Our estate planning attorneys have represented high net worth individuals, families, and business owners in Santa Cruz County and throughout California to develop wealth and estate planning strategies and solutions that achieve their goals and objectives.
The term “Living Trust” or “Inter Vivos Trust” is used in reference to a trust created during the lifetime of the person creating the trust (“Settlor”) Living Trusts that may be altered, amended, and revoked are referred to as “Revocable” and those that cannot be altered, amended, and/or revoked are referred to as “Irrevocable.”
Revocable Trusts are the most frequently used trust in Estate Planning but Irrevocable Trusts are commonly used where there is a wish to avoid life insurance proceeds from being included in the Taxable Estate or where there are serious creditor issues.
A-B Trust (Bypass Trust)
For the past century, the A-B or Bypass Trust was the most commonly used trust for tax planning. Because of changes in the tax laws in 2011 and 2012, this type of trust is used less frequently. Essentially, an A-B Trust is a Living Trust that is revocable during the joint lifetimes of a spouse but becomes irrevocable as to a part on the death of the first spouse. This Estate Planning approach is more expensive than a simple Inter Vivos Trust and more expensive to administer after the death of the first spouse, but it is still a valuable tool in some situations.
The appropriateness of an A-B Trust should be discussed with the Estate Planning Attorney.
Under the current Federal Estate and Gift Tax laws, there is a limitation on the amount of gifts that can be made that “skip” or bypass a generation. Accordingly complex rules have been adopted to determining whether a generation has been “skipped”. If there is a skip and the amount of the estate and gift exceed the available exclusion, a Generation Skipping Tax is imposed.
Special Needs Trust
Third-Party Special Needs Trusts (“SNT”) are utilized when an intended beneficiary suffers from a disability and is receiving Public Benefits. The Special Needs Trust is specifically designed so that a gift, either by will or trust, will not adversely affect the Public Benefits available to the beneficiary it will merely supplement, not replace, the Public Benefits. Without a Special Needs Trust in an appropriate situation, the Beneficiary might be disqualified from receiving Public Benefits until the gift was exhausted.
A simple will is an instrument expressing the intent of the person as to how his Estate is to be administered and distributed on death. The will, unless a holographic will, will require two (2) witnesses each other sign and who witness the signing by the person creating the will or in whose presence the will is declared to be the will of the person creating the will. Simple wills are commonly used in small estates that won’t require a Probate.
A Pour-over Will is a will that is used in conjunction with another estate planning instrument. The function of the will is to transfer any assets that are subject to Probate to the desired instrument. The most common use of a Pour Over Will is in conjunction with a Revocable Living Trust that contains the provisions governing disposition of the decedent’s estate.
California Law permits a person to write their own will. The requirements of a holographic will are (1) the entire instrument showing the intent that it be a will shall be in the handwriting of the person creating the will; (2) the instrument be dated; and (3) the instrument be signed by the person creating the will.