WILLS

WHAT IS A WILL?

A will is a written document that allows you to determine how certain assets and property will be distributed upon your death. It also allows you to determine who will be responsible for distributing your property and paying your debts after your death. Moreover, it will allow you to determine who will be responsible for the care of your minor children should you and the other parent die. Lastly, a will can be used to state any desires you may have regarding disposition of your remains and the nature of any funeral services.

DO I REALLY NEED A WILL?

An attorney can advise you on the law concerning wills, but you must ultimately decide whether you want to distribute your property and care for your beneficiaries by will or in accordance with state intestacy laws—that is, the state laws that determine who inherits from you if you die “intestate” or without a will. For some people their state intestacy laws are adequate, but for many people a well-drafted will is the best way to ensure that their property will be given to the right people. Having a will may save your beneficiaries time and money later and if you have a minor child it is especially important to consider getting a will. It is recommended that you discuss your particular situation with an attorney before making a decision.

WHAT WILL HAPPEN TO MY PROPERTY IF I DIE WITHOUT A WILL?

If you die without a will, your property will be distributed in accordance with state intestacy laws. Normally, the property will go first to your spouse, then to your children, then your parents, and then to your brothers and sisters, nieces and nephews, and other close relatives. If you are unmarried the property will go to your children, and if you have no children, to your parents. That means your friends, former spouse, or favorite charity will receive nothing. If you are not married to your current partner, then he or she will receive nothing. If you have no living relatives, your property will go to the state, even if a close friend or companion survives you. One way to ensure that your property goes to the person whom you desire is to have a will.

WHAT PROPERTY MAY BE DISPOSED OF IN A WILL?

If you are married, your will may dispose of your separate property and your one-half of your community property or quasi-community property. If you are unmarried, your will can dispose of nearly all of your property.

WHAT PROPERTY IS NOT DISPOSED OF IN A WILL?

A will cannot control what happens to some kinds of property, including:

1. Money from any life insurance policies (i.e. SGLI). That money will go to the person(s) you have named as beneficiaries on the policy, no matter whom you have chosen as beneficiaries in your will.
2. Any real estate, cars, bank accounts or other property that you own jointly with another person(s) as joint tenants with the right of survivorship. Property owned as joint tenants with the right of survivorship is transferred to the surviving joint tenants upon your death no matter whom you named as beneficiaries in your will.
3. Some community property. In California and other community property states, the money, real estate and other objects you and your spouse acquire during your marriage is called community property. Generally, both spouses own this property equally, no matter who earns the most or who actually purchased the property. Therefore, your will can only distribute your half of the community probably, and cannot include your spouse's half.
4. Money saved in your retirement plan. This money will go to the person(s) whom you have named as beneficiaries of your plan, no matter whom you name as beneficiaries in your will.
5. Property held in a living trust. This property will go to the beneficiaries of the living trust, no matter whom you have named as beneficiaries in your will.

WHO IS THE EXECUTOR?

The executor is the person authorized by the court to act for the estate of the deceased person. The probate court will ordinarily appoint the person named in the will, unless unusual circumstances compel a different appointment. The executor's first job is to have the will probated (that is, confirmed to be true), if necessary. Then, the executor is authorized to administer the estate, including paying taxes, debts, and funeral expenses, as well as ultimately settling the estate according to the terms of the will. All assets must be found and, if necessary, valued by appraisers. The executor then distributes the property to the person(s) designated in the will, and in some cases may hold property for minors until they reach the age of majority.

WHO CAN MAKE A WILL?

Any individual 18 of age or older and of sound mind may make a will.

WHAT WILL HAPPEN TO MY CHILDREN IF I DIE WITHOUT A WILL?

If your child's other parent is living, he or she will usually retain full custody of your child. If the child's other parent does not survive you, you may appoint a guardian and that person will take care of any minor children and/or their property. If you do not appoint a guardian, the probate court will appoint a guardian for your children in accordance with state law. The court will normally appoint a close relative if one is available, but it may not be the person you would designate. Therefore, to ensure that your wishes are followed, a will should be created designating the person you wish to care for your children. If your children are under the age of 18 you may want to consider making a life insurance trust for your children to receive if your spouse dies with you or before you. It is important to discuss this option with your attorney.

HOW SHOULD I DISPOSE OF MY PROPERTY?

This question must also be answered by you. An attorney will advise you as to the legal consequences of your chosen disposition, but you must make the decision as to how to dispose of your property. Ask your attorney about leaving property to minors if you wish for a minor to inherit under your will.

CAN MY SPOUSE AND I HAVE THE SAME WILL?

No. You and your spouse must each have a separate will.

WHEN SHOULD I CHANGE MY WILL?

You should probably change your will after every marriage, divorce, annulment, separation, birth, death or significant event in your life that could affect how your property would be disposed of when you die. It is also recommended that you have your will reviewed every few years to ensure that it is adequate to handle your present needs. If you have questions consult with an attorney.

LIVING TRUSTS

WHAT IS A LIVING TRUST?

