Holes In Your Trust That Can Lead To A Contested Estate

living trust

Living trusts offer many advantages for estate planning so you can create a legacy of wealth for your heirs. But what happens if there are problems with the trust or how it is managed?

In the worst case, these issues can lead to a contested estate. Below is important information about how living trusts can be contested and how to avoid the problem. If you have questions about estate planning, our living trust lawyers in Encino at Ourfalian & Ourfalian can help.

What Is A Living Trust?

A living trust is a legal entity that you can create as part of your estate planning. A grantor establishes the trust and can name themselves or another party as the trustee. The trustee ensures that all trust terms established by the grantor are executed for the benefit of the beneficiaries.

When you create a trust, it must be funded. Trust funding entails moving assets into the trust. For instance, if you own several rental houses, you might transfer them into the trust. A trust can be revocable, meaning changes can be made at a later date. Or the trust can be irrevocable, meaning the asset transfer cannot be changed.

Who Can Contest A Living Trust?

For someone to contest the trust, they must have legal standing. Someone has legal standing if they will probably be directly affected when the trust is executed. Some of the individuals who might be able to contest a living trust are:

  • Beneficiaries of the trust
  • Trust grantor heirs who were not named in the trust
  • A successor trustee

However, it is not enough to have legal standing. The person who wants to contest the trust must have lawful grounds. If you are unhappy that you didn’t receive something in the trust, that’s not enough to contest it:

  • You believe the trust grantor had a mental incapacity and could not legally change the trust.
  • The trust was set up because of undue influence or coercion.
  • Trust documents were forged.
  • The trustee has mismanaged assets for their benefit.

If you are a beneficiary of the trust and do not like that someone got more assets than you did, it is technically possible to contest the estate. But if the living trust is valid and set up legally, your effort will likely fail.

In California, you have 120 days to contest the trust from when the probate notice is mailed. The notice under Probate Code 16061.7 offers specific information to the heirs and beneficiaries of the trust.

How To Avoid Holes In Your Trust

If you go to the effort and expense to set up a living trust, you want it to stand up in court. While your Encino living trust lawyer will do their best to set up an unbreachable trust, there are several things you also can do to prevent someone from contesting your trust. Doing these things will avoid holes and vulnerabilities in the trust:

Talk To Your Heirs And Beneficiaries

Communicate with your heirs and beneficiaries about your estate plans and goals. Some of these matters can be difficult to discuss with your loved ones, especially those with wealth. However, talking about what you plan to do with your money with the relevant parties will avoid many problems before they occur.

If family dynamics mean, you cannot easily communicate with family about these subjects, your estate planning attorney can mediate for you. Your lawyer also might even recommend a therapist to assist you.

Write An Explanation Letter

Putting a written, signed letter in the estate plan is another way to avoid someone trying to poke holes in the living trust. First, discuss why you left assets to a particular person and your goals. Then, you can prevent holes in the trust by hand writing this letter to prove it was you.

The letter is not a legal document. Instead, it is a personal letter in your handwriting to your loved ones to help avoid a contested estate.

Do Not Put Beneficiaries In Your Estate Planning

If a beneficiary helps with your estate planning, this could be a way for someone to contest the estate. They may claim the beneficiary had undue influence on you. It is better to rely on your living trust attorney to help you.

Noting will help the probate court to decide there was undue influence than if there is a sudden change to another attorney. It is even more suspicious if one of the beneficiaries was involved in that process.

Have A Psychological Examination

It might seem strange to need to prove that you are of sound mind and body when you set up a trust or write a will. But it will help to avoid a contested estate if a forensic psychologist examines you and declares you in good physical and mental health. This information and the psychologist’s contact information can be included with the estate planning documents.

Have Another Attorney Review The Trust

You also can avoid a contested estate and holes in the trust by having another estate planning attorney review the documents. This independent review will ensure your estate planning is appropriate and legally sound. In addition, a probate court will probably not intervene and invalidate your estate plan if two independent attorneys signed off on it.

