10 Types of Trusts: A Quick Look

Considering the myriad of trusts available, creating an estate plan that works can seem daunting.  However, that’s what we, as estate planning attorneys, do every day. We know the laws and will design a plan which addresses your specific situation. 

Here’s a look at the basics of ten common trusts to provide a general understanding. There will not be a quiz at the end. All you need to do when we meet is share your goals and insight into your family and financial situation, we’ll design a plan that incorporates the best documents for your situation.

1. Bypass Trusts. Commonly referred to as Credit Shelter Trust, Family Trust, or B Trust, Bypass Trusts do just that: bypass the surviving spouse’s estate to take advantage of tax exclusions and provide asset protection. 

2. Charitable Lead Trusts. CLT's are split interest trusts which provide a stream of income to a charity of your choice for a period of years or a lifetime. Whatever’s left goes to you or your loved ones.

3. Charitable Remainder Trusts. CRTs are split interest trusts which provide a stream of income to you for a period of years or a lifetime and the remainder goes to the charity of your choice. 

4. Special Needs Trusts. SNT's allow you to benefit someone with special needs without disqualifying them for governmental benefits. Federal laws allow special needs beneficiaries to obtain benefits from a carefully crafted trust without defeating eligibility for government benefits.

5. Generation-Skipping Trusts.  GST Trusts allow you to distribute your assets to your grandchildren, or even to later generations, without paying the generation-skipping tax.

6. Grantor Retained Annuity Trusts. GRAT's are irrevocable trusts which are used to make large financial gifts to family members while limiting estate and gift taxes.

7. Irrevocable Life Insurance Trusts. ILIT's are designed to exclude life insurance proceeds from the deceased’s estate for tax purposes. However, proceeds are still available to provide liquidity to pay taxes, equalize inheritances, fund buy-sell agreements, or provide an inheritance.

8. Marital Trusts. Marital Trusts are designed to provide asset protection and financial benefits to a surviving spouse. Trust assets are included in his or her estate for tax purposes.

9. Qualified Terminable Interest Property Trusts.  QTIP's initially provide income to a surviving spouse and, upon his or her death, the remaining assets are distributed to other named beneficiaries. These are commonly used in second marriage situations and to maximize estate and generation-skipping tax exemptions and tax planning flexibility.

10.  Testamentary Trusts. Testamentary Trusts are created in a will. These trusts are created upon an individual's death and are commonly used to provide for a beneficiary. They are commonly used when a beneficiary is too young, has medical or drug issues, or may be a spendthrift. Trusts also provide asset protection from lawsuits brought against the beneficiary.

There are many types of trusts available. We’ll help you select which trusts, if any, are a good fit for you. If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Wills, Trusts & Dying Intestate: How They Differ

Most people understand that having some sort of an estate plan is, as Martha Stewart would say, a “good thing.” However, many of us don’t take the steps to get that estate plan in place because we don’t understand the nuances between wills and trusts – and dying without either.

Here’s what will generally happen if you die, intestate (without a will or trust), with a will, and with a trust. For this example, we’re assuming you have children, but no spouse:

A. Intestate. If you should die intestate, your estate will go through probate and all the world will know what you owned, what you owed, and who got what. Your mortgage company, car loan company, and credit card companies will all seek payment on balances you owed at the time of your death. 

 After that, state law decides who gets what—and when. 

1. For example, if your only heirs are your children and you have not provided any instructions, state law will mandate divvying up proceeds equally. 

2. Your older children will get their shares immediately if they’ve attained adulthood.

3. But, the court will appoint a guardian to manage the money for your minor children until they become adults. 

4. Shockingly, that guardian can charge a lot of money and be a total stranger - as can the guardian who raises your child.  

5. Yes, if you die without a valid will, the court, not you, will decide who raises your minor children.

Keep in mind that since your death has been published to alert valid creditors, it’s not uncommon for predators (fake creditors) to come forth and make demands for payment – even if they’re not owed anything. 

The bottom line: Dying intestate allows state law and the court to make all the decisions on your behalf – regardless of what your intent might have been. Publicity is guaranteed.

