In short, the answer to this question is that you will very likely need an estate planning attorney to draft a reliable estate plan.
I have been in practice for over 36 years, and in that time, I have never really found an online or self-help service that adequately prepared the documents in an estate plan such that they completely suited a client’s needs.
This is because the act of creating an estate plan is highly specialized and more involved than most people realize. An adept estate planning attorney will start their process by sitting down and properly interviewing their client. They use the information they get from the interview to start putting together an estate plan—not the other way around.
This way, the estate planning attorney will be able to gear the estate plan toward the unique needs of the client or clients from the outset. If there are unique circumstances that need to be accommodated—say, if a couple has a special needs child, or one of the beneficiaries is not very good with money and needs a more structured payout—the estate planning attorney can craft the estate planning documents to make the necessary accommodations.
None of these particularities or issues are ever addressed in the boiler plate online and self-help forms. Most of these forms will assign you a trust no matter what your estate looks like. Typically, I’ve found that 60%-70% of those trusts end up going to probate anyway, often because they were not properly set up or funded. If the whole purpose of setting up a trust is to avoid probate, then the high failure rate of online-drafted trusts immediately defeats the purpose. If you don’t have a qualified person drafting and reviewing your trust, it may be impossible for you as a layperson to spot errors. You may walk away from an online estate planning session with a faulty document or documents, which may cause a rude awakening upon the document-drafter’s death.
Should High-Net-Worth Individuals In California Be Keeping An Eye On Estate Planning Laws?
The main concern of most of my high-net-worth clients is avoiding estate tax, which is now at about $24 million. There are other estate planning issues that are of particular importance to high-net-worth people, such as trying to minimize taxes by setting up a specialized house trust or an irrevocable trust with their children.
Those kinds of issues are important to address as soon as possible during the lifetime of the estate holder, because once that person dies, any of their basic trusts become irrevocable, and we can’t change anything about them.
Typically, I counsel clients by asking the following questions:
- What are your needs?
- What are you looking to do? What are your goals?
- Who do you want to take care of?
- Is there anyone who cannot take care of themselves? How would you like to provide for them?
Many people do not realize this, but we can create estate plans around anything that affects a person’s estate, including difficult personalities. For instance, let’s say there is a potential beneficiary who can’t fully take care of themselves who has an aggressive spouse. Let’s say that spouse is looking to manipulate the incapacitated heir into giving up their inheritance to her. In a case like that, we can address the full gamut of a person’s concerns, needs, and issues with a bespoke estate plan. We set up financial vehicles that will ensure that all vulnerable parties are able to receive their inheritance in a way that is protected from predation. As a whole, we create estate plans that address and meet our clients needs, as well as the needs of their beneficiaries.
What Exactly Is A Special Needs Trust? Who Are Special Needs Trusts Intended For?
There are a few different kinds of Special Needs Trusts. Historically, Special Needs Trusts are meant for a people who have some sort of medical issue—whether physical or emotional/mental—that makes them incapable of taking care of themselves on a day-to-day basis.
Many of the people for whom these sorts of Special Needs Trusts are designed receive some sort of state or federal aid. Since this sort of aid is often income-based, if a recipient inherits a substantial amount of money, they may be disqualified from the aid program.
Some types of Special Needs Trusts exist to serve as the “owner” of an inheritance. This way, heirs can benefit from an inheritance without that inheritance disqualifying them from the basic aid, services, and care they need. Heirs are often given some access to the resources in the trust in a way that does not jeopardize their ability to access government funds or programs.
Another type of Special Needs Trust can be set up to continue providing support (or to hire adequate care and support staff) for a person with special needs after their parent or caretaker dies. We can draft Special Needs Trusts for use while the caretaker or parent is still alive, or can earmark the trust for use after the parent or caretaker’s death so that the special needs person will have access to resources and care they might need in the future.
Are There Ways That I Can Protect My Assets For Surviving Parents, Spouse Or Children In California?
Asset protection area is a very delicate area. There are definitely laws—both state and federal—that prohibit someone who already has a judgment or pending judgement against them from creating a vehicle to avoid paying that debt. This is referred to a “fraud on creditors.”
With that in mind, so long as the situation does not veer into fraud on creditors territory, there are ways to create limited asset protection. A person without liabilities, judgements, or pending judgements against them may be able to transfer their assets to certain type of irrevocable trust, so that they no longer technically own those assets. Once the assets are transferred into the trust, they can be used by whoever is named as the beneficiary of the trust.
It is very important to note that the trustees for such a trust have to be selected very carefully. The person who created the trust cannot act as a trustee, nor can a beneficiary or any person associated with a beneficiary. Rather, trustees must be neutral third parties.
I have seen many people inadvertently stymie themselves by making themselves the trustees of these sorts of trusts. Eventually, the Court comes in and examines these cases and finds that the trusts are void, because the grantor is still basically controlling the assets in the trust.
Another vehicle that is sometimes used for asset protection is called a creditor and predator trust. These are revocable trusts for children. When the parents of the child-beneficiary away, the assets meant for the beneficiary would continue in what is called a “sub-trust.” Notably, sub-trusts are not owned by the beneficiary, so neither creditors nor manipulative spouses or third parties can access the assets (hence the name “creditor and predator”).
We typically make “creditor and predator” trusts in situations where an independent third-party is controlling the assets in the trust. That way, if there’s a judgment against the beneficiary, no one has access to the principal.
Typically, “creditor and predator” trusts give the beneficiary payments of the earnings or interest on those proceeds over a period of time, which allows them to live without having to jeopardize the principal (or what we call the “corpus of the assets.”)
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