sound mind," but it does go a bit further than that. It's the process of making sure the person's real intent lines up with the estate plan. They need to understand things like:

  • The will's overall purpose
  • The fact that they are signing a will at all
  • The fact that the documents will help pass their assets and property on to their beneficiaries

A trust can be used for more than education

Say that you want to set up a trust for a grandchild so that they can pay for their education. It's a wise use of your money, and creating that trust can be part of your estate planning.

As you do it, though, remember that you can create a trust that the child can use for multiple purposes. It does not have to be constrained to education alone.

Not liking a will is not grounds to challenge

Your parent's will arrives, and you just don't like the terms. Maybe you thought that you'd get a specific asset or maybe you thought more money would go your way. You have been looking forward to it, and now you're disappointed. Can you challenge the will?

You may be able to, but remember that you can't do it just because you don't like it. Your parent was not obligated to write a will that you would like. In fact, they can even leave you out of the will entirely if they want. You may feel angry or frustrated about this, but that's not enough for a challenge on its own.

Picking guardians keeps children out of state care

Say you pass away in a car accident, along with your spouse. That's why you're doing your estate planning after all -- to make sure you're ready for the unexpected.

If you have minor children, what happens to them in this situation? You can't care for them any longer, so you need to have that plan in place well in advance.

An out-of-date estate plan can lead to disputes

It is not enough just to have an estate plan. You need to make sure that it is actually up to date. This is a constant process. Writing a will and then forgetting about it for 10 years does not help anyone. Your assets could change significantly in that time.

For instance, people now have far more digital assets than they used to control. Some are digital products, like movies and books. Others are digital forms of money, such as bitcoin. Some are just things that, though not really valuable at all, have a sentimental value for your family. Examples could be all of those pictures that you keep online.

Why even careful people put off estate planning

Most people put off estate planning. In fact, most people don't have a will.

If you think about it, you may assume that people without their documents in line are reckless individuals who like to take chances. They know they're going to pass away, after all, and they know they cannot predict when it will happen. Not doing estate planning, then, is quite a gamble.

Many older Americans still have a mortgage

Here's what people assume, based on the traditional model, is going to happen when someone does their estate planning: They'll pay off the mortgage, retire, live in the home without payments until they pass away and then leave the home to their heirs debt-free.

This is what people often strive for, and it's what does happen in many cases. However, some statistics show that a lot of people are going to pass away while they still have an outstanding mortgage.

A trust can protect money for the future

If you're thinking about putting money in a trust fund for your children, you probably want to control how you give it to them. For instance, maybe the trust will set it aside for educational costs or maybe it will pay out when they hit a certain age.

There are a lot of important benefits to a trust fund, but there's one thing to consider when creating the trust long before you pass away: It can also protect that money since it's no longer legally yours. It belongs to the trust.

Limit family strife with an estate plan

It's easy to think that estate planning is all about you or all about your financial assets. While it does start with these things, it's actually all about your family. It may have a bigger impact on them than you realize.

For instance, those who do not have an estate plan run the risk of pitting their heirs against one another, possibly in court, if they do not agree on how to split up the estate. If one person gets an asset that someone else wanted, it can lead to resentment that lasts for life. Children may argue and fight so much that they never talk to one another again.

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