A Revocable Living Trust portfolio consists of the Trust and also Pour-Over Wills, Durable Powers of Attorney for Asset Management and the Health Care Directives.  You, or you and your spouse are the Trustors and Trustees of the Trust – you are the owners and managers of your Trust.

It’s really just two decisions:

First, who is going to inherit – who are your beneficiaries?  Then, the hard part, if something should happen to any of these beneficiaries, who would get their share?  Maybe it goes to their children (your grandkids) or maybe back to the other beneficiaries, which many times would be their brothers and sisters.  Many people choose the grandkids but if there are no grandkids, then back to their siblings.  You need Plan B, just in case.

Second, you’ll need to pick an administrator to settle the Trust estate, someone who is trustworthy and gets things done.  Again, you’ll need to choose a second person as an alternate.  The Pour-Over Wills and the Durable Powers of Attorney for Asset Management also need administrators and you may choose the same people as you did in the Trust.  For the Health Care Directives, you need to choose who will talk with your doctors if you can’t and who makes those end-of-life decisions, first choice and second choice.  If you have minor children choose a first and second choice for their guardian.

When you have these answers you’re ready to start the process of getting your Trust documents, which takes about four to six weeks and includes your phone consultation with the estate planning attorney as well as the notary bringing the documents to you for signatures, notarization, explanation and re-titling of your assets into your Trust (funding).

Call or email our estate planning advisors today to get started:
Toll free:  877-624-9231  or  714-860-7003
estateadvisors@AmeriEstate.com

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Let us be your guide in securing your essential estate planning needs.  From information and education, to counseling with your qualified attorney, to preparing and recording deeds and other Trust funding support, the AmeriEstate team is here to assist you from beginning to end.

We use a simple 3-part process:

Education:  Consult with an authorized AmeriEstate representative whose role is to help educate you on trusts and probate, give you various options and gather information in preparation for your attorney consultation.

Attorney Consultation:  A Provider Attorney will be assigned to provide your legal consultation via telephone.  Your Attorney will answer your questions and work with you to create a well-crafted and comprehensive estate plan.

Personal Delivery and Notarization of Estate Plan:  A Notary Public who is specifically trained in the delivery and execution of your estate plan will deliver your estate plan to you at your home, where you’ll sign as the documents are explained and notarized.

You can expect superior customer service by our trained and experienced customer service team as well as continuing access to your Provider Attorney for any questions, changes or other assistance you may require.

Call or email our estate planning advisors today to get started:
Toll free:  877-624-9231  or  714-860-7003 estateadvisors@AmeriEstate.com

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A-B Marital and A-Marital

Do you know the type of married trust created in your estate plan, and how it works?
As husband and wife, you created a Revocable Living Trust to protect your loved ones and protect your estate’s real property and financial assets from a Court Probate.  Another reason is to reduce or eliminate Federal Estate Tax liability concerns, upon both your deaths.  It is important to understand, while both of you are living, what happens when the first spouse dies and what powers you have as the surviving spouse. Here is a general overview:

• A-B Marital Trust (also known as Credit Shelter Trust or Bypass Trust)
  Total assets likely to exceed applicable credit amount during the Grantor’s lives, thus preserves applicable credit amounts for each spouse. Currently for 2011-2012, you can pass up to $10 million (deceased spouse exemption being $5 million) if, after the death of the first spouse, a division of assets is completed and assets are funded to the A-Trust (Revocable) and B-Trust (Irrevocable).
  This A-B Trust is designed to provide maximum estate tax savings and to respect and protect the wishes of both spouses, such as a blended family.
• A-Marital Trust (with Disclaimer Provisions)
  Total assets usually (but not always) well under the current applicable credit amount (e.g. $5 million), with the surviving spouse choosing to;
  1) receive deceased spouse interest as an outright “marital gift” in trust, or,
  2) to “disclaim” an interest in the deceased spouse interest in the trust, thus to preserve the deceased spouses credit against estate taxes, possibly leaving more to the heirs.  Any amount “disclaimed” is further held and maintained in the B-Trust.

