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Grass Valley, Nevada City, Lake Wildwood, Penn Valley and Alta Sierra Residents – Did You Know?

If you are a resident of Grass Valley, Nevada City, Lake Wildwood, Penn Valley or Alta Sierra, you now have more choices when selecting your Estate Planning attorney. The areas in and around Grass Valley and Nevada City already have living trust attorney’s in town, but just a short drive down Highway 49, in beautiful, historic Auburn, you will find CunninghamLegal. For those who are not familiar with CunninghamLegal, we are The Living Trust Lawyers, have been in business over 20 years and have handled thousands of living trusts and trust administrations.

That’s what we do. Estate Planning, Living Trusts and Trust Administration. In fact, we even have two California Bar Board Certified Specialist attorneys, one attorney with an advanced LL.M. degree and another attorney who will be Board Certified soon; all in our Auburn office to serve you and your families.

Our current clients from Grass Valley, Nevada City, Lake Wildwood, Penn Valley and Alta Sierra love the small town feel of their cities, but at the same time, they recognize that they don’t want people in town to know their business. That’s why they head to Auburn.

If you are the kind of person who values privacy and expects a fantastic client experience give us a call for a free, no obligation consultation. We’ll even review your existing trust for free.

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Two Common Mistakes with Trusts

CunninghamLegal – The Living Trust Lawyers

This is a great article from the American Academy of Estate Planning Attorneys. The writer, Steve Harnett, J.D., LL.M., does a wonderful job of boiling it down to the essential facts. You can find the article here: Two Common Mistakes with Trusts

This is a copy of the entire article from the link referenced above:

Trusts are incredibly useful tools. But, like other useful tools, they do not fit every circumstance. They must be used appropriately. For example, a hammer is an exceptional tool to use when looking to drive a nail into a wall. But, if you hit the nail with a glancing blow, the nail will bend and you’ll end up with a difficult situation. Here are a couple common errors with the use of trusts, and how they could be avoided.

The first mistake with the use of trusts is not using the right type of trust. There are many different types of trusts. By far the most common type of trust is a Revocable Living Trust, often called a “RLT.” A RLT is a great solution for most situations. It can provide for management of your assets during incapacity, avoids probate at death, etc. But, it may not be the right solution for every situation. For example, if someone is looking to qualify for Medicaid in the future, the assets in a RLT will be considered available resources, just as if those assets were owned outright. A special irrevocable trust could be used if one wished to qualify for Medicaid. Such a Medicaid trust could limit the transferor’s rights in the assets to income only, or the transferor might not be a beneficiary of the Medicaid trust at all. While a Medicaid trust is not the right solution for everyone, it can remove the assets from consideration for Medicaid and allow the transferor to qualify for Medicaid, if the transfer is made far enough in advance of the Medicaid application. Whether you are the attorney or the client, consider what type of trust is appropriate. Each type of trust has its strength. The key is choosing the right type of trust for the situation.

The second mistake with the use of trusts is not funding the trust properly. A RLT is a great tool, but only if it is funded. If a RLT is unfunded, the RLT may just be a worthless piece of paper. If there is a Pour-Over Will, which transfers the assets to the RLT upon death, the assets would be subject to probate and only then would be distributed according to the terms of the RLT. But, if there is no Will, the unfunded assets would pass pursuant to the one-size-fits-all system enacted by the legislature of the state of residence, the system known as “intestacy.” An RLT should be funded appropriately to maximize its usefulness during incapacity (to avoid needing a conservatorship) and death (to avoid a probate).

Source: https://www.aaepa.com

 

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Your Estate Planning Binder Misses You

CunninghamLegal – The Living Trust Lawyers

For some people, a sighting of their estate planning binder is as rare as seeing Bigfoot in line at your local Starbucks. The binder is often initially reviewed and then is stored away for various reasons; to protect the documents, to protect confidential information contained in the documents, or to prevent one from having to think about the possibility of incapacity or their eventual passing.

