ROBERT K. SMITH, ATTORNEY
TrustSmiths.com (818) 949-0100
Servicing The Greater Los Angeles Area
including La Canada, Arcadia, Burbank, Glendale, Los Angeles, Pasadena, Redondo Beach,
San Marino and Santa Clarita
Living Trust or Traditional Will
As explained above, a Living Trust document replaces the traditional will for identifying beneficiaries of the trust maker's assets and for naming the person(s) responsible for carrying out the trust maker's instructions. Since utilizing a Living Trust to transfer assets at death is a relatively new technique (not easily accomplished until the early 1970's), a traditional will may be more commonly used in some states for naming beneficiaries and the executor. Therefore, a person should make either a Living Trust or a traditional will, but not both. See Pour-Over Will below for further description.
When a Living Trust is selected instead of the traditional will, a "pour-over" will is included in an estate plan for ensuring the coordination of an estate plan through the Living Trust document. The pour-over will names the Living Trust as the beneficiary for any assets not funded into the Living Trust during the trust maker's lifetime, such that those assets are said to "pour over" into the Living Trust after the trust maker's death. These assets added to the Living Trust are administered under the terms of the trust. A pour-over will does not avoid probate. A distinct set of rules apply to determine if the assets that must pour over into the Living Trust will go through the probate process or if the transfer of those assets to the trust can occur through another statutory procedure, such as the Small Estate Affidavit procedure in California.
Durable Power of Attorney for Financial Management
The "springing power" may be utilized as the type of Power of Attorney for Financial Management for estate planning purposes in that such power does not take effect unless the maker, called the "Principal," is determined to be incapacitated. In other words, if the Principal is unable to make his or her own financial decisions, commonly determined by two physicians, then the Power of Attorney authorizes the Agent identified in the document to make financial decisions and to control the Principal's assets, but only for the benefit of the incapacitated Principal. This Power of Attorney form applies only to assets that are not funded into the Living Trust, such as retirement plan holdings, and is a companion to the Living Trust document which names the successor trustee to assume control of trust assets if the trust maker, as original trustee, is determined to be incapacitated. An "immediate" Power of Attorney for Financial Management may be utilized as an estate plan document, but usually is limited to naming spouses as Agents or is selected after careful consideration since it may be uncommon to name another person to control the Principal's assets while the Principal is still able.
Advance Health Care Directive/Durable Power of Attorney for Health Care/Health Care Proxy/Living Will
The document utilized to name an Agent to make health care decisions for another person, called the "Principal," goes by different names but has the same function- i.e., this document authorizes health care professionals, such as doctors and hospital personnel, to communicate with the Agent about choices to be made for a patient's health care. In most cases, the Agent interacts with health care providers because the patient is unable to do so. The purposes of these forms are twofold: 1. to name an Agent to make decisions of behalf of the Principal; and, 2. to provide directions to the Agent in making those decisions. The most extreme decision this document allows the Agent to make is to discontinue artificial means of prolonging the Principal's life. These forms also allow for burial and funeral instructions as well as the Principal's intention relative to organ donations.
Trust Transfer Deed or Quitclaim Deed
A Living Trust is utilized to reduce the cost and time delay involved in transferring assets to beneficiaries after a property owner's death, which very often involves real property such as a residence. In order to effectively implement a Living Trust estate plan it is imperative that the legal title to real property be changed from the name(s) of the individual(s) owner(s) to the name of the Living Trust. A Trust Transfer Deed or Quitclaim Deed is the document used to change title of real property to the Living Trust. It is not uncommon to name the orginal trustees as well as the Living Trust in the Quitclaim Deed so that the former individual owners are identified as new trust owners, for example, "John Smith and Mary Smith as Trustees of the Smith Family Trust." Since the former individual owners retain the same legal ownership rights they had before establishing their Living Trust, there is no change in true ownership rights when the legal title is changed over to the Living Trust (as a device to avoid probate).
Assignment of Tangible Personal Property
This document allows the trust maker to state his or her intention that the Living Trust should also contain the tangible personal property items which very often do not have title documents to prove ownership of such assets, such as jewelry, works of art, furniture and household effects.
It is important to keep a current listing of Living Trust assets so that the successor trustee may locate all estate assets. Schedules are provided for that purpose as well as to evidence the trust maker's intent that the Living Trust owns the assets listed. The trust maker's intent to transfer title to his or her assets to the Living Trust may become an issue if the title documents held by the financial institution do not reflect Living Trust ownership, perhaps due to mistake by the trust maker or financial institution.
Trust Funding Instructions
In order for beneficiaries to avoid an expensive and time-consuming probate court process, a Living Trust must be funded properly. In addition to current funding issues, such as changing title for real property, bank accounts, stock and brokerage accounts during the trust maker's lifetime, a trust maker may need to address post-death funding issues. For example, a Living Trust may include provisions for a continuing trust in order to control inheritances for minor children or financially inexperienced adults. In such cases, assets that were not funded into a Living Trust during the trust maker's lifetime, such as retirement plan accounts or life insurance policies, may need to be funded into the Living Trust after the trust maker's death. Typically, an estate plan includes such trust funding instructions in a separate letter for the trust maker.