beneficiaries – Experience a Richer Way to Wealth

Introduction:

When crafting an estate plan in California, it’s crucial to address the multifaceted aspect of real estate ownership to ensure a seamless transition of assets. Real estate can often be the most significant component of an individual’s estate, and adequately addressing it is essential for comprehensive estate planning. Depending on when you purchased or acquired California real estate, there is a good chance that the property has appreciated in value, or is likely to appreciate in value. for this reason, when crafting your estate plan, your real estate portfolio requires additional thought that should not be overlooked. Sometimes it’s not always as straightforward as simply choosing a beneficiary to receive the property following your passing.

Fortunately, an experienced San Diego estate planning lawyer can assist you through this process.

When drafting your estate plan, here are ten pivotal questions to consider.

1. What Real Estate Do You Own and Who Do You Want to Receive Your Real Estate?

Evaluation:

Begin by taking stock of all your real estate assets. List each property, including primary residences, rental properties, vacation homes, and any undeveloped land. This foundational step is crucial for the subsequent planning stages.

Then list who your potential beneficiaries are and the relationship you have with them. How old are your beneficiaries? Are they related to you?

2. How is My Real Estate Titled?

Ownership Structures:

Identify how each property is titled – whether individually, jointly, or through a business or trust. The title structure profoundly influences how the property is handled in estate planning and taxation.

Common ways to hold title in real estate can be:

Tenants in Common
Joint Tenants
Husband and Wife, as Community Property with Rights of Survivorship
Individual as sole and separate property
In a Trust
LLC

3. What is the Value of My Properties?

Appraisal:

Obtain current appraisals to know the market value. This valuation will play a significant role in tax planning and distribution to heirs.

4. What Are the Tax Implications?

Tax Liability:

Understand the potential tax liabilities, including property, capital gains, and estate taxes. California’s Proposition 19 has nuanced tax implications that should be understood and planned for.

5. How Should I Distribute My Real Estate?

Beneficiaries:

Decide how you wish to distribute each property. Consider the beneficiaries’ individual needs, preferences, and their ability to manage real estate.

Will my beneficiaries use the real property as their primary residence in the future?
Should I distribute the real estate into the names of my beneficiaries where there names will be on the deed upon my death?
Should I distribute the real estate in an Asset Protection Trust to my beneficiaries?

These questions are all incredibly important to consider for purposes of Prop 19 and transfer tax reassessment purposes.

6. Is there a mortgage on the property?

Who will assume your mortgage?:

Under the Garn-St Germain Depository Institutions Act of 1982, lenders cannot enforce the due-on-sale clause in certain situations, such as property transfers between family members upon death, during a divorce, or into a living trust.

7. How Can I Protect My Real Estate from Creditors?

Asset Protection:

Explore strategies to protect your properties from potential creditors’ claims, lawsuits, or other liabilities. Legal tools like LLCs or trusts can offer enhanced protection.

8. Is My Real Estate Suitable for a Trust?

Trust Incorporation:

Consider incorporating trusts to avoid probate, provide for privacy, manage tax implications, and ensure a structured distribution of assets.

Revocable Living Trusts are best for probate avoidance and privacy. You can build in estate tax and capital gains tax planning strategies within your Revocable Living Trust.

Who will be responsible for the expenses of the property, including taxes and upkeep, during the administration process?

9. How Does California Law Affect My Estate Plan?

Legal Landscape:

California has specific laws regarding real estate and estate planning. How do these laws impact your properties and your overall estate?

10. Should I Consult with a Professional?

Expert Guidance:

Consider seeking advice from an estate planning attorney, especially one well-versed in California’s complex legal and tax landscape, to ensure your estate plan is robust, compliant, and optimized for your specific circumstances.

Conclusion:

The intertwining of real estate and estate planning is intricate, necessitating thorough scrutiny and strategic planning. By addressing these ten questions, you embark on a journey of crafting an estate plan that not only stands the test of legal and financial scrutiny but also honors your legacy and provides for your heirs with foresight and diligence.

Call to Action:

Embarking on estate planning, especially where real estate is involved, requires nuanced insight. Reach out to our team of seasoned estate planning professionals at Peaceful Warrior Law in San Diego, California, to guide you through each step, ensuring peace of mind and a legacy preserved. Contact us today for a personalized consultation.

You’ve probably heard you need a trust to keep your family out of court and maybe out of conflict in the event of your death or incapacity. And, if you haven’t, you’re hearing it now. If you own any “probatable” assets in your name at the time of your incapacity or death, your family must go to court to access them. If you aren’t sure if your assets are “probatable,” contact us to discuss.

