You Can't Trust a Junky Trust

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"Living trusts are the junk bonds of the estate planning profession." So states a former probate department judge. You may wonder why a judge would say such a thing. Most people know that a revocable living trust may be used to minimize federal estate taxes on estates in excess of $600,000. Additionally, a primary benefit of living trusts in California is avoidance of probate.

In California, if you have gross (not net) assets over $60,000 (not $600,000), the Probate Code requires your estate be subjected to probate. There are exceptions, depending on how your assets are titled. In California, the average cost of probate administration is 8% of the gross estate and the average probate takes eighteen months to complete.

Many people attempt to avoid probate by holding their assets in joint tenancy. They may not realize the risks and tax implications involved in joint tenancy. A properly drafted, properly funded, living trust will avoid probate and the risks of joint tenancy.

So, why did that judge compare living trusts to junk bonds? Because there are many unqualified people drafting living trusts. An improperly drafted trust can cost your heirs as much or more time and expense than probate. Even a trust drafted by an attorney may be defective, especially if the attorney does not regularly practice estate planning or if the attorney is one who has a high volume practice which does not consider the individual circumstances of each client.

My husband and I were victims of a high volume attorney. My husband is an optometrist, an SCCO alumni. While I was in law school we went to an attorney my husband knew to have our trust drafted. After I became an attorney, one of my first estate planning clients was an optometrist friend and his wife. Fortunately, I took the time to do some research before drafting their trust. I discovered the Business and Professions Code states a business requiring a specialized license can only be transferred to a qualified transferee. This law applies to a wide range of professions, including optometrists.

I thought to myself, "I'll just look and see how our trust is drafted." To my horror, our own trust completely ignored this issue. Our trust treated my husband's optometric practice as a regular business. Without proper amending, our trust would have been invalid.

There is no such thing as "one size fits all," in estate planning. It is imperative that your attorney is an estate planning attorney and that he or she has taken the time to get to know your unique situation and that your documents fit your individual circumstances. Before choosing an estate planning attorney, it is a good idea to interview more than one attorney. Many will provide a short consultation, free of charge.

The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.

Copyright 2011 © by Jacqueline M. Skay. All rights reserved. You may reproduce materials available at this site for your own personal use and for non-commercial distribution. All copies must include this copyright statement.

Estate and Trust Law
A Professional Law Corporation

Jacqueline Skay - Attorney at Law

760.745.7576
jskay@estateandtrustlaw.com

You Can't Trust a Junky Trust

Click here to return to Our Newletter.

"Living trusts are the junk bonds of the estate planning profession." So states a former probate department judge. You may wonder why a judge would say such a thing. Most people know that a revocable living trust may be used to minimize federal estate taxes on estates in excess of $600,000. Additionally, a primary benefit of living trusts in California is avoidance of probate.

In California, if you have gross (not net) assets over $60,000 (not $600,000), the Probate Code requires your estate be subjected to probate. There are exceptions, depending on how your assets are titled. In California, the average cost of probate administration is 8% of the gross estate and the average probate takes eighteen months to complete.

Many people attempt to avoid probate by holding their assets in joint tenancy. They may not realize the risks and tax implications involved in joint tenancy. A properly drafted, properly funded, living trust will avoid probate and the risks of joint tenancy.

So, why did that judge compare living trusts to junk bonds? Because there are many unqualified people drafting living trusts. An improperly drafted trust can cost your heirs as much or more time and expense than probate. Even a trust drafted by an attorney may be defective, especially if the attorney does not regularly practice estate planning or if the attorney is one who has a high volume practice which does not consider the individual circumstances of each client.

My husband and I were victims of a high volume attorney. My husband is an optometrist, an SCCO alumni. While I was in law school we went to an attorney my husband knew to have our trust drafted. After I became an attorney, one of my first estate planning clients was an optometrist friend and his wife. Fortunately, I took the time to do some research before drafting their trust. I discovered the Business and Professions Code states a business requiring a specialized license can only be transferred to a qualified transferee. This law applies to a wide range of professions, including optometrists.

I thought to myself, "I'll just look and see how our trust is drafted." To my horror, our own trust completely ignored this issue. Our trust treated my husband's optometric practice as a regular business. Without proper amending, our trust would have been invalid.

There is no such thing as "one size fits all," in estate planning. It is imperative that your attorney is an estate planning attorney and that he or she has taken the time to get to know your unique situation and that your documents fit your individual circumstances. Before choosing an estate planning attorney, it is a good idea to interview more than one attorney. Many will provide a short consultation, free of charge.