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WHEN ARE YOU ENTITLED TO A COPY OF A TRUST?

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A beneficiary or heir doesn’t automatically get a copy of a trust. Each beneficiary and heir is entitled to notice when a trust settlor dies and/or there is a change of trustee. Once the beneficiary or heir asks, in writing, for a copy of the trust then the trustee must provide a copy of the trust and all of its amendments within sixty days.

Once those sixty days have run, the beneficiary can petition the probate court to compel the trustee to provide a copy of the trust and its amendments. The beneficiary can also ask for attorney’s fees and court costs for having to file the petition. California law does not put any cap on the attorney’s fees and costs. This means the longer the trustee fights to be provided a copy of the trust, the more it will cost the trustee when he or she loses. Whatever amount the court awards for fees and costs is payable by the trustee personally. The trustee can’t use trust funds to pay.

The trust instrument determines the nature and scope of a trustee’s duty to account and report [Prob. Code §§ 16061, 16062]. The trust instrument may expand, restrict, or waive the duty to account and report, subject to certain restrictions. It is important to note that although the trust instrument may waive a trustee’s general duty to account when the trustee is not a disqualified person, a trustee nonetheless may be compelled to account “upon a showing that it is reasonably likely that a material breach of the trust has occurred” [Prob. Code § 16064(a)]. As such, a trustee cannot rely upon exculpatory language in the trust instrument to refuse to account to a beneficiary.

If you have cause for an Elder Abuse claim, you may file a Petition to Remove the trustee and/or ask for an accounting of the Trust. Otherwise, the first task the practitioner must undertake when representing a beneficiary is to review the trust instrument to determine whether the trustee owes a general duty to account or report, as well as the scope of that duty.

WFB Legal Consulting, Inc.–A BEST ASSET PROTECTION Services Group–Lawyer for Business

DISTINCTIONS BETWEEN TRUST AMENDMENTS AND RESTATEMENTS

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A Trust Amendment is a legal document that changes specific provisions of a Revocable Living Trust but leaves all of the other provisions unchanged, while an Amendment and Restatement of Trust completely replaces and supersedes all of the provisions of the original Revocable Living Trust.

Understanding the Basics of Revocable Living Trusts

Before discussing when Trust Amendments or full Amendments and Restatements are required, you’ll need to understand what a Revocable Living Trust is – a legal contract between the Trust maker and Trustee that can be changed at any time and requires the Trustee to oversee the management of property transferred into the trust by the Trust maker for the benefit of the Beneficiary of the trust.

The key to a Revocable Living Trust is the fact that it’s revocable – meaning that at any time while the Trust maker is alive and competent the Trust maker can change, modify, update, or completely revoke the provisions of the trust agreement. Since this is the case, the name of the legal document that’s required to change, modify, or update the trust agreement is called a Trust Amendment and the legal document that’s required to revoke the trust agreement is called a Trust Revocation.

Contrast a Trust Amendment with a Trust Amendment and Restatement, which is a type of trust amendment that completely supersedes the terms of the original trust agreement. The name and date of your trust will stay the same (for more on this, see below), but each and every provision of the original agreement will be replaced by the terms of the restatement.

When Are Trust Amendments vs. Restatements Required?

While there aren’t really any written rules as to when an Amendment instead of a full Amendment and Restatement is required, the general rule is that if the changes that the Trust maker wants to make are minimal – adding or deleting specific bequests, changing who will serve as Successor Trustee, updating a beneficiary’s or Successor Trustee’s legal name due to marriage or divorce – then a simple Trust Amendment will cover these types of changes.

On the other hand, if the changes that the Trust maker wants to make are significant – adding a new spouse as a beneficiary, completely cutting out a beneficiary, changing from distributions to family members to distributions to charity or vice versa – then a complete Amendment and Restatement should be considered.

What if you’ve made a series of three or four simple Trust Amendments over the past 10-15 years and you want to make another change? Then consider consolidating all of your changes into a complete Amendment and Restatement – this will prove to be helpful to your Successor Trustee who will have a single document to follow instead of piecing together the provisions of four or five separate documents.

The Legalities of Trust Amendments

If you’re considering making a change to your Revocable Living Trust, don’t simply mark up your trust agreement and stick it back in the drawer. Why? Because a Trust Amendment must be signed with the same formalities as the original trust agreement, so your handwritten changes will, depending on applicable state law, either void the trust agreement or be ignored. Instead, ask your estate planning attorney to prepare the Trust Amendment for you so that it will be legally valid and binding on all of your beneficiaries.