None of these recommendations mean your estate cannot be contested. But if you take these steps, it will make a litigation attorney think about taking on a contested will case. In addition, many attorneys will see that a second, independent estate planning lawyer signed off on the trust. That will make it much less likely they will prevail in a trust contest.

Call A Living Trust Lawyer In Encino For Legal Assistance

Setting up a living trust is an effective way for many people to handle their estate planning. Ourfalian & Ourfalian can assist if you need assistance with a living trust. We can answer any questions and create a comprehensive estate planning strategy ideal for your needs and goals. Please contact our living trust lawyers in Encino for a complimentary consultation at (818) 550-7777.

Revocable Trust Vs Irrevocable Trust : Understanding the Differences

revocable trust

Every adult in the San Fernando Valley should have a well-crafted estate plan in place. Yet, many people do not even have a will, let alone other estate planning documents. A survey cited by the AARP found that 6 in 10 U.S. adults lack any estate plan. A proper estate plan should be comprehensive. It should protect you, your family, and your assets no matter what tomorrow brings.  

A living trust is an effective, efficient estate planning tool that can help many people protect their assets. A living trust may be revocable and irrevocable—there are very important differences between these two options. At Ourfalian & Ourfalian, we help families secure their futures. In this article, our Glendale estate planning attorneys explain the key things to know about the differences between a revocable living trust and an irrevocable living trust in California. 

What is a Living Trust?

A trust is a legal relationship between several parties. The grantor/settler is the party that creates the trust. When a trust is created, it is overseen by a trustee who is responsible for receiving and managing the assets. Finally, the beneficiary is the party for whom the assets in the trust are being held. There are many different types of trusts. A living trust is one of the most common examples. Living trusts can be divided into two broad categories: 

  • Revocable Living Trust:  The Cornell Legal Information Institute defines a revocable living trust as a trust in which “the settlor retains the ability to alter the trust or end the trust altogether.” You will often hear a revocable living trust referred to as a revocable trust. As a revocable trust can be easily revised, it is one of the most popular estate planning vehicles. 
  • Irrevocable Living Trust: While less commonly used, it is possible to create an alternative type of living trust called an irrevocable living trust. An irrevocable living trust is not nearly as flexible as it cannot be altered or taken back by the settlor. Still, in certain circumstances, an irrevocable living trust may be an effective way to protect assets.

Differences Between a Revocable Trust and an Irrevocable Trust 

Modification of the Trust 

Perhaps the most central difference between a revocable trust and an irrevocable trust is in the name itself. Revocable living trusts are among the most popular estate planning tools because they can be modified—and even revoked outright—at any time. A core advantage of a revocable living trust is that it allows the settlor (grantor) to retain full control over their property throughout their lifetime. Any assets placed within control of a revocable living trust can be moved or adjusted as the settlor sees fit. 

In contrast, an irrevocable living trust cannot be changed by the grantor once it is put into place. Once the settlor funds and signs an irrevocable living trust, they lose their ability to alter the documents. In other words, they will lose direct control over the property and assets placed within an irrevocable living trust. It cannot be modified. The loss of direct control over property/assets is certainly a disadvantage of an irrevocable living trust compared to a revocable living trust. 

Ownership of the Property 

Another key difference between a revocable trust and an irrevocable trust is ownership of the property. As a revocable living trust stays within the control of the person who created it, the property and assets within the trust are still fundamentally owned by the person. They can control them and they will even be responsible for paying certain taxes on them. 

On the other hand, all assets placed within the control of an irrevocable living trust are the property of the trust. With an irrevocable trust, the grantor has no more direct control over the property and assets included. They no longer own the property at all. The property is owned and controlled by the trust itself for the benefit of the named beneficiaries. 

Protection of Assets 

A revocable trust is a more flexible estate planning tool. It allows the trust grantor to retain control over their property and assets. That being said, there are limitations to what you can do with a revocable trust. Most importantly, a revocable living trust provides limited asset protection during the lifetime of the settlor. As the person who creates a revocable living trust still fundamentally has full control and ownership of the property/assets, creditors can try to make a claim against those assets to resolve an outstanding debt or other financial obligations. 