Estate planning binders have been stored in the back of hall closets, underneath beds, or even inside mini-storage units located miles from the house. While the goal of protecting the documents from harm and protecting the sensitive information within from the curious glances of others is praiseworthy, the “out-of-sight, out-of-mind” approach goes against the responsible action of having had the estate plan created in the first place.

A quality estate plan takes an uncertain future into consideration. For example, naming contingent trustees and contingent beneficiaries addresses the possibility of changing circumstances. Another example of preparing for an uncertain future is that well-drafted estate plans address the possibility that a beneficiary may be receiving government benefits at the time of distribution. This beneficiary would then have their share distributed to a Special Needs Trust in order to augment, and not supplant, assistance they are receiving from the government.

Despite the ability of a quality estate plan to be forward-looking, a proactive approach is needed to ensure that the estate plan still meets the needs and the goals of the client. Is the estate plan still understood? Are there questions? Are changes needed?

Currently, there are many families relying on estate plans that were drafted before Congress dramatically increased the estate tax exemption in 2012. The “A-B Trust” structure that protected a family’s legacy from being eaten away by estate tax is often no longer needed and now can be cumbersome and expensive upon the passing of a married client.

Clients know about their own changing circumstances, but may not be aware of changes in the law. Estate planning attorneys are cognizant of changes in the law, but may not be aware of changes in the lives of all of their clients.

The key is to spend some time with your estate plan. Review the structure of the plan. Review the people you have nominated as your successor trustee, your financial power of attorney, and your health care agent. Review what will occur if you become incapacitated and how your legacy will be distributed upon your passing. As you review your estate plan, have post-it notes handy to write down questions that arise or to mark provisions that you are considering changing.

A dusty estate planning binder is the enemy! Vanquish the enemy today. Review your estate plan in light of your circumstances. Call us if you need help with the review.

Posted by: Doug Reeve. Doug can be contacted in our Camarillo office at (805) 484-2769.

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Resilience After Unimaginable Loss – An Interview with Sheryl Sandberg of Facebook

CunninghamLegal – The Living Trust Lawyers

Caring for a loved one can bring unimaginable joy as well as unparalleled despair. We do our best to try to comfort our clients and ask them to remember the good times, however that’s easier said than done. It takes more than words; it takes a certain level of resilience when coping with the loss of a loved one. It’s not easy. It never is, but we’re here to help you through the difficult times.

For Sheryl Sandberg, resilience helped her survive the shocking death of her husband while on vacation. Sheryl Sandberg is synonymous with Facebook and Silicon Valley success, and she’s the voice of Lean In. Together with the psychologist Adam Grant, his friendship — and his research on resilience — they share what they’ve learned about planting deep resilience in ourselves and our children, and even reclaiming joy.

Read the full article at: Resilience After Unimaginable Loss – Sheryl Sandberg Interview

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Bypassing the Bypass Trust

CunninghamLegal – The Living Trust Lawyers

In this article, Stephen M. Wood, Attorney in our Camarillo and Ventura County office discusses A-B Trusts and why you should consider having your trust reviewed by an Attorney now.

Bypassing the “B” Trust

Under the current estate tax regime, it is often unnecessary for a married couple to have what is commonly called an A-B Trust. The “A” portion being the “Survivor’s Trust” and the “B” portion being the “Bypass Trust.” The A-B Trust presents a number of tax, cost and other problems that can easily be avoided when both spouses are living, but even if one spouse has died, there are legal strategies that can help.

When a Bypass Trust may still be needed

I won’t cover all the reasons why a Bypass Trust may still be needed, but, simply put, if a married couple is very high net worth (think top 1%), they should probably still have a Bypass Trust. In an uncertain estate tax law environment though, even if a trust should have provisions for a Bypass Trust, it should provide some flexibility for the surviving spouse to not fund the Bypass Trust if it doesn’t make any sense tax-wise. President Trump’s current tax plan gets rid of the estate tax altogether, but other than a repeal of the estate tax, other details are murky.  What if the estate tax is repealed and portability goes away, but the estate tax is brought back years later after one spouse has already died during the repeal? What if the estate tax exemption increases even further? Or, decreases? Since no one has a crystal ball, flexibility in the trust is your best friend.

