Independent Trustee is a Special Trustee

Not all trustees are independent and not all trustees are special… but the terms “independent trustee” and “special trustee” have the same meaning in estate planning. They are an unrelated and economically disinterested person with limited authority in a trust. Not all trusts will have such a trustee as the vast majority of trusts just have a standard trustee. However, in some situations this special trustee is advisable.

In one of the trusts the term is defined as:

An Independent Trustee or Special Trustee shall mean a Trustee who is neither a Beneficiary of any trust established under this instrument nor a person who has transferred or joined in the transfer of property to the trust estate.  If a General Power of Appointment held by a Beneficiary of a trust may only be exercised with the consent of the Independent Trustee, the term Independent Trustee also means a person who does not have a substantial interest in the property subject to the power which is adverse to the exercise of the power in favor of the Beneficiary, the Beneficiary’s estate, the Beneficiary’s creditors, or the creditors of the Beneficiary’s estate.  If at any applicable time no Trustee then serving is an Independent Trustee, the first successor Trustee named or designated herein shall serve as the Independent Trustee for the sole purpose of exercising or not exercising the Independent Trustee’s powers.  If no successor Trustee named or designated herein would qualify as an Independent Trustee, the then serving Trustee shall petition the Court having jurisdiction over the internal affairs of this trust for the appointment of an Independent Trustee for the sole purpose of exercising or not exercising such powers.

In that same trust, later on the document names the Independent or Special Trustee with the following language

For any trust created herein, but only during the lifetime of the Settlor(s), the Settlor names as Special Trustee and successor Special Trustee, in the order and priority indicated, the persons listed below. The Special Trustee’s duties shall be limited to the exercise of discretion under this trust, and the Special Trustee shall not be concerned with other aspects of trust administration. The Special Trustee shall receive reasonable compensation.   Any Special Trustee may resign. The Special Trustee is JOHN DOUGH. If Mr. Dough is unable to act the Settlor(s) reserve the right to name a new Special Trustee provided that the new Special Trustee is not a related party as defined by IRC Section 672(c).  Notwithstanding anything herein to the contrary the Special Trustee shall specifically have the following powers exercisable as related to the children, and subsequent heirs, of the Settlor(s):

                        i.    the right to modify or amend the trust instrument to achieve favorable tax status or respond to changes in the Internal Revenue Code, state law or the rulings and regulations there under;

                        ii.   modify the terms of any power of appointment granted by the trust (although a modification or amendment may not grant a beneficial interest to any individual or class of individuals not specifically provided for under the trust instrument);

                        iii.  power to remove and name a new Trustee, trust advisor, investment committee member or distribution committee member;

                        iv.  terminate the trust;

                        v.   veto or direct trust distributions;

                        vi.  change situs or governing law of the trust, or both.

                        vii. appoint a Successor trust protector

                        viii. interpret terms of the trust instrument at the request of the Trustee; and

                        ix.  advise the Trustee on matters concerning a beneficiary. 

Hopefully this helps you to know why these trustees are special and independent   If you want to discuss how such a trustee could improve YOUR estate plan let me know.


Estate Planning Legacy Discussion – Random Points

Estate planning is on my brain just about 24/7 and 365. I occasionally give my brain a day off but not often. I thought today I would just post some discussion points or, to put another way, things you should be thinking about in regards to your own estate plan:

– How would you like your assets distributed when you are gone?

– Who will be the physical guardian of your kids?

– Who will take care of your kid’s money if they aren’t old enough?

– Do any of your heirs have special needs?

– Do any of your heirs receive governmental assistance of any kind?

– Would a random drug testing clause make sense for any of your heirs to protect them from themselves?

– Are there any charities, religious or educational organizations you want to benefit?

– Who’s the beneficiary of your 401k?

– What about the contingent beneficiary?

– Do you want to be on life support if you are in an irreversible coma?

– Do you have a business that needs to be included in your estate plan?

– Are there any advanced estate planning tools that you should consider?

The list goes on and on so get your plan started now with an estate planning professional!

Who is entitled to notice in a California Probate case?

It’s not always crystal clear who is entitled to notice in a California probate case. Let’s start with a basic premise that over-noticing is probably better than under-noticing. If it’s a gray area, in the notice rules, I usually suggest you give notice.

Basic Rule #1: If there is a will give notice to every single person named in the will.

Basic Rule #2: If there is a trust give notice to every single person named in the trust.

Ok, those two rules are easy. Who else is entitled to notice?

California probate code 1206 says to give notice to all “heirs.”  Ok, then who are “heirs?”

California probate code 248 et seq talks about heirs and who is entitled to notice. Basically it’s family tree on down. So let’s say there are 3 children. All 3 children get notice. Let’s say one child dies leaving four kids of his own. Then the 2 kids get notice and the 4 grandkids. Plus, if any of them are minors then the minor’s guardian gets notice. This leads to the most important rule of probate Court notice:

Basic Rule #3: Give notice to all potential recipients of the estate, as if there was no will, even if there is a will or trust.  Let me repeat, ALL!

Ok, what if there is step child do they get notice? Probate code 1207 would suggest in the negative unless there is reason to be believe they would have been adopted.

What about a step-sibling of the decedent? Oh boy, this is a tough one for people. The toughest thing in all of the rules of intestate succession. If a person dies with no kids and money is to be distributed to their siblings half-bloods (even if they NEVER met them) are the same as full bloods. Yes, really. (See probate code 6406).