On the other hand, irrevocable trusts offer strong asset protection. The assets placed within an irrevocable trust are no longer owned by the settlor. In effect, this means that creditors and other parties cannot pursue these assets to resolve debts and other claims. Irrevocable living trusts can be useful asset protection tools in many different circumstances, including when it comes to proactively protecting your estate from the risk posed by future long-term care costs. 

Tax Implications (Estate Tax)

There are tax implications that come with creating a trust. A revocable living trust is taxed differently than an irrevocable living trust. Most notably, this is an issue when it comes to estate tax. The assets placed within a revocable trust are still owned and controlled by the grantor in the eyes of the IRS. Those assets will be subject to an estate tax if the estate tax applies. In contrast, the assets and property placed within the control of an irrevocable trust are no longer owned by the grantor. As such, assets within a valid irrevocable trust are generally not subject to estate tax liability. 

Contact Our Estate Planning Attorney in the San Fernando Valley

At Ourfalian & Ourfalian, our Glendale estate planning lawyers have the skills, experience, and professional expertise to help you with all types of living trusts. If you have any questions about using a revocable living trust or an irrevocable living trust as part of your estate plan, we can help. Contact our estate planning law firm today to arrange your strictly private, no-obligation consultation. With an office in Glendale, we provide estate planning services throughout the San Fernando Valley, including in Pasadena, Burbank, North Pasadena, and Encino.

How to Properly Fund a Living Trust

living trust

In addition to a will, many people opt for living trusts as part of their estate plans. Revocable living trusts can end up saving time and money by avoiding probate, and they give the grantor a high level of control over assets during their lifetime.

For 99% of people, a living trust is more useful than an irrevocable trust, which does have certain tax and creditor protection. Unlike an irrevocable trust, a living trust allows the grantor to retain control over all of the assets within the living trust during their lifetime. As such, the grantor can put in and pull out assets as they like. But a living trust does not have much use to anyone if it is not properly funded.

For residents of Glendale, California that have questions about estate planning tools like living trusts, the Glendale living trust lawyers at Ourfalian & Ourfalian can help.

What Does Funding a Trust Mean?

Executing the trust documents does not end the estate planning process. You have to physically transfer the title of your assets into the name of the trust; otherwise, any assets that are left out of the trust, i.e., are not properly transferred into the name of the trust, will wind up going through probate.

To fund a trust, you simply change the title from your name to that of the trust you wish to fund. While this is simple, in theory, it can quickly become complicated, especially if you are married. For married couples, funding a trust means changing the title of any jointly owned assets—marital assets, which include all assets acquired during the course of a marriage—to either a joint trust or each spouse’s individual trust.

Determining how to split these assets can be complex, and will likely require the assistance of an experienced estate planning attorney. However, as the California Department of Justice warns, beware of unscrupulous individuals working for living trust mills in California that sell invalid and unnecessary living trusts to unsuspecting victims. Only trusted estate planning attorneys are qualified for this type of work.

What Types of Assets Can I Use to Fund My Living Trust?

Many types of assets require a new title (proof of ownership) document before they can be used to fund a living trust. To do this, you need to change the title of said assets from your name to the name of the trust. Examples of assets that require this title transfer include real estate, stocks, and bank accounts. Some assets, such as personal belongings or heirlooms, do not require title documents. Below is a list of all types of assets that can be used to fund a living trust:

  • Checking accounts
  • Savings accounts
  • Money market accounts
  • CDs
  • Real property
  • Non-retirement investment accounts including brokerage and mutual funds
  • Bonds and stock certificates
  • Shareholder stock
  • Business interests
  • Non-liquefied annuities
  • Notes payable to you
  • Safety deposit boxes
  • Personal property and family heirlooms

Are There Assets I Should Not Use to Fund the Trust?

Some assets should not be transferred to a living trust. For example, retirement accounts and 401(k) Plans should not name the trust as the primary beneficiary. Since the trust is not a natural person, the trust would have to take a mandatory distribution of the entire retirement account and pay income taxes currently. Your children or other persons who you have designated as beneficiaries of such retirement accounts would have rollover rights deferring the payment of income taxes. As such, unless the designated beneficiaries of such accounts are not seen as being in a position to manage a retirement account, such retirement accounts should be distributed directly to these beneficiaries, rather than your trust. There are other ways to pass down these assets, however, which an attorney can help you with.