 B. Will. If you should die with a valid will, your assets will still go through the probate process. However, after creditors have been satisfied, the remaining assets go to whom you’ve identified in your will. 

 1. So, if you want to leave money to your children and name a guardian for the minor ones, the court will usually abide by your wishes. 

2. The same holds true if you specified that you wanted to give assets to a charity, your Aunt Betty, or your neighbor. 

3. Keep in mind that predatory creditors are still an issue as your death has been publicized. Even with a will, probate is a public process.

The bottom line: While a court oversees the process, having a will allows you to tell the court exactly how you want your estate to be handled. But, a public probate is still guaranteed.

 C.Trust. If you’ve created a trust, you’ve taken control of your estate plan and your assets.  Trust assets are not subject to the probate process and one of the most important benefits of trusts is that they are private. Notices are not published, so you avoid predators coming after your estate. 

You’ll have named a trustee to manage your estate with specific instructions on how your assets should be dispersed and when. 

1.One word of caution – trusts must be funded in order to bypass probate. 

2.Funding means that your assets have been retitled in the name of your trust.

3.Think of your trust as a bushel basket. You must put the apples into the basket as you must put your assets into the trust for either to have value.

You do still need a will to pour any assets inadvertently or intentionally left out of your trust and to name guardians for minor children.

The bottom line: Trusts allow you to maintain control of your assets through your chosen trustee, avoid probate, and leave specific instructions so that your children are taken care of – without receiving a lump sum of money at an age where they are more likely to squander it or have it seized from them.

Don’t let the will versus trust controversy slow you down. Call the office today; we’ll put together an estate plan that works for you and your family whether it be a will, trust, or both.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Wills vs. Trusts: A Quick & Simple Reference Guide

Confused about the differences between wills and trusts?  If so, you’re not alone. While it’s always wise to contact experts like us, it’s also important to understand the basics. Here’s a quick and simple reference guide:

What Revocable Living Trusts Can Do—That Wills Cannot:

1. Avoid a conservatorship and guardianship. A revocable living trust allows you to authorize your spouse, partner, child, or other trusted person to manage your assets should you become incapacitated and unable to manage your own affairs. Wills only become effective when you die, so they are useless in avoiding conservatorship and guardianship proceedings during your life.

2. Bypass probate. Property in a revocable living trust does not pass through probate. Property that passes using a will guarantees probate. The probate process, designed to wrap up a person’s affairs after satisfying outstanding debts, is public and can be costly and time consuming – sometimes taking years to resolve.

3. Maintain privacy after death. Wills are public documents; trusts are not. Anyone, including nosey neighbors, predators, and unscrupulous “charities” can discover the details of your estate if you have a will. Trusts allow you to maintain your family’s privacy after death. 

4. Protect you from court challenges. Although court challenges to wills and trusts occur, attacking a trust is generally much harder than attacking a will because trust provisions are not made public.

 What Wills Can Do – That Revocable Living Trusts Cannot:                 

1. Name guardians for children. Only a will – not a living trust or any other type of document – can be used to name guardians to care for minor children.

2. Specify an executor or personal representative. Wills allow you to name an executor or personal representative – someone who will take responsibility to wrap up your estate after you die. This typically involves working with the probate court, protecting assets, paying your debts, and distributing what remains to beneficiaries. But, if there are no assets in your probate estate (because you have a fully funded revocable trust), this feature is not necessarily useful.

 What Both Wills & Trusts Can Do:

1. Allow revisions to your document. Both wills and trusts can be revised whenever your intentions or circumstances change so long as you have the legal capacity to execute them. 

   a. WARNING: There is such as a thing as irrevocable trusts, which cannot be changed without legal action.    

 2. Name beneficiaries. Both wills and trusts are vehicles which allow you to name beneficiaries for your assets. 

 a. Wills simply describe assets and proclaim who gets what. Only assets in your individual name will be controlled by a will.

 b. While trusts act similarly, you must go one step further and “transfer” the property into the trust – commonly referred to as “funding.” Only assets in the name of your trust will be controlled by your trust.