Disadvantages of a Bypass Trust

Some of the disadvantages of a Bypass Trust include (take a deep breath!) no adjusted cost basis for Bypass Trust assets on the surviving spouse’s death, the cost to allocate assets to the Bypass Trust when the first spouse dies, ongoing administration costs of administering the Bypass Trust, the Bypass Trust cannot be changed by the surviving spouse and a principal residence in a Bypass Trust does not qualify for the IRC 121 exemption. Not having an adjusted cost basis when the surviving spouse dies can cause the heirs thousands in capital gains taxes.

I recently handled a case where there had been significant appreciation of the Bypass Trust assets since the first spouse died. If the heirs were to sell the appreciated property after the surviving spouse dies, it would result in over $100,000 in capital gains taxes. Fortunately, we were able to amend the Bypass Trust in court, which amendment will result in the Bypass Trust assets receiving an adjusted cost basis upon the surviving spouse’s death.

How to get rid of the Bypass Trust

What if you don’t need a Bypass Trust, but you still have one? If both spouses are living, getting rid of an A-B Trust is as simple as amending and restating their current trust. However, when one spouse has already passed away, amending the trust is no longer an option because the Bypass Trust is irrevocable. However, an irrevocable trust can be modified in court in a way which results in an adjusted cost basis on the surviving spouse’s death, like in the above example. This strategy is not for every client with a Bypass Trust, but there are other options that may be available depending on the terms of the trust.

If you know someone with an A-B Trust and both spouses are still living, please encourage them to have their trust amended right away. And if you know someone who already has a Bypass Trust that was established when their spouse died, it would be my pleasure to help them explore their options to get rid of it.

For more information call Stephen at 805-484-2769.

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Families Spend More To Care For Their Aging Parents Than To Raise Their Kids

CunninghamLegal – The Living Trust Lawyers

This is an eye-opening article from Forbes on the cost of caring for aging parents. You might be surprised to read that it costs families more to care for a frail older adult than to raise a child for the first 17 years of her life. Planning for these costs now will prepare you and your family for the future.

Read the entire article here: Costs of Caring for Aging Parents

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Stephen P. Bezaire Clients – Welcome to CunninghamLegal

CunninghamLegal – The Living Trust Lawyers

We have had the pleasure of spending time with Stephen Bezaire and his team and are honored that he has entrusted his successful, long-standing practice to us at CunninghamLegal. Our shared passion for the law and estate planning bode well for a smooth and seamless transition as Stephen heads to a well-deserved retirement.

Most important is that we assure you that your estate and financial planning are in safe hands. For more than twenty-two years, CunninghamLegal has helped clients like you with living trusts, estate planning, trust law, probate law, and elder law including Medi-Cal and VA benefits planning. As Stephen mentioned, your existing estate plans will not be impacted by this transition; the staff in Pasadena will still be here to help you, and our CunninghamLegal team is at your disposal.

We understand that the relationship you have with your lawyer is a personal one, and we look forward to meeting you and gaining your trust.

Sincerely,

James L. Cunningham, Jr.

Attorney at Law

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Is Hiring a Specialist a Good Idea?

CunninghamLegal – The Living Trust Lawyers

When I was going to law school, I often received calls from family members and friends with legal questions they had ranging from contracts, landlord-tenant issues, divorce, personal injury, workers compensation and the list goes on. I would try my best to help answer someone’s legal question, but I quickly realized that it is impossible for an attorney to know everything about the law. There are millions of pages of state laws, federal laws and even more pages of published court opinions interpreting laws. Just like you would see a cardiologist for a heart problem because they listen to heartbeats all day long, you should hire an attorney to do your estate plan who solely does estate planning.

