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socrateaser
socrateaser, Attorney
Category: Estate Law
Satisfied Customers: 34830
Experience:  Retired (mostly)
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RE: California residents & Revocable Living Trusts

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RE: California residents & Revocable Living Trusts My husband and I want to leave everything to each other. A lawyer suggested a Joint Revokable Living Trust.


We are uncertain how to address the possibility of dying in a common disaster. We named different people in that event.


The lawyer made it sound that we would receive each others assets as a surviving spouse. However, some of her comments that if assets were left over upon the death of the surviving spouse that the remaining assets from the first spouse would go to the beneficiary listed by the first spouse to die. 


She made it sound like either spouse that survives the other is free to completely use or liquidate the assets which is what we want. However, my concern is that the potential beneficiary of remaining assets could object.


Is there suggested terminology to accomplish our objectives? 


Also, could one trustee act on behalf of both trustees if one becomes incapacitated?

Submitted: 1 year ago.
Category: Estate Law
Expert:  socrateaser replied 1 year ago.
Is there suggested terminology to accomplish our objectives?

A: What you want is called an A/B disclaimer trust. The trust language must provide that at the death of the first spouse, the decedent's share of community property is deposited into a separate trust account (or, if there are real estate assets, then the property is retitled and held as a one half share in the name of the decedent's trust and the survivor's trust. The decedent's trust is irrevocable and separately accounted for -- however, the surviving spouse has the right to be paid income generated from the decedent's trust, in the event that the assets and income in the survivor's trust is insufficient to support the surviving spouse's needs.

However, the principal balance of the decedent's trust cannot be used by the suviving spouse under any condition. The purpose of this provision is that without it, the surviving spouse could simply take all of the assets from the decedent's trust, dump them into the survivor's trust, then revoke the survivor's trust, and then make a new trust and give all of the decedent's assets to an entirely new beneficiary.

This happens frequently, when a spouse dies first, and the other spouse remarries. The survivor will decide that he/she wants his/her new husband to have everything, so he/she forgets that he/she had children with his/her late spouse, since they are adults, and all of a sudden, the decedent's kids are screwed out of their inheritance by a younger new spouse who appears from nowhere to romance the surviving spouse.

Also, could one trustee act on behalf of both trustees if one becomes incapacitated?

 

A: Yes. This is a fairly routine option.

 

Hope this helps.

Customer: replied 1 year ago.

We both want our surviving spouse to be free to completely use or liquidate the assets unless we die in a common disaster.

Do you practice in California?

 

The reason we are considering Revocable Living Trusts is to avoid probate expenses. All real estate assets are currently held JTROS. All bank accounts are held jointly. It sounds like we should only fund a new revocable living trust with one small bank account to establish it. Then if we die in a common disaster, the assets from our separate pourover wills could be placed into the revocable trust that would then become irrevocable.

Expert:  socrateaser replied 1 year ago.

We both want our surviving spouse to be free to completely use or liquidate the assets unless we die in a common disaster.

 

A: Then an A/B disclaimer trust with language that permits the surviving spouse to use both principal and income from the decedent's trust would permit this outcome.


Do you practice in California?

 

A: I am a member in good standing of the State Bar of California. However, I am not taking cases at this time (retired).

The reason we are considering Revocable Living Trusts is to avoid probate expenses. All real estate assets are currently held JTROS. All bank accounts are held jointly. It sounds like we should only fund a new revocable living trust with one small bank account to establish it. Then if we die in a common disaster, the assets from our separate pourover wills could be placed into the revocable trust that would then become irrevocable.

 

A: If all of your assets are held jointly with rights of survivorship, and neither spouse cares who the surviving spouse chooses as beneficiary/ies after his/her death, then you don't need a trust, because all of the jointly held assets will automatically transfer to the surviving spouse. There will be no other assets to probate (except for your personal effects, which no one ever probates, unless those effects happen to contain Faberge eggs, Van Gouge paintings or Tiffany lamps).

