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A: There are many different types of trusts, but the revocable living trust is most popular and is a device whereby you indicate how you want the trust assets managed and distributed to the beneficiaries.
Q: What are the differences between a will and a trust?
A: Although both are instruments where you indicate how you want your assets distributed, assets held in a trust are not subject to probate. If you only have a will, then your remaining property will go through the probate process and your will becomes public record. Conversely a trust is a private document and can never be viewed by the public, including snooping family members.
Q: I’m not wealthy. Do I need a trust?
A: It depends on what your idea of “wealthy” is and if you are willing to pay the probate fees. Without a trust your assets will normally go through probate before being distributed to your spouse or heirs. Probate can be a time consuming and frustrating process often requiring the expertise of an attorney. California lawmakers have imposed a fee schedule on attorneys which can be found at California Probate Code Section 10810 and is illustrated in the table below.
Value of Estate Attorney’s Fees
$100,000 $4,000
$250,000 $8,000
$500,000 $13,000
$750,000 $18,000
$1,000,000 $23,000
$2,000,000 $33,000
As you can see, these statutory fees are owed to attorneys on a sliding scale based
upon the value of the decedent’s assets. It is important to note that encumbrances
on your property are not taken into consideration when calculating the attorney’s
fees. Additionally, this schedule does not take into account the personal representative’s
(aka executor) fees or additional compensation for extraordinary services that the
probate court may choose to award to the attorney, personal representative, or both.
Lastly, unless you’ve designated in a will or other instrument the name of the person
who will serve as your personal representative, the Probate Court will designate
the personal representative for you. In one-
With a trust your assets will be managed by your Trustee and distributed to your beneficiaries pursuant to your instructions. You determine who your Trustee and successor Trustees will be and the order of succession. You can easily change your Trustees by preparing an Amendment to your Trust. Your Trustee may be entitled to a fee but you decide how much the fee will be. In addition to freeing your loved ones of the expenses and burdens of probate, you obtain the benefit of privacy by preventing your affairs from becoming public record in the Probate Court files. Finally, in almost all cases, the cost to prepare a revocable living trust is much less than the expenses of probate.
Q: What about the Estate Tax repeal? Will I need a trust if there is no Estate Tax?
A: These are loaded questions and can’t be answered with a simple “Yes” or “No”. It is true that under the Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”) the Federal Estate Tax and Generation Skipping Transfer Tax (“GST”) are repealed in 2010. However, the Estate Tax and GST Tax are only repealed for the year 2010, meaning that in order for a person to take advantage of the tax savings opportunity provided by EGTRRA, they must die in 2010. Also, this repeal has no affect on probate, which is imposed by the State.
What many people don’t realize is that under current law, after 2010 the estate tax exclusion amount goes back to $1 million per person and any assets above that are taxed at a rate of approximately 55%. Many legal and tax professionals believe that eventually Congress will act and adjust the exclusion amount to $3.5 million; however, that is not the law at this time and to raise the exclusion amount will take an act of Congress (pun intended).
Check out the estate tax calculator located on the More Info page to determine whether or not you have a taxable estate and what the estimated expenses will be upon your death.
Also, please click on the links below to read articles addressing the current state, and potential future of the Estate Tax and GST Tax.
Why No Estate Tax Could Be A Killer, WSJ 2/13/10
Will the Estate Tax Disappear?, WSJ 10/23/09
Q: Are there any tax advantages of having a trust?
A: Yes. Under current tax law an individual can pass an unlimited amount of assets to their beneficiaries and not have to pay any estate tax, on the condition that the person dies this year. Anyone who doesn’t die this year will only be able to pass up to $1 million in assets to their beneficiaries without paying Estate Tax. One is therefore likely to assume that a husband and wife can pass up to $2 million to their heirs free of Estate Tax. However, this will not happen without a properly drafted trust. Instead, when the first spouse dies their assets will pass outright to the surviving spouse under the unlimited marital deduction. The deceased spouse’s assets will then be included in the taxable estate of the surviving spouse. When the surviving spouse dies they can only pass $1 million of the remaining assets to the beneficiaries free of Estate Tax, thereby wasting the deceased spouse’s $1 million estate tax exclusion amount. This can be avoided with a properly drafted trust designed to preserve the deceased spouse’s estate tax exclusion amount.