 3.  Provide asset protection. Trusts, and less commonly, wills, are crafted to include protective sub-trusts which allow your beneficiaries access but keep the assets from being seized by their creditors such as divorcing spouses, car accident litigants, bankruptcy trustee, and business failure.

While some of the differences between wills and trusts are subtle; others are not. Together, we’ll take a look at your goals as well as your financial and family situation and design an estate plan tailored to your needs. Call us today and let’s get started.

 If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

James Brown’s Vague Estate Plan Equated To Years of Family Litigation

James Brown, the legendary singer, songwriter, record producer, dancer, and bandleader was known to many as the “Godfather of Soul.” Although he intended his estimated $100 million estate to provide for all of his children and grandchildren, his intentions were somewhat vague.  This forced his family into years of litigation which ended up in the South Carolina Supreme Court.

As an estate planning attorney, I work with my clients’ to ensure that we avoid these types of situations before they happen. In this author’s humble opinion, it is well worth spending the time up-front, to avoid the nightmares that can result later without proper planning.

Everything Seemed In Order…

Brown signed his last will and testament in front of Strom Thurmond, Jr. in 2000. Along with the will that bequeathed personal assets such as clothing, cars, and jewelry, Brown created a separate, irrevocable trust which bequeathed music rights, business assets, and his South Carolina home. 

At first glance, it seems as though everything in Brown’s estate plan was in order. In fact, he was very specific about most of his intentions, including:

1. Donating the majority of his music empire to an educational charity

2. Providing for each of his six adult living children (Terry Brown, Larry Brown, Daryl Brown, Yamma Brown Lumar, Deanna Brown Thomas and Venisha Brown)

3. Creating a family education fund for his grandchildren

However, only days after his death in 2006 from congestive heart failure, chaos erupted. 

Heirs Not Happy With Charitable Donation:

Apparently, Brown’s substantial charitable donations didn’t sit well with his heirs. Both his children and wife contested the estate.

 i. Children. His children filed a lawsuit against the personal representatives of Brown's estate alleging impropriety and alleged mismanagement of Brown's assets. (This was likely a protest of the charitable donation.)

 ii. Wife. Brown’s wife at the time, Tomi Rae Hynie, and the son they had together, received nothing as Brown never updated his will to reflect the marriage or birth. In her lawsuit, Hynie asked the court to recognize her as Brown's widow and their son as an heir. 

In the end, the South Carolina Supreme Court upheld Brown’s plans to benefit charities and recognized Hynie and their son as an heir. 

Should You Anticipate Litigation?

Brown’s estate was substantial and somewhat controversial – and he failed to update or communicate his intentions to his family.  His heirs were taken by surprise.  And experienced attorney could have avoided much of the family upset.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

The IRS Took Half of Tony Soprano’s Estate: Not The Greatest Result

Actor and producer, James Gandolfini, was famously known as the likeable mafia man Tony Soprano on the long running cable television series, The Sopranos. On the show, family meant everything. Well, sort of, anyway. In real life, Gandolfini’s family really did mean everything and he had the best intentions when it came to providing for them. 

However, he made a classic mistake by failing to take advantage of tax incentives, legal protections and opportunities. The Internal Revenue Service (IRS) ended up taking half of his estate. Don’t fall into the same trap.

An Estate Planning Attorney Could Have Saved Gandolfini Millions

When James Gandolfini died suddenly in 2013, his estate was an estimated $70 million. In addition to leaving $1.6 million to friends and relatives and bequeathing properties and land in Italy to his kids, his will was fairly straight forward. He provided:

A.   30% to one sister;

B.   30% to another sister;

C.   20% to his wife;

D.   20% to his daughter; and

E.   Separate trusts for his wife and his 13-year-old son.

Although he was very generous to his two sisters, his plan failed to take advantage of some key tax incentives and opportunities. Shockingly, the IRS ended up taking over half of his total net worth. An estate planning attorney could have saved millions of dollars that would have gone to his family instead of Uncle Sam. 