However, if you are looking for an attorney, how can you be assured that the attorney you are speaking to understands your legal concerns and knows how to help? Any attorney can say they practice a specific field of law, but how can you be assured that they really do? The State Bar of California, the certifying authority for attorneys, developed a “certified specialist” program so that it is easier for you know that you are hiring someone who is an expert in their field. I recently obtained my certified specialist designation in estate planning, trust and probate law, which is no small feat. As the State Bar puts it:

“A Certified Specialist is more than just an attorney who specializes in a particular area of law.  An attorney who is certified by the California State Bar as an Estate Planning, Trust & Probate Law Specialist must have:

  • Taken and passed a comprehensive full-day written examination in estate planning, trust, and probate law administered by the State Bar Board of Legal Specialization;
  • Demonstrated a high level of expertise and requisite number of years of experience in estate planning, trust, and probate law;
  • Fulfilled mandated ongoing education requirements in estate planning, trust, and probate law;
  • Been favorably evaluated by other attorneys and judges familiar with his or her estate planning, trust, and probate work.”

Out of 190,000 attorneys in California, only 1000 of them are certified as specialists in estate planning, trust and probate law. That is only 0.5% of attorneys. From the State Bar again – “Whether your situation is simple or complex, consider hiring an attorney who is a ‘Certified Specialist in Estate Planning, Trust & Probate Law’ by the State Bar Board of Legal Specialization – an attorney who is committed to maintaining skill and expertise in estate planning, trust, and probate law through continual attention and continuing education.

Stephen M. Wood is an Attorney in our Camarillo office. For more information about hiring an attorney who specializes in Estate Planning, Trust and Probate Law, call Stephen at 805-484-2769.

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Should You Settle?

CunninghamLegal – The Living Trust Lawyers

Ever hear this, “Don’t Settle,” or better yet, “Never Settle!” ? 

These may be wise words to follow in certain aspects of your life, but what about your legal life, or specifically, your inheritance?

After a person dies and their estate is being administered, unforeseen circumstances can arise that affect distribution of the estate.  Such factors can include ambiguities or errors in the estate plan, changes in the law, problems with specific assets, and unfortunately – disagreements among heirs.  Sometimes, due to a combination of these factors, it is not possible to satisfy each person’s desire (or opinion) as to the distribution of the estate.  When there is a Trust, a settlement among the heirs/beneficiaries can be useful to resolve some of these challenges.  Although settlement can also be an option in a Court administered probate, that process has parameters which are outside of the scope of this article.

In a privately administered trust, a trustee (often a family member) is the fiduciary named in the trust who will gather the assets, pay expenses, perhaps liquidate assets and prepare the estate for distribution. Say, for example, the trust contains the long-time family residence, cash accounts, investments, and dad’s classic 1959 Chevy convertible.  The trust says to distribute all property “equally to my children who survive me.”  Let’s add to our hypothetical that the family wants to hold on to the home and one child wants the ’59 Chevy.  What options does the Trustee have?

It would be the trustee’s right to sell all of the assets and merely hand out checks in equal amounts to each beneficiary.  However, this could cause a great amount of discontent among the beneficiaries.  If the trustee is a family member, this could cause anger and resentment for years to come, if not forever.  Let’s look at a few of the options available to the trustee.