Q: Doesn’t holding property in “joint tenancy” avoid probate?
A: Yes, but probate is only avoided on the death of the first spouse. When the second spouse dies the property must go through probate. If the house were placed into a trust while both spouses were alive there would be no need for a probate to be opened at either death.
Q: I have a trust that was drafted 10 years ago or more. Do I need a new one?
A: Most likely yes. Due to the changes in tax laws that have occurred over the past 10 years it is very likely that your trust is outdated and doesn’t properly take these changes into account. For example, in 2000 the per person estate tax exclusion amount was $675,000. Today this amount is unlimited, but next year the amount will be $1 million. Your estate plan was likely drafted based upon the size of your estate and the estate tax exclusion amount at that time and because the estate tax exclusion amount has changed significantly over time, your trust likely needs to be updated.
We would be happy to review your existing estate plan documents on a complimentary basis and provide you with our opinion of the status of your existing estate plan.
Q: Why do I need to hire a lawyer if I can prepare a trust online?
A: An estate planning attorney is aware of the current tax laws and changes in these
laws. Every person’s situation is unique and their estate plan should be drafted
to account for the changing tax laws. Therefore, we do not believe in taking a one-
Click here for more information about the perils of Do-
A: Probate is the legal process that must be used to wind up a deceased person's
legal and financial affairs. One’s assets must be probated if the gross value of
their assets exceeds $100,000. (California Probate Code Sections 13100-
Q: I’m not married. Why should I have a Trust?
A: Unmarried people still need a Trust so that their friends or family are not imposed
with the burden of having to probate one’s estate. Additionally, should an unmarried
person get married in the future, placing one’s assets into a Trust will help avoid
these separate property assets from becoming commingled with community property assets
after they married. Finally, it is very important to use a Trust to ensure that
one’s property is distributed according to their wishes, otherwise a Probate Court
will distribute the property under the California intestate property laws (California
Probate Codes Sections 6400-
Q: What documents are included in an estate plan?
A: A complete and cohesive estate plan requires that the following documents be prepared and executed: 1) Revocable Living Trust, 2) Pour Over Will, 3) Certification of Trust, 4) General Durable Power of Attorney, 5) Health Care Power of Attorney, 6) Advance Health Care Directive, 7) HIPAA Authorization, 8) Assignment of Personal Property, 9) Property Agreement (for married persons only), and 10) Personal Property Memorandum.
A: A Pour Over Will is a Will that is designed to closely mirror the provisions
contained in one’s Trust and instructs the personal representative of one’s probate
estate to “pour” the probate assets over into the Trust and to administer these assets
under the terms contained in the Trust. A person would only need a Pour Over Will
if they failed to properly transfer title of their assets into the Trust. Therefore
Pour Over Wills are a clean-
Q: What is a Certification of Trust?
A: When dealing with assets held in your Trust, third parties often want evidence that you are the Trustee and have the power to enter into the transaction at issue (e.g., selling real estate, opening a brokerage account, etc.). In such a case, providing the person with a copy of the Certificate of Trust rather than the full Trust Agreement provides them with the information they need, and keeps private the information with respect to the Trust’s beneficiaries and the disposition of the assets in your Trust upon your death.
Q: What is a General Durable Power of Attorney?
A: A General Durable Power of Attorney authorizes the successor Trustees named in your Trust to act on your behalf with respect to your financial affairs. It is sometimes called a Springing Power of Attorney because it is not effective immediately. Rather, it “springs” into effect upon either your incapacity or execution of the Certification of Authorization by Principal which will also be provided immediately behind the General Durable Power of Attorney.
Q: What is a Health Care Power of Attorney?
A: A Health Care Power of Attorney allows you to designate those individuals who will make health care decisions on your behalf upon your incapacity. These people are referred to as your “Health Care Agents.”
Q: What is an Advance Health Care Directive?
A: An Advance Health Care Directive (also sometimes referred to as a “Living Will”) is where you convey to your Health Care Agent and health care personnel your desires concerning life sustaining treatment and anatomical gifts.
