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A Successor Trustee must follow all the provisions in the actual Trust document. However, a California Trustee must also follow the rules and procedures mandated by the California Probate Code. The following are some of the most common pitfalls that get Trustees into Trouble.

Failing to serve the required Notice to Beneficiaries AND heirs-at-law

Whenever a Trust becomes irrevocable, or there is a change in Trustees of an irrevocable Trust, the Trustee must send out notice pursuant to Probate Code § 16061.7. Failure to give timely notice or no notice at all can open the Trustee up for personal liability as well as allow for any beneficiaries or heirs-at-law to contest the trust for a prolonged period.

Failing to Account

Some Trust documents waive all accounting and thus a Trustee may believe that he or she is not required to provide any accounting. However, under California law a Trustee must account at least annually and any waiver of such accounting is against public policy.

Failing to Act Impartially

Trustee must act impartially among all the beneficiaries of a Trust. Favoring one beneficiary over another may result in a breach of fiduciary duty.

Failing to Keep Trust Assets Separate

A Trustee must manage an estate completely separate from the Trustees own personal assets. Trust accounts have their own EINs and must be vested in the name of the Trust, not the Trustee individually.
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A Conservatorship is a legal proceeding where a judge appoints an individual to care for another adult who is incapable of caring for themselves or managing his or her own finances. If you have a complete estate plan which includes a Durable Power of Attorney and an Advance Health Care Directive, then a conservatorship can usually be avoided. However, there are times when this proceeding is absolutely necessary and thus you should nominate a conservator while you are living. This can easily be accomplished by including nomination language in your Durable Power of Attorney or your trust instrument. If you do not nominate someone, then a judge will appoint someone over you and possibly your estate.

A recent article in the Los Angeles Times highlights the need to have your wishes clearly defined with respect to your potential conservator. The infamous Zsa Zsa Gabor is in poor health at the age of 94 and requires a conservator to manage her heath care and finances. Zsa Zsa’s daughter petitioned the court for appointment as conservator but was denied in favor of Zsa Zsa’s husband, Frederic von Anhalt, and a team of attorneys. Von Anhalt will serve as conservator of the person (making medical decisions for Zsa Zsa) while several attorneys will oversee Zsa Zsa’s finances.
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New parents have a lot on their minds. Between 2:00 a.m. feedings and baby proofing, most parents have not even begun to think about making a will. This is a grave mistake. Having a valid will is one of the most important things you can do for your child.

Although wills can designate who will inherit your bank accounts, real property and jewelry, more importantly, they designate a legal guardian for your children. All children under the age of 18 require a legal guardian. While parents are still living they enjoy this role. However, when parents die leaving minor children a court must decide who will be appointed legal guardian. If you have a will, you can designate who this person will be. If you do not have a will, the courts will decide for you.

Designating a guardian for your children is probably one of the toughest issues parents face. Should it be grandma? Or your best friend? Or your sister who lives 3,000 miles away? Every family is different and every child is different. In one family it may be grandma who is best suited for this role. In another it may be a friend and not a family member at all who is the best person to care for your children. Once you have decided who the individual is you must put it in writing in your will.

Everyone needs an estate plan. However, too often we get calls to do an emergency house call because Mom or Dad received a bad prognosis and doesn’t have any estate planning documents in place. While we endeavor to accomplish the needs of these individuals, sometimes we simply cannot. California law requires that an individual have testamentary capacity to sign a Will or Trust. A person is not mentally competent if she or he doesn’t understand the nature of the document, cannot remember the nature and types of his or her property, and doesn’t recall his or her relations to living relatives.

A dementia diagnosis does not automatically prohibit someone from having testamentary capacity. However, it is crucial to have your estate planning documents in place before you become severely ill or disabled. Children whose parents suffer from a memory disorder should try and determine if Mom or Dad has sufficient planning before the disorder gets worse. This does not mean that children should have access to Mom or Dad’s will, but an honest conversation with parents about the state of their affairs is certainly prudent. Too often we have clients come in trying to sort of their parents’ estate because they were too embarrassed to talk to Mom or Dad while they were living.

A recent article in the Wall Street Journal claims that the baby boomer population will find themselves without a hefty inheritance from their parents. Traditionally, children could expect to receive something from their parents when mom and dad died. Unfortunately, many baby boomers have relied on this notion as a way to pay for retirement. They expected to cash in on mom and dad’s estate only to find that no such estate exists. Many have not properly funded their own retirement while also suffering from huge financial losses in 2008.

Individuals are living longer and requiring more money for their living and medical expenses. Although these parents were diligent savers, they did not expect to live into their 80s and beyond. Longevity is a blessing and unfortunately a financial curse for some families. Baby boomers are finding themselves in the scary situation of expecting zero inheritance while simultaneously dipping into their own financial pockets to pay for their parents’ care.

The anxiety surrounding inheritance and financial woes is often worsened by parents’ refusal to discuss such issues with their children. Many parents are uncomfortable discussing finances with anyone, let alone their own children. However, an open discussion can help ease anxieties and create valuable planning opportunities for both parents and children. It can also set realistic goals and expectations for future expenses.