 

A "pourover" will must be probated, so any assets not funded to a trust, if those assets exceed $150,000 in gross value, or they are held by an entity which requires letters of administration from a court, must be probated before they can be placed into a trust. The purpose of a pourover will is to provide for the incidental omission of assets which would otherwise be subject to a final distribution different from that which is required by the parties' estate plan, as described in their joint revocable trust.

 

Every competent estate plan contains both a pourover will for each spouse, and a joint revocable trust.

 

BotXXXXX XXXXXne, you have fairly typical estate plan requirements. Each of you can execute a pourover will, and a revocable trust, if you have valuable assets which are not held JTROS, and you can assign or title those assets to yourselves as cotrustees.


Hope this helps.

 

Customer: replied 1 year ago.

socrateaser wrote: BotXXXXX XXXXXne, you have fairly typical estate plan requirements.

We have been told to expect that any estate plan we set up will be contested. My husband's first wife wrote hateful letters to him prior to our marriage. She has now passed. His two remaining children and one of their husband's have made a variety of threats. The child who has only spoken to him probably less than five minutes in over 20 years is more aggressive. She has made untrue allegations in writing to his family and their attorneys.

We are debating reasons to leave our real estate currently titled JTROS out of a new joint revocable trust. The value could be 1M. We are not certain the additional costs involved if the real estate is not titled in a trust when one of us passes.

 

 

 

 

Expert:  socrateaser replied 1 year ago.
The children have no claim on their father's estate to the extent that it is devised to you. Anyone can contest anything.

California law provides that an intestate (no will) estate passess all community property (property acquired by either spouse during a valid marriage wile domiciled in California) to the suriviving spouse -- plus 1/2 of all separate property. The other 1/2 goes to the surviving children of the decedent. So, if your husband has ascertainable separate property from prior to your marriage, and he does not want to leave anything to his children, then he needs a comprehensive estate plan that expressly omits the children from taking under the will or trust. If it does, then that express omission will be enforced by the courts. Otherwise, an omitted child could contest the estate instruments.

Legally, there is nothing that absolutely prohibits a cotest to an estate. But, reality is that most contestants buckle when their attorney tells them to pony up $10-15,000 in advance fees, or take their business elsewhere. And, by the time your husband passes, that could be inflated to $20-25,000. Costs go up.

Hope this helps.
Customer: replied 1 year ago.

The child is an attorney.

Expert:  socrateaser replied 1 year ago.
Unless the child is actually an estate litigation attorney, the child may find him/herself in over his/her head, and end up screwing up the case. I see this happen all the time. Regardless, there is no way to absolutely protect yourselves, short of moving to a locale where you can no longer be found. Even today, finding someone when they do not owe you any ascertainable debt is extremely difficult -- because without a proper purpose, you cannot access someone's credit report, and bank records are off limits. So, if the goal is to simply avoid the hassle, then relocate out of California, perhaps even outside the USA.

Otherwise, there is always a risk. I don't perceive any real substantive risk, because the children have no claim. But, they can still sue and thereby try to obtain a settlement as a means of limiting your legal expenses. There's no way to legally prevent this in advance.

Hope this helps.
Customer: replied 1 year ago.

Child is not an estate litigation attorney.

socrateaser wrote: "they can still sue and thereby try to obtain a settlement as a means of limiting your legal expenses." Did you mean they could sue me and I could be required to pay their legal expenses?

My husband had about 2M in debt when we first obtained his financial records from a bookkeeper. His previous wife (not the child's mom) and that wife's children who were drug addicts were the primary reasons. I had substantial liquids assets (CDs, savings etc) when we met. I've spent many years trying to eliminate his debt (using many balance transfer offers to lower interest rates, and selling some of the assets). I also lent about $400K of my pre-marital assets to pay down the home mortgage since the interest rate on my CDs was so low compared to the mortgage rate. As we approach debt elimination, is it safe to repay the debt to myself writing "repaying loan from check number - or transaction number" etc. I would then want to put the money into CDs or another investment in my name alone with my husband listed as POD (pay on my death).

My husband's primary income is from his parent's trust. Within 30 days of his death, that income would go to his children.

We feel vulnerable. His children did nothing to help him after his late wife died. I have no reason to believe they would act in his best interests if I died before him.