  • 401(k) accounts
  • 403(b) accounts
  • IRAs
  • Certain qualified annuities
  • Certain other retirement accounts
  • Health savings accounts
  • Interests in professional corporations
  • Incentive stock options
  • Active bank accounts
  • Vehicles

How Can I Use Real Property to Fund My Living Trust?

Real estate is usually the most valuable asset an individual or married couple owns. The current median home sale is $1.2 million in Glendale, according to the online real estate marketplace Realtor. As such, many believe it would make sense to fund your living trust with your most valuable asset.

In order to accomplish this, the real property must be re-titled, including executing a trust transfer deed, which must be notarized, and then sending off the deed to be recorded by the county. While you may be able to handle some of the more straightforward types of bank account and investment transfers necessary to fund your living trust, real property is not so simple. This is one of the reasons you should consider working with an attorney to create and fund a revocable living trust.

What if I Forget to Transfer Assets To My Living Trust?

Your trust package is normally accompanied by a document called “pour-over will” that causes any forgotten assets to pour over or be transferred to your trust at your death. While this does not avoid the probate process, it at least ensures that such “forgotten” assets are passed down in accordance with beneficiary designations and instructions contained in your trust agreement, in accordance with your wishes.

While the funding process may not be difficult, many people delay such funding process; this is why it is recommended to consult with experienced living trust attorneys to help you with the process. In the future, as you acquire more properties, just remember to title those properties in the name of your trust!

Benefits of Creating a Living Trust

  • Greater Privacy—Assets distributed to beneficiaries through a will must pass through probate, the official proving of a will. A will is a public document once it goes through probate. As such, information about accounts, assets, and beneficiaries will also become public knowledge. When it comes to a living trust, “who gets what and how much” is a private matter. There will be no public record surrounding your assets or accounts.
  • Flexibility and Retraining Control Over Assets—An alternative to a revocable living trust is an irrevocable trust. There are some pros to revocable trusts for certain individuals, but a living trust allows much greater flexibility. Health issues, financial constraints, and other unforeseen circumstances may arise after you create and fund a living trust. Because you retain control over the assets within the trust until you pass away, having access to those assets may be of significant importance to you.
  • Avoiding Probate—Probate often takes half a year or longer to be completed and for beneficiaries to have access to their inheritances. A living trust can expedite the bequeathal timeline, as well as save money, in many circumstances, by avoiding the costly probate process.

Call a Glendale Living Trust Estate Planning Attorney Today

Many aspects of estate planning can be carried out on your own. Others, such as funding a living trust, should be handled by a qualified and trusted Glendale estate planning attorney. There is no reason to procrastinate when it comes to estate planning. The sooner you begin, the better off you and your loved ones will be in the long run. We urge you to call a Glendale estate planning attorney at Ourfalian & Ourfalian today. Call us at (818) 550–7777 to schedule a free consultation.

The Benefits Of A Living Trust

Living Trust

As living trust attorneys, we are frequently asked by clients to describe the benefits of a revocable living trust.  Many clients believe trusts are overly complicated and very expensive to establish or manage; as such, they are for wealthy people only and that the benefits of a trust do not apply to them. However, this is a misconception and here are the reasons why

What Is A Living Trust?

Before delving into the benefits of establishing a living trust, we need to first define what a living trust is. A living trust is defined essentially, as a legal document, or trust, created during an individual’s lifetime. A designated person or trustee is given responsibility for managing that individual’s assets for the benefit of the eventual beneficiary or beneficiaries. A living trust is designed to make it simpler to transfer assets with the best chances of bypassing the complicated and costly legal process of probate.

While the two share some similarities, a living trust differs from a will in that it is in effect while the settlor is alive. The trust does not have to clear the courts upon the settlor’s passing, and the beneficiaries will receive the assets left to them by the settlor when the settlor dies or becomes incapacitated.