Many people are curious about the concept of a "living trust" because they have heard it will assist in their estate planning. This handout will discuss the living trust and its advantages and disadvantages. This handout is not comprehensive, and our office is not permitted to prepare a living trust for you. If you are interested in using this option in your estate planning, you should consult a probate or estate planning attorney. Ask a RLSO attorney for a copy of this office’s referral list for civilian attorneys.

A trust is a legal entity that owns property for the benefit of a living person, called the beneficiary. The trust is created by a grantor, who sets the rules of the trust and provides the trust with money. The trust is then managed by a trustee, who invests the money and pays it out for the benefit of the beneficiary. The beneficiary does not have legal title to the money in the trust, but does enjoy the benefits of that money.

In the typical living trust the grantor, trustee, and beneficiary are the same person. That means that you (as the grantor) set up the trust and give money to it. Then you (as the trustee) manage the trust’s money, invest it, and pay it out as needed for the benefit of the beneficiary (who is also you).

Living trusts are further divided into two categories: revocable trusts, which may be canceled or changed during their existence, and irrevocable trusts, which cannot be altered. In the typical revocable living trust, you transfer your property to the trust by written agreement. The agreement basically provides for the trustee to pay you all of the income from the trust during your lifetime along with any principal that you may request. You may amend or revoke the trust or change the trustee at any time before your death or incapacity. However, upon your death, the trust becomes irrevocable and its terms cannot be changed. At that point the trustee, or a successor trustee if you were the trustee, continues to administer the trust assets, and, like a will, the trustee must distribute any property in accordance with the terms of the trust agreement that apply at your death.

WHAT ARE THE ADVANTAGES OF A LIVING TRUST?

A living trust has a number of advantages. First, the trust usually provides for continuous management of the trust assets regardless of the grantor's physical or mental incapacity or death. There is usually no need to appoint a conservator (or guardian in the case of a minor) for an incompetent person since the trustee manages the trust assets according to the terms of the trust agreement. In fact, usually there is no need for a durable power of attorney if the trust document has been properly completed because the successor trustee would be the same person selected to be an agent under a power of attorney.

Proceedings for appointing a conservator or guardian for a person’s property involve court control of the incompetent person’s assets of, substantial legal fees, and the requirement of a bond; the proceedings may often provoke unpleasant family tension or quarrels. Accordingly, elderly or ill persons find the ability to name a successor trustee outright particularly attractive. If the trust provides for it, the trustee may collect income, purchase and sell trust assets, manage a business or real estate, and pay hospital or other medical bills. When the crisis ends, and the grantor recovers, the grantor can usually revoke the trust if he desires or take up management of the assets. If the grantor should happen to die, the trust should provide for the disposition of trust assets to beneficiaries.

Second, trusts are a good means of keeping property separate. For example, if one spouse has inherited property from his or her parents and desires that the property be kept separate from the other spouse, the separate property can be placed in a trust.

Another advantage of the revocable living trust is that assets placed in a living trust should avoid or minimize probate costs and processes. This may result in the reduction of probate expenses, since all probate fees are based on the gross fair market value of the assets passing through probate. In addition to a possible reduction or elimination of probate fees, assets placed in a living trust would usually avoid delays in distribution caused by the probate court. Assets in a living trust can usually be transferred immediately to the beneficiaries.

Also, living trusts are private; they are not filed at the courthouse as wills are. Finally, living trusts may provide a tax benefit because a properly drafted complex living trust may minimize or eliminate the federal estate tax.

WHAT ARE THE DISADVANTAGES OF A LIVING TRUST?

The living trust is not without disadvantages. For example, transferring the title in a home or other real estate, bank accounts, securities and other investments into a living trust can be troublesome and almost always requires the help of a specialized attorney. In refinancing a home, many lenders demand that the house be taken out of a living trust pending refinancing because they are unwilling to extend credit to a trust. The person who established the trust then needs to make sure that he places the house back into the trust once the refinance has been accomplished.

Also, military members may lose some of the exemptions which they receive under various states' laws by transferring ownership into a living trust, which is not afforded the benefits of the Servicemembers' Civil Relief Act. Finally, the validity of the trust is only as good as the expertise of the lawyer assisting the client. For instance, problems may arise in transferring property located in other states into a living trust. Today, the living trust business is booming, particularly in California, and many lawyers of differing abilities have inundated the market. Potential clients should be wary of low cost, and possibly lower quality, services which may not afford the protection which the client had intended. Additionally, you should be aware that there have been many scams involving living trusts shut down by the Federal Trade Commission. Exercise caution.

The costs associated with creating the living trust vary from law firm to law firm. For instance, many law firms charge a flat fee for the trust agreement, but additional fees accrue each time property or assets are transferred into the trust.

In conclusion, a living trust is an excellent estate planning tool for many persons. However, not all persons require a living trust. Young, active-duty military personnel with relatively few assets would probably incur a greater expense by obtaining a living trust than the expenses associated with the probate of a small estate. Also, the mobility of younger persons presents problems with observing trust formalities, e.g., continually acquiring and transferring property to the trust, for many years. On the other hand, older persons, particularly retired persons with substantial assets and tax avoidance concerns, may benefit from a living trust. Ultimately, each person must weigh the prospect of saving money for their survivors against the effort and expense of establishing and maintaining a living trust.