3 Ways an Estate Planning Attorney Can Help You:

It’s clear that anyone with an estate value equal to that of Gandolfini should have a knowledgeable estate planning attorney. However, you need a good estate planning attorney, too. Here are three ways an estate planning attorney can help you:

1. Assess your current financial situation. Many people don’t fully understand what they have – or how to valuate it. A good planner always starts by reviewing your tax returns, income sources, liquid and illiquid assets, wills, insurance policies, and estate and retirement planning documents;

2. Identify your goals. Identifying your goals and taking your current needs into account provides the foundation for a solid estate plan structure;

3. Develop a plan. Developing an estate plan is where we can really make a difference – especially in:

 a. Explaining how estate planning documents work;

 b. Weighing the pros and cons of each of those documents;

 c. Identifying tax issues and taking advantage of incentives and opportunities; and

 d. Creating a “network” with other professionals such as CPAs, insurance professionals, and financial advisors.

Best of all, an estate planning attorney can keep you on track by periodically reviewing your estate plan, advising you when to update your estate planning documents, and steer you in the right direction to avoid having your assets taken by the IRS.

Don’t fall into the same trap as Gandolfini.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

A Missing Will—Flo Jo’s Tragic Mistake

If you’ve created a Will, congratulations! You have made your intentions clear to the world and have provided for your loved ones based on what you determined was best. One caveat, and Rule #1 when creating your Will—make sure to tell someone where to find it! 

Olympic Gold Medalist’s Death Tears Family Apart When Will Is Lost:

Olympian sprinter Florence (Flo Jo) Griffith Joyner was considered to be the “fastest woman of all time” having broken records in the 100 and 200 meter sprints in the 1988 Olympics. She was only 28-years-old at the time. Sadly, she died ten years later from an epileptic seizure. 

Although she had created a will, it could never be located. Considered to have died intestate (without a will), it took a probate court four-years to close her case. In the end, it caused years of litigation and tore her family apart.

Where There’s No Will, There’s No Way:

Without a will to instruct a probate court as to your intentions, there is no way for it to adequately provide for and protect your loved ones. In Flo Jo’s case, a judge eventually appointed a third party to administer the estate because tensions had grown out of control between her husband and her mother.

Her mother claims Flo Jo had promised her that she could stay in the house for the rest of her life. Her husband claims that was not the agreement. Tensions only increased throughout the probate process. 

Her mother unsuccessfully sued her son-in-law for wrongful death. The two also battled in court for years over, believe it or not, setting up a charitable organization in Flo Jo’s name. The bottom line was that the bad blood between them was never resolved.

Don’t Tear Your Family Apart!

No one dreams of having their family torn apart over who gets what and when after they die.  However, as Flo Jo’s case shows, that’s exactly what happens sometimes. It’s much easier to accept someone’s wishes when you know they are accurate. 

That’s exactly what a will provides. Without one, your loved ones are left wondering about your trueintentions – which is never a good idea.

We can help you create an estate plan which best fits your needs. Avoid tearing your family apart. Get the peace of mind knowing your intentions are clear, documented, and easy to find. You owe it to your family.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Sonny Bono’s Procrastination in Creating His Estate Plan Causes Years Of Estate Litigation

Sonny Bono, the singer, songwriter, restauranteur, and former Congressman, died in a tragic ski accident in 1998 at the age of 62. His net worth was just under $2 million at the time of his death, yet Bono did not have a Will. Apparently, he meant to have one drawn up, but simply never got around to it. 

Sadly, his fourth wife and surviving spouse, former Representative Mary Bono, spent years battling to be the executor of his estate. She also faced lawsuits filed by anyone and everyone who wanted a piece of the pie – some of whom you wouldn’t believe...