But you may need clarification about whether you need a revocable living or irrevocable trust. More and more, we’re seeing people come our way asking for a irrevocable trust, and so this article is designed to help you learn the difference and then get into an “eyes wide open” conversation about the right kind of trust for you and your loved ones.

What Is A Trust?

A trust is an agreement between the grantor of the trust (that’s you) with a trustee (someone named by you) to hold title to assets for the benefit of your beneficiaries (whoever you name). When we break it down in its simplest form, it’s that straightforward. It’s an agreement.

Now, the terms of that “agreement,” called a “trust agreement,” can vary significantly, and that’s where we come in, as we’ll work with you to clarify the terms that you want between yourself and the trustee for the benefit of the people you name as beneficiaries.

With a revocable living trust (RLT), during your lifetime, you’ll be the “grantor,” the “trustee,” and the “beneficiary.” So, for all intents and purposes under the law, nothing really happens when you retitle your assets in the name of your RLT, so long as you’re living and have the capacity (meaning you can make decisions for yourself).

With an RLT, once you become incapacitated (which is determined as per the instructions in the trust document) or in the event of your death, the trust becomes irrevocable, and the person or persons you’ve named as successor trustee steps in to control the assets held in the name of the trust for the benefit of the beneficiaries named in the trust. If you’re still living but incapacitated, you would be the beneficiary still. If you’ve died, then your named heirs would be the beneficiaries. At that point, the trust may distribute outright to your beneficiaries or be held in continuing trust — protected from creditors, future divorces, future lawsuits, and even estate taxes (if the trust is drafted properly) — if your trust terms provide for continuing protection.

You could indicate in the trust agreement that you want your beneficiaries to “control the trust” but that you want the trustee to continue to hold title to the assets, thereby protecting the assets, while giving the beneficiaries nearly full control and use of the assets. This is a bit tricky, so don’t try it at home without support. But, if you want to provide this kind of benefit and protection to the people you love, be sure to talk with us about building a Lifetime Asset Protection Trust into your plan. It’s highly worth it if you’ll pass on anything more than what your children will immediately spend upon your death.

We support you in making these decisions in our Family Wealth Planning Session process before ever drafting a single legal document for you. But before we talk about that, let’s clarify what a irrevocable trust is and where it might fit into your plan.

A irrevocable trust is the same as a revocable trust — an agreement between a grantor and a trustee to hold the property for a beneficiary. Still, if the trust agreement is irrevocable, or once it becomes irrevocable, it cannot be changed. There are some exceptions to this, but for the most part, that’s the case. If you put your assets into a irrevocable trust, you cannot then take them out of the trust and return them to yourself because the gift to the trustee to hold the assets for the beneficiary is irrevocable.

A irrevocable trust can remove assets from your name and protect them from future lawsuits or future growth in your estate, which removes them from your estate for estate tax purposes. We’ll recommend irrevocable trusts when we’re preparing your estate for the potentiality that you may need long-term nursing care that you would like covered by Medicaid (or Medi-Cal) without decimating your family’s inheritance, or on the other end of the spectrum, if you have an estate that could be subject to the estate tax or that could be at significant risk of lawsuits.

When you meet with us for a Family Wealth Planning Session, we’ll look at your assets, family dynamics, personal desires, and how the law will apply to all of it. Then, together, we’ll decide on the right plan for you — whether to include a trust or not, whether that trust should be revocable or not, and if it is revocable, when it should be irrevocable, and how long it should last for the people you love.

Never choose a type of trust without working with a lawyer who understands you, your family, your assets, and your goals. Never use a life insurance professional or financial advisor to choose the type of trust or draft your trust for you. Too many variables could leave your family with a big mess. We’ll guide you to make the right decisions during life and be there for your family when you can’t be. And we’ll integrate the proper insurance, financial, and tax professionals into your planning at the right time to ensure everything we create works for you and the people you love.

When you meet with us, we’ll learn about you, your family dynamics, your assets, your risks and liabilities, and your needs and desires to support you in the empowering decision-making process of creating an estate plan that works for you and the people you love. Contact us today to get started.

This article is a service of Brittany Cohen, Personal Family Lawyer. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love. That’s why we offer a Family Wealth Planning Session, during which you’ll get more financially organized than you’ve ever been before and make all the best choices for the people you love. You can begin by calling our office today to schedule a Family Wealth Planning Session and mention this article to find out how to get this $750 session at no charge.

[email protected]

858-427-0539