Expert:  socrateaser replied 1 year ago.
Did you mean they could sue me and I could be required to pay their legal expenses?

No, I meant that sometimes people sue simply to cause their opponent to incur legal expenses. If the initial cost of hiring an attorney is more than the amount sought in a settlement, then sometimes a person who may ultimately be found without liability, will settle simply to end the case before it starts. A clever opponent may sue if only to get an ounce of blood, knowing that may be all that can be achieved, but hoping that the opponent may become scared and settle for even more.

So, if you are sued, and a competent lawyer wants $25,000 as an advance to take the case, and tells you that it could cost twice that amount if the matter is tried, then you may immediately decide that you don't want to pay any lawyer, and instead you will try to settle with the children -- because you fear that you could spend all the money and lose anyway.

Concerning the implications of your newly added info, you appear to be interested in knowing something about an income trust to which your husband is currently beneficiary, but at death will transfer to his children. That is an entirely new question, for which website policy requires you to open a new Q&A session.

Hope this helps.
Customer: replied 1 year ago.

We understand the income received during my husband's lifetime. His remaining children seem overly anxious for him to pass away. He is in excellent health and his family is known for longevity.


Do you have suggestions regarding repaying the pre-marital money I lent to pay down the pre-existing mortgage?


Is there suggested terminology for the joint revocable trusts & pourover wills to accomplish our objectives?


I am grateful for your replies, and will be rating you as highly as possible.

Expert:  socrateaser replied 1 year ago.
Do you have suggestions regarding repaying the pre-marital money I lent to pay down the pre-existing mortgage?

A: Since you are already to receive your husband's marital estate at his death, I don't know from what assets you would obtain that repayment. I suppose that you and your husband could sign an agreement under which he would transfer a certain portion of his community property interest to you as separate property. But, from the children's viewpoint, that could look like an attempt to keep the kids from getting their portion of their father's estate -- i.e., it makes you look more like the "evil stepmother." So, I think you may be trying to do something here that could backfire -- moreover, it would appear to be entirely unnecessary.

Is there suggested terminology for the joint revocable trusts & pourover wills to accomplish our objectives?

A: A "transmutation" agreement, whereby community property is transferred to a spouse as separate, requires a lawyer for each party. Otherwise, a court will almost certainly refuse to enforce the agreement, as the product of undue influence. So, if this is something you really want to do, you will have to pay significant legal fees to hire a lawyer for each of you to negotiate the terms of the agreement at arm's length. Otherwise, I can practically guarantee that the agreement won't be worth the paper it's printted on.

Hope this helps.
Customer: replied 1 year ago.

Thank you. We will let the monies that were originally listed as a loan go unpaid. When I mentioned I intended to loan substantial pre-marital money to pay down pre-existing debts years ago, his child replied "Why would you ever help my Dad?" The same child ignores promissory notes my husband made to her decades ago for a downpayment on the child's mortgage. It was supposed to be repaid in full when the property was sold. The property was sold about four years ago and the debt is completely ignored.

I will ask the lawyer setting up the trust if we should both sign a document regarding the money originally meant as a loan that could be used to show a judge when/if his children sue me. And perhaps documentation on the 2M in pre-existing debt. The written threats to his relatives and their lawyers make no mention of the above but instead make wild accusations of completely untrue claims.

Thank you again for your time and knowledge. If I can figure out a way to increase the payment for your reply I will do so.

Expert:  socrateaser replied 1 year ago.
You can leave a bonus/tip in whatever amount you wish. I generally recommend at least $100,000Cool. Nobody ever follows that recommendation, though.

Note: If you ask the attorney whether or not to create a pre-dated loan document, and he/she says "yes," then go find a different lawyer. That is a potential fraud, and while I entirely understand that you want to memorialize in writing that you had a deal concerning these loans, you would be far better served to hire two lawyers, pay the extra dough and put together a transmutation agreement that will actually transfer the money to you formally as your separate property. The former may fail -- the latter will not.

Happy Independence Day.
socrateaser, Attorney
Category: Estate Law
Satisfied Customers: 34830
Experience: Retired (mostly)
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