Does My Living Trust Need to be Fixed?

From the Desk of San Diego Probate Attorney and Estate Lawyer, Kristina R. Hess

Imagine my surprise when some new clients of mine, (fictitiously named in this San Diego Trust Attorney Blawg, of course, to protect confidentiality and privacy) Sam and Sallie, of Santa Luz, showed me a newspaper advertisement.

The headline of the ad read, “We Fix Trusts!”  Below the headline an enumerated list set forth some provisions that trusts and some estate plans lack.

I was curious to see what type of deficiencies were listed.  Things like:

1) Safeguards for incapacity;

2) Lack of creditor and divorce protection for your children’s inheritance;

3) Tax Provisions for married couples that result in income taxes;

4) Unprotected retirement plans;

5) Outdated language…

As I went through the list, I did a mental checklist.  Yes, yes, yes, yes, and yes.  All my clients can rest assured that they are getting the best Living Trust and estate plan for their needs.  As a member of Wealth Counsel, the tools we use are constantly being updated to be the gold standard in the estate planning world.

A rock-solid estate plan will make sure that 1) you are provided for from your assets in the event of incapacity…

2) Everyone with assets should really consider a lifetime asset protection trust for children.  This is a really good idea because the statistics on divorce are not improving.  To give your children the gift of protection from creditors and outside threats, is a gift that you cannot give yourself in California.  But, it is a wonderful opportunity to provide a protected Trust for loved ones.

In addition, it is a good idea to incentivize your children.  No one wants to create a structure that provides no incentive for our children to work or be productive members of society.  You can structure your trust and also work with your children now while you are alive such that they have the right wealth mindset, and are developing their own unique gifts and talents and manner of contributing to the world.  We need to work, to contribute, and to have meaning and purpose in our lives.  Too many “trust fund” children miss out on this when their every material need is given to them with no effort on their part.  Strategic planning can help them develop a meaningful life where the wealth is built to last and not to be squandered.

3) Income tax issues with recent estate tax changes.

Now that our federal estate tax credit is up to $5.43 million in 2015, up from $5.34 million in 2014, less than 1% of the U.S. population has to concern themselves with estate taxes.  Nonetheless, here in beautiful San Diego we have plenty of people in that 1%….

Yet, the key point is that if your Living Trust is 3 or more years old, and has an outdated A-B Trust design, then, chances are if you are married, and a spouse dies in San Diego, if the credit-shelter or “bypass” trust is funded with 50% of the trust assets these assets will not receive a second step-up in basis.  Thus, when the surviving spouse passes, the heirs could end up paying a six figure capital gains tax burden!  That could be a serious tax issue that is completely avoidable.

So, yes, if you have an older Trust, contact us about a complimentary Trust Review (normally $750).

4) The Supreme Court decision from June 2014 I wrote about in this blog here

5) outdated language relates to the income tax provision, contest clauses, and other issues.

So, do you need your Living Trust fixed?

Empower the Generations!

Build Lasting Legacies.

San Diego Estate Planning Attorney

Kristina R. Hess