What about a child of a decedent born after the decedent dies? You think I am joking!? See California probate code section 249.5. It’s a long probate section about this exact situation. Yes, really!

I have give you 3 basic rules and a few other tidbits. The key is talk to a good attorney and keep yourself out of trouble!


5 Steps to a complete ESTATE PLAN

Estate planning is overwhelming to some. In my office we try to distill it down to the basics to make it something people can complete.  There are basically five steps in the process.

1) GOALS: We need to discuss what YOUR goals are.

2) INFORMATION: We need to gather and organize YOUR information.

3) ANALYZE: We need to analyze and discuss YOUR situation.

4) OPTIONS: We need to analyze and discuss the options that might work for YOU.

5) IMPLEMENT: We need to sign and organize YOUR estate plan.

Let’s get together to talk about YOU and YOUR estate plan soon!  -John

National Estate Planning Week 2012

I was excited to see that October 15-21 is National Estate Planning Week. I read the article on theNAEPC website.  Use this as a push to get YOUR affairs in order. The website indicates over 1/2 of American adults do not have an up-to-date estate plan. Do YOU?

Basic Estate Planning is necessary for everybody

As an estate planning attorney, since 1994, I have met with a lot of perspective clients. I have helped thousands of families with my estate planning services. In all that time I think I am yet to meet someone that doesn’t need some type of estate planning document.  This is because estate planning is so much more than giving away your money. It’s also about naming a guardian for your kids, determining who will make health care choices for you, determining if you will remain on life support, determining if you will be cremated or not, and on and on the list goes.

If you have assets of low monetary value but they are important to you then a simple will is crucial. It will lay out who gets your treasures.

If you have no assets but care about not remaining on life support for a pro-longed period of time then you should have an Advanced Health Care Directive; sometimes called “Living Wills” or “Medical Power of Attorneys.”

If you want to make sure someone can take of your day to day financial, and quasi-financial, needs you should have a financial or “durable” power of attorney.

Talk to a qualified estate planning attorney to make sure your affairs are organized correctly!


Best States for Dynasty Trusts – 2012

Each year my law school classmate, Steve Oshins, puts out a list of the top states to use for a “dynasty trust” and for a asset protection trusts. He just released his dynasty trust rankings.

A dynasty trust is a trust designed to live as long as possible, from generation to generation, or a “Rockefeller Trust” as I like to call them. The government, long ago, determined that creating a taxable event at each death was important… and likewise smart attorneys came up with ways around the tax.  The dynasty trust is the best way to pass wealth, for many generations, without tax.

Steve Oshins, a 1994 graduate of the McGeorge School of Law (University of Pacific), like me, is one of the nation’s foremost experts on dynasty trusts. He has been quoted in major publications like Forbes and the Wall Street Journal.  Steve often speaks about dynasty trusts and each year publishes his ranking of the top states to house your dynasty trust. Here is the link to Steve’s latest rankings.

Dogs in estate plans

I had the pleasure of attending the Placer SPCA’s Barktoberfest events this weekend in Roseville. We took our dog Coco. I must say that Coco had a dog-gone good time there!  I actually could make a long post about how much fun Barktoberfest was but that’s not the point of my post. If you have a dog, a horse, a cat, a fish, a bird, or any other animal that you want to provide for at your death what are your options? What can you do to make sure they are taken care of after you become incapacitated or die?  Notice I include incapacity because that’s an issue not to ignore!

We all agree, no matter how smart your dog is, you can not just give them money.  The average dog may be better with money than the average 18 year old boy but still you shouldn’t leave them an inheritance. So what are some options:

1) Give your pet and money to a friend. Yes, that simple. It can be in your will or trust. “I give Fido and $5,000 to my friend Betty.”  Done.

2) A pet trust is not common but it’s a viable option. The money can be left in trust pursuant to California probate code 15212. This is a little more complex than the above but it works and is suitable for larger gifts.

3) Leave your pet to a care home and make a donation to that home.

There are options so meet with a qualified estate planning attorney and discuss them!

John Palley to speak on estate planning

I have spoken to many groups in the last 18 years.  From small town gatherings in Davis, Dixon, Sacramento, Roseville and the list goes on. To large groups at Lyon, Rotary and SIRS (Seniors in Retirement). I have taught classes to attorneys, paralegals and financial planners on estate planning, probate and trust matters. I have taught several classes for UC Davis Extension and recently spoke at a UC Davis MBA class.  My latest speaking engagement is at the Lyon Real Estate Fun Realtor Education Day (FRED) on October 15, 2012. Here is the press release if you are interested in more details.  -John

Estate Planning Window Closing….

As the year progresses toward December 31st one of the biggest estate planning opportunities in modern history is getting set to expire.  The Bush era tax cuts, as modified in December 2010, created an unprecedented FIVE MILLION DOLLAR GIFT TAX EXEMPTION.  This exemption, now $5,120,000, is set to expire at year end.

The estate tax can quickly eat 50% of your assets of death… even if you have a living trust. Yes, a living trust does not, in and of itself, avoid estate tax! You need to do more if you have a potentially taxable estate. As of today you would need to have more than $5,120,000 to be estate taxable but that number is set to shift to $1,000,000 on January 1, 2013. Yes, just one million and that includes life insurance and retirement accounts!

If your total estate may be worth more than $1,000,000 on January 1, 2013 then you need to look at your estate plan NOW!  THIS YEAR. Do not wait!

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