Q: What is a HIPAA Authorization?
A: “HIPAA” stands for Health Insurance Portability and Accountability Act. A HIPAA Authorization provides the Health Care Agents named in the Health Care Power of Attorney with access to your medical information. Since the enactment of the Standards for Privacy of Individually Identifiable Health Care Information (45 CFR Parts 160 and 164) under the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and the California Confidentiality of Medical Information Act (“CMIA”) and 45 CFR Chapter 164, hospitals generally will not release your medical information to anyone, including a spouse or close family member, unless these people are designated as Authorized Recipients under a HIPAA Authorization.
Q: What is an Assignment of Personal Property?
A: An Assignment of Personal Property is a document that substantiates one’s intent to transfer the title of all of their tangible personal property into their Trust, thereby avoiding the need to probate these items.
Q: What is a Property Agreement?
A: A Property Agreement is a document designed to clarify the manner in which a married couple’s assets are held. This document is particularly important to execute for married couples in California due to the considerable tax benefits that result from assets being held as Community Property rather than the more common form of Joint Tenancy. Additionally, If a husband and wife each come into a marriage with separate property assets the Property Agreement is the device whereby they assets are intended to remain their separate property although the assets are being transferred into the same Trust.
Q: What is a Personal Property Memorandum?
A: A Personal Property Memorandum is a form whereby one can indicate how they would like their personal effects (e.g., mementos, jewelry, furniture, art, etc.) to be distributed on their death. There is no need to complete the Personal Property Memoranda prior to executing the Trust. Rather, as time goes by your would simply write on the Personal Property Memorandum and provide a description of the item and who it is supposed to go to upon your death. The remaining items not disposed of in the Personal Property Memorandum would be distributed according to the terms of your Trust.
Q: Why should I choose Winstead Law Group, APC to prepare my estate plan?
A: Choosing to work with an attorney is a difficult decision and many people fail to perform their due diligence before retaining an attorney. There are three things everyone should do before they retain an attorney:
1) Always check with the State Bar to determine whether the attorney has ever been disciplined.
2) Perform a search on the internet to ascertain what any clients and/or former
client have to say about the attorney. You can also check with the Better Business Bureau to see whether there are any client comments regarding the attorney. Please note that the client reviews are not always accurate as attorneys can write their own biased reviews and the occassional disgruntled client can post a negative review that is not typical of most client’s experiences.
3) Make sure that the attorney’s practice focuses on the area of law where
you need them to address, otherwise you may be paying for the attorney to become familiar with an area of law that is not their expertise.
Winstead Law Group, APC specializes in tax and estate planning. We have the knowledge
and experience necessary to address complex planning issues. Moreover, we do not
engage in the “cookie-
We understand that our clients have busy schedules and we respect their time. Clients can therefore schedule appointments to meet with us outside of standard office hours and we meet with clients in our office, at their office, or in their home for their convenience.
Q: What can I expect if I choose Winstead Law Group, APC to prepare my estate plan?
A: We will first have an educational meeting during which we will discuss your family and your objectives and we will obtain the information needed to create your estate plan. This meeting is typically complimentary.
Once all of the needed information is obtained draft versions of the estate plan documents are prepared and we will meet to review the draft version of your estate plan documents in detail. One of our goals is for our clients to fully understand their estate plan documents and the provisions contained therein, therefore please expect to spend approximately 1.5 hours at this meeting. During this meeting any questions or concerns you may have are addressed and desired revisions to these documents are noted.
After all desired revisions are made to the estate plan documents a meeting is held to perform a final review of these documents. Provided that you verify that the documents meet with your approval, we will then execute the documents in the presence of one of our qualified notaries.
Q: What is the cost of an estate plan?
A: Because of our desire to provide each client with an estate plan specifically designed to fit their unique needs, we do not charge a standard fee for these services. Instead, after a complimentary consultation during which we discuss your present and anticipated situation, your desired distribution provisions, and your objectives, we will provide you with a quote for the preparation of your estate plan. However, based on our experiences, estate plans typically cost between $1,750 and $3,000 depending on complexity. We do not believe that estate planning should be held up due to financial issues. Therefore, we offer a variety of payment plans for your convenience.