Cher & Secret Love Child Want Piece of Sonny’s Estate:

Having died intestate (without a Will), Sonny Bono’s estate was seemingly up for grabs. His surviving spouse had to specifically fend off two people whose demands on the estate made headlines:

1.Cher. Yes, THE Cher, Sonny’s second wife, sued for a share of his estate seeking $1.6 million in unpaid alimony. When the couple   divorced in 1974, Sonny was allegedly ordered to pay Cher $25,000 per month for six months, $1,500 per month child support, and $41,000 in attorneys’ fees.

a. Apparently, he never did. While it’s odd that someone with their own net worth of over $300 million would even bother taking the time, it’s nonetheless true. Whether she collected is anyone’s guess, but not likely.

2. Secret Love Child. As if Cher’s lawsuit wasn’t odd enough, a secret love child made his own claim on Sonny’s estate. Then 35-year-old Sean Machu came forward claiming to be Bono’s illegitimate son. 

 b.  Although Bono admitted to having an affair with Machu’s mother in his autobiography, The Beat Goes On, and Machu's birth certificate lists Salvatore Bono (aka Sonny) as the father, Machu later withdrew the lawsuit when a DNA test was required.

Bono’s estate was eventually divided between his surviving spouse and his two children, Chastity (now Chaz) Bono and Christy Bono Fasce (a child from his first marriage).

Don’t Leave Your Wealth Up For Grabs – Take Action Now:

As Sonny Bono’s case shows, not having a Will, trust, or other estate planning documents in place gives others the sense that your wealth is up for grabs.  Most of us don’t relish the idea of creating a plan for what will happen when we die.  However, it’s a necessity in order to avoid having your spouse and children go through court battles and heartache.

It’s imperative that you take action now.  We have the tools you need to put your estate plan into place so that procrastination is not an issue. If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Marlon Brando’s Housekeeper Claimed He “Told” Her She Would Inherit His Home

Legendary Oscar-winning actor Marlon Brando left the bulk of his estate (worth approximately $26 million) to his producer, other associates, and his longtime housekeeper, Angela Borlaza. 

Brando created a valid last Will and testament.  However, he did not include Borlaza—who later sued alleging that Brando promised that she would inherit his home when he died.

A Promise Is A Promise…

While a promise is a promise, it can be easily broken.  In this case, Brando either never promised Borlaza anything or promised to give her the home, but never got around to putting it in his will.  Borlaza claimed the latter and sued his estate for $627,000. 

However, since the alleged promise was oral, the court was restrained by what was contained in Brando’s will on the assumption that he made all of his wishes known.  Borlaza eventually settled the matter for $125,000, but she was lucky to get even that. 

Making oral promises to someone about what they’ll inherit when you die generally fail without some other proof that the promise was valid such as someone else being part of the conversation in which the promise was made.  Short of that, courts can – and reasonably must – rely upon the documents in front of it when probating an estate.

Put It in Writing:

Make sure that your loved ones receive everything you promised them by putting your wishes in writing through a last will and testament, a trust, or another estate planning tool.  Don’t rest on your laurels.  It is imperative to update your estate plan documents when any significant or life changing events occur such as:

1. a new oral promise you made to someone

2. adoption

3. birth

4. circumstance changes (change in health, wealth, or state of residence)

5. divorce

6. income changes

7. marriage

8. divorce

9. re-marriage

Need help putting your wishes in writing? It’s easier than you think and will give you the peace of mind that your loved ones aren’t forgotten.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Who Is Your Beneficiary? Marilyn Monroe Ultimately Had No Idea

When creating a last Will and testament, it’s important to know your beneficiary. Sadly, that’s not always the case. Marilyn Monroe, one of the world’s most famous icons, didn’t seem to have any idea to whom she left her money.

Acting Coach & Psychiatrist Got Everything:

Marilyn Monroe died at the age of 36 from a drug overdose. The year was 1962 and there have always been questions as to whom she named as beneficiaries. In fact, her business manager, Inez Melson, was allegedly suspicious about Marilyn Monroe’s Will when it was first drafted. 