A living trust is simply a legal way for one to pass onto their heirs the desired property without the expense, time, and hassle of having to go through probate proceedings.

What Are The Advantages Of A Living Trust?

Some of the major benefits of the living trust, as outlined in greater detail below, are that, unlike a will, the living trust avoids the probate process at death, can control all of your assets, and prevents the court from controlling your assets at incapacity.

Avoid The Time And Expense Of Probate

Avoiding probate is by far the most recognized benefit of a Revocable Living Trust. Probate is the legal process through which the court sees that, when you die, your debts are paid and your assets are distributed according to your will. If you do not have a valid will, then the assets are distributed according to state law. On the other hand, when the assets are in the name of the trust, there is no need for probate since the estate is now controlled by the trustee of the trust. You or you and your spouse can be the primary trustees receiving full control to buy, sell, borrow or transfer in the case of a spouse’s death. After both spouses pass, the trust identifies the person who will act as successor trustee. The trust gives that person the right to manage all assets on behalf of your wishes made known in the trust document. Remember, you and your spouse will decide who will manage all affairs.

Protect Your Privacy

With a Revocable Living Trust, you keep your estate plan private. Probate is a court-supervised process that requires the filing of all probate documents with the local probate court. This makes each probate pleading a part of the public court records that anyone can read, including your Last Will and Testament, a list of your beneficiaries and assets, and a breakdown of who is getting what and how and when they are getting it. In effect, the process “invites” disgruntled heirs to contest your will and can expose your family to unscrupulous solicitors. On the other hand, a Revocable Living Trust is a private contract between you as the Trustor and as the Trustee; therefore, it does not have to be filed with any court clerk. As such, you family can take care of your financial affairs privately.

Assisting During Incapacity

Another major benefit of a Revocable Living Trust is the ability to build mental disability planning right into the trust. The trust can specify how your mental incapacity should be determined, how you should be taken care of if you do become disabled, and who will be able to manage your property at that time. This will keep you and your property outside of a court-supervised guardianship or conservatorship. In the absence of a living trust, if you cannot conduct business due to mental and/or physical incapacity (Alzheimer’s, stroke, heart attack, etc.), only a court appointee can sign for you – even if you have a will (remember, a will only goes into effect after you die).  Once the court gets involved, it usually stays involved until you recover or die. The court, not your family, controls how your assets are used to care for you. This public process can be expensive, embarrassing, time consuming, and difficult to end if you recover.  Also, it does not replace probate at death – your family could have to go through the court system twice.

Take Care Of Your Family

A major advantage of the living trust is the speed with which your assets may be distributed. This can be an especially important issue for those who leave behind a spouse and children, especially younger children. Property from your estate is easily and quickly passed on per your instructions. This can keep cash in your spouse’s pocket to pay for living expenses for themselves and your children.

A living trust can also have other benefits. Because the estate is managed by a third party, it can be set up to hold and protect your assets until your children become adults at which time the property is passed on. This can prevent young children from wasting significant portions or even all of their inheritance before they reach maturity. It can also assist a child who is poor at managing their own finances. Additionally, a trust can reduce or eliminate estates taxes, can be changed or cancelled at any time, can protect dependents with special needs, and, most importantly, can afford you a peace of mind.

Meet with a Glendale Living Trust Attorney Today

You have spent much of your life acquiring your assets. Now is the time to protect them and to ensure they go to your desired heirs per your final instructions. Explore your options today for a living trust.

To ensure your living trust is established correctly and will avoid probate, you should consult with an experienced living trust attorney. Give the experienced Glendale living trust attorneys at Ourfalian & Ourfalian a call today at (818) 550-7777 to schedule a free, no-obligation consultation. The experienced staff at Ourfalian & Ourfalian will be happy to assist you and answer any questions you may have regarding a living trust.

Do not allow your assets to go through the time and expense of probate. Take care of your family and ensure your directions are followed to the letter by establishing a living trust today.  The sooner you take action, the more peace of mind you will have about the stability and correct distribution of your estate.