Don’t I “own” all the assets when my spouse dies? It depends on the provisions setforth in the trust:

• A-B Marital Trust– Upon the death or incapacity of either spouse, one-half of the trust becomes irrevocable and may evoke a notification to all beneficiaries.  The surviving spouse ”shall” divide the estate as follows:
  • In regard to the “A” Trust (Survivors Trust), estate is tax-free up to the applicable credit amount (i.e. $5 million). Surviving spouse has no restrictions in any way, can amend or revoke the ”A” Trust at anytime.
  • In regard to the “B” Trust (Decedents Trust), no estate taxes regardless of amount transferred (when division is completed). Surviving spouse can manage assets, receive all income, invade principal (with some limitations), but cannot amend or revoke at anytime. “B” Trust is Irrevocable.
• A-Marital Trust– Surviving Spouse has a choice to “disclaim”, or not:
  • NO Disclaimer filed, all assets in the trust are treated as if the deceased spouse made an unlimited marital gift to the surviving spouse; the entire trust estate is included in the estate of surviving spouse, thus retaining full and complete power to amend or revoke at anytime.
  • With Disclaimer filed, the trust is divided into “A” Trust and “B” Trust with limited rights to the surviving spouse (see A-B Marital Trust). There is a time-limit restriction in activating this option.

Can we request a restatement of our A-B Trust to an A-Marital while we’re both living? Yes you can.

Always consult your Estate Planning Attorney, and your Tax Advisor, before requesting a trust restatement.  An A-B Trust created for you ten years ago may no longer fit your estate plan today. There is a financial cost in a division of your estate and you will need to file with the IRS, Form 706. This cost may be prohibitive if  your estate value has diminished over the years. For more information, please contact us at AmeriEstate Legal Plan, at 877.624.9231

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Written By Stephanie Lane, Sr. Client Resource Director

What happens when a domestic partner becomes incapacitated or dies?

In reality, it can be devastating to both the partner and their children. Not only at the time of death, but also while living and incapacitated. Without proper planning, you basically give up control of your estate and management of your well being upon incapacity. Even a Will is not going to fully protect your loved ones, but it will certainly open the door to challenges from “other” interested parties, through a costly and time consuming Probate process, open to court records. Without an estate plan in place, the state will provide a plan referred to as “intestacy”. Under these laws, your estate will pass to biological relatives under the traditional family model. In California, AB 205 (The Domestic Partner Rights and Responsibilities Act of 2003), effective January 1, 2005, made substantial progress in reversing some of these laws. To learn about AB 205, go to www.eqca.org

Here is an estate planning perspective from AmeriEstate Legal Plan, Inc.

Various states offer legal representation for domestic partnerships, with the rights and responsibilities varying from jurisdiction to jurisdiction. A marriage allows concrete legal and tax benefits to both a husband and wife; however, the laws do not recognize the rights and privileges for same-sex couples in many areas. What you need to know:

• One should not solely rely on intestacy laws in place of an estate plan.
• Never assume that because you are registered domestic partners that will be enough proof of your intent as to what your partner will inherit.
• On a Federal level, Domestic Partners are not recognized, thus taxes, including income, gift, estate and property taxes must be addressed appropriately.
• Legal Documents you should be aware of: wills, revocable living trusts/ pour-over wills, beneficiary designations with contingencies, durable powers of attorney for asset management, advance healthcare directive, domestic partner agreement, parenting agreement, domestic partner registration with legal counsel suggested.

Is there a solution that AmeriEstate Legal Plan, Inc. offers?

Yes. By creating your Domestic Partners Revocable Living Trust, as a Trustee being the manager of your trust assets, you control what happens to your estate, how it will be distributed, and name a guardian for your children in the event of incapacity, or death. This can be for both Registered and Non-Registered Partners. Best of all, it’s private and confidential, bypassing the Probate process. Your Healthcare Directive will avoid potential problems by naming your ‘attorney in fact’ allowing your partner access to you and representing your wishes to your doctor during incapacitation or hospitalization.

How do we prepare to create a Domestic Partners Revocable Living Trust?