  • The trustee could ask a court how the trust should be distributed.  This is not necessarily a lawsuit.  The court sits in an administrative role and is empowered to instruct the trustee.  Instructing the trustee and determining how trust property should pass are two of the Court’s specific powers pursuant to Probate Code § 17200.   The details of a 17200 Petition will be laid out in a future blog.
  • Effective January 1, 2017, a trustee may use the Notice of Proposed Action for preliminary and final distributions.  Found in Probate Code §§ 16500 – 16504, the Notice of Proposed Action relieves the trustee of liability for taking specific actions.  The actions must be described in the Notice, and the Notice must be provided to all affected beneficiaries.  Using this process for trust distributions was specifically prohibited until January 1, 2017.  Using our example above, a Notice of Proposed Action can now be issued describing the proposed distribution and/or sale of the house and the ’59 Chevy.  The trustee might seek input from the family members prior to issuing the Notice.  If no beneficiary objects within 45 days of receipt of Notice, the trustee can be confident in taking the described action. If a timely objection is received, the trustee may then choose to file the matter for court determination.
  • Now, let’s look at the settlement option.  Similar to other litigation, a trust settlement tells the “story”, describes the issues, and sets forth the solution.  A trust settlement specifically lays out the provisions of the trust, the beneficiaries, the assets, the distributions outlined in the trust, and the distribution the beneficiaries have agreed upon.  The proposed settlement still must conform to the letter and spirit of the trust document.  Each beneficiary may retain their own attorney (at their own cost) to review the settlement and provide input and suggestions.  This is often a good idea to avoid second thoughts or confusion later.  The settlement could say that one beneficiary will receive the ’59 Chevy, and the remaining beneficiaries will own the home together and rent it out.  It may also direct to sell certain assets or a buy out of the house by one child.  It would reconcile how the estate will be equally allocated in light of the distribution.   If the beneficiaries come to this agreement, the settlement can be signed, which can include a release of liability for the trustee.  The trustee is then free to make the distributions.[1]

If there is remaining animosity, the trustee may still file the settlement with the court for approval.  The difference here between bringing a settlement to court and filing a Probate Code §17200 Petition for instructions is that as to the settlement, the court is being asked to approve and ratify the agreement.  In a 17200 Petition, the Court would make its own determination as to how the trust should be distributed.

So, settling is not always bad and shouldn’t be avoided.  CunninghamLegal handles simple and complex trust administration for clients throughout California.  Please contact us to discuss your trust drafting and administration needs.

Written by:

Preston A. Marx, III
Attorney at Law
www.cunninghamlegal.com

530-269-1515

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[1] There are other statutory requirements such as a trustee accounting that must be complete prior to distribution.  The trustee must complete all required tasks prior to distribution, even if there is a settlement. Those tasks are outside the scope of this article.

 

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Estate Tax and Gift Tax Coming to an End?

CunninghamLegal – The Living Trust Lawyers

The year 2017 is bringing changes to the estate and gift tax exemption, the annual exclusion as well as a possible repeal of the estate tax due to President Trump and a Republican majority in Congress.

The estate and gift tax exemption is increasing this year as expected. As a refresher, the estate and gift tax is a tax on the transfer of assets either during life (gift tax) or at death (estate tax). The new exemption amount allows an individual to give away during life or at death $5.49 million without being subject to the tax. A married couple can double their exemption amount with portability, but portability requires the surviving spouse to make the election on a timely filed estate tax return (9 months after their spouse’s death).

The annual gift tax exclusion is still $14,000. The annual gift tax exclusion is the amount of money you can give away without being subject to gift tax. For example, if an individual gives $16,000 away, then they will have to report $2,000 of the gift ($16,000 minus the gift tax exclusion) on a gift tax return, thus, using a sliver of their $5.49 million of exemption.

President-elect Trump and the Republicans in Congress have their sights on a repeal of the estate tax, so 2017 may bring some historic changes. Interestingly, there has been little to no mention of repealing the gift tax. With the outgoing estate tax, there may be incoming changes for step-up in basis rules. However, like the current estate tax, the step-up in basis rules will have little impact on the vast majority of Americans. Trump’s tax plan will cap a step-up in basis on capital gains up to $10 million held at death (currently unlimited) and disallow contributions of appreciated assets into private charities.

Written by: Stephen M. Wood | Attorney at Law | CunninghamLegal | Camarillo Office | www.cunninghamlegal.com |  (805) 484-2769