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San Diego Probate & Estate Administration Law Blog

What are the downsides to an incentive trust?

There are many positive reasons to use an incentive trust. You can encourage your heirs to be successful, for instance, and you can ensure that they only get the money when they are mature and responsible enough to handle it.

However, before deciding to use this kind of trust, you do want to consider the downsides. What are the potential negative impacts of the incentive trust?

Why do estate disputes involve stepmothers?

If your mother passed away and your father got married again, some studies suggest that your family could be more likely to get into a heated estate dispute in the future. After all, stepmothers are frequently at the heart of these disagreements.

Why does this happen? Is there something that stepmothers inherently do wrong or some way that they try to take advantage of the other family members?

2 types of guardians: Understanding the difference

If you are thinking of picking a guardian for your children as part of your estate planning process, you need to be aware that there are two different types. It is important to specify exactly what the guardian's role is intended to be and what powers he or she legally gets in the event of your passing.

The first type of guardian is known as a guardian of the estate. This person typically watches over your assets or money, managing them on the child's behalf. For instance, perhaps your child is just 12 years old. Your estate is worth $3.2 million. You know you do not want to leave a home and millions of dollars to a minor. The guardian can watch over the estate until the child turns 18 and the assets legally pass on to him or her. The guardian can also use the money on the child's behalf -- paying for doctor's visits, for instance.

What is a charitable bailout?

Trying to decide how to leave your company to your children? One option to consider may be the "charitable bailout," which is a creative way to transfer ownership and help save on taxes.

The way it works is that you create a charitable remainder trust, and you put your entire company into that trust. This trust then takes the income and pays it out to your heirs, who you designate as beneficiaries.

More or less than one will can cause probate problems

Everyone wants to control their fortunes, and there are many laws in California that allow people to leave their assets and possessions to the people and organizations they love. Some people do not have a living will to govern these desires, and when there's no will, the only way is probate court.

This problem exists for all classes and types of people and estates. Several famous artists and economic leaders left no will, and children and relatives have relied on courts to assign portions of wealth. One artist left two wills, forcing a private agreement between the two possible benefactors months after the man's death.

Can physical assets go into a trust?

When most people think about the assets in a trust, they consider monetary assets. Trusts can be used to pass money down to heirs while still retaining some control over that money. For instance, the trustee who administers the account could be instructed to pay out a specific annual amount over a course of 10 or 20 years, rather than just leaving the lump sum to the heir all at once.

But what about physical, tangible items? Can they also go in the trust?

The benefits of talking to your family about your estate plan

Since an estate plan largely focuses on financial details, many people assume that it should be private. Just as it is not considered polite to ask someone how much they make in a year, family members do not want to pry into someone else's personal business. An elderly person may see no reason to tell heirs exactly what the estate will leave to them.

However, if you are doing your estate planning, you should know that it is actually quite beneficial to open this type of dialogue with your heirs. This information does not have to stay personal. After all, a major goal of estate planning is to pass that wealth to your heirs, so it can help to involve them in this process. Some benefits of communication include:

  • Creating a responsible plan for how your heirs will use the money and assets they receive. Parents often worry that their heirs will simply squander their wealth, but the estate plan can be crafted to prevent it.
  • Working together to define your financial legacy. You have a philosophy for how you handle money already, but it can help to work with your heirs to create a family philosophy that can work from one generation to the next.
  • Reducing the odds of an estate dispute. Talking to your heirs in advance gives them a chance to offer feedback and help you create a plan that everyone approves of. Plus, your heirs will have realistic expectations, which can also lower the odds of a dispute because there are no surprises.

Is it too soon to do your estate planning?

You're 40 years old, in the middle of your life. You're married, you have two kids, and you have a good job. You recently bought your dream home in the suburbs. Life has played out exactly how you wanted it to, and you assume you have decades left to enjoy it.

Is now really the time to think about estate planning? Or is that something you can put off until you get closer to retirement?

Reasons a trustee could get removed

It is critical to take your time when naming a trustee, picking someone you know will do a good job. Perhaps your first inclination is to pick one of your adult children. Maybe you have another relative that you can count on. Perhaps you want to use a professional. No matter what route you decide to go, take your time, consider the person very carefully and only make your selection when you feel fully confident that he or she can administer your trust properly.

After all, a trustee can get removed from a trust. This is chaotic for your estate plan and damage may already be done. Some reasons that this happens include:

  • The trustee misuses the funds for his or her own gain. For instance, perhaps your trust was supposed to help your grandson pay for college, but your son or daughter decided to take money out to buy a house.
  • The trustee does not follow all of the terms set up in the trust. For example, perhaps you created a trust that only pays out when younger heirs reach a certain age. The trustee decides to give them some money in advance, bowing to pressure from the other heirs.
  • Hostility between the beneficiaries and the trustee. Perhaps the two never saw eye-to-eye, or maybe the beneficiaries believe the trustee is mismanaging the funds. When open hostility occurs and communication breaks down, it may be time for a change.

Trusts may help if you own property outside of California

You are trying to decide if it is wise to use a trust while doing your estate planning. You know how helpful they can be, but you just need to determine whether or not your specific situation means that you'll really enjoy all of the benefits.

Do you own property in another state? For instance, perhaps you first lived in Washington before moving down the coast to California. You still have your house in Washington, which you and your family visit every few months to see your extended family.

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