Monroe’s Will left some money to care for her mentally ill mother and bequeathed some of her personal belongings to Inez Melson. The remainder went to her acting coach and psychiatrist:

• 25% to her psychiatrist to help those who couldn’t afford psychiatric counselling

•  75% of the residue (the majority of her estate) was left to Lee Strasberg, her acting coach

A bit strange, but there it is, and Monroe could never have predicted what happened next…

Strasberg’s 2nd Wife Takes Control of Monroe’s Fortune:

Lee Strasberg controlled Monroe’s estate for a short while. Then, his second wife, Anna, took over. Although she only met Monroe one time, she created utter chaos for years. Here’s a brief rundown of what happened:

1. Multi-million Dollar Lawsuit Over Publicity Rights. Strasberg filed a multi-million-dollar lawsuit over publicity rights of Monroe’s image and likeness – and won. Ironically, she has since earned more money thanks to Monroe than Monroe earned in her lifetime.

2. Licensing Deal On Products. Strasberg made millions of dollars through a licensing deal with CMG Worldwide who sold products with Monroe’s picture on it such as cigarette lighters, pet clothing, and other “iconic” memorabilia. 

3. Multi-million Dollar Lawsuit Over Personal Belongings. Strasberg also filed a lawsuit against the heirs of Monroe’s former agent, Inez Melson, for personal belongings in their position. She won and auctioned them off at Christie’s for over $13 million.

Strasberg eventually sold her interest in Monroe’s estate for a reported $20 - $30 million.  Interestingly, Monroe has consistently been one of the top highest earning deceased celebrities since her death. Her estate earned $17 million in 2015 alone.

Consider Everything—Carefully:

When creating an estate plan, it’s important to consider everything very carefully. While you may want a specific person to benefit from your estate (as Monroe wanted for Lee Strasberg), the probability that someone else will get control of your assets is likely unless you provide otherwise. 

Monroe obviously had very good intentions for providing for help to those who are mentally ill.  Had she considered those intentions more carefully, many more people could have been helped.  Instead, someone she met once bilked her estate for their own purposes.

We can all learn from Monroe’s mistakes. If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.

Did Whitney Houston Leave Too Much Money To Bobbi Kristina?

Whitney Houston’s estate was worth approximately $20 million when she died – plenty to meet the needs of her only daughter – Bobbi Kristina. Sadly, only a few years after Houston’s death, Bobbi Kristina died as well. 

Although Bobbi Kristina’s previous boyfriend, Nick Gordon, is still a suspect in her murder, many say that having access to so much money at a young age was a contributing factor. Sadly, Houston’s estate planning mistakes are all too common.

Aunt & Grandmother Say Will Did Not Depict Houston’s Intentions:

Houston’s aunt and grandmother filed a lawsuit to re-write the Will as they say it didn’t accurately depict what Whitney really wanted for Bobbi-Kristina. They claimed that she was too young to handle so much money.

Although they likely had the best of intentions, probate courts must follow the terms of the actual Will or trust documents, not what the person who died might have otherwise intended. 

Whitney Houston’s Will was created in 1993, specifying that a trust would be created after she died for any children she may have (so before Bobbi-Kristina was even born). Unfortunately, she never updated her Will before she died. 

Inheriting Money at a Young Age is Never a Good Idea:

Whether this tragedy could have been adverted if Bobbi Kristina’s distributions were delayed until she was older is anyone’s guess. The bottom line is that inheriting large sums of money at a young is generally never a good idea. Although the young beneficiary might be responsible, young people can be easily manipulated by others.

While it’s clear that Houston could have better protected that money with a stronger estate plan, she’s certainly not the only one guilty of not following through. In fact, many of us have the best intentions, but simply don’t make the time to create – and update – proper estate planning documents that can help beneficiaries. 

Set Your Beneficiaries Up For Success!

You do have the power to set your young beneficiaries up for success. In most cases, that means creating a trust that allows them access to money over time and can be managed by someone you trust and has their best interests at heart. 

We can provide you with the tools you need to protect your loved ones – whatever your situation may be. As Houston’s case shows, ignoring estate planning issues can have tragic consequences.

If you want to ensure that your family is cared for, please click here to schedule your complimentary Estate Planning Strategy Call with San Francisco’s premier estate planning attorney, Matthew J. Tuller.