Will the Name of Your Trust Change if You Amend or Restate It?

The answer is No – the nice thing about doing a Trust Amendment or an Amendment and Restatement is that the original name and date of your Revocable Living Trust will remain the same. That way, all of the hard work you put into funding your Revocable Living Trust under the original trust name and date won’t need to be undone.

 

Presented by WFB LEGAL CONSULTING, Inc.—Lawyer for Business. A BEST ASSET PROTECTION Services Group

WHAT ARE THE REAL ADVANTAGES OF A LIVING TRUST?

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Living Trusts

Over the last two decades, the popularity of Living Trusts has skyrocketed. No longer are a tool just for the rich, Living Trusts one of the most common estate planning tools in use today. In fact, today’s estate planning is not just about death and taxes, but includes protection of one’s assets from the potential claims of creditors as well as personal income tax planning. This legal arrangement, usually drafted by an estate attorney, creates a separate entity called a Living Trust. A Living Trust is called that simply because it is created while you’re alive (as opposed to a “testamentary” trust created after death).

The Parties Involved The Living Trust document itself names three different parties. The individual (or couple) that establishes the Trust is named the Grantor (also referred to as the Trustor). The Trustee is the person named by the Trust as the controller of the Trust’s assets (and in many cases, the Trustees are the same people as the Grantors). On the receiving end, the Beneficiaries are the heirs that will benefit from the Trust once the Grantor’s have passed away.

Who Needs A Living Trust? Almost anyone with an estate of $100,000 or more can benefit from having a living trust. Estates of $100,000 or more are often subjected to probate in their state of residence, which can cost anywhere from 2%-4% of the estate’s value in court and legal fees. The living trust also is useful for individuals subject to estate taxes. Through a living trust, a couple is able to maximize their Unified Credit to its fullest. It even accomplishes protection for individuals wanting to avoid conservatorship. Advanced living trusts can be structured for complicated family situations. Re-married spouses, with children from a previous marriage, can use an advanced revocable trust to ensure kids receive their proper inheritance.

Avoiding Probate Living Trusts avoid probate, since they are completely private. Because a trust is recognized as a separate legal entity, distributions can be made by a Trustee to named beneficiaries without any involvement from the courts. The courts maintain no control over the Trust’s assets, and do not tie up the assets in a lengthy (and costly) probate process. The Trustee simply distributes assets to named heirs, but only if those assets have actually been placed inside the Trust.

Funding Your Living Trust Once established, almost anything can be placed in a trust: savings accounts, stocks, bonds, real estate, life insurance, and personal property. In “funding” the trust, you simply change the name or title on your assets to the name of your Trust. Many people worry about losing control of assets; however, that is not the case within a carefully-constructed Living Trust.

Always There for You Because the Trust is essentially controlled by one individual (the Trustee), that person can carry out your wishes when you’re not able to. For instance, if you have children from a previous marriage and wish to leave them an inheritance, specific instructions to the Trustee will ensure that they receive what you had requested. If you’re institutionalized or unable to care for yourself anymore, the Trust can still function and make distributions as needed. The Trustee has a fiduciary responsibility to see that your requests are fulfilled exactly. He or she can even provide care and protection for disabled relatives or handicapped children in accordance with your wishes.

Reducing Estate Taxes The Living Trust also minimizes estate taxes by fully utilizing every individual’s Unified Credit. The Estate Tax Credit, as mandated by Congress, currently shelters up to $5.43 million from estate taxes. With only a will in place, a married couple will receive a single $5.43 million exemption. However, if a Living Trust with “A-B Provisions” is in place and one spouse dies, the Living Trust separates into two separate trusts (commonly referred to as an A-B Trust).

In an A-B Trust, each of the two separate trusts receives its own $5.43 million exemption, meaning a total of $10.86 million is sheltered from estate taxes. Any amounts over that $10.86 million will be subject to estate taxes, with rates climbing as high as 46%. Living Trusts are easy to start-up and require little on-going maintenance. They afford an extra measure of protection against loss of control, and ensure that your assets remain out of the public record even after your death. However, they do not provide protection against creditors or divorce, and do not reduce estate taxes for estates over $5.43 million in value ($10.86 million if married). Each family’s situation is different. Some will benefit from a living trust, while others may not. If you are married or have assets over $100,000, you owe it to your family to investigate the best means to preserve your hard-earned wealth. And for estates over $5.43 million, you may want to combine a living trust with another advanced estate planning technique.