Wills, Trusts, and Estate Planning


Warning: The information provided herein is for general background purposes only. You should consult an attorney for advice concerning your circumstances.

  • Administration of Trusts
  • Preparation of Trusts
  • Powers of Attorney
  • Wills
  • Advance Health Care Directives

What Is A Trust?

A trust is a written instrument by which the settlor declares that upon a certain event, such as his disability of death, another person known as the trustee, is placed in charge of administering the assets and financial affairs of the settlor. Trusts are usually declared by a single person or jointly by a married couple. Typically, a trust will provide that upon the mental incapacity or death of one spouse, then the other spouse will act as trustee, and after the mental incapacity or death of both spouses, then some other person, typically an adult child, family member, or trusted friend will act either jointly or singularly as successor trustee. The trust can describe the duties of the trustee to provide for the management of financial affairs and the care of the settlor during his lifetime and provide for the disposition of assets, such as real property and financial accounts, after the death of the settlor(s), e.g. distributions to children, charities, and other beneficiaries.

The drafting of trusts requires that attention be given to the specific needs and instructions of the settlor. Provisions in the California Probate Code establish statutes that govern the duties of trustees and the rules pertaining to the administration of trusts. For example, a trustee has a fiduciary duty (a duty of honesty, loyalty, and full disclosure) while acting in the capacity of a trustee, and he cannot misuse his position for his own personal benefit.

What is a Will?

A Will is a document that must be executed with certain legal formalities, and it sets forth the beneficiaries of a decedent’s estate. A Will takes effect at death. Wills are the subject of a court supervised probate court proceeding.

Upon the death of a testator, any person may lodge the testator’s last Will with the clerk of the court. A Will is administered by a probate proceeding. The advantage of using a trust over a Will is that a trust does not require any action before the court and may be administered by the trustee and the trustee’s attorney.

Typically, when a settlor declares a trust, he also declares a pour-over will. A pour-over will simply states that if the settlor owns any property at death that he forgot to title in the name of his trust, then he directs the executor of his Will to distribute that property to the trustee of his trust, so as to be administered by the terms of the trust.

What is Estate Planning?

Estate Planning is the practice of planning for the disability or death of the client and the succession of property and business interests. Estate Planning includes the preparation of documents such as a trust, Power of Attorney, and an Advance Health Care Directive. Estate Planning also concerns the disposition of retirement assets, such as IRA and pension plan accounts. Estate Planning addresses the issue of minimizing the Federal Estate Tax. Estate Planning can protect the surviving spouse and the children of the parties, including children by prior relationships of each party. Careful drafting is required to meet the requirements of each client. There is not an all-purpose estate plan or all-purpose trust for all persons.

What is an Advance Health Care Directive?

An Advance Health Care Directive allows a person, known as the agent, to make healthcare decisions for another person, known as the principal, if the principal is unable to do so due to illness or incapacity. An Advance Health Care Directive can describe the type and manner of medical care the principal wishes if he/she cannot make decisions for himself/herself.

What is a power of attorney?

A power of attorney is a document by which one person, known as the principal, grants to another person, referred to as the agent, the power to make decisions and enter contracts on behalf of the principal. A power of attorney can include provisions that make the power of attorney durable. In other words, the power of attorney will continue to be effective even if the principal becomes mentally incompetent. An advantage of a durable power of attorney is that it may avoid the necessity of a conservatorship for a person who has become mentally incompetent. A power of attorney can be drafted so that it is either narrow or broad in scope. For example, the power of attorney may only give the agent a power to deal with a particular business or a particular transaction, or it may be limited to contracts concerning a particular parcel of real property or particular items of personal property. The power of attorney can be drafted with broad provisions allowing the agent to buy and sell securities, to purchase or sell real estate, or engage in almost any other transaction on behalf of the principal. There are other statutes governing the creation of a power of attorney for healthcare decisions.

WHAT IS TRUST ADMINISTRATION?

The most common type of trust is a revocable trust, established by one person or a married couple, who are referred to as either “Trustor(s)” or “Settlor(s).” The trust is typically drafted to be completely revocable or modifiable at any time by the settlors. After the death of the settor(s), the trust becomes irrevocable and the assets of the trust are distributed in the manner set forth in the declaration of trust, usually to the settlors’ children or other named beneficiaries. The settlors, while mentally competent, usually act as trustees (administrators) of the trust. Then upon the mental incapacity of one or both settlors, a successor trustee assumes the position of trustee, which is typically one or more of the settlors’ adult children.

After the death of the settlors, beneficiaries, heirs, and children of the settlors have the right to obtain information concerning the trustee’s administration of the trust. The trustee is required to serve a notice concerning the administration of the trust when the trust becomes irrevocable by reason of the death of one or more of the settlors, a change of trustee of an irrevocable trust, and under other circumstances. Probate Code §16061.7. The notice requires a warning that the person receiving the notice has time limits in which to contest the trust. The notice generally must be served within 60 days following the occurrence of the event requiring service of the notification.

Additionally, a trustee of a trust that has become irrevocable has a duty to keep the beneficiaries of the trust reasonably informed of the status of the trust and its administration. Probate Code §16060. Generally, the trustee must provide copies of the trust to any beneficiary upon request. Probate Code §16060.7.

A trustee who fails to serve the required notice may be responsible for all damages, including attorneys fees and costs caused by the failure. Probate Code §16061.9. Trustees also have the duty to provide a written account at least annually to the beneficiaries to whom income or principal is required or authorized, in the trustee’s discretion, to be distributed. Typically, the report is informal rather than a technical “formal” account. Probate Code §16062.

During the course of administration of the trust, the trustee gathers assets, pays liabilities, and determines the distributions payable to beneficiaries. If a trustee is unsure concerning what action should be taken in a particular circumstance, then the trustee may serve a notice of purposed action and give the beneficiaries an opportunity to object, instead of bringing a formal court petition for instructions. Probate Code §16500.

A trustee who is not performing his duties, as required by the trust instrument or as required by the provisions of the Probate Code concerning trust administration, can be removed by court order. The grounds for removal of a trustee include hostility or lack of cooperation among co-trustees that impairs the administration of the trust, where a trustee has failed or declines to act, or where the trustee has committed a breach of the trust. Probate Code §15642.

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