Your best path is to consult with an Estate Planning Attorney who can counsel you on the unique legal and personal needs each of you have as partners, thus to avoid disinheriting your partner but to concretely establish your intent. Visit AmeriEstate Legal Plan, Inc. for more information at www.ameriestate.com. You may contact us at 877.624.9231

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At AmeriEstate Legal Plan, we like to emphasize to our members seeking estate planning,  is that estate planning is exactly that: “planning.”  The plan changes over time.  One thing our provider attorneys try to emphasize with our memers clients is that the plan today may be different from the plan tomorrow and that ANY time ANYONE mentioned in ANY  of the documents undergoes some change (inheritance, death, disability, divorce, new birth, etc.), you NEED to go back to look at your plan, because maybe it should change.  That is a particularly good point to emphasize,  because, once clients receive their Living Trust or other estate planning documents, it can be easy to set it aside and not think about it again.  In fact, it is important to know that being a member of the AmeriEstate Legal Plan makes it particularly easy (and inexpensive if not FREE) to re-visit their plan in the event that something changes.

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We receive a lot of questions about what, if any administration is needed for a Living Trust after one spouse has died.  A lot of the older trusts will have been created with credit shelter, or A-B provisions.   An A-B Trust REQUIRES the administrative division of the trust assets upon the death of the first spouse.

As a simplified statement, an A-B or A-B-C Trust is designed, in part, to maximize the total amount of the estate that will ultimately pass to the intended beneficiaries, by minimizing the impact of estate taxes, and secondly to protect the wishes of both spouses as it relates to the ultimate beneficiaries, regardless of which spouse dies first.

When the first spouse dies when this type of trust is in place, then the decedents share (usually one-half) of the trust estate may still be available for the needs of the surviving spouse, but only within certain specific limits and purposes.  Beyond that the decedents share (TRUST B)  is irrevocable in terms of the ability to change any of its terms.  The survivors share is still amendable and revocable by the surviving spouse.

If the surviving spouse does not undertake the administrative A-B Division after the first death, then for all intents and purposes, the entire trust will be rendered irrevocable.  The reason being, if you haven’t divided the trust assets (allocating specific assets to trust A and Trust B, respectively, then there is no way to know to which set of assets a surviving spouse amendment would apply.

There is no statutory deadline on how long you have to complete the division, but it should be done within 6 to 9 months after the first death.   The longer you wait, the harder it is to create an accurate snapshot of the estate at the first death and some form of detailed forensic accounting may be required to analyze how assets were used, invested and spent since the date of the first death. Also if the surviving spouse received actual benefit in excess of the specified limits associated with the B Trust, then there may be other problems to overcome and you may lose some of your otherwise available tax benefits.

If you happen to come across a situation where a spouse has died and the trust is an A-Marital or disclaimer style, then there is a hard limit of 9 months for the surviving spouse to decide whether to exercise a qualified disclaimer, if warranted for tax reasons, to create and fund the Decedents B Trust.  An A-Marital Trust, aka Disclaimer Trust is a marital trust whereby at the death of the first spouse, the entire decedent’s share will pass entirely in trust to the surviving spouse, (effectively all trust assets being part of the Survivors A-Trust), UNLESS, the surviving spouse shall disclaim, in writing any or all of the decedents share of trust assets.  Then upon disclaimer, the surviving spouse would establish and fund the credit shelter, or “B” Trust.

The new Estate and Gift Tax law passed at the end of 2010, created a new dynamic related to the A-Marital/ Disclaimer type trust.  Under the new law, if one spouse dies after 2010, then to the extent that the deceased spouse does not use his or her newly updated $5 million (in effect for 2011 and 2012), then the remainder of the decedent’s exemption can be added to the surviving spouses exemption (even if the trust is not formally divided into an A and B Trust).  This new feature is known as “Portability”.   In order to “claim” the portability of the deceased spouses unused exemption, the surviving spouse would have to file an estate tax return and portability election for the deceased spouse.  Of course we don’t know if this provision will be maintained in the law beyond 2012.

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A fairly frequent comment from our AmeriEstate Legal Plan members planning their estates using a Living Trust is: “How can I be more assured that my wishes will be properly carried out vis a vi my Living Trust, even long after I am gone?”

Actually that is a very good question.  In answering it, there are a couple extra things you may want to consider:

1)      Adding a Trust Protector

2)      Appointing a Corporate Trustee to act as your Successor Trustee, or

3)      Both

Keep in mind that your beneficiaries have certain rights regarding the fulfillment of your wishes as it relates to them, and usually have the ability to legally compel the Trustee or other responsible party(ies) to disclose information or fulfill their legal obligations, etc..  Sometimes, however you may have a situation where you feel your beneficiaries cannot or will not stick up for themselves if their interests become abused, or you feel your trust requires specialized administration, or you anticipate your trust will remain in existence for many years (10, 20 + yrs) after your death and you want a Trustee who will be properly engaged for the long term.

The Trust Protector’s role is created by the Trust Agreement to add an additional layer of protection and is usually a person most familiar with the Grantor’s long-term financial and personal goals. A Trust Protector usually is the balance of power between the Trust Agreement, the Trustee, The Grantor, and the Beneficiaries.

Neither the Trustee or the Trust Protector should be a family member, nor anyone related to the family by blood or marriage. Both positions should be independent of each other acting in the long-term interest of the beneficiaries.

If you had a trust created to protect your beneficiaries, you might consider naming a corporate trustee as opposed to a family member to provide objective and professional management of your trust. Your selection of a corporate trustee is an important one, so follow these steps to learn how you can benefit from a corporate trustee and make an informed decision.

Step1

Investigate the services offered by financial institutions. Most house entire departments of corporate trustees who are experienced and highly knowledgeable in the management of trusts. They offer professional and confidential services that are paramount to the well-being of your current and future beneficiaries.

Step 2

Hire a corporate trustee who is able to provide expert record keeping services, which may include complex accountings of the distributions made from your investments, disbursements from your income and principal amounts from the assets set forth in your trust. Your corporate trustee would also file your income tax returns, saving you or your beneficiaries from that tedious legality.

Step 3

Involve a corporate trustee who keeps abreast of current trust administration laws. Your corporate trustee will be able to make informed and complex decisions regarding investment strategies and appropriate distributions to your beneficiaries as the terms of your trust are executed to the letter of the law. Your beneficiaries will feel secure and benefit highly from continuity and exceptional financial services.

Step 4

Choose a corporate trustee that is outside the realm of your family bonds. He or she will be able to make decisions and apply the terms of your trust with professionalism and objectivity without the emotional baggage that comes with having a close family member doing the job.

Step5

Select a corporate trustee who is able to undertake legal responsibility and offer continuity of services over a period of years to your current and future beneficiaries. Another benefit of a corporate trustee is that he or she will investigate claims made against the trust and will defend any false claims and appear in court, if necessary.

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In estate planning involving spouses there may be issues surrounding how to deal with separate property acquired prior to marriage or as a result of inheritance.

As part of your estate planning consultations with your attorney, you may be asked whether you wish any particular property or financial assets you currently consider to be your sole and separate property to remain your sole and separate property once transferred to your trust, or whether you wish to convert or confirm that such assets are intended to be the community property of both spouses.  There are pros and cons to this decision and what follows is a discussion of the most common questions surrounding this issue.

In Community Property States such as California, Arizona, Texas, Nevada, Idaho, Louisiana, New Mexico, Washington or Wisconsin, Community Property Law concerns the distribution of property acquired by a couple during marriage in the event of the end of the marriage, whether by divorce or death of one of the parties. In community property states all property (both real, personal and financial) accumulated by a husband and wife during their marriage becomes joint property even if it was originally acquired in the name of only one partner, unless the spouses enter into some form of formalized agreement concerning their separate and joint ownership of property.

Important Definitions:

Community property is ordinarily defined as everything the couple owns that is acquired during the marriage with the exception of separate property owned by either of them individually.

Separate property is that property that each individual brings into the marriage, in addition to anything that either spouse acquires by inheritance during the marriage.

Quasi Community property is property which is initially the separate property of one spouse but through specific action or inaction can become partially the property of the other spouse under operation of law, such as through commingling.  Quasi Community property is any property owned between spouses or where a spouse acquires an equitable interest which is other than 50/50 ownership.  Examples include combining separate property assets with community property assets; using earnings from employment to pay housing expenses on otherwise separate property such as mortgage payments, property taxes, insurance; failing to compensate a non owner spouse for performing services contributing to the economic utility of separate property, such as having a non owner spouse preview and screen possible tenants for rental property or conducting repairs on same.

Generally, four types of property acquired after marriage amount to community property: earnings, damages obtained from a personal injury suit, damages awarded in an industrial accident action, and rents and profits from separate property.

Benefits generally associated with Community Property.

Step Up In Basis.  In general, community property assets such as real estate or other appreciating assets such as securities or even businesses will receive a full “Step Up In Basis” on the death of either spouse.  Assets owned by only one spouse or held as joint tenants receive only a partial step in basis representing only the decedent’s ownership interest.  Step Up In Basis is the general rule applied to appreciating assets in that the beneficiary’s (or recipient of the assets) basis equals the fair market value of the property at the time the decedent dies. For capital gains tax purposes, owning appreciating assets between spouses as Community Property is generally much more tax efficient.  You should speak with a qualified tax advisor for more specific information on your situation.

What about giving away appreciating assets during your lifetime? Example, if you give a  home to a Beneficiary before your death, the Beneficiary would receive a carryover basis, which would be equal to the transferor’s adjusted basis in the home, otherwise known as your original cost for the property plus certain capital additions made during the course of ownership.  Often this results in a ‘built in’ capital gain that could largely be avoided if the asset is inherited rather than gifted during your lifetime.

Estate Tax Planning.  In marital estates which may be subject to Estate Taxes,  a benefit may be gained by dividing the value of community property assets held in certain types of Living Trusts to maximize the amount of one’s estate that my pass to beneficiaries free from any estate taxes.  Again, you should seek the advice of your estate planning and/or a qualified tax advisor as it may relate to your situation.

How Do You Convert Separate Property to Community Property?

Usually, converting separate property to community property involves adding your spouse to title of your bonafide separately owned property or engaging in activities as illustrated above which tend to allow your spouse to acquire a material interest in such property (quasi-community property).

General Drawbacks to Converting Separate Property to Community Property.

The most common drawbacks to converting separate property to community property is that you may not be able to fully control the ultimate disposition of the property without the consent of your spouse, and in the case of divorce, your spouse will likely be awarded half of the property, or more or less, depending on the circumstances and judicial decisions.

Benefits to Owning Separate Property.

Separate property may be managed, disposed of, or bequeathed through inheritance at the sole discretion of the owner of the separate property, without requiring the consent of the non-owner spouse.

Drawbacks to Owning Separate Property.

• In the event the spouse owning separate property dies first, unless properly structured through an effective estate plan, your spouse may unintentionally be deprived of the use of the separate property or the property itself, if that was your intent.
• You may lose significant tax benefits you might otherwise be entitled to in the areas of capital gains taxes or estate taxes.
• Unless you have a formalized agreement regarding the treatment of separate vs community property, such as may be created as part of your estate plan, or by entering into a pre-nuptial or post-nuptial agreement, it is often difficult to ensure that there is no prospective commingling which may have the effect of converting your separate property to community or quasi community property.

How Can You Keep Your Separate Property Separate?

In general, your separate property acquired prior to marriage or received through inheritance can maintain its separate property status if:

• The property is not comingled with community property assets
• The non-owner spouse is not added to title
• A pre-nuptial or post-nuptial agreement is entered into
• Property is held in trust as the separate property of only one spouse (usually combined with executing a separate property agreement addendum to the trust and titling the property “In Trust as the sole and separate property of husband or wife”)

o   Note: these scenarios are not exhaustive and you should seek professional guidance from your Estate Planning attorney as it relates to your particular circumstances.

In an estate planning setting, each spouse generally can designate their own beneficiaries to their share of Community or Quasi Community Property.  The exception is owning property vested as Husband and Wife as Community Property with Right of Survivorship.  In this case, in states where applicable, the surviving spouse is considered the sole owner of such property.

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AmeriEstate is pleased to announce that in keeping with long honored policies, all of its current legal plan members residing in Arizona, who are affected by the recent adoption of the Uniform Trust Code (“UTC”), governing all revocable and irrevocable trusts in Arizona, are being provided the necessary and important legal updates at no charge.  This represents a value of up to $500 to our members.

We are thankful to Provider Attorney Joseph Udall for all his help and efforts in making this invaluable service to our members possible.

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The State of Arizona recently adopted most provisions of  the Uniform Trust Code (UTC) adding several new requirements to both new and existing Trusts.  The new law went into effect on January 1, 2009.

Arizona’s legislature made this law retroactive to ALL trusts created before this change in the law.  This means, at the very least, most trusts should be reviewed within the next year or so, to make sure there are no unintended consequences from the existing trust language.

Some of the important new changes in the law include:

New rules for Irrevocable Trusts and Revocable Trust that become irrevocable (such as at the death of the Settlor(s), imposing a duty on the Trustee to keep beneficiaries “reasonably informed about the material facts of the trust”, in order to better protect their interests.

Defining the term “Qualified Beneficiaries” as those beneficiaries who have a specific right to be informed about the material facts of a trust.  In the past the law was vague on who could request and receive information about the trust. Some interpretations said that no-one had the right to demand information while others interpreted then current law to include any “potential” beneficiary as having the right to demand information about the trust.

Stipulating that information required to be available to “qualified beneficiaries” could be limited to the material facts specifically pertaining to that beneficiary, and not necessarily include information specific to other beneficiaries.

“Special Needs” trusts will be better recognized under Arizona state law, and it will be more clear that a special needs beneficiary’s creditors can not attack even a self-settled special needs trust.  This is important as all Revocable Living Trusts prepared by the Arizona Provider Attorneys for AmeriEstate Legal Plan contain provisions for a special needs beneficiary sub-trust.

New rules of perpetuity allowing Trusts to remain in force for up to 500 years, in case Settlors wish to have all their assets remain in trust for the use and enjoyment of their descendants, such as a family or vacation property, or to provide continuing income streams for multiple generations.  The previous law limited a Trust’s existence to 90 years after the death of the Settlor.

Requiring the Trust to specifically state the “Material Purposes” of the Trust and allow for future Trustees to amend administrative provisions if circumstances or changes in the law make it difficult for the trust to complete its stated objectives.

New clarifications in the rules and legal authority to act in cases where there are multiple Successor Trustees acting as “Co-Trustees”.

Among the items included in the Arizona Trust Code:

Mandatory Rules

The Trust must now explicitly state the material purposes of the Trust such as:

1.    The management by Trustee of Settlors’ assets during Settlors’ lifetime.
2.    The payment of income and principal to Settlors.
3.    The non-judicial administration and distribution of Settlors’ assets upon the death of Settlors in the manner set forth in the Trust.
4.    Avoiding probate at a Settlor’s death.
5.    Avoiding a conservatorship proceeding upon a Settlor’s incapacity.
6.    The reduction or elimination/minimization of federal, state and local estate and gift taxes by use.
7.    Spendthrift provisions protecting trust assets from the creditors of beneficiaries, except child support judgments against a beneficiary, and of course claims by the IRS or other government agency, provided a statute exists that allows it..

Other mandatory rules include:

1.  The duty of a Trustee to notify “qualifying beneficiaries” within 60 days whenever a trust becomes irrevocable or there is a change in Trustee for an irrevocable trust. The Trustee will be required to  provide all qualified beneficiaries notice of the existence of the trust, portions of the trust agreement relative to the beneficiary’s interest, and the right to receive financial statements annually.  Remember that not all trusts for married couples become irrevocable (partially or fully) upon the death of the first spouse (eg. A-Marital Trusts).  In those cases no notification is required.

2. The requirement that an odd number of Successor Trustees must act by majority consent and unanimous consent is not allowed when there are an odd number of Successor Trustees.  e.g.  2 out of 3 co-trustees provides majority rule.

3.  New Rule Against Perpetuities allows trusts to continue for up to 500 years before mandatory termination. Arizona’s previous law extended the “rule against perpetuities” to 90 years; this change makes the creation of multi-generation trusts much easier.

Important Definitions:

A. A “qualified” beneficiary is any beneficiary who is eligible to receive either an income or principal distribution at the present, or who would be entitled to receive a distribution if all of the current beneficiaries died or if the trust terminated. This includes current discretionary beneficiaries, remainder beneficiaries, the takers in default under a testamentary power of appointment or an unexercised nontestamentary power of appointment, and the appointees under an exercised nontestamentary power of appointment.

B. A “nonqualified” beneficiary is any person or entity who has any interest in the trust, vested or contingent, who is not a qualified beneficiary. Nonqualified beneficiaries might include the Settlor’s siblings who receive the remainder interest in a credit shelter trust if both the Settlor’s widow and child died. Those siblings are not “qualified” beneficiaries because if the widow died or the trust terminated at the present time, the child, and not the siblings, would be entitled to the trust assets. Also, charities or the Settlor’s intestate heirs named in the family disaster clause are nonqualified beneficiaries.

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