A recent study in 2011 found that more than 50% of Americans do not have an estate plan. Furthermore, the study found that 92% of adults under 35 do not have one. A favorite saying among estate planning practitioners is, “Everyone has an estate plan. If you don’t create it yourself the State of California will create one for you.” This simply means that if you don’t create your own plan then the State of California will tell your family members where your assets will go upon your death. This is called intestate succession. To avoid this, everyone, young or old, should have a Last Will and Testament. A Durable Power of Attorney and Advance Health Care Directive are two additional necessary documents that every person should possess.

Last Will and Testament

This document outlines who you would like to inherit your assets at your death. You nominate an Executor to administer your estate and you can also nominate a guardian for any minor children you may have at the time of your passing. You can also nominate a pet guardian for any pets that you may leave behind as well. This is the most basic form of estate planning. Having a Last Will and Testament will allow you to have choose who will inherit your assets but it will necessitate a court proceeding called, “probate” in order for these assets to pass to your heirs.

Probate attorneys are well versed in handling contentious probate estates. Usually the problems involve money and beneficiaries and most of the time these problems are never publicized. However, probate problems with famous estates are a different matter entirely. These cases highlight the necessity for good estate planning for everyone.

Rosa Parks was a national figure in the civil rights campaign of the 1950s-1960s. She famously refused to give up her seat on a bus which launched the Montgomery Bus Boycott and became an integral part of the civil rights movement. However, she continued to receive publicity even after her death in 2005 but this time for an entirely different reason. Her last will and testament became part of a six year legal battle in a probate court in Wayne County, Michigan.

At the heart of the matter was a challenge to the validity of Parks’ will between Parks’ nieces and nephews and a charity she designated to receive her estate. The parties finally reached an agreement that gave the family members 20% and the charity the remaining 80% of the estate. However, the litigation could have been avoided entirely with better estate planning documents.

A good estate plan will designate with specificity what your wishes are regarding your entire estate. It will outline to whom you want to receive certain gifts. It will also be clear why you’re choosing to disinherit some heirs. Furthermore, the circumstances under which an estate plan is created should be carefully examined. Estate plans are more likely to be subject to challenges when they are done while an individual is ill, has been diagnosed with a disease, or when there is apparent duress.

Rosa Parks’ estate is a great example why individuals need to have good estate planning documents. No one wants to assume that their heirs will challenge their will but unfortunately this happens all too often. However, with good documents these challenges are less likely and very often completely avoided.
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A member of Burt + Clerc was named as a “Top Lawyer” by Palm Springs Life in their June 2011 issue. Julia E. Burt was recognized for her years of experience and exceptional service in the field of estate planning. 62 of the Coachella Valley’s finest legal professionals made the 2011 list of Top Lawyers. Congratulations to every one of them but especially our very own Julia Burt!

Retirement accounts and most other beneficiary designated accounts are traditionally left out of estate planning documents. A trust attorney will usually recommend that clients keep their IRAs and life insurance polices outside of a trust. However, there is a huge caveat to this advice, you MUST have the appropriate beneficiaries designated.

For parents with minor children, the issue of who to designate is usually incorrectly assumed. Most parents will name their spouse as the beneficiary and then name their children as contingent beneficiaries. If all of your children are adults this scenario works beautifully. However, if you name your minor children as beneficiaries you now have a huge potential problem. For example:

Case No. 1

Many people neglect planning their estate, creating a will or trust and thinking about the inevitable. Much of this is due to the fact that people are not especially pleased to discuss their own death and the misconception that estate planning is only for the wealthy. However, everyone needs an estate plan especially parents with minor children. Irrespective of how large or small your estate is, if you have a child under the age of 18 you need an estate plan.

At a bare minimum, we at Burt + Clerc, advise new parents to have a Will, a Durable Power of Attorney and an Advance Health Care Directive.

A will is a written document that outlines your wishes regarding how you want your property distributed when you die. Importantly for parents, it can also outline who you wish to nominate as guardian of your minor children. Knowing who will care for and raise your children is a huge comfort to many parents. Nominating a guardian also helps make the transition for everyone, including children and family relatives, must easier.

Durable Power of Attorney (DPOA)

A DPOA allows you to nominate an agent to act on your behalf regarding finances. This document is important if you should become incapacitated or unable to make these decisions yourself. For parents this is especially important because if a parent becomes incapacitated the agent will be able to pay for the child’s health, education and other needs.

Advance Health Care Directive
An Advance Health Care Directive, also known as a living will, outlines your desires and wishes regarding health care decisions and end-of-life care. This document can sometimes be the hardest to complete but necessary and important. Ambiguity regarding your heath wishes can cause much confusion and consternation among family members. This is magnified when a parent has minor children. Every parent should think about their inevitable passing and what their wishes are regarding end-of-life care. You should share this document with your spouse and/or family and your health care provider.
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