Friday, April 18, 2014

Estate Planning: What you don’t know can Hurt you!

Over the years I have seen some common problems with Trust documents.  Here are some examples:

  1. Unfunded & defunded trusts – the trust is created but no assets (or not all of the assets) are transferred into the name of the trust. Result: The trust does not control distribution. A defunded trust was originally funded correctly, but the house was removed in order to do a re-finance. When the Settlor dies, it may be necessary to do a Hegsted petition or a probate, in order to transfer the assets. Another example: Dad re-marries, and his new wife spends his money on lots of expensive things, or gifts it to her children. At the time of Dad’s death, there is no money left in the trust. The trust says that whatever is there goes to Dad’s children, but the money is gone. 
  2. Underfunded trusts – These are trusts that are created to preserve assets for generations, but don’t contain enough money to pay the expense of the assets. Example: Mom and Dad own vacation property next to a lake. They leave $200,000.00, along with the property, to pay the expenses. The question is what happens when the money runs out.  Example #2) Dad and Mom leave a trust with a specific dollar amount bequest ($100,000.00) to one child, and the rest to be divided between the other children. Unfortunately, the assets of the estate are no longer worth what Mom and Dead believed, and the trust does not have enough money to satisfy the specific gift. If the parents had left the child a percentage bequest (e.g. 10%), then the Trustee could satisfy the gift based upon the assets available, and everyone would know what was supposed to be done. 

Lynn A. Dean,
Estate Planning Attorney
If you have had an estate plan done years ago I recommend you have it reviewed.  

Life is not static, change happens and at the Law Office of Lynn A. Dean, we cut through the confusion of estate planning, and counsel you through the process with compassion and expertise.

Friday, April 11, 2014

Beware of Trump Cards in an Estate Plan, Rule #3 - The Beneficiary Designation

Lynn A. Dean
Estate Planning Attorney
This post is the last of the 3-part series: Beware of Trump Cards in an Estate Plan - Three Rules.

Estate Planning Documents can be undone (or trumped) by a number of things and one of them is Beneficiary designations.  Beneficiary designations are contracts.  The owner of the money (IRA, Insurance policy, annuity, bank account) tells the holder of the money (bank, insurance company, broker) where they want the money to go when they die. Most beneficiary designations allow you to name a primary beneficiary and a contingent beneficiary.

A beneficiary designation will trump anything said in a Will or Trust. The example we have is the IRA which names the first wife as the beneficiary. The second wife contacted us, and asked what could be done. He has been married to the second wife for more than 20 years. When the client comes to me, I will strongly recommend that they check all of their beneficiary designations, to make sure they are correct. A divorce does not automatically terminate a beneficiary designation. A beneficiary designation that says “my estate” will cause the asset to go through probate. A proper beneficiary designation for an IRA is a complicated question. Generally naming a living breathing person is the best choice, but for a couple with young children, the trustee of the trust may be the best choice.

A second example is the husband who thought he had protected his children by naming them as beneficiaries of a portion of this trust. He left his $1 million IRA to his wife, by beneficiary designation, with his three children as contingent beneficiaries. He may have assumed (incorrectly) that anything she didn't use during her lifetime would go to his children. Instead, she immediately took control of the entire IRA, and changed the beneficiaries to her children. It is now possible to set up a trust to receive the proceeds of the IRA, distributing the required minimum distribution to the spouse during her lifetime, and the remainder to the children of the IRA owner.

Estate Planning can be complicated, but at the Law Office of Lynn A. Dean, we make it easy.  Contact us to schedule a consultation to discuss your situation.  


Friday, April 4, 2014

Trump Cards in an Estate Plan Rule #2, Beware of The Deathbed Documents.

Lynn A. Dean
Estate Planning Attorney
There are a few rules that you should be aware of about estate planning.  This post is the 2nd of 3 in the 3-part Blog series: Beware of Trump Cards in an Estate Plan.


A deathbed document is one done at the last minute, before a person passes away. Yes, I do get calls from the children of someone in the hospital, asking me to come and help their parents. Sometimes these calls are legitimate, but often the child is trying to change the parent’s existing instructions. Deathbed documents are frequently subject to challenges, and the California legislature recently changed the rules regarding “No Contest” clauses. Essentially, you have to have a “good faith” basis to challenge a document, and “I think Mom was crazy” is considered a good faith basis. So the “No Contest” clause will not apply to disinherit someone who challenges a will or trust, if they have a “good faith” basis.  Watch the estate be eaten alive by attorney’s fees when you are trying to defend deathbed documents against